The legal status of the Board of Directors in Joint stock companies under Viet Nam Law

The Board of Directors is an important body in Joint stock companies. Viet Nam Law on Enterprises has regulations on the legal status of the Board of Directors in Joint stock companies. Let’s find out this issue with Lawyer X through the following scenario: “Dear Lawyer! I want to ask what is the position of The Board of Directors in Joint stock companies? What are rights and obligations of the Board of Directors? Thanks for answering me!”

Legal grounds         

Law on Enterprises

What is The Board of Directors?

– The Board of Directors is the managerial body of the company and has the right to make decisions on behalf of the company, perform rights and obligations of the company, except the rights and obligations of the GMS.

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

+ Decide the company’s medium-term development strategies and annual business plans;

+ Propose the types of authorized shares and quantity of each type;

+ Decide sale of certain types of unsold authorized shares; decide other methods of raising capital;

+ Decide selling prices for the company’s shares and bonds;

+ Decide repurchase of shares as prescribed in Clause 1 and Clause 2 Article 133 of Law on Enterprises;

+ Decide the investment plan and investment projects within its jurisdictions and limitations prescribed by law;

+ Decide solutions for market development, marketing and technology;

+ Approve sale contracts, purchase contracts, borrowing contracts, lending contracts, other contracts and transactions that are worth at least 35% of the total assets written in the latest financial statement, unless another ratio or value is specified in the company’s charter; contracts and transactions within the jurisdiction of the GMS as prescribed in Point d Clause 2 Article 138, Clause 1 and Clause 3 Article 167 of Law on Enterprises.

+ Elect, dismiss the President of the Board of Directors; designate, dismiss, enter into and terminate contracts with the Director/General Director and other key executives specified in the company’s charter; decide salaries, remunerations, bonuses and other benefits of these executives; designate authorized representatives to participate in the Board of Members or GMS of another company; decide their remunerations and other benefits;

+ Supervise the Director/General Director and other executives managing the company’s everyday business;

+ Decide the company’s organizational structure, rules and regulations; establishment of subsidiary companies, branches and representative offices; contribution of capital to and purchase of shares of other enterprises;

+ Approve the agenda and documents of the GMS; convene the GMS or carry out surveys for the GMS to ratify its resolutions;

+ Submit annual financial statements to the GMS;

+ Propose the dividends; decide the time and procedures for paying dividends or settling business losses;

+ Propose reorganization or dissolution of the bankruptcy; file bankruptcy of the company;

+ Other rights and obligations prescribed by Law and the company’s charter.

– The Board of Directors shall ratify its resolution and decisions by voting at the meeting, questionnaire survey or another method specified in the company’s charter. Each member of the Board of Directors shall have one vote.

– In case a resolution or decision is ratified by the Board of Directors against regulations of law or a resolution of the GMS or the company’s charter and causes damage to the company, the members that vote for the ratification of such resolution or decision shall be jointly responsible for it and pay compensation for the company; the members that vote against such resolution or decision shall not be held responsible. In this case, the company’s shareholders are entitled to request the court to suspend or invalidate the resolution or decision.

Term of office and quantity of members of the Board of Directors

– The Board of Directors shall have 03 – 11 members. The specific quantity of members shall be prescribed by the company’s charter.

– The term of office of a member of the Board of Directors shall not exceed 05 years without term limit. An individual may only be elected independent member of the Board of Directors of a company for up to 02 continuous terms.

– In case the term of office of all members of the Board of Directors ends at the same time, they shall remain members of the Board of Directors until new members are elected and take over their jobs unless otherwise prescribed by company’s charter.

– The company’s charter shall specify the quantity, rights, obligations of independent members of the Board of Directors; method for organizing and coordinating their activities.

Organizational structure and requirements to be fulfilled by members of the Board of Directors

– To be a member of the Board of Directors, 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 busines administration in the company’s busines lines; a member is not necessarily a shareholder of the company, unless otherwise prescribed by the company’s charter;

+ A person may hold the position of member of the Board of Directors of more than one company;

+ A member of the Board of Directors of a state-owned enterprise prescribed in Point b Clause 1 Article 88 of Law on Enterprises and subsidiary companies of a state-owned enterprise prescribed in Clause 1 Article 88 of Law on Enterprises must not be a relative of the Director/General Director or any other executive of the company, of the executive or the person having the power to designate the executive of the parent company.

– Unless otherwise prescribed by securities laws, an independent member of the Board of Directors prescribed in Point b Clause 1 Article 137 of Law on Enterprises shall satisfy the following requirements:

+ He/she is not working for the company or its parent company or subsidiary company; did not worked for the company or its parent company or subsidiary company within the last 03 years or longer;

+ He/she is not receiving a salary from the company, except the allowances to which members of the Board of Directors are entitled as per regulations;

+ His/her spouse, biological parents, adoptive parents, biological children, adopted children and siblings are not major shareholders of the company, executives of the company or its subsidiary companies;

+ He/she is not directly or indirectly holding 1% of the company’s voting shares or more;

+ He/she did not hold the position of member of the Board of Directors or the Board of Controllers of the company within the last 05 years or longer unless he/she was designated in 02 consecutive terms.

– An independent member of the Board of Directors shall notify the Board of Directors if he/she no longer satisfies the requirements specified in Clause 2 of Article 155 Law on Enterprises and is obviously no longer an independent member from the day on which a condition is not satisfied. The Board of Directors shall the disqualification if this member at the nearest GMS or convene the GMS to elect a new independent member within 06 months from the day on which the notification is received from the member.

The President of the Board of Directors

– The Board of Directors shall elect one of its members President of the Board of Directors; dismiss its President.

– The President of the Board of Directors of a public company or a joint stock company prescribed in Point b Clause 1 Article 88 of Law on Enterprises must not concurrently hold the position of Director/General Director.

– The President of the Board of Directors has the following rights and obligations:

+ Plan the activities of the Board of Directors;

+ Draw up agenda and prepare documents for meetings of the Board of Directors; convene and chair the meetings;

+ Organize the ratification of resolutions and decisions of the Board of Directors;

+ Supervise the implementation of resolutions and decisions of the Board of Directors;

+ Chair the GMS;

+ Other rights and obligations prescribed by Law and the company’s charter.

– In case the President of the Board of Directors is not present or not able to perform his tasks, he/she shall authorize another member in writing to perform the rights and obligations of the President of the Board of Directors in accordance with the company’s charter. In case no member is authorized or the President is dead, missing, detained, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, making a getaway; has limited legal capacity or is incapacitated, has difficulty controlling his/her behavior, is prohibited by the court from holding certain positions or doing certain works, one of the Board of Directors shall convene a meeting with the remaining members to elect one of them as the interim President under the majority rule until a new decision is issued by the Board of Directors.

– Where necessary, the Board of Directors may designate the company’s secretary, who will have the following rights and obligations:

+ Assist in convening the GMS and meetings of the Board of Directors; takes minutes of the meetings;

+ Assists members of the Board of Directors in performing their rights and obligations;

+ Assists the Board of Directors in applying and implementing the business administration rules;

+ Assist the company in development of shareholder relationship, protection of lawful rights and interests of shareholders; fulfillment of the obligation to provide and disclose information and administrative procedures;

+ Other rights and obligations prescribed by the company’s charter.

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