The legal status of the Board of Members in the State-owned enterprise in Viet Nam

by Hà Ngọc

State-owned enterprises may be limited liability companies with a Board of members. Viet Nam law on enterprises has regulations on the legal status of the Board of Members in the State-owned enterprise. Let’s find out this issue with Lawyer X through the following scenario: “Dear Lawyer! I would like to ask if a state-owned enterprise is a limited liability then what rights and obligations shall the legal status of the Board of Members in the State-owned enterprise? Thanks for answering me!”

Law on Enterprises

What are state-owned enterprises?

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.

The legal status of the Board of Members in the State-owned enterprise in Viet Nam
The legal status of the Board of Members in the State-owned enterprise in Viet Nam

The Board of Members

– 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 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 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 busines 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.

Rights and obligations of the Board of Members

– The Board of Members shall, in the name of the company, perform the rights and obligations of the owner, shareholders/members of other companies owned by the company or whose shares/stakes are owned by the company.

– 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;

+ Decide the company’s annual business plan, policies on market development, marketing and technology;

+ Organize internal audits and decide establishment of the company’s internal audit unit;

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

President of the Board of Members

– The President of the Board of Members shall be designated by the state ownership representative body as prescribed by law and must not concurrently hold the position of Director/General Director of the company or another enterprise.

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

+ Plan quarterly and annual activities of the Board of Members;

+ Draw up agenda and prepare documents for meetings or surveys of the Board of Members;

+ Convene and chair meetings of the Board of Members or organize surveys of the Board of Members;

+ Organize the implementation of decisions of the state ownership representative body and resolutions of the Board of Members;

+ Supervise, organize the supervision and evaluation of the achievement of strategic targets and the company’s business performance, performance of the Director/General Director;

+ Organize the disclosure of the company’s information as prescribed by law; take responsibility for the adequacy, punctuality, accuracy and systematic organization of the disclosed information.

– In addition to the cases specified in Article 94 of Law on Enterprises, the President of the Board of Members may be dismissed or discharged if he/she fails to perform the rights and obligations specified in Clause 2 of Article 95 of Law on Enterprises

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 President and other 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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Finally, hope this article is useful for you to answer the question about “The legal status of the Board of Members in the State-owned enterprise in Viet Nam”. If you need any further information, please contact  LSX Law firm+84846175333 or Email: [email protected]

Frequently asked questions

In what cases shall the president or another member of the Board of Members in a state-owned enterprises be dismissed?

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.

Shall the Board of Members in state-owned enterprises perform the rights and obligations of the owner in the company’s name?

The Board of Members shall, in the name of the company, perform the rights and obligations of the owner, shareholders/members of other companies owned by the company or whose shares/stakes are owned by the company.

In what cases shall the President or another member of the Board of Members be discharged from duty?

The President or another member of the Board of Members shall be discharge 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.

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