Protecting Foreign Investor Rights in Corporate Governance Dispute

We needed to prevent the transaction from proceeding while engaging in negotiated resolution. The first step was an immediate filing for emergency court injunction at the competent Provincial People's Court, supported by:

(1) the Investment Agreement's related-party-transaction provisions and the proposed transaction's clear status as related-party;

(2) preliminary independent valuation evidence suggesting the proposed acquisition prices exceeded fair market by approximately 30-40%;

(3) procedural defects in the convening notice for the extraordinary shareholders' meeting (insufficient detail about the transactions to be voted on under Article 142 of the Enterprise Law).

The court granted the injunction within nine days, halting the shareholders' meeting and the proposed transaction. The Vietnamese majority shareholders' response was immediate: a request for negotiation. We agreed but on three conditions: (1) the injunction would remain in place during negotiations; (2) the Vietnamese majority would commission an independent valuation from a firm acceptable to both sides; (3) any restructured transaction would be subject to the Investment Agreement's supermajority requirement.

The independent valuation came in approximately 35% below the originally proposed prices. With this baseline, we negotiated a restructured transaction: smaller acquisition (only one of the two affiliated companies), at fair-market price, with the consideration paid in shares from a portion of the Vietnamese majority's holding rather than new issuance. This eliminated dilution of the Taiwanese investor's stake and maintained dividend capacity.

The restructured transaction was approved at a properly-convened shareholders' meeting with the Taiwanese investor's affirmative vote. The Taiwanese investor maintained its 35% stake and its blocking-right protection. The Vietnamese company subsequently performed strongly through 2024, and as of late 2024 was on track for a 2026 Hanoi listing. The Taiwanese investor's stake has appreciated approximately 80% from its 2019 acquisition cost based on third-party valuation references.

The negotiated outcome preserved the working relationship between the shareholders. Subsequent governance has been notably more careful, with related-party transactions properly identified and submitted for supermajority approval as a matter of routine.