The organizational structure of state-owned enterprises in Viet Nam

by Hà Ngọc

The state-owned enterprise is an essential economic entity through which the state can deploy economic policies. The organizational structure of state-owned enterprises is stipulated in Viet Nam Law on Enterprises. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask how the state-owned enterprises are organized in Viet Nam? What enterprises are considered state-owned enterprises in Viet Nam? Thanks for answering me!”

Legal grounds

2020 Viet Nam 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.

Application of regulations on state-owned enterprises       

Wholly state-owned enterprises specified in Point a Clause 1 Article 88 of Law on Enterprises shall be organized as single-member limited liability companies in accordance with this Chapter and relevant regulations of Law on Enterprises. In case of discrepancies between regulations of Law on Enterprises, the regulations of this Chapter shall prevail.

Partially state-owned enterprises specified in Point b Clause 1 Article 88 of Law on Enterprises shall be organized as multiple-member limited liability companies in accordance with Section 1 of Chapter III or as joint stock companies in accordance with Chapter V of Law on Enterprises

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 organizational structure of state-owned enterprises in Viet Nam
The organizational structure of state-owned enterprises 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.

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.

*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.

The company’s President

The company’s President shall be designated by the state ownership representative body as prescribed by law and has up to 02 terms of office of up to 05 years each, unless he/she has worked for the company for more than 15 consecutive years before the first designation. The requirements, dismissal of the company’s President shall comply with Article 93 and Article 94 of Law on Enterprises.

The company’s President shall perform the rights and obligations of the state ownership representative at the company in accordance with the Law on Management and use of State Investment in Enterprises; other rights, obligations and responsibilities prescribed in Article 92 and Article 97 of Law on Enterprises.

The Presidents’ salaries and allowances shall be recorded as the company’s administrative expenses.

The company’s President shall employ the company’s administration and assistance apparatus to perform his/her rights and obligations. Where necessary, the company’s President may discuss with domestic and foreign counsels before making important decisions under his/her jurisdiction. The counseling costs shall be specified in the company’s financial management regulations.

The decisions within the President’s jurisdiction mentioned in Clause 2 of Article 99 shall be made in writing and bear the President’s signature, even if the President concurrently holds the position of Director/General Director.

A President’s decision takes effect from the day on which it is signed or on the effective date written therein, unless it is subject to approval by the state ownership representative body.

In case the President is not present in Vietnam for more than 30 days, he/she shall authorize another person in writing to perform some of his/her rights and obligations. A written notification of the authorization shall be sent to the state ownership representative body. Other cases of authorization shall comply with the company’s rules and regulations.

The Director/General Director and Deputy Directors/General Directors

The Director/General Director shall be designated or hired by the Board of Members or the company’s President under a personnel plan approved by the state ownership representative body. The Director/General Director shall manage the company’s everyday business and has the following rights and obligations:

– Organize the implementation of the company’s busines plans and investment plans and evaluation thereof;

– Organize the implementation of resolutions and decisions of the Board of Members, company’s President and state ownership representative body and evaluation thereof;

– Decide everyday matters of the company;

– Issue the company’s rules and regulations after they are approved by the Board of Members or company’s President;

– Designate, hire, dismiss, terminate employment contracts with the company’s executives, except those within jurisdiction of the Board of Members or the company’s President;

– Enter into contracts and carry out transactions in the company’s name, except those within jurisdiction of the President of the Board of Members or the company’s President;

– Prepare and submit quarterly and annual reports on achievement of business targets and financial statements to the Board of Members or the company’s President;

– Propose the distribution and use of post-tax profits and other financial obligations of the company;

– Recruit employees;

– Propose the plan for the company’s reorganization;

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

The company may have one or several Deputy Directors/General Directors. The designation and quantity of Deputy Directors/General Directors shall be specified in the company’s charter. Rights and obligations of Deputy Directors/General Directors shall be specified in the company’s charter and their employment contracts.

Controllers and the Board of Controllers

The state ownership representative body shall decide the establishment of a Board of Controllers, which has 01 – 05 Controllers including a Chief Controller. The term of office of a Controller shall not exceed 05 years. A Controller must not be designated more than 02 consecutive terms. In case the Board of Controllers has only 01 Controller, he/she shall be the Chief Controller and has to satisfy corresponding requirements.

An individual may concurrently hold the position of Chief Controller or Controller of up to 04 state-owned enterprises.

 A Controller or Chief Controller shall satisfy the following requirements:

– He/she has a bachelor’s degree or higher in economics, finance, accounting, audit, law, business administration or a major that is relevant to the enterprise’s business operation and at least 03 years’ experience (05 years for Chief Controller);

– He/she is not executive of the company or any other enterprise; not a Controller of enterprises other than state-owned enterprises; not a company’s employee.

– 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, any of the Deputy Directors/General Directors, the chief accountant or any other Controllers of the company;

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

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Frequently asked questions

What are forms of 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).
– 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).

What do wholly state-owned enterprises include?

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.

What do partially state-owned enterprises include?

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.

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