The Right of Shareholders to Sue Managers of a Joint Stock Company

The right of shareholders to sue managers¹ of a joint stock company is an important legal mechanism enabling shareholders to protect their own lawful rights and interests, as well as those of the company, where a manager breaches an assigned duty. This article examines the conditions for exercising this right, the persons entitled to bring such a claim, the persons who may be sued, and the grounds for such a claim under Article 166 of the Law on Enterprises.

Within the organizational and management structure of a joint stock company, the authority to manage and operate the company is vested in the General Meeting of Shareholders, the Board of Directors, the Director or General Director, and other managerial positions, in accordance with the Law on Enterprises and the company’s charter. The vesting of such managerial authority simultaneously gives rise to a need for accountability mechanisms, so as to prevent the abuse of authority in a manner that would affect the lawful rights and interests of shareholders and of the company.

To give effect to this accountability mechanism, the Law on Enterprises currently in force recognizes the right of a company’s shareholders to sue the company’s managers in certain specified circumstances.

The right to sue a company’s managers is provided for under Article 166 of the Law on Enterprises 2020, as amended and supplemented in 2025,¹ as a legal mechanism intended to strengthen corporate governance by requiring managers to properly exercise their functions within the scope of the authority assigned to them. This right is granted to a shareholder, or a group of shareholders, holding at least 1% of the total ordinary shares. This provision enables shareholders, in particular minority shareholders, to protect their own legitimate rights and interests, as well as the lawful interests of the company.

That said, the right to sue a manager is available only to shareholders holding ordinary shares; shareholders holding preference shares² are not entitled to exercise this particular right. It should not, however, be understood that shareholders holding preference shares are wholly without any right to sue, or without legal protection. The rights of such shareholders must instead be assessed by reference to the specific class of preference shares they hold, the company’s charter, and other applicable legal provisions.

In addition to specifying who may bring such a claim, Article 166 of the Law on Enterprises also specifies in detail who may be sued, namely:

• – (i) Members of the Board of Directors;
• – (ii) The Director; and
• – (iii) The General Director.

These are key managerial positions occupying a central role in the management and administration of the company, representing the company in numerous activities and transactions with customers, partners, and other third parties.

Clause 24, Article 4 of the Law on Enterprises, however, provides that “managers of an enterprise” within a joint stock company include the Chairman of the Board of Directors, members of the Board of Directors, the Director or General Director, and any individual holding another managerial title as provided for in the company’s charter. Article 166, by contrast, limits the persons who may be sued to members of the Board of Directors, the Director, or the General Director, thereby excluding other managerial titles created under the company’s charter from the scope of persons who may be sued. This shows that the class of persons who may be sued under Article 166 is narrower than the concept of “manager of an enterprise”³ defined under Article 4 of the Law on Enterprises 2020.

The fact that the current Law on Enterprises limits the persons who may be sued to the above managerial positions reflects their position, authority, and responsibility within the company. These are the persons who hold substantial operational and controlling authority over the company’s activities, and who are capable of directly influencing strategic planning, the organization of business operations, and decisions on significant matters relating to the company’s assets and interests. Accordingly, where such persons engage in conduct falling within the statutory grounds, this may affect not only the company’s operations but may also infringe the lawful rights and interests of the company, its shareholders, and other related parties.

At the same time, it must be acknowledged, as a matter of fair assessment, that other managerial positions created under a company’s charter — such as, for example, Chief Operating Officer or Chief Financial Officer — also play a highly important role in a company’s management structure. Where an individual holding such another managerial title breaches the duties of a manager under Article 165, the fact that such individual falls outside the class of persons who may be sued by shareholders reduces the effectiveness of the accountability mechanism applicable to a company’s managers. This provision should therefore be considered for further refinement, so as to align with the duties and responsibilities of managers under Clause 24, Article 4 and Article 165 of the Law on Enterprises, and to strengthen consistency among these legal provisions.

As to the grounds for such a claim, Article 166 of the Law on Enterprises provides that a member of the Board of Directors, the Director, or the General Director may be sued where such person falls within one of the following categories of breach:

• – (i) Breach of the duties of a company manager as provided under Article 165 of the Law on Enterprises 2020;
• – (ii) Failure to perform, incomplete performance, untimely performance, or performance in a manner contrary to the law, the company’s charter, or a resolution or decision of the Board of Directors, in respect of the rights and duties assigned to such person;
• – (iii) Abuse of position or title, or use of the company’s information, know-how, business opportunities, or other assets, for personal benefit or for the benefit of another organization or individual; or
• – (iv) Other cases as provided by law and the company’s charter.

The above provisions address, in reasonably comprehensive terms, the typical categories of breach that may arise in a managerial position. Current law, however, still contains a general, open-ended ground, “other cases as provided by law and the company’s charter”, which may give rise to differing interpretations and applications in practice, and may generate conflicting views when determining the liability of such persons. It may nonetheless be observed that the grounds for a claim under Article 166 are all directed at controlling breaches by managers of their duties in managing and operating the company, thereby providing a legal basis for shareholders to protect themselves and the company, while also enhancing transparency and effectiveness in corporate governance.

Overall, Article 166 of the Law on Enterprises establishes an important legal mechanism enabling shareholders to participate directly in overseeing the company’s management and operation. This provision will help to raise the awareness and sense of responsibility of managers in operating the company, while also strengthening internal accountability mechanisms and upholding the principle that authority must be matched by responsibility.

¹ Under Vietnamese law, this refers to a statutory right of shareholders to bring legal proceedings against managers in circumstances prescribed by the Law on Enterprises.

² A type of shares under Vietnamese law that carries preferential rights, which may differ from “preferred stock” under US or other foreign laws.

³ “Manager of an enterprise” is a statutory concept under Vietnamese law and has a broader scope than the terms “director” or “officer” commonly used in Common Law jurisdictions. It may cover various managerial positions specified by the Law on Enterprises and the company’s charter and should therefore not be understood solely by reference to the Common Law concept of a corporate director.

Should you require further assistance, please do not hesitate to contact:

Attorney: Tran Thi My Duyen

• – Email: info@bizlawyer.vn
• – Tel: 086.885.1900

Best regards.