Veto Rights are one of the most heavily negotiated protections in any Vietnamese shareholders’ agreement, since they determine which decisions an investor can actually block.
A well-drafted shareholders’ agreement (SHA) is the central tool investors use to protect their position in a Vietnamese company, but its enforceability depends heavily on whether its provisions are aligned with the company charter.
This briefing, prepared by IVLF Advisors’ private equity practice, analyses how to draft an enforceable Vietnamese SHA: reserved matters, board nomination mechanics, deadlock resolution and aligning the SHA with the company charter.
SHA vs. charter: which prevails in a conflict?
Under the 2020 Enterprise Law (as amended by Law No. 76/2025/QH15), the company charter is the instrument that binds the company and third parties (including the business registration authority). The SHA is a separate contract between shareholders, binding them to each other but not automatically binding on the company unless reflected in the charter.
Where there is a conflict, corporate decisions are governed by the charter and valid shareholder/board resolutions — a breach of the SHA only creates liability between shareholders, it does not invalidate a corporate decision.
A standard reserved matters list for minority investors
Common reserved matters include: changes to the core business lines, increases/decreases in charter capital, borrowing above a threshold, related-party transactions, mergers/demergers, charter amendments, and unusual profit distributions. For the strongest enforceability, these matters should be built into both the SHA and the charter as special voting-majority requirements or as requiring the consent of the investor-nominated board member.
Securing board seats: cumulative voting and its limits
The Enterprise Law applies cumulative voting as the default method for electing board members at a joint-stock company, giving minority shareholders a route to nominate board members proportionate to their ownership. However, this mechanism does not guarantee a specific seat outright — the outcome depends on the number of candidates and the voting strategies of other shareholders, so the SHA typically needs a direct board-nomination commitment as a supplement.
Information rights and audit rights
The SHA should clearly set out the investor’s right to access periodic financial statements, attend board meetings as an observer (if it lacks a seat), and request an independent audit where irregularities are suspected — these rights are not automatically available by statute to minority shareholders below the statutory ownership threshold.
Deadlock resolution: escalation, Russian roulette, Texas shoot-out and their feasibility in Vietnam
International deadlock mechanisms (escalation to senior management, Russian roulette, Texas shoot-out) can in principle be included in an SHA under freedom of contract, but enforcing a forced share transfer under these mechanisms in Vietnam can be difficult if the losing party does not comply voluntarily — they should be paired with concrete security measures (irrevocable powers of attorney, deposits) to strengthen practical enforceability.
Choosing governing law for the SHA: Vietnamese or foreign law?
An SHA between parties with a foreign element may choose foreign governing law under the freedom-of-contract principle applicable to civil relations with a foreign element, but provisions directly bearing on the organisation and governance of the Vietnamese company must still comply with Vietnamese law. Commercial arbitration (domestic or foreign) is typically chosen as the dispute resolution mechanism to increase neutrality and award enforceability.
Enforcement measures: deposits, irrevocable powers of attorney, liquidated damages
To strengthen practical enforceability, an SHA should combine security measures under the 2015 Civil Code such as deposits, liquidated damages clauses (set at a reasonable level to avoid being deemed unenforceable as excessive), and an irrevocable power of attorney to a neutral third party to take necessary action upon a material breach.
Counsel’s view: A provision left out of the charter risks not binding the company or third parties — investors should insist on aligning core rights (reserved matters, board nomination) into both the SHA and the charter at closing, rather than relying on the SHA alone.
Frequently asked questions
Does an SHA need to be registered with a state authority?
No, an SHA is a private civil contract between shareholders and requires no registration, but content affecting the company’s organisation should be reflected in the registered charter. Does cumulative voting guarantee a board seat?
Not absolutely — the outcome depends on the number of candidates and other shareholders’ voting strategies, so a supplementary commitment in the SHA is needed.
Can an SHA choose foreign governing law?
Yes, but provisions on the organisation and governance of the Vietnamese company must still comply with the Vietnamese Enterprise Law. IVLF Advisors’ private equity practice helps draft and review SHAs with strong enforceability under Vietnamese law.
Request a review of your existing SHA and charter from the IVLF team.
Veto Rights: Practical Takeaway
Well-drafted Veto Rights only work if the reserved matters list in the SHA is mirrored in the company charter, since Vietnamese courts and licensing authorities will look to the charter first. For related structuring guidance, see IVLF Advisors’ shareholders’ agreement and governance advisory services.
Investors should also review the National Business Registration Portal for charter amendment procedures that affect how Veto Rights are enforced in practice. Ultimately, durable Veto Rights are negotiated into both documents from day one, not added later.
Shareholders agreement Vietnam: 5 drafting priorities
A well-structured shareholders agreement Vietnam package should coordinate reserved matters, information rights, transfer restrictions, deadlock procedures and exit mechanics with the company charter.
Veto rights Vietnam company
Veto rights Vietnam company provisions should identify precise decisions, approval thresholds, permitted exceptions and consequences of non-compliance. Charter-level implementation is often essential.
Board seat rights Vietnam
Board seat rights Vietnam arrangements should cover nomination, removal, quorum, observer access and information rights. The governance documents must remain consistent with mandatory corporate rules.
Vietnam corporate lawyer consultation
A Vietnam corporate lawyer consultation can identify conflicts between the shareholders agreement and charter and create an enforceable implementation checklist. Contact IVLF for a confidential governance review.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
