What is the minimum number of members of the Board of Directors of a public company in Vietnam? If it's not enough, will it be fined?
What is the minimum number of members of the Board of Directors of a public company in Vietnam?
Pursuant to Article 276 of Decree No. 155/2020/ND-CP stipulating the composition of the Board of Directors as follows:
Composition of the Board of Directors
1. The Board of Directors of a public company has 03 - 11 members.
2. At least one third (1/3) of the members of the Board of Directors of a public company shall be non-executive members.
3. In case a unlisted public company applies the model specified in Point b Clause 1 Article 137 of the Law on Enterprises, at least one fifth (1/5) of its members of the Board of Directors must be independent members. In case the Board of Directors of this unlisted public company has fewer than 05 members, at least 01 of them must be an independent member.
4. Number of independent members of the Board of Directors of a listed companies:
a) At least 01 independent member if the Board of Directors has 03 – 05 members;
b) At least 02 independent members if the Board of Directors has 06 – 08 members;
c) At least 03 independent members if the Board of Directors has 09 – 11 members.
Thus, the number of members of the Board of Directors of a public company is at least 03 people and at most 11 people.
At the same time, at least one third (1/3) of the members of the Board of Directors of a public company shall be non-executive members.
What is the minimum number of members of the Board of Directors of a public company in Vietnam? If it's not enough, will it be fined?
If a public company does not have an independent member of the Board of Directors, will it be penalized?
Pursuant to Point a, Clause 6, Article 15 of Decree No. 156/2020/ND-CP as amended and supplemented according to the provisions of Clause 13, Article 1 of Decree No. 128/2021/ND-CP:
Violations against regulations on public company administration
...
6. A fine ranging from VND 100.000.000 to VND 150.000.000 shall be imposed upon a public company for committing one of the following violations:
a) Failing to ensure the number of members of the Board of Directors or the Board of Controllers; failing to ensure that at least 1/3 of the members of its Board of Directors are non-executive members; failing to ensure the composition and number of independent members of the Board of Directors; failing to ensure that members of the Board of Directors, the Board of Controllers and the audit committee meet standards and eligibility requirements, and are not subject to any cases prescribed by law; failing to establish an audit committee affiliated to the Board of Directors or failing to ensure the composition and number of members of the audit committee;
b) Failing to invite representative of the accredited audit organization that has audited the Company’s annual financial statements to participate in the annual General Meeting of Shareholders in case the auditor's report on annual financial statements contains qualified opinions, adverse opinions or disclaimer of opinions;
c) Committing violations against regulations on transactions with shareholders, executive officers and their related persons;
d) Failing to enter into written contracts when conducting transactions with related persons.
Thus, in case a public company fails to ensure the number of members of the Board of Directors, it may be fined from VND 100 million to VND 150 million.
How must the Board of Directors comply with its responsibilities and obligations?
The Board of Directors must fully comply with the responsibilities and obligations as prescribed in Article 278 of Decree No. 155/2020/ND-CP:
In addition to the responsibilities and obligations specified in the Law on Enterprises and the company's charter, the Board of Directors also has the following responsibilities and obligations:
- Assume responsibility to the shareholders for the company’s operation.
- Ensure equal treatment for all shareholders; respect interests of people with interests relevant to the company.
- Ensure that the company’s operation is conformable with law, the company's charter and regulations.
- Formulate operating regulations of the Board of Directors; submit them to the General Meeting of Shareholders for ratification and post it on the company’s website. The Minister of Finance shall provide the model operating regulations of the Board of Directors of public companies.
- Supervise and prevent conflict of interest between members of the Board of Directors, the Board of Controllers, the General Director/Director and other executive officers, including improper use of the company’s assets and taking abuse of transactions with related parties.
- Formulate the company administration regulations and submit them to the General Meeting of Shareholders for ratification in accordance with Article 270 of Decree No. 155/2020/ND-CP.
- Designate the person in charge of company administration.
- Provide training in company administration and necessary skills for members of the Board of Directors, the Director/General Director and other executive officers of the company.
- Submit reports on performance of the Board of Directors to the General Meeting of Shareholders in accordance with Article 280 of Decree No. 155/2020/ND-CP.
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