In corporate governance, resolutions of the Board of Directors play a vital role in guiding and making a company’s strategic decisions. However, such resolutions are not always lawful or aligned with the common interests of the company. If a resolution violates the law, contravenes the Company Charter, or causes damage to shareholders, the annulment of such a resolution may be considered.

So how is the procedure for annulling a resolution of the Board of Directors implemented? Who has the authority to request such annulment? Does the annulment of a resolution affect the company’s operations? These issues will be addressed in the article below.

Below, NPLAW respectfully invites our readers to explore matters relating to the annulment of resolutions of the Board of Directors.

I. Overview of the annulment of resolutions of the Board of Directors

The annulment of a resolution of the Board of Directors refers to the invalidation or termination of the legal effect of a resolution issued by the Board of Directors due to defects in its content, violations of law, contravention of the Company Charter, or damage caused to shareholders or the enterprise.

Such annulment may arise if the resolution is adopted in breach of prescribed procedures, negatively affects the interests of the company, or violates applicable legal regulations. Once a resolution is annulled, decisions or transactions implemented on the basis of such a resolution may be suspended, amended, or invalidated, and the company may even be required to compensate for damages. Accordingly, a clear understanding of the regulations governing the annulment of resolutions is essential to ensure transparent and lawful corporate governance.

II. Legal regulations on the annulment of resolutions of the Board of Directors

1. What constitutes the annulment of a resolution of the Board of Directors?

Currently, Vietnamese law does not provide a specific definition of the annulment of a resolution of the Board of Directors. However, it may be understood as the invalidation or termination of the legal validity of a resolution issued by the Board of Directors.

The annulment may occur if the resolution violates the law, contravenes the Company Charter, is adopted beyond authority or in breach of prescribed procedures, or causes damage to the lawful rights and interests of shareholders, the company, or third parties. Upon annulment, decisions or activities performed on the basis of such resolution may be suspended, amended, or revoked in accordance with the law.

2. In what cases may the resolution of the Board of Directors be annulled?

Pursuant to Clause 4, Article 153 of the Law on Enterprise 2020, the resolution or decision of the Board of Directors may be subject to a request for suspension or annulment if it satisfies both of the following conditions:

  • The resolution or decision is adopted by the Board of Directors in contravention of the law, resolutions of the General Meeting of Shareholders, or the Company Charter; and
  • Such a resolution or decision causes damage to the company.

3. Conditions for annulling the resolution of the Board of Directors

Pursuant to Clauses 2, Article 115 and Article 151 of the Law on Enterprise 2020, the right to request the annulment of resolutions of the General Meeting of Shareholders is vested in shareholders or groups of shareholders holding at least 5% of the total number of ordinary shares, or a lower percentage as stipulated in the Company Charter. These parties have the right to request the Court or Arbitration to review and annul a resolution or part thereof of the General Meeting of Shareholders in the following cases:

  • The procedures for convening meetings and adopting resolutions of the General Meeting of Shareholders seriously violate the provisions of the Law on Enterprise and the Company Charter, except for the cases specified in Clause 2, Article 152 of the Law on Enterprise 2020;
  • The content of the resolution violates the law or the Company Charter.

Pursuant to Article 151 of the Law on Enterprise 2020, a request for the annulment of the resolution of the General Meeting of Shareholders must be made within 90 days from the date on which the minutes of the General Meeting of Shareholders or the minutes of vote-counting results are received.

III. Questions regarding the annulment of resolutions of the Board of Directors

1. Who has the authority to annul the resolution of the Board of Directors?

Pursuant to Clause 4, Article 153 of the Law on Enterprise 2020, shareholders have the right to request the Court to suspend or annul the validity of resolutions or decisions of the Board of Directors.

Accordingly, the Court is the competent authority to consider and resolve requests for annulment of resolutions of the Board of Directors where such resolutions contravene the law, resolutions of the General Meeting of Shareholders, or the Company Charter, cause damage to the company, and are requested to be annulled by shareholders.

2. Is it necessary to prepare a written document to annul the resolution of the Board of Directors?

Pursuant to Clause 4, Article 153 of the Law on Enterprise 2020, shareholders have the right to request the Court to suspend or annul the resolution of the Board of Directors if such resolution violates the law, resolutions of the General Meeting of Shareholders, or the Company Charter, and causes damage to the company.

Although the Law on Enterprise 2020 does not specifically require the preparation of a written document for the annulment of the resolution of the Board of Directors, in order to ensure transparency and avoid disputes, it is necessary to prepare written documents clearly stating the reasons, legal grounds, and relevant decisions.

3. What procedures are required to annul the resolution of the Board of Directors?

Pursuant to Clause 4, Article 153 of the Law on Enterprise 2020, shareholders may directly request the Court to annul the resolution of the Board of Directors without the need to send prior written notice to the Board of Directors. Accordingly, a request for the annulment of the resolution of the Board of Directors does not constitute a dispute.

However, to request the Court to annul the resolution of the Board of Directors, shareholders must prepare a litigation dossier. Pursuant to Clauses 4 and 5, Article 189 of the Civil Procedure Code 2015, the litigation dossier includes:

  • A petition and accompanying documents and evidence;
  • A copy of the resolution;
  • Evidence proving that the conditions for requesting annulment are satisfied;
  • Personal identification documents (identity card, citizen identity card, etc.).

Litigation procedures

  • The person whose lawful rights and interests are infringed submits the petition to the Court in accordance with the methods prescribed in Article 190 of the Civil Procedure Code 2015;
  • The Court receives and accepts the dossier if it is valid, and proceeds with case acceptance;
  • The Court conducts first-instance adjudication;
  • If the parties disagree with the Court’s decision, they may file an appeal, or the Procuracy may lodge a protest.

4. Does the annulment of the resolution of the Board of Directors affect the validity of prior decisions?

The annulment of the resolution of the Board of Directors may affect the validity of prior decisions if such decisions are legally based on the annulled resolution. However, the extent of such impact depends on the specific content, effective date, and scope of influence of the resolution.

Where prior decisions are issued independently and do not rely on the annulled resolution, they may remain legally effective. In specific cases, each document and the actual impact of the annulment must be reviewed to determine the validity of related decisions.

5. In cases where the resolution of the Board of Directors violates the law, at whose request may it be annulled?

Pursuant to Clause 4, Article 153 of the Law on Enterprise 2020, resolutions of the Board of Directors that violate the law, the Company Charter, or resolutions of the General Meeting of Shareholders may be annulled at the request of shareholders. Specifically, shareholders or groups of shareholders meeting the statutory shareholding threshold are entitled to request the Court to suspend or annul resolutions of the Board of Directors where such resolutions cause damage to the company.

IV. Legal consultancy services on the annulment of resolutions of the Board of Directors

In the current complex legal environment, engaging legal consultancy services is an optimal solution to ensure full compliance with applicable laws. Lawyers provide advice on matters relating to the election and operation of the Board of Directors and propose the most effective legal solutions for clients.

Ngoc Phu Law Company Limited, with its team of experienced lawyers, is willing to assist clients in all matters relating to the Board of Directors. We are committed to delivering effective legal solutions and maximizing the protection of our clients’ lawful rights and interests.