Tóm tăt Luận án The legal issues on economic group in Viet Nam

MINISTRY OF EDUCATION AND TRAINNING MINISTRY OF JUSTICE HANOI LAW UNIVERSITY VU PHUONG DONG THE LEGAL ISSUES ON ECONOMIC GROUP IN VIET NAM FIELD OF STUDY : ECONOMIC LAW CODE : 62 38 01 07 ABSTRACT OF DOCTORAL THESIS ON LAW STUDIES HA NOI – 2015 Trainning Institution: HANOI LAW UNIVERSITY Academic Supervisors : 1. Dr. Nguyen Thi Dung 2. Dr. Dong Ngoc Ba Opponent 1 : Prof.Dr. Nguyen Thi Mo Opponent 2 : Assoc.Prof.Dr. Nguyen Nhu Phat Opponent 3 : Dr. Nguyen Thi Nhung Thi thesis will be defended before the University Thesis Evaluation Board at Hanoi Law University, dated This thesis can be available at: 1. National library of Vietnam 2. Library of Hanoi law University 1PREAMBLE 1. Urgency of the subject Since the 6th National Party Congress-1986, the twenty-five years of develtiopment under new economic model, facilitated Vietnam to become a country with high economic growth, improved social life, also the concept of business has been changed a lot. Through a process of almost twenty year development, a number of enterprises in the State sector as well as in the private sector experienced strong growth, and long-term capital accumulation; M&A (mergers and acquisitions), consolidation has occurred frequently with the support of the stock market. Moreover, demand for investment-linked that performing complex form and multidisciplinary business needs have become topical. These have posed the following problems to be solved: the model of economic organization which has been operating so far has not meet the requirement to raise capital, specialized production and business management. In fact, the model of Economic Group (hereafter referred to as “EG”) have been appeared in Vietnam and partly meet the needs of investors in both the State and private sector. In the State sector, the Government did implement the policy of transition General Company 91 to Economic Group. Hence a number of EGs have been established including the Vietnam Oil and Gas Group, Vietnam National Coal – Mineral Industries Holding Corporation Limited (Vinacomin), Vietnam Electricity (EVN), etc. After the Government established pilot EGs and issued Decree No 101/2009/ND-CP dated 5th November 2009 of the Goverment on piloting the establishment, organization, operation and management EGs, on the one hand State owned EGs had continuous movement in many different directions. However, on the other hand a few State owned EGs did operate inefficiency, and have not meet the expectations of the Government that would consider the model EGs being a key solution in economic development strategies throughout the comprehensive integration period. Furthermore, certain corporations adversely created a burden for developing countries, causing losses of the budget, increasing the ratio of Government debt, which reduces the effective indicator of investment, creating complex and adverse implications on society such as the case of Vinashin (). Decree 69/2014 /ND-CP dated of the Government, to some extent, has contributed unified regulations on the State owned EGs. There are, moreover, many other texts provisions on the use of and investment in the State capital have been issued. However, the effectiveness of the implementation of the law 2on State owned EGs still not effectively and the issued relating to State owned EGs have not been fixed thoroughly. Meanwhile, enterprises in the private sector are actively switching to model EGs: FPT, Hoa Phat Group, Hoang Anh Gia Lai Group, Group CEO, etc ... However, the current legislation on private EGs is not systematic. For private sector EGs, except four articles in current Enterprise Law (which is full effect on 01 July 2015) (here after referred to as “Enterprise Law 2014”) and an article specified in the Decree No 102/2010ND-CP dated 1st October 2010 of the Government guiding the Enterprise Law 2005, there was still no specific regulations on this model. The private EGs hence have been difficult to deploy business operations including internal corporate governance. However, as the inevitable trend of development, private EGs model could become the new driving force for the models replacing State owned EG in economic development strategy in Vietnam in the coming time. For that reason, the immediate construction of legal system forming the basis for the implementation of the restructuring EGs is an urgent need For the above mentioned reasons I have decided to choose subject "The legal issues on Economic Group in Vietnam" as the subject of my PHD research. 2. The purpose of research and tasks of the thesis The purpose research thesis is to analyze and evaluate legal issues on EGs model therefore finding appropriate solutions perfecting legislation on EGs in Vietnam. To accomplish this goal, the task of the thesis laid out following specific research issues: Firstly, the thesis studied the economic nature, the legal nature of EGs thereby determining the specific characteristic of this business model; Second, the thesis studied the development process, analyzing the dominant factors and determines the basic content of the legislation on EGs; Thirdly, the thesis researched models and laws in foreign countries around the world, from which compare, evaluate and drawn valuable lessons for the process of law making on EGs in Vietnam. Fourth, the thesis researched and assesses the status of legislation on the link of EGs formation, the establishment of the rights and obligations of the participating enterprises in EGs, the monitoring mechanism of the State and operation termination of EGs. These studies are the basis for the thesis proposing practical solutions. 3Fifth, the thesis showed the complete solutions for perfecting the EGs legislation including basic solutions and detail solutions. 3. Scope of Research Economic Group is a special model of economic organization and is also the researching object of many different industries and fields including economics, finance, administration and legal. In specialized economic law, the scope of the author's research thesis on this topic focused on the legal provisions of model EGs. In terms of content, the thesis focused on the legislation on EGs to be able to assess the matters/issues on EGs’ the status, establishment, operation, management and administration. These provisions were studied in contract law systems, business law, competition law, procurement law, the law on intellectual property. The thesis studied regulations on State owned EGs and model of private EGs. The similarity of the two models is in nature however the provisions on the State owned EGs model overwhelmed as compared to the private EG’s ones. The parallel studying of the two models lay the foundation that the making thesis evaluate and propose appropriate for each type of model and then narrowing of operation of State owned EGs and as consequently give priority to TDKT private EGs. The thesis focused primarily studies the domestic legal provisions and after that analyzes, gave comment on the provisions of foreign laws to draw the necessary lessons for the construction and then improved the Vietnamese legal system. The thesis focused study of current legislation in order to accurately assess the status of laws. However, to ensure the feasibility of the recommendations, the thesis also studied the movement and development of the legal system on EGs. 4. Research Methodology To perform the research tasks of the thesis, the author did apply specific research methods being appropriate for each respectively content, including methods of analysis, synthesis, statistics, logic, history, compare, etc. in order to clarify the issues studied. Including: Methods of analysis, logic synthesis are used in the entire contents of the thesis; Historical and comparison methods, were used in research history and development of legislation on EGs; 4Comparison method used in researching the model and legislation of EGs in a number of countries over the world. Statistical method used in the assessment of the current legal situation in Chapter III of the thesis. 5. New scientific contribution of the thesis As scientific research on EGs legal system, the author desire to contribute his new view for the legal science as follows: First, the thesis contained scholarly research and the views of the author's thesis on the legal status and position of EGs. This is an much important matter as the basis for building regulations EGs; Second, the thesis clarified the nature of the link from various aspect in EGs as capital, the brand link, technology links, market link; Third, the thesis provided solutions and opinion as to rights of management, transactional and legal issues, the relationship between the parent company and its subsidiaries, the relationship between companies in the same grade in EGs were clarified in the thesis content; Fourth, while the issued shown are solved, the thesis proposed the solution to perfect and improve the legislation in the current period on restructuring State owned EGs, to the private EGs develop positively. 6. Structure of the thesis Besides preface and conclusion, the thesis includes the following specific contents: Chapter 1: Overview of Research topics Chapter 2: The theoretical issues of Economic Groups and Legislation on Economic Groups Chapter 3: Status of legislation on Economic Groups in Vietnam Chapter 4: The direction and solutions to complete the legislation on Economic Groups in Vietnam CHAPTER 1: OVERVIEW OF THE RESEARCH TOPICS The topic of “Economic Group” is not a new topic. There have been a number of studies on this topic. However, these study were primarily from an economic perspective, and specializing in business management, public management. Various studies often focused on the 5internal link in the Group, the administrator governance in the Group, the effective usage of corporate resources. In this Research, the following Basic contents resolved: First, the authors focused studying and presenting the concept of EGs under two angles: the economic perspective on the basis of the studies mentioned above, and a legal perspective on the basis of the author’s in-depth study. Based on EGs reviewing from many aspects, the thesis author plans to build a legal concept of "Economic Group". The thesis also spent appropriate time to specific the legal position and status of EG. This is an issues facing many obstacles, many different concepts, is at the core of arguments about EG. Second, the thesis focused on the legal provisions on connective links in EGs: capital link, industrial property rights link and a number of other forms of association. The author did also put attention to other contents to explain more about internal links within the Group. The author clarified the nature of each type of link, the characteristics, the dominant factors, and the provisions of the law on these links. Through the clarification on the links in the Group, the author’s ambition is to clarify the diverse nature of EGs’ the operation in Vietnam Third, the thesis studied the provisions of the law on the establishment of State owned EGs and private EGs. The formation of the State EGs from administrative orders and the conversion from model of General Companies (“Tổng Công ty”) has created unsound problems. The thesis thus focused on analyzing the shortcomings to suggest towards perfection. Relating to private EGs, the process of establishing has not been supported by specific regulations that causing confusion about the name of the group. A few opinions of regulations on the scale of group was suggested but not yet specified. The author's thesis analyzed and clarified that situation and proposed his own specific recommendations for private EGs. Fourth, the author’s research also focused on relationship among entities in EGs, rights and obligations of enterprises in EGs. Accordingly the author planned to focus in-depth analysis and clarification of management activities in the State EGs between the parent company and its subsidiaries, affiliated companies in EGs, especially the responsibilities of the parent company in the use of State invested capital and the capital allocation to its subsidiaries, affiliated companies in EGs. In terms of private EGs, for the reason that there have been so far no regulations on operating activities and the private EGs currently depend on the investors ‘rights to freely conduct business, the author still studied generally. Throughout this content, the author clarified 6the issues relating to rights of management, transaction, legal issues between the parent company and its subsidiaries, the relationship between the enterprises in the same grade in EGs, the single level investment, multi-level investment. Fifth, since the problem was resolved thoroughly, the thesis presented recommendations to improve the legal system and boost the effectiveness of EGs’ operations. These solution would be both comprehensive and detail to ensure the feasibility of the implementation process. CHAPTER 2: THE THEORETICAL ISSUES OF MANAGEMENT AND LEGISLATION ON ECONOMIC GROUP 2.1. SOME ISSUES OF MANAGEMENT ON ECONOMIC GROUPS 2.1.1. The concept of “Economic Group” A series of concept on “economic group" or "Business Corporation" have been presented, but mainly approaching from economic perspective. Based on general concept, “Economic Group” is defined as a large-scale organization, conducting business activities in multidisciplinary and multi-sector, based on links formed investment, capital contribution, merger, acquisition, reorganization or others business links to agglomeration and accumulate resources in order to increase competitiveness and profit maximization”. From legal perspective, EGs should be defined as follows: "The Group is a consortium of economic links between independent legal entities on the basis of investment and contractual agreements linked. Investment activities and contractual agreements create rights and obligations for each member of the consortium, including the legal entity holding dominant/controlling powers, and the other subsidiaries and affiliates (the legal entities are controlled)”. 2.1.2. Characteristics of Economic Group 2.1.2.1. Economic Group formed as a consortium, from the links between independent business entities Economic Groups are formed on the basis of the link between business entities. Business entities are independent legal entities. Links between business entities in the consortium are specified in the contractual agreement. The link among the legal entities of the group is completely different from the link between members of the company. The link between the members of the group can be controlling or not. 7First, the tight link, controlling link: (i) Links governed through equity investment; (ii) Links governed by controlling rights of the company’s business; (iii) Controlling Link through the transfer of rights relating to industrial property and some other rights. Second, the link is not controlling 2.1.2.2. Economic Group owning identity but no legal status EGs is a consortium whose identity. The identity is set to define independent legal entity, operating on the basis of close links because of the economic benefits. From the nature of links in EGs and from legal perspective, it can be seen that EGs have no legal status: 2.1.2.3. Economic groups have complex organizational structures, multiple levels The organizational structures of corporations aim to harmonize the companies’ interests in the Group. EGs have more than one level. Level one consists of the original controlling company (parent company – Grade 1) controls the Grade 2 enterprises (the subsidiary level). Level three covers controlling enterprises – Grade 2 enterprises and the Grade 3 controlled enterprises (be controlled by the Grade 2 enterprises) which controlled by the parent company. The huge Groups usually have no limit on the number of levels in the group, which resulted in the number of companies in very large scale 2.1.2.4. Economic groups holding a huge scale, a large number of employees, wide operating range, diversified businesses, higher revenue. EGs with the accumulation of capital of companies in the group, including the parent company, subsidiaries, affiliates, associated companies. Because the enterprises in the Group operating in diversified sectors, the Group holds a large scale workforce. Workforce is clearly categorized from simple workers to intellectual labor with creative expertise from medium to high qualification. Most of EGs are multidisciplinary and multi-sector including a number of lines is core business. EGs conduct large-scale investment, wide operating range, good competitive advantage, high level of management, profit maximization. 2.1.3. Classification links in Economic Group In terms of criteria on the cause of forming, links in EGs can be divided in 02 categories: natural formation link and link from administrative decisions. In terms of criteria on competitive relationship in the market, links in EGs can be divided in vertical link and horizontal link. 8In terms of criteria of management method, links in EGs can be divided in links between the parent company and its level I subsidiaries, link among cross-ownership companies. 2.1.4. The role of Economic Group in market economy The establishment and development of the EGs in all over world as well as in Vietnam is to meet the constantly changing of geo-political and cultural conditions. The model of Economic Group plays a significant role in the development of each country's economy and also the global economy. First, EGs are the basis for the establishment and development of large scale business models. Secondly, EGs are one of the State’s tools to implement State economic structural adjustment Thirdly, EGs enhance the competitiveness, economic and international integration.. Fourthly, EGs improve the efficiency of science and technology. Fifth, EGs will be responsible for implementing employment, social security 2.1.5. Model of economic groups in some countries in the world Most of the EGs all over the world have naturally established, on the basis of capital accumulation. A number of groups have undergone a long process of development under the impact of complex business conditions, continuously changing business environment. Political factors, geography, economy, culture, have also impact on the establishment of different countries. Model of EGs in Britain, America, Japan, Korea, China, have its own characteristics. Each country has a large selection of ways to develop the nature EGs of the economy, but just a few select the State owned model. In fact, the EGs promote the development of the country but also have implications for the natural development of the market, even; model EGs in countries including South Korea, China; has been creating relatively complex and adverse consequences for the economy. 2.2. THEORETICAL ISSUES OFLEGISLATION ON ECONOMIC GROUP 2.2.1. The Legal view on Economic Group The legislation on EGs is in the overall system of regulations established business institutions. From broad or narrow sense, legislation on Economic Group has different connotations. Firstly, from the broad view 9The process of EGs’ operations have generated relation on land, competition, tax, environmental, labor, credit and other subjects. Thus, in the broad view sense, it can be understood: "The legislation on EG is the system of regulations governing the social relationship arising in the process of formation and movement of EG." Second, in the narrow sense ”The legislation on EG is the system of regulations governing the social relationship arisi