📖 Etymology corner, before we dive in
The word "associate" comes from Latin associare — "to join to, to unite with," from ad- (to) + socius (companion, ally). A business associate is someone you've chosen to bind yourself to in pursuit of a shared commercial goal.
The word "transaction" comes from Latin transactio — "an agreement, a settlement," from transigere, "to drive through, to carry through to the end." A transaction is something carried all the way through — from intention, to action, to completion.
And the word "related" comes from Latin relatus, past participle of referre — "to carry back, to refer back." To be related is to be referred back — to share a common origin, a common control, a common benefit.
Today's article is about what happens when "associates" carry through "transactions" that refer back — benefit that flows from a company to its own controlling shareholder through the back door — and what the law does about it. Ngọc Prinny-mode: on. 🦊
🧐 Meet today's cast
Three people started a joint-stock company together. Let's call them:
- Sam Park — contributed 15% of capital. Works in the business, trusts the plan.
- Tom Nguyen — also contributed 15%. Same story as Sam, same worries.
- Victor Vong — the "senior partner." Deep pockets. Contributed 70% of capital.
Initial mood: aligned. Shared vision. Everyone signed the charter (Điều lệ). Everyone believed in "more money in, more say." Sam and Tom's mantra: "góp nhiều nói nhiều, góp ít nói ít" — contribute more, speak more.
Fast forward: the company turns profitable. Sam and Tom see none of that profit. Instead, they watch the company's money move — first as a "loan" to another company, then as an "investment" in yet another business.
When they ask Victor, they get: "Don't worry, the money's still working for the company."
When they push back, they get: "This was decided by the person holding 70% of shares, so."
Sam and Tom come to a lawyer friend with one question: "Do we have any rights at all?"
The answer, as it turns out, is yes — and in one very specific scenario, their 30% becomes more powerful than Victor's 70%. Let's walk through the mechanism. 🔍
🧐 Part 1: Related-party transactions — what they are and why they matter for tax
Before we get to the corporate law drama, let's lay the conceptual foundation: what is a "related-party transaction" (giao dịch liên kết)?
Per Article 18, Law on Tax Administration 2025 and Article 4.1, Decree 255/2026/NĐ-CP, a related-party transaction covers:
"Purchases, sales, exchanges, leases, loans, transfers, assignments of goods or services; financial loans, guarantees, and other financial instruments; transfers of tangible and intangible assets; and agreements to share resources such as assets, capital, labor, and costs — between related parties."
This is a deliberately wide net. What's a "related party" (bên liên kết)? Article 5, Decree 255/2026/NĐ-CP lists 12 categories. The ones most relevant to Victor, Sam, and Tom's situation include:
- One enterprise holding directly or indirectly at least 25% of owner's equity in another enterprise (Category 1) — Victor's 70% easily clears this bar
- An enterprise where an individual controls through capital contribution or direct management participation (Category 9) — again, Victor
- Transactions involving loans or transfers of at least 25% of equity with controlling individuals or their family members (Category 11)
Why identify related-party transactions at all? Under Article 3.1, Decree 255/2026/NĐ-CP, the purpose is tax integrity: taxpayers with related-party transactions must eliminate any factors that artificially reduce their corporate income tax obligation, and declare those transactions as if they were arm's-length dealings between independent parties.
In plain English: you can't route money to your own companies at artificially favorable prices to reduce the group's tax bill. The company's transactions with Victor's related entities have to be priced and structured as if Victor were a stranger.
This matters for Sam and Tom because the exact definition of who is "related" to Victor — and what transactions with those related parties look like — is the same framework that triggers their rights under corporate law.
⚖️ Part 2: The corporate law superpower — "transactions with related persons"
Here's where the story turns. The money flowing from the company to Victor's other entities isn't just a tax issue. It's a corporate governance trigger under the Enterprise Law 2020.
The key rule: Article 167, Enterprise Law 2020
For a joint-stock company (công ty cổ phần), transactions between the company and any of the following require General Meeting of Shareholders (GMS) approval when the transaction value exceeds 35% of the company's total assets (or a lower threshold if stated in the charter — some charters use 10%):
- Shareholders owning 51% or more of voting shares (that's Victor)
- Directors, members of the Board of Supervisors, the General Director
- Related persons (người có liên quan) of any of the above — which under Article 4.24 of the Enterprise Law covers immediate family, controlled companies, and companies where these individuals hold ≥35% shares
And here is the magic clause: When the GMS meets to vote on such a transaction:
The shareholder (or group of shareholders) with a direct interest in the transaction is not entitled to vote.
Let that land for a moment.
Victor, who controls 70% of shares in normal circumstances, is excluded from voting on any resolution that directly benefits him or his related companies. His 70% becomes zero valid votes for that specific resolution.
Sam and Tom's 30% — normally outvoted at every single GMS — suddenly represents 100% of valid votes for exactly that resolution.
The two diagrams above illustrate this reversal. The money-flow diagram shows where Victor's "loans" and "investments" actually went. The voting chart shows what happens when Sam and Tom realize they can call a GMS on this specific question.
🚨 What if Victor already did it without calling a GMS?
This is the more likely real-world scenario — and the law still has teeth.
If a related-party transaction above the threshold was executed without proper GMS approval, shareholders have the right to:
- Petition the court to declare the transaction void (tuyên giao dịch vô hiệu) — the loan or investment is treated as legally nonexistent
- Require the interested party to return all benefits received and compensate for all resulting damages — Victor's related companies would have to repay the company, and Victor himself could be jointly liable
This is the nuclear option — and it's available even retroactively.
📋 Connecting the two frameworks: tax + corporate governance
Here's the elegant overlap that makes this situation legally coherent:
| Framework |
Threshold for "related" |
Key legal effect |
| Tax (Decree 255/2026) |
25% equity ownership |
Must declare transactions at arm's-length prices; tax cannot be manipulated via related-party pricing |
| Corporate governance (Enterprise Law 2020) |
Shareholder with 51%+ voting rights, plus their related persons |
Transactions above asset threshold require GMS approval; interested shareholder excluded from vote |
Victor's entities qualify as "related" under both frameworks. The tax law ensures the transactions are priced fairly for CIT purposes. The Enterprise Law ensures the transactions can't be authorized by Victor alone — Sam and Tom must approve them.
🏠🚗 Real-life analogies
- 🏠 The housing committee that bids on its own building project. A building management committee decides to hire a contractor to renovate the lobby. One committee member owns the contracting company. They cannot vote on whether to hire their own company — the other committee members decide. Even if the other members represent a minority of the building's square footage, they have full say on this specific decision.
- 🚗 The judge who recuses themselves from a family member's case. The judge's authority is enormous in ordinary circumstances — but when they have a personal stake in the outcome, they step aside and the ruling is made by someone who doesn't. Victor's 70% is like the judge's authority: vast in general, but recused the moment personal interest enters the room.
🤔 Did you know? Quick legal trivia 🤔
- The "arm's-length principle" (nguyên tắc giao dịch độc lập) in Decree 255/2026 requires that related-party transactions be benchmarked against comparable independent transactions — this is the foundation of international transfer pricing rules adopted by most OECD members, and Vietnam has implemented it to prevent profit-shifting between related entities.
- The Enterprise Law's definition of "người có liên quan" (related persons) is surprisingly wide: it covers spouse, parents (biological and adoptive, including step-parents and in-laws), children (biological, adoptive, step-children, sons/daughters-in-law), siblings, grandparents, grandchildren, aunts, uncles, cousins — and any enterprises where these individuals hold 35%+ equity. Victor's wife's company is a "related person" of Victor. His parents' company is a "related person" of Victor.
- The conflict-of-interest exclusion from voting at the GMS is not a punishment — it's a structural protection built into corporate law to prevent the company from being used as a personal piggy bank by its controlling shareholder.
- Minority shareholders holding 10% or more of voting shares for at least 6 consecutive months have standing to call an extraordinary GMS themselves under Article 115 of the Enterprise Law — Sam and Tom, collectively at 30%, meet this threshold easily.
📝 Quick self-quiz — are you minority-shareholder-law-fluent?
-
Under Vietnamese corporate law, what type of resolution requires GMS approval rather than just board approval, when it involves a controlling shareholder's related party?
A. Any transaction at all B. Transactions above specified asset thresholds involving related persons C. Only transactions involving family members D. Only transactions with foreign entities
-
When Victor's related company is the beneficiary of a proposed company transaction, can Victor vote at the GMS on that resolution?
A. Yes — he controls 70% B. Yes — but only if Sam and Tom agree C. No — interested shareholders are excluded D. Only if the Board approves his participation
-
True or false: if a related-party transaction was already completed without proper GMS approval, shareholders lose the right to challenge it.
-
Sam and Tom together hold 30% of voting shares and have held them for 8 months. Can they call an extraordinary GMS on their own?
A. No — they need at least 51% B. No — only the Board can call a GMS C. Yes — 10% for 6+ consecutive months is sufficient D. Only with a court order
-
Under Decree 255/2026, what percentage of equity ownership in another company creates a "related party" relationship for tax purposes?
A. 10% B. 25% C. 51% D. 65%
Answer key: 1-B · 2-C · 3-False (court can still declare it void) · 4-C · 5-B 🎉
💡 Practical tips for minority shareholders and founders
For Sam and Tom (minority shareholders in this situation):
- Request the company's accounting records and contracts related to every "loan" and "investment" Victor has made. As shareholders holding 10%+ for 6+ months, you have statutory inspection rights under Article 115, Enterprise Law 2020.
- Identify which transactions exceed the threshold (check the charter first for the applicable percentage — some use 10% or 35% of total assets). Each qualifying transaction that went undisclosed to the GMS is a potential basis for a court challenge.
- Check whether Victor's counterparties are indeed "related persons" under the Enterprise Law definition. A company majority-owned by Victor, or by his spouse, or controlled by Victor's parents — all qualify.
- Consider calling an extraordinary GMS to retroactively ratify — or refuse to ratify — past undisclosed transactions. At 30%, you have the right to call the meeting; and with Victor excluded from voting on conflict-of-interest resolutions, you hold 100% of valid votes.
For founders setting up a joint venture:
- Negotiate the related-party transaction threshold into the charter explicitly. The law sets a default; your charter can set a lower one (e.g., 5% or 10% of total assets rather than 35%).
- Add a tag-along / drag-along clause for situations where the majority wants to sell. A shareholders' agreement (thỏa thuận cổ đông) is separate from the charter and can add protections that charter templates don't include.
- Document everything about resource contributions beyond capital: who brings the customers, who holds the relationships, who does the operational work. These often matter in a dispute even if not on the cap table.
🌿 A quick detour into nature's version of this rule
Behavioral ecologists describe conflict of interest in animal group decision-making as a fundamental challenge: when the dominant individual in a group has a personal stake in a decision that diverges from the group's collective interest, group cohesion breaks down and resource allocation becomes dysfunctional. Many colonial species — meerkats, bee colonies, wolf packs — have evolved mechanisms for removing a conflicted individual from the decision-making process: a queen bee that begins laying unfertilized eggs is replaced; a dominant meerkat that monopolizes food at the expense of the group is eventually ousted. Corporate law's conflict-of-interest exclusion is the legal equivalent of exactly this evolutionary mechanism: the group protects itself from the individual whose interests have diverged, by temporarily removing that individual's voice from the decision. 🐝
🗣️ Over to you
Have you or someone you know been in Sam and Tom's position — minority shareholders watching company money move to the majority's related entities, feeling powerless? Did you know about the voting exclusion rule before reading this? Drop your experience in the comments — real stories from people who've navigated these situations are genuinely valuable to others in the same spot. And if you know a founder who's about to sign a shareholder agreement without these protections built in, share this with them. Before, not after. 📣
#VietnamLaw #CorporateLaw #MinorityShareholder #RelatedPartyTransactions #GiaoDichLienKet #DeluluVN #NgocPrinny #LegalEducation #BusinessLaw #ShareholderRights
🚨 Fun but serious: a brief legal disclaimer 🚨
Hey there, legal explorer! 🕵️♀️ Before you close this tab —
- This article is a map, not a teleporter 🗺️ — it explains the legal mechanism, but your specific shareholding structure, charter provisions, and transaction facts determine what remedies are actually available.
- The thresholds and procedures described reflect current law — your company's charter may specify different percentages that override the statutory defaults.
- For actual disputes between shareholders, summon a professional legal wizard 🧙♀️ — and this kind of corporate dispute is exactly the territory where Thầy Điệp & Associates Law Firm can help.
- Reading this doesn't make you a corporate litigator, the same way knowing the rules of chess doesn't make you a grandmaster. ♟️😉
Full disclaimer: ngocprinny.blogspot.com/2024/08/disclaimer.html
#LegalInfo #delulu.vn #NotLegalAdvice #ConsultAPro #NgocPrinny
💝 Support your legal ninja's wellness fund! 🍵
This article wove together tax law, corporate governance, and a real human story to explain a mechanism that could determine whether Sam and Tom get justice — or not. That kind of cross-disciplinary synthesis runs on:
- Hours of reading decrees, Enterprise Law provisions, and transfer pricing rules 📚
- 10+ years of hands-on legal expertise ⚖️
- A genuine desire to give "the little guy" the legal vocabulary to fight back 📝
- And the usual herbal tea 🍵
If this gave Sam and Tom — or someone like them — a fighting chance, consider treating this ninja to a green tea →. 🌱
More about the author and the DELULU world: delulu.vn/about-2/
Author: Nguyễn Lê Bảo Ngọc (Ngọc Prinny)
Reviewed by: Lawyer Lê Thị Kim Dung and Lawyer Nguyễn Văn Điệp, Thầy Điệp & Associates Law Firm
And a little closing wish, timed exactly to when you're reading this:
🌙 Nếu bạn đọc bài viết này vào buổi tối, chúc bạn ngủ thật ngon — và mong rằng mọi giao dịch liên kết của bạn đều được thực hiện đúng trình tự.
☀️ Nếu bạn đọc vào buổi sáng, chúc bạn một ngày tràn đầy năng lượng — và nhiều cổ phần được bảo vệ vững chắc.
🇬🇧 Wherever you're reading from — may your shareholding always carry its full legal weight, and your related-party transactions always go through the right channels.
🇯🇵 いつ読んでいても、心穏やかな一日を。
🇫🇷 Et où que vous soyez, que vos droits d'actionnaire soient toujours respectés — même à 30%. ☘️
