Is it mandatory for Joint Stock Companies to have Board of Controllers in Vietnam? What are the rights and obligations of the Board of Controllers of joint stock companies in Vietnam? – Thanh Nhan (Binh Thuan, Vietnam)
Article table of contents
Rights and obligations of the Board of Controllers of joint stock companies in Vietnam (Internet image)
1. Is it mandatory for Joint Stock Companies to have Board of Controllers in Vietnam?
According to Clause 1, Article 137 of the Law on Enterprise 2020, unless otherwise prescribed by securities laws, a joint stock company may choose one of the following models:
(1) A joint stock company with the GMS, Board of Directors, Board of Controllers and Director/General Director.
If the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, a Board of Controllers is not mandatory;
(2) A joint stock company with the GMS, Board of Directors and Director/General Director.
+ In this case, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors.
+ The organizational structure, functions and duties of the audit committee shall be specified in the company's charter or the audit committee’s operating regulations promulgated by the Board of Directors.
Thus, the Board of Controllers in a joint-stock company may or may not be present depending on the organizational structure of the joint-stock company.
If the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, a Board of Controllers is not mandatory;
2. Organizational structure of the Board of Controllers of a joint-stock company in Vietnam
The organizational structure of the Board of Controllers of a joint-stock company is specified in Article 168 of the Law on Enterprise 2020 as follows:
- 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.
3. Rights and obligations of the Board of Controllers in Vietnam
Article 170 of the Law on Enterprise 2020 stipulates the rights and obligations of the Supervisory Board of a joint-stock company as follows:
- 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 this Law.
- When requested by the shareholder or group of shareholders specified in Clause 2 Article 115 of this Law, 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 this law, 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 this Law, the company's charter and resolution of the GMS.
Van Trong
