What are the requirements to be satisfied by members of the Board of Members in a state-owned enterprise in Viet Nam?

State-owned enterprises may be limited liability companies with a Board of Members. Members of this Board of members shall satisfy specific requirements prescribed by law. Let’s find out this issue with Lawyer X through the following scenario: “Dear Lawyer! I would like to ask how shall members of the Board of Members in state-owned enterprises be chosen? What are the requirements to these persons? Thanks for answering me!”

Legal grounds

Law on Enterprises

State-owned enterprises in Viet Nam

State-owned enterprises shall be limited liability companies or joint stock companies, including:

– Wholly state-owned enterprises (100% of charter capital of which is held by the State). Wholly state-owned enterprises include:

+ Single-member limited liability companies 100% of charter capital of which is held by the State that are parent companies of state-owned corporations or parent companies in groups of parent company – subsidiary companies;

+ Independent single-member limited liability companies 100% of charter capital of which is held by the State.

– Partially state-owned enterprises (over 50% of charter capital or voting shares is held by the State, except the enterprises specified in Point a Clause 1 of Article 88 of Law on Enterprises). Partially state-owned enterprises include:

+ Multiple-member limited liability companies and joint stock companies over 50% of charter capital or voting shares of which is held by the State that are parent companies of state-owned corporations or parent companies in groups of parent company – subsidiary companies;

+ Independent multiple-member limited liability companies and joint stock companies over 50% of charter capital or voting shares of which is held by the State.

*Organizational structure

The state ownership representative body shall decide whether to apply one of the two models below to organize the state-owned enterprise as a single-member limited liability company:

– A company with a President, Director/General Director and Board of Controllers;

– A company with a Board of Members, Director/General Director and Board of Controllers.

General view of the Board of Members

– The Board of Members shall consist of up to 07 members including a President. Members of the Board of Members shall be designated, dismissed, rewarded and disciplined by the state ownership representative body.

– The Board of Members shall perform the company’s rights and obligations in the company’s name as prescribed by Law on Enterprises and relevant laws.

– The term of office of the President and other members of the Board of Members shall not exceed 05 years. A member of Board of Members may be designated again for not more than 02 terms in the same company unless he/she has worked for the company for more than 15 consecutive years before the first designation.

Requirements to be satisfied by members of the Board of Members

To become a member of the Board of Members, a person shall satisfy the following requirements:

– He/she is not one of the persons specified in Clause 2 Article 17 of Law on Enterprises.

– He/she has professional qualifications and experience of business administration or experience of the company’s business lines.

– He/she is not a relative of the head or deputies of the state ownership representative body; any of the members of the Board of members, the Director/General Director, the Deputy Director/General Director, the chief accountant or Controllers of the company.

– He/she is not an executive of the member enterprise.

– A member of the Board of Members other than the President may concurrently hold the position of Director/General Director of the company or another company that is not a member enterprise under a decision of the state ownership representative body.

– He/she has never been discharged from the position of President of the Board of Members, member of Board of Members, the company’s President, Director/General Director, Deputy Director/General Director of a state-owned enterprise.

– He/she satisfies other requirements specified in the company’s charter.

*Dismissal, discharge of members of the Board of Members

– The President or another member of the Board of Members shall be dismissed in the following cases:

+ He/she does not fully satisfy the requirements specified in Article 93 of Law on Enterprises;

+ He/she hands in the resignation and is accepted in writing by the state ownership representative body;

+ A reassignment or retirement decision is issued;

+ He/she is not capable of or qualified for the given tasks;

+ He/she is not healthy or reputable enough to hold the position.

– The President or another member of the Board of Members shall be discharged from duty in the following cases:

+ The company fails to achieve the annual targets; fails to conserve and develop investment capital as required by the state ownership representative body without an excuse that is objective or accepted by the state ownership representative body;

+ He/she is convicted by the Court under an effective judgment or decision;

+ He/she fails to perform her duties in an honest manner or abuses his/her power and position or uses the company’s assets for personal gain or serve any other organization’s or individual’s interests; fails to truthfully report the company’s finance and business performance.

– Within 60 days from the issuance date of the decision to dismiss or discharge the President or member of the Board of Members, the state ownership representative body shall designate another person as President or member.

Rights and obligations of members of the Board of Members

– Participate in meetings of the Board of Members; discuss, propose, vote on the issues within the jurisdiction of the Board of Members;

– Inspect, access, extract logbooks; monitor contracts, transactions, accounting books, financial statements, minutes of meetings of the Board of Members and other documents of the company;

– Other rights and obligations prescribed by the company’s charter, Law on Enterprises and relevant laws.

*Responsibilities of members of the Board of Members

– Comply with the company’s charter, decisions of the company’s owner and regulations of law.

– Exercise and perform their rights and obligations in an honest and prudent manner to protect the lawful interests of the company and the State.

– The Board of Members has the following rights and obligations:

+ Decide the matters prescribed in the Law on Management and use of State Investment in Enterprises;

+ Decide establishment, reorganization, dissolution of the company’s branches, representative offices and dependent units;

– Be loyal to the interests of the company and the State; do not abuse their power and position or use the enterprise’s information, secrets, business opportunities and assets for personal gain or serve any other organization’s or individual’s interests;

– Promptly and fully notify the company of the enterprises that they own or have shares/stakes or that their related persons own, jointly own or have separate controlling shares/stakes. These notifications shall be retained at the company’s headquarters.

– Implement resolutions of the Board of Members.

– Take personal responsibility when performing the following actions:

+ Take advantage of the company’s name to violate the law;

+ Do business or conduct transactions that do not serve the company’s interests and cause damage to other organizations and individuals;

+ Pay debts before they are due while the company is facing financial risks.

– The member who discovers another member’s violation shall send a written notification to the state ownership representative body, request the violator to stop the violation and implement remedial measures.

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