Will PVN start a lawsuit against HDI Global SE?

PVI's total assets by the end of the first quarter of 2021 is fixed at VND 23,153 billion.

According to information the Hanoi Stock Exchange (HNX), Ho Chi Minh City Securities JSC (HSC) has become a major    shareholder of PVI since June 22 2021 after buying more than 13.8 million PVI shares, equivalent to 6.19% of its charter capital.

HDI Global SE was fined

The said transaction coincides with that of a PVI's foreign shareholder during June 10 to June 22, 2021 period to reduce its ownership ratio to 85.3 million PVI shares, equivalent to 38.18% of PVI's charter capital.

Thus, it is possible that HDI Global SE has transferred all the shares registered for    sales to HSC.

While PVI's another major    shareholder, Funderburk Lighthouse Ltd, also registered to sell 2 million PVI shares (from June 21 to July 16, 2021) through agreement and order matching method for    restructuring its investment portfolio.

Funderburk Lighthouse Ltd holds more than 27 million shares of PVI before the above transaction (equivalent to an ownership ratio of 12.13%), and expected to drop it to more than 25 million units if this transaction is successful (According to Business Forum Magazine’s data, Funderburk Lighthouse Ltd only held PVI shares and has sold all of them to HDI Global SE).

As such, these transactions are said to comply with the State Securities Commission (SSC)'s sanction decision against HDI Global SE. Because in April 2021, SSC issued a decision to impose an administrative penalty on HDI Global SE with a total fine of up to VND 185 million for    many violations, including the act of performing one or    several transactions to conceal the real ratio of ownership at PVI to evade disclosure obligations as required by the Securities Law; Violating regulations on foreign investors' ownership ratio. Therefore, HDI Global SE was forced to transfer PVI shares to reduce its ownership ratio at PVI in accordance with Vietnam’s laws (below 49%).

With only 38.18% of charter capital after transactions, HDI Global SE will no longer be a controlling shareholder at PVI. This will be a great advantage for    PVN to regain the right to manage PVI at the PVI Extraordinary General Meeting of Shareholders scheduled to be held on July 30, 2021.

However, in order to ensure the rights, interests, and capital of a state-owned enterprise, PVN as a major    shareholder should soon clarify the legality of the Resolution by the PVI General Meeting of Shareholders in 2019, as well as the resolutions issued by the PVI Board of Directors 2019 to the present, including the removal of conditional business lines PVI's operations to become a public company with 100% foreign capital.

Because, through illegal acts, HDI Global SE and related organizations have raised the ownership ratio at PVI to 53.92% (at the end of 2019). At the same time, PVI's 2019 Annual General Meeting of Shareholders approved PVI's Board of Directors consisting of 9 members, 4 of whom are PVN and the remainder HDI Global SE and Funderburk Lighthouse Limited.

On January 16, 2020, only a group of HDI Global SE shareholders (5 people) elected Mr. Jens Holger Wohthat as Chairman of PVI’s Board of Directors. This resolution was passed without the consent of other shareholders, especially without PVN’s agreement. This is considered a consequence of HDI Global SE's illegal acts, causing PVN to lose its management rights at PVI, making it very difficult to divest state capital from PVI as directed by the Government.

PVN has the right to initiate a lawsuit

As legally stated, in view of the Lawyer Truong Thanh Duc, in the opinion of VILAF Law Office, on the basis of HDI Global SE’s violations at PVI and SSC’s sanction measures against HDI Global SE, the validity of the Resolution of the PVI General Meeting of Shareholders in 2019 may be considered and decided by the Court if any shareholder or    a group of shareholders initiates a civil lawsuit against HDI Global SE to protect their interests and rights.

Specifically, HDI Global SE's above violations led to the adoption of the Resolution of the 2019 General Meeting of Shareholders and the Resolutions after the 2019 General Meeting of Shareholders, especially the resolutions disagreed by PVN, including the Resolution to dismiss Mr. Nguyen Xuan Hoa- PVN’s Representative at PVI from Chairman of PVI’s Board of Directors to elect Mr. Jens Holger Wohthat, HDI Global SE’s representative as Chairman of the PVI Board of Directors.

Article 154 of the 2015 Civil Code stipulates that the statute of limit    ations for    initiating a civil lawsuit is counted from the date the person with the right to claim (PVN in this case) knows or    should know that its rights and interests have been infringed. Basing on developments and awareness during the investigation, assessment, and handling of violations of HDI Global SE at PVI, PVN can argue that PVN has only known violations of HDI Global SE since SSC issued a decision on administrative penalties against violations of HDI Global SE (April 16, 2021).

Besides, Article 132 of the Civil Code 2015 states that the statute of limit    ations for    initiating a civil lawsuit will not be applied to request the Court to declare an invalid civil transaction related to Article 123 and Article 124 of the Civil Code 2015. In which, Article 123 of the Civil Code 2015 stipulates that civil transactions with an objective or    contents which breach legal prohibitions or    which contravene social morals shall be invalid. Therefore, PVN can base on the above provisions to request the Court to declare transactions and agreements of HDI Global SE, Funderburk, and Sunway to acquire shares at PVI invalid due to violations of the legal prohibitions (specifically, the violation of the maximum foreign ownership rate of 49% at PVI), affecting PVN's legitimate rights and interests.

PVN also has the right to request the Court to annul the effect of consequences caused by HDI Global SE's violations, including the contents of the Resolution of the 2019 PVI General Meeting of Shareholders and other Resolutions of the PVI General Meeting of Shareholders issued after determining the violations of HDI Global SE and claiming damages, if any, HDI Global SE. PVN may argue that the votes (directly and indirectly) of HDI Global SE are invalid because of violations by HDI Global SE regarding the ratio of securities ownership at PVI.

Accordingly, the procedure for    approving the contents of the Resolution of the PVI 2019 General Meeting of Shareholders in 2019 and other Resolutions of the PVI General Meeting of Shareholders (namely, votes HDI Global SE, Funderburk, and Sunway accounted for    54,64 percent of the total voting rights of PVI's General Meeting of Shareholders in 2019, while they are only allowed to own no more than 49%) violated the provisions of the Enterprise Law 2014 and the PVI’s Charter. Therefore, in order to ensure the interests of the State in successful divestment from PVI, PVN must regain management rights at PVI.

At the same time, PVN as a major    shareholder must request HDI Global SE, PVI's General Meeting of Shareholders, PVI's Board of Directors to strictly punish individuals who have committed violations in accordance with the laws, PVI’s Charter, PVI’s Code of Conduct.

Thus, determining the legality of the Resolution of the 2019 General Meeting of Shareholders and the Resolutions issued after the 2019 General Meeting of Shareholders of PVI, especially the resolutions disagreed by PVN, will be the "key" to re-establish PVN’s management rights at PVI, preserving state capital and causing no loss during State divestment from PVI.

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