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

The Board of Controllers in Joint-stock companies is an essential body of the company, which has its primary function in supervising the activities of other departments. Viet Nam Law has regulations on the legal status of the Board of Controllers in Joint-stock companies. Let’s find out this issue with Lawyer X through the following scenario: “Dear Lawyer! I want to ask how shall the Board of Controllers in Joint Stock companies be elected? What are rights and obligations of this body? Thanks for answering me!”

Legal grounds

Law on Enterprises

What is Board of Controllers?

– The Board of Controllers shall have 3 – 5 Controllers. The term of office of a Controller shall not exceed 05 years without term limit.

– The Chief Controller shall be elected by the Board of Controllers among the Controllers. The Chief Controller shall be elected and dismissed under the majority rule. Rights and obligations of the Chief Controller shall be specified in the company’s charter. More than half of the Controllers shall have permanent residences in Vietnam. The Chief Controller shall have a bachelor’s degree in economics, finance, accounting, audit, law, business administration or a major that is relevant to the enterprise’s business operation, unless higher standards are prescribed in the company’s charter.

– In case the term of office of all Controllers expires before an election can be carried out, the existing Controllers shall keep performing until Controllers are elected and take over the job.

Requirements to be satisfied by Controllers

– A Controller shall satisfy the following standards and requirements:

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

+ His/her major is  economics, finance, accounting, audit, law, business administration or a major that is relevant to the enterprise’s business operation;

+ He/she is not a relative of any of the members of the Board of Directors, Director/General Director and other executives;

+ He/she is not the company’s executive, is not necessarily a shareholder or employee of the company unless otherwise prescribed by the company’s charter;

+ Other standards and requirements are satisfied as prescribed by law and the company’s charter.

– In addition to the standards and requirements specified in Clause 1 of Article 169 Law on Enterprises, Controllers of a public company or state-owned enterprise prescribed in Point b Clause 1 Article 88 of Law on Enterprises must not be relatives of the executives of the company and the parent company; of the representative of enterprise’s investment or state investment in the company and the parent company.

Rights and obligations of the Board of Controllers

– Supervise the Board of Directors and the Director/General Director managing the company.

– Inspect the rationality, legitimacy, truthfulness and prudency in business administration; systematic organization, uniformity and appropriateness of accounting works, statistics and preparation of financial statements.

– Validate the adequacy, legitimacy and truthfulness of the income statements, annual and biannual financial statements, reports on performance of the Board of Directors; submit validation reports at the annual GMS. Review contracts and transactions with related persons subject to approval by the Board of Directors or the GMS and offer recommendations.

– Review, inspect and evaluate the effectiveness of the internal control, internal audit, risk management and early warning systems of the company.

– Inspect accounting books, accounting records, other documents of the company, the company’s administration where necessary, under resolutions of the GMS or at the request of the shareholder or group of shareholders specified in Clause 2 Article 115 of Law on Enterprises.

– When requested by the shareholder or group of shareholders specified in Clause 2 Article 115 of Law on Enterprises, the Board of Controllers shall carry out an inspection within 07 working days from the day on which the request is received. Within 15 days after the end of the inspection, the Board of Controllers shall submit a report to the Board of Directors or the requesting shareholder or group of shareholders. The inspection must not obstruct normal operation of the Board of Directors or interrupt the company’s business operation.

– Propose changes or improvements to the company’s organizational structure and administration to the Board of Directors or the GMS.

– Promptly submit a written notification to the Board of Directors whenever a member of the Board of Directors, the Director/General Director is found to be violating Article 165 of Law on Enterprises, request the violator to stop the violations and implement remedial measures.

– Participate in and discuss at the GMS, meetings of the Board of Directors and other meetings of the company.

– Employ independent counsels and internal audit unit of the company to perform their tasks.

– The Board of Controllers may discuss with the Board of Directors before submitting reports and proposals to the GMS.

– Other rights and obligations prescribed by Law on Enterprises, the company’s charter and resolution of the GMS.

Rights to information of the Board of Controllers

– Documents and information shall be sent to Controllers in the same manner as those being sent to members of the Board of Directors, including:

+ Meeting invitations, questionnaires and enclosed documents;

+ Resolutions, decisions and minutes of meetings of the Board of Directors and the GMS;

+ Reports of the Director/General Director to the Board of Directors or other documents issued by the company.

– Controllers are entitled to access the company’s documents at the headquarters, branches and other locations; enter the executives’ and employees’ workplace during working hours.

– The Board of Directors, members of the Board of Directors, the Director/General Director and other executives shall fully and promptly provide information and documents about the company’s administration as requested by Controllers or the Board of Controllers.

Salaries, bonuses and other benefits of Controllers

Unless otherwise prescribed by the company’s charter, the salaries, bonuses and other benefits of Controllers shall be paid as follows:

– Controllers’ salaries, bonuses, other benefits and operating budget shall be decided by the GMS;

– Reasonable costs of food, stay, travel, independent counseling services of Controllers shall be reimbursed. The total salaries and costs must not exceed the annual operating budget of the Board of Controllers which has been approved by the GMS, unless otherwise prescribed by the GMS;

– Salaries and operating costs of the Board of Controllers shall be recorded as the company’s expenses in accordance with regulations of law on corporate income tax and relevant laws and placed in a separate section in the company’s annual financial statements.

Responsibilities of Controllers

– Comply with regulations of law, the company’s charter, resolutions of the GMS and code of ethics in performance of their rights and obligations.

– Perform their rights and obligations in an honest and prudent manner to serve the best and lawful interests of the company.

– Be loyal to the company’s interests; 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.

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

– The Controller that violates Clauses 1, 2, 3 or 4 of Article 173 Law on Enterprises and causes damage to the company or another person shall be personally or jointly responsible for the damage and return the benefits earned from the violation to the company

– Send a written notification to the Board of Controllers of violations committed by another Controller and request the violator to stop the violation and implement remedial measures.

Dismissal of Controllers

– The GMS shall dismiss a Controller from office in the following cases:

+ He/she does not fully satisfy the standards and requirements specified in Article 169 of Law on Enterprises;

+ He/she hands in a resignation and is accepted;

+ Other cases specified in the charter.

– The GMS shall dismiss a Controller in the following cases:

+ He/she fails to perform his/her duties;

+ He/she fails to perform his/her rights and obligations for 06 consecutive months, except in force majeure events;

+ He/she commits multiple, serious violations of Controller’s duties prescribed by Law on Enterprises and the charter;

+ Other cases specified in resolutions of the GMS.

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Conclusion: So the above is The legal status of the Board of Controllers in Joint stock companies under Viet Nam Law. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com