A shareholder’s right to not have the value of shares diluted is commonly respected in many countries. In Viet Nam, however, the concept of "anti-dilution" is still new both to investors and in the law.

An anti-dilution provision in a share purchase contract gives a current shareholder the right to maintain its proportion of ownership in a company by receiving a proportional number of new shares any time the company issues additional stock. Without this right, shareholders see their proportion of ownership (and voting rights) diluted every time new shareholders come on board.

The laws of many countries have complex formulas for defining dilution of shares, but they are all aimed at preserving the ownership stake of existing shareholders.

Vietnamese law does not yet set forth a comprehensive mechanism on dilution of shares or protection of shareholders. The 2005 Law on Enterprises only gives current shareholders pre-emptive rights, a sort of right of first refusal. When a firm issues new shares, it must first offer the shares to all current shareholders on pro rata basis. This kind of option to buy or suffer dilution may not satisfactorily solve the problem, however, forcing a current shareholder to come up with additional capital and buy shares or sit back and watch them be sold to outside investors, diluting their interests.

The main investors in many Vietnamese companies are so-called "strategic investors", who may have invested considerably in the growth and development of a company and may have a particularly strong interest in keeping their interests from later being water down by an additional share issue.
Many lawyers advise these strategic shareholders to add an anti-dilution provision in their share purchase agreement to protect themselves. Such a provision could grant the strategic investor special status by means of warrants, stock options, or preferred shares. The problem with these provisions is that they may contradict the pre-emptive right of other shareholders as stipulated in Article 79.1 of the 2005 Law on Enterprises.

Another problem with the legality of anti-dilution provisions may arise if they require a company to issue a certain number of shares to the strategic investor at a nominal price every time they offer additional shares. This is a method to ensure that the strategic investor retains its percentage claim on dividends.

However, such nominal pricing of new shares may be disallowed by Article 87 of the 2005 Law on Enterprises which requires that the price of new shares not go below the fair market price of such shares in the latest financial statements of the company, with a few exceptions.
In many companies, protecting minority shareholders is necessary, but the roles of strategic investors are important to grow the company and make the pie bigger for everyone. The Law on Enterprises needs to contain a legal mechanism giving shareholders a right to negotiate anti-dilution provisions in share purchase agreements. At present, the law is cloudy enough on this issue that investors are struggling to structure deals to get around legal barriers to anti-dilution provisions.