1. What are internal enterprise disputes?

Internal enterprise disputes are understood as disputes over rights and interests between individuals and organizations in an enterprise arising during the process of establishment, operation, dissolution, merger, consolidation, division or separation of the enterprise. Specifically, according to Article 30.4 of the 2015 Civil Procedure Code, internal enterprise disputes include: “Disputes between a company and its members; dispute between a limited liability company and its managers, between a joint stock company and members of the board of directors, director or general director, or between members of a company regarding the establishment, operation, dissolution, merger, consolidation, division, splitting, handover of assets of the company, or organizational transformation of the company”.

2. Common types of internal enterprise disputes

The first is disputes between the enterprise and its members:

• Disputes between members/shareholders who do not contribute enough capital according to the commitment to contribute/register on the enterprise registration certificate;

• Disputes over asset valuation when contributing capital, not transferring ownership of assets contributed as capital;

• Disputes over rights and interests, profit sharing…

The second is disputes between the enterprise and its manager:

• Disputes arising from decisions of the General Meeting of Shareholders of a joint-stock company, the Members’ Council of a limited company;

• Disputes arising from decisions or operating activities of the Chairman of the Board of Directors, the Chairman of the Members’ Council, the General Director, the Director;

• …

The third is disputes between members of the enterprise:

• Disputes over choosing a legal representative, electing members of the Board of Directors…;

• Disputes over rights and obligations of members and shareholders in the enterprise;

• …

3.        Causes of internal enterprise disputes

          First, internal enterprise disputes arise because relevant individuals do not respect the provisions of the law. When co-operating to establish an enterprise, individuals participating in the establishment of enterprises do not research the provisions of the law, failure to anticipate problems arising during the operation of the enterprise, so they do not build an appropriate internal corporate management document system.

         Second, internal enterprise disputes arise due to mutual suspicion. The lack of clarity and transparency in the implementation of records on management and finance along with the lack of adequate reporting leading to suspicion are some of the main reasons leading to disputes.

        Third, the person who directly manages and operates the enterprise sometimes makes subjective decisions and does not comply with internal management documents, resolutions of the General Meeting of Shareholders, the Board of Directors, the Board of members. This is also a fundamental cause of internal disputes in enterprises.

4.        Experience of lawyers specializing in settlement of internal enterprise disputes

          Lack of experience in internal enterprise disputes resolution may result in the loss of rights and obligations of the disputing parties because such internal dispute will put the enterprise to the verge of bankruptcy. Phong & Partners Law Firm hereinafter shares our experiences on steps to take to resolve internal enterprise disputes.

           Step 1: Negotiation

• In all disputes including internal enterprise disputes, you should not rush to consider litigation. The nature of an internal enterprise dispute is a conflict of rights and interests. Therefore, when an internal dispute arises, the parties should discuss to find common ground in determining the legitimate and appropriate rights and interests of the parties.

• In case the parties cannot self-evaluate and analyze to determine the appropriate legal rights and interests for the parties, with our experience gained, enterprises need to find a lawyer with reputation, experience and professional capacity for research and advice in the process of negotiating and resolving internal disputes.

Step 2: Internal mediation

• In case the disputing parties have tried their best and have also consulted with a lawyer, but the parties to the internal enterprise dispute still cannot find a common ground and cannot negotiate, should one of the parties go to court to ask for a settlement?

• Our answer is you should not. Because, in our opinion, filing a lawsuit to ask for dispute settlement is the last method, once the parties have applied all methods but still cannot resolve the dispute.

• Internal mediation, that is, the disputing parties can ask a lawyer, expert or a reputable individual to act as a mediator for the parties. Our experience shows that, in many cases, the parties cannot negotiate but can be reconciled through this method.

• In order for this stage of mediation to be successful, in addition to an important factor is that the goodwill of the parties in an internal enterprise dispute, enteprises need to find a qualified, experienced and reputable lawyer to provide advice and/or act as a mediator.

Step 3: Mediation through a commercial mediator

• Internal enterprise disputes are resolved by commercial mediation if the parties have an agreement on such mediation. Commercial mediators shall be selected by the parties from the list of commercial mediators of a commercial mediation organization or from the list of ad hoc commercial mediators announced by Department of Justice of provinces/cities directly under the Central Government.

• Disputes may be conducted by one or more commercial mediators as agreed by the parties. At any time during the mediation process, the commercial mediator has the right to make a proposal to resolve the dispute.

• When a successful mediation is achieved, the parties shall make a document on the successful conciliation result. The document on the successful conciliation result shall be considered and recognized according to the provisions of the civil procedure law so that such document is as valid as a legally effective judgment. In order to be recognized and enforceable under the law on civil judgment enforcement, one or both parties may apply to the Court for recognition.

Step 4: Filing a lawsuit at an Commercial Arbitration Center or a Court

(1) Filing a lawsuit at an Commercial Arbitration Center

• Commercial arbitration is a method of dispute settlement agreed by the parties and conducted in accordance with the law on commercial arbitration. One of the advantages when settling disputes at commercial arbitration is information security. Court procedures are public, so sometimes it will affect the reputation of the enterprises, which is what the enterprises are undesirable.
• Some notes when choosing commercial arbitration as an internal enterprise dispute resolution agency:
  • ​The involved parties and disputing parties must have good legal knowledge to be able to participate during the arbitration because the evidences, opinions, views and arguments provided by each party to the Arbitrator Council shall be immediately provided to the other party by the Arbitrator Council and they will request the other party to comment within a certain time limit, according to the Rules of Procedure of each Arbitration Center. Therefore, the party who lacks legal knowledge will face more disadvantages.
  • ​The arbitral award is final, which means that the arbitral award will take effect immediately without the parties having the right to appeal. Therefore, during the arbitration proceedings, the disputing parties must invest time and effort in order to protect legitimate rights and interests in a best way.
  • The arbitral award may be annulled by the Court according to the request of one of the disputing parties if it violates the “Arbitration Procedures”. That is, although the arbitral award takes effect immediately, the Court has no right to consider whether the Arbitration is correct in terms of content, but according to the provisions of law, the Court has the right to consider whether the Arbitrator has followed the correct order and procedures... or not. Therefore, the disputing parties also need to pay attention to this issue, if it is found that the Arbitrator Council is procedurally incorrect, the disputing parties should propose an adjustment to avoid the case that the award is annulled.

(2) Filing a lawsuit in Court

• Compared with the above-mentioned dispute settlement methods, dispute settlement by courts is considered to have strict procedures, state power, and high enforcement value. Different from dispute settlement at arbitration, the Court has 2 levels of trial: first instance and appellate. If the case is resolved at the District Court but the parties disagree, they have the right to appeal and the Provincial Court will be the appellate court; if the case is resolved at the provincial court but the parties do not agree, they have the right to appeal and the High Court will be the appellate court.
• Some notes when internal enterprise disputes are resolved in Court:
  • ​Regarding petitions: It should be note that the content requested by the Court to settle must be clear and specific. In some cases, it is not easy to clearly define the lawsuit claim. In many cases, the Court has to return the petition or request clarification of the scope of the petition.
  • Regarding the collection and provision of evidences: It should be note that if the involved parties cannot collect evidences by themselves to protect legitimate rights and interests, they may request the Court to do so.
  • ​Regarding the presentation of defense views to the Trial panel: It should be note that in order for the Trial panel to clearly understand and agree with defense position, the litigant must invest a lot of research to give a clear, detailed, logical defense point and in accordance with the provisions of the law. This should be done before the Court has the decision to bring the case to trial because at the trial, the Trial panel will not have enough time to fully understand the views of the litigant as the litigant wishes, especially problems of high complexity.

5. Phong & Partners Law Firm has extensive experience in settlement internal enterprise disputes.

With a team of lawyers and legal specialists who are well-trained, have many years of experience in providing legal services to enterprises, Phong & Partners is increasingly trusted by the business community when they need professional advice, especially in internal enterprise disputes.

PHONG & PARTNERS LAW FIRM

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