Eximbank delays AGM amid losses

When shareholder rights find no respect

The conflict between shareholders and Eximbank’s Board of Directors is getting out of control, as shareholders can virtually have no say against the board’s decisions.

Helpless shareholders

On April 29, the market stirred when the mounting conflict between Eximbank’s Board of Directors (BOD) and its large shareholder group came to light. The first clash culminated in the annual general meeting (AGM) being postponed due to insufficient participation of shareholders with voting power. As a matter of fact, the number of shareholders showing up at the meeting only accounted for 50.19 per cent of the total voting shares, meaning the remaining 49.81 per cent of shareholders decided to boycott the AGM—a rather hefty percentage for a listed bank of Eximbank’s proportion.

Prior to the AGM, the bank’s BOD received letters from representatives of two domestic shareholder groups, one holding 11.82 and the other 10.42 per cent of the voting shares, requesting Eximbank to elect two additional board members to make up the 11 members agreed upon during the bank’s unusual AGM held in mid December 2015.

The BOD, however, did not conduct the necessary procedures for the election of additional board members. In fact, the body added the shareholder groups’ request as a proposal to the AGM’s agenda, pending further consideration. What the bank should have done otherwise was to announce the additional election procedure and submit the nominations to the State Bank of Vietnam for approval, so that all shareholders could exercise their rights to vote during the planned AGM.

What is more, according to AGM referential documents, the BOD unilaterally decided that “it was not the right time to elect new BOD members,” which essentially goes straight against the spirit of its 2015 AGM’s charter.

These facts are what have been raising the hackles of concerns among Eximbank shareholders, who fear that the BOD may well proceed the same way in the future, and elected to hold up the AGM or refuse to perform any AGM resolutions.

Information asymmetry

According to current regulations, shareholders have the right to know what is going on at the business they own a stake in, obligating the timely disclosure of information. However, this right has been abused by many joint-stock companies. Eximbank is one of those deliberately delaying the disclosure of information at its 2016 AGM. Numerous shareholders were rather surprised reading pages 11 and 12 of the AGM documents, proposing to trim the number of BOD members from 11 to 9, as requested by foreign shareholder groups. These pages were only added to the AGM documents in the morning of the expected meeting on April 29.

Meanwhile, a number of shareholders said that pages 11 and 12 were later posted on Eximbank’s website, but the (official) date of posting was April 28, merely a day prior to the planned AGM. The exact date and time of posting these documents can now only be identified by the people managing the Eximbank website.

Small shareholder groups are thus questioning why the bank posted such important information in the very last minute, and what the intention of the foreign shareholder groups are in requesting to change the number of BOD members barely three days prior to the AGM.

The foreign shareholder group, including Sumitomo Mitsui Banking Corporation, VinaCapital’s Vietnam Opportunity Fund (VOF), and Mirae Asset Exim Investment Limited, have shown inconsistency in requesting a slice in the number of board members, from 11 to 9, for no particular reason, when merely four months ago at the unusual meeting last December, it was them who approved the number 11.

Major shareholders’ right to call an AGM

In case when a group of large shareholders opposes a decision made by the BOD of a business, is there any procedure available for them to review the board’s decision?

In accordance with the Law on Enterprises, shareholder groups holding over 10 per cent of the ordinary shares (or a smaller ratio regulated by the company’s charter) over six consecutive months have the right to call for an AGM when the BOD is deemed to seriously violate shareholders’ rights.