Vietnam Joint Venture Agreements: The Clauses That Decide Control
Control is not the shareholding split. It is the reserved-matters list, the legal representative, what happens when a partner cannot fund, and whether the exit mechanism actually works.
Most joint venture negotiations in Vietnam spend their energy on one number: the shareholding split. It is the wrong place to spend it. Control in a Vietnamese joint venture is decided by the reserved-matters list, the legal representative, the funding mechanics and the exit, and a 51 percent partner who loses those four arguments has bought a minority stake at a majority price.
This is what to negotiate, in the order it matters.
The percentage is a default, not the answer
Vietnamese company law sets voting thresholds that apply unless your charter raises them. In a multi-member limited liability company, ordinary resolutions of the Members' Council generally pass with 65 percent of the attending capital, and a reserved category covering charter amendments, reorganisation, dissolution and the disposal of major assets requires 75 percent. In a joint stock company the equivalent thresholds are lower for ordinary business and higher for special matters.
Read those numbers carefully against your split. At 65 percent you control ordinary business. At 51 percent you control nothing on your own. At 70 percent you can run the company but cannot amend its charter. Each of those is a different deal, and none of them is described by the phrase "we have the majority".
Reserved matters: the list that actually decides control
Statutory thresholds are the floor. The charter and the joint venture agreement can require a higher vote, and this is where a minority partner protects itself and a majority partner discovers what it did not read.
Negotiate the list explicitly rather than accepting a template. The questions worth asking are which decisions can be taken by the general director alone, which need the Members' Council, and which need both partners.
| Decision | Usually fine at ordinary threshold | Worth reserving to both partners |
|---|---|---|
| Annual budget and business plan | Approval of the plan itself | Any spend above an agreed figure outside the approved plan |
| Borrowing and guarantees | Working capital facilities within the plan | Shareholder loans, related-party debt, any guarantee of another group company |
| Related-party contracts | Routine purchases at market terms | Management fees, royalties, service charges payable to either partner |
| People | Hiring below director level | Appointing or removing the legal representative, general director and chief accountant |
| Capital | Nothing | Any increase, reduction or new member admission |
| Assets and IP | Ordinary disposals | Licensing or transferring IP contributed by either side |
The charter and the JV agreement are two documents
The joint venture agreement is the commercial contract between the partners. The charter is the constitutional document filed with the authorities and is what a Vietnamese court, bank or notary will read. When the two disagree, the registered charter is what governs the company's dealings with the outside world.
This sounds procedural and is not. Partners routinely negotiate a detailed agreement, then file a short standard-form charter that contains none of it, and are surprised two years later when the bank accepts a signature the agreement said required both partners. Anything meant to bind the company rather than just the partners has to be in the charter.
The legal representative is a control position, not a title
The legal representative binds the company. They sign contracts, deal with the tax office, control the seal in practice and carry personal administrative exposure for the company's filings. Whoever holds that role holds day-to-day control regardless of the shareholding.
Vietnamese law allows a company to have more than one legal representative, with the charter setting out each one's scope. Two representatives with divided authority, or a rule that certain documents need both signatures, is often the cleanest way to give a minority partner real protection without paralysing the business.
Practical takeaway. Decide three things before you argue about percentages: who is the legal representative, what needs both signatures, and what happens if one partner cannot fund a capital call. Those three answers describe the deal more accurately than the split does.
Funding, and what happens when one side cannot pay
Registered capital must be contributed within the schedule filed with the investment authority, and a shortfall is a registration breach rather than a private matter between partners. The company then has to register the reduced capital, which in a joint venture means renegotiating the split under time pressure and with a regulator watching.
The agreement should say what happens when a partner misses a call. The usual options are dilution on an agreed formula, a shareholder loan from the funding partner with a conversion right, or a call option over the defaulting partner's stake. Pick one in advance. Deciding it in the quarter it happens is how joint ventures end up in arbitration.
Deadlock, and the exits that actually work
Every joint venture agreement has a deadlock clause and most of them are decorative. Escalation to the chairmen, then to a mediator, then to arbitration, describes a process rather than an outcome.
- Put and call options at a pre-agreed valuation method, exercisable on defined trigger events. The method matters more than the number: name the multiple, the basis and who appoints the valuer.
- Shoot-out clauses, where one partner names a price and the other chooses to buy or sell at it. Effective, but only fair when both partners could actually fund the purchase.
- Drag and tag rights, so a sale to a third party is not blocked by a minority holder, and a minority holder is not left behind with a new partner they did not choose.
Whichever you choose, remember that a share transfer in a foreign-invested company usually needs regulatory approval and takes time. An exit mechanism that assumes a transfer can complete in days is not an exit mechanism.
Transfer restrictions and pre-emption
In a multi-member limited liability company, a member wanting to sell must generally offer the interest to the other members first, on the same terms, before selling to an outsider. That statutory right of first refusal exists whether or not your agreement mentions it, and it shapes every exit conversation.
What the agreement adds is the detail: how long the other partner has to decide, how price is set if the offer is not a cash sale, and whether a transfer within the seller's own group counts as a sale at all. That last point is worth settling early, because most foreign partners eventually reorganise their holding structure for reasons that have nothing to do with Vietnam.
Governing law and where a dispute is actually resolved
Contracts between a foreign investor and a Vietnamese partner over a company incorporated in Vietnam sit partly under Vietnamese law whatever the agreement says: the charter, the corporate approvals and the share register are Vietnamese matters.
For the commercial agreement, arbitration is the common choice, either at the Vietnam International Arbitration Centre or offshore in Singapore or Hong Kong. Vietnam is a party to the New York Convention, so a foreign award is recognisable, but recognition proceedings take time and are not automatic. If enforcement will ultimately be against assets sitting in Vietnam, an award that a Vietnamese court will accept quickly is worth more than a theoretically stronger one from further away.
A sensible negotiating order
Settle the reserved matters list, the legal representative arrangement and the funding default first. Then the exit. Then the percentage, which by that point is mostly about economics rather than control. Joint ventures that fail in Vietnam rarely fail because the split was wrong. They fail because nobody wrote down what happens when the partners disagree.
Negotiating a joint venture in Vietnam? Our market entry and company setup team reviews the charter alongside the agreement, so the control you negotiated is the control that gets registered.
