Representative of state capital share and representative of corporate capital share in Vietnam

Vietnam law has regulations on representative of state capital share and representative of corporate capital share. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask what are requirement that the representative of state capital share and representative of corporate capital share must conform to? What are regulations on appointment of a representative of state capital share and representative of corporate capital share? Thanks for answering my questions!”

Legal grounds

• 2014 Vietnam Law on Management and Utilization of State capital invested in the enterprise’s manufacturing and business activities

Eligibility of the representative of state capital share and representative of corporate capital share

The representative of state capital share and representative of corporate capital share must conform to the following requirements:

– Vietnamese citizens residing in Vietnam;

– Possess right political qualities and good personality, and be fully capable of performing civil acts as well as be healthy enough to fulfill assigned tasks;

– Have a good command of laws and show their strong willingness in complying with laws;

– Have appropriate working capability and proper professional qualifications or skills as well as working experience that match requirements for taking up the position as a representative;

– Be not banned from holding certain posts, or subject to disciplinary measures, investigation, prosecution, judicial trial and imprisonment and disciplinary decisions;

– Be not the spouse, parent, foster parent, natural son or daughter, adopted son or daughter, full sibling, sibling-in-law of the Chairperson and members of the Board of Members, the Chairperson and members of the Board of Directors, President, auditors, Director General or Director, Deputy Director General or Vice Director, Chief Accountant of the enterprise;

– Conform to other criteria as stipulated by legal regulations on enterprises and other relevant laws.

Appointment of a representative of state capital share and representative of corporate capital share

– Pursuant to requirements set out in Article 46 hereof, the owner’s representative agency, enterprises of which 100% charter capital is held by the State shall be entitled to choose and appoint the representative of state capital share or corporate capital share. Appointment of such representatives must be clarified in a document in which rights and responsibilities of these representatives must be clearly stated.

– Time limit for appointment of representatives of state capital and corporate capital is determined for the period which does not exceed the term of Board of Members, Board of Directors in office.

– Full-time representatives shall get involved in the work of representation at enterprises.

– Those representatives, who are not working full time, shall be able to get involved in the work of representation at less than three enterprises, and the number of representatives of this type at an enterprise shall not be allowed to exceed 30% of total membership of the Board of Members and Board of Directors.

Those representatives who are not working full time shall be entitled to serve as representatives at one or several enterprise(s) in accordance with regulations laid down in the charter of enterprises.

Rights and responsibilities of the representative of state capital share

– Ask for the advice from the owner’s representative agency before raising opinions, casting votes and making decision at the Shareholders’ General Council, meeting of the Board of Directors, Board of Members, on the following issues:

+ Scope of businesses, objectives, tasks, strategy and plan for investment and development, and plan for production and business;

+ Introduction and revision of the charter; increase or reduction in the charter capital; election, dismissal, discharge, commendation, reward and penalties for members of the Board of Directors, Board of Members, General Director or Director, Deputy Director General or Vice Director;

+ Distribution of profits and setting up of annual funds in the enterprise;

+ Reorganization, dissolution or bankruptcy;

+ Other issues managed under the delegated authority of the Shareholders’ General Council, Board of Directors and Board of Members.

– Make on-time reports on any loss incurred by joint-stock companies or multiple-member limited liability companies during their operations, failure to ensure payment competence, to complete assigned tasks as well as other violations.

– Submit the quarterly, annual and on-demand reports on manufacturing and business activities, financial status, and recommend solutions at the request of the owner’s representative agency and the representative of state capital share.

– Request joint-stock companies and multiple-member limited liability companies to pay in their distributable profits and dividends in proportion to the share of state capital invested in such companies to the State Budget.

– Be deprived of the right to continue to act as the representative if that person does not fully exercise the delegated powers or assume the delegated responsibilities or does not meet the requirements for a representative any more.

– Bear legal responsibility for any violation causing any loss on or damage to the state capital.

– Exercise the rights and assume the responsibilities in accordance with regulations laid down in the charter of joint-stock companies and multiple-member limited liability companies, the enterprise law and other relevant laws.

Powers and responsibilities of the representative of corporate capital share

– Ask for the advice from the enterprise who appoints such representative before raising opinions, casting votes and making decision at Shareholders’ General Council, meeting of the Board of Directors, Board of Members, on the following issues;

+ Business scope, objectives, tasks, strategy, plan for investment and development, and the plan for production and business;

+ Introduction and revision of the charter; increase or reduction in the charter capital; appointment, dismissal, discharge, commendation, reward and imposition of penalties for members of the Board of Directors, Board of Members, General Director or Director, Deputy Director-General or Vice Director;

+ Distribution of profits, setting up of annual funds for enterprises;

+ Reorganization, dissolution and bankruptcy;

+ Other issues managed under their delegated authority of the Shareholders’ General Council, Board of Directors and Board of Members.

– Make on-time reports on any loss incurred by joint-stock companies or multiple-member limited liability companies during their operations, failure to ensure payment competence, complete assigned tasks and other violations.

– Submit the quarterly, annual and on-demand reports on manufacturing and business activities, financial status and suggest solutions at the request of enterprises.

– Be deprived of the right to continue to act as the representative if that person does not fully exercise the delegated powers or assume the delegated responsibilities or does not meet the requirements for a representative any more.

– Bear legal responsibility for any violation causing any loss on or damage to the capital and assets of the enterprise.

– Exercise the rights and assume the responsibilities in accordance with regulations laid down in the Enterprise Law, the charter of enterprises and other relevant laws.

Salary, remuneration, bonus and other benefits for the representative of state capital share and the representative of corporate capital share

– The full-time representative of state capital share and the full-time representative of corporate capital share invested in joint-stock companies and multiple-member limited liability companies shall be paid salary, responsibility allowance, bonus and other benefits by these companies.

– The part-time representative of state capital share and the part-time representative of corporate capital share invested in joint-stock companies and multiple-member limited liability companies shall be paid salary, remuneration, bonus and other benefit as follows:

+ Remuneration paid by joint-stock companies or multiple-member limited liability companies;

+ Salary, responsibility allowance, bonus and other benefit paid by the owner’s representative agency and enterprises of which 100% charter capital is held by the State.

Supervision and inspection of state investment in an enterprise

– Issuance of policies and laws on state investment in an enterprise.

– Investment of state capital in an enterprise that must adhere to objectives, principles and scopes stipulated by 2014 Vietnam Law on Management and Utilization of State capital invested in the enterprise’s manufacturing and business activities.

– Determination of invested capital, balancing of invested capital spending and revenue as well as utilization of capital sources as state investments in enterprises.

– Economic and social efficiency in investment of state capital in enterprises.

– Decision on investment intention, application process and procedure for the decision on investment of state capital in enterprises.

– Exercising of powers or performance of duties of the owner’s representative agency towards the state investment in enterprises.

Supervision and inspection of the management and utilization of capital and assets of enterprises of which 100% charter capital is held by the State

– Issuance of policies and laws on management and utilization of capital and assets in enterprises.

– Exercise of powers or assumption of responsibilities of the owner’s representative agency towards the management and utilization of capital and assets in enterprises.

– Implementation of the plan for production, business, and the financial plan and strategy for corporate development, and performance of tasks in providing public products and services according to the purchase order placed by the State or as planned.

– Capital mobilization and utilization of mobilized capital, management of receivables, payables, and implementation of projects for investment, purchase and sale of fixed assets, and preservation and development of corporate capital.

– Introduction of internal rules and regulations of the enterprise.

– External and outward investment activities of the enterprise.

– Disposal and divestment of capital, and collection of distributable profit and dividends on the enterprise’s external investments.

– Management of the enterprise’s paid-in capital invested in joint-stock companies and multiple-member limited liability companies.

– Implementation of regulations on salary, wage, remuneration, bonus, responsibility allowance, and other benefits paid to employees, managers, auditors and representatives of corporate capital share.

– Fulfillment of obligations to the State budget, distribution of profits, setting up and utilization of corporate funds.

Please see more:

• Instructions for exclusive registration of company logos in Vietnam
• Service of changing the legal representative of Vietnamese enterprises

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