Resolving Shareholder Disputes in Joint Venture Companies with Foreign Investment in Vietnam

1. Current Situation and Risks of Shareholder Disputes in Joint Ventures in Vietnam

When a joint venture — typically between a foreign investor and a Vietnamese partner — operates in Vietnam, shareholder disputes are not uncommon. Such disputes can cause prolonged consequences: business stagnation, loss of contracts, and serious damage to the company’s reputation.

1.1. Common Types of Shareholder Disputes

Typical types of disputes include disagreements over capital contribution ratios, share transfer rights, management and operational control, profit distribution, or contributed asset ownership.

In joint ventures with foreign capital, factors such as cultural differences and control rights between the foreign investor and Vietnamese partner often intensify the risk of conflict.

1.2. Common Causes and Unique Risks in Joint Ventures in Vietnam

Some frequent causes include: lack of clarity in shareholder agreements, inappropriate company charters, failure to fulfill capital contribution commitments on time, or lack of cooperation in management activities.
Recent data indicates that the number of shareholder disputes in Vietnam has increased significantly in the past two years.

Associated risks include: foreign investors losing control or decision-making rights, Vietnamese shareholders being restricted from accessing information or transferring shares, and companies being paralyzed due to internal conflicts.

2. Legal Mechanisms and Solutions for Resolving Shareholder Disputes in Joint Ventures in Vietnam

After understanding the situation, let’s examine the approaches and legal mechanisms available for resolving shareholder disputes in joint ventures with foreign investment in Vietnam. DEDICA Law emphasizes that the most effective solution is not only resolving disputes once they occur, but preventing them from the outset.

2.1. Legal Framework and Methods of Resolution

Under Vietnamese law, internal disputes between shareholders, between a company and its shareholders, or between foreign investors and Vietnamese partners are governed by the Law on Enterprises 2020, the Civil Procedure Code 2015, and relevant decrees.

Available dispute resolution methods include:

• Negotiation & Mediation: The first and most cost-effective approach, helping preserve cooperative relationships.

• Commercial Arbitration: Suitable where shareholders have an arbitration clause and prefer confidentiality and faster proceedings.

• Court Litigation: Applied when there is no prior agreement or when enforcement power is required; the court has jurisdiction to settle such disputes.

2.2. Practical Guidance and Key Considerations

Step 1: Review the shareholder agreement and the joint venture charter — these act as the company’s “internal law,” especially crucial for joint ventures with foreign ownership.
Unclear provisions regarding share transfers, management authority, or profit distribution significantly increase the risk of disputes.

Step 2: When a dispute arises, prioritize negotiation or mediation — in Vietnam, this approach often minimizes costs and helps maintain business operations.

Step 3: If negotiation fails, consider arbitration or court proceedings:

• Arbitration: Suitable when shareholders seek a faster, confidential, and internationally accepted process.

• Court: Appropriate when coercive measures are required, such as suspending shareholder meetings, demanding payments, or annulling resolutions. Many disputes between Vietnamese and foreign-owned companies have been effectively resolved through court judgments.

Step 4: Special considerations for joint ventures with foreign investment:

• Clearly determine the applicable law, contract language, and dispute resolution forum from the outset.

• Ensure shareholders’ rights to information, control over contributed assets, and management authority to prevent exclusion from key corporate decisions.

• When handling disputes, evaluate the foreign element (e.g., presence of foreign shareholders or assets abroad), as this may affect court jurisdiction and judicial assistance procedures.

3. Conclusion

Shareholder disputes in joint ventures with foreign investment in Vietnam are not only legal issues but also strategic challenges in corporate governance. Even a minor conflict, if not handled properly, can undermine trust among partners, disrupt capital flows, and harm the company’s market position and reputation.

The most effective approach does not lie in “winning or losing” a dispute, but in risk control and the protection of legitimate rights through a sound legal strategy. Therefore, establishing a clear company charter, drafting detailed shareholder agreements, and seeking advice from experienced corporate lawyers are essential steps.

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