Hoang Hai JSC was formed in 2010 as a shareholding company, and quickly established itself as a successful retail operator in the coffee shop market. The company sells high quality, highly priced coffees, teas, fruit juices and snacks from several locations in Hanoi, and has plans to expand to several others towns and cities in the future.

The boad ofmanagement hes identified a new oppoturnity to diversify the bussiness and intends to open three fitness centres equipped with gymnasia, swingimg pools and relaxation areas. Each fitness centre will also have its own coffee shop.

Three buildings suitable for conversion into fitness centres were found and the board of management has decided to acquire these and purchase the fitting and equipment necessary for the fitness centres. The board of management has also sanctioned a high profile marketing campaign with a view to giving the new centres extensive publicity before the opening dates.

The fitness centres initiative has not been universally welcomed by the shareholders of the company. Despite announcing increased profits, the board of management has not increased the dividend this years, citing the need for reinvestment as a justification for this. Several shareholdrers have pointed out that ther Charter of the company refers to its lines of business as a food and drink retailer, with no mention of fitness centres. These shareholders believe that the board of management has acted outside its authority, and that the new venture is highly risky, as most premium grade hotels already have well-established fitness centres that are open to the public.

Required:

With reference to the Vietnamese enterprise law:

(a)Discuss the actions that can be taken by the shareholders who oppose the diversification plan of the board of management.

(b)Examine the potential consequences to the members of the board of management of the actions that have been taken in diversifying the business.