Organizational structure and requirements to be fulfilled by members of the Board of Directors of joint stock companies in Vietnam

Organizational structure and requirements to be fulfilled by members of the Board of Directors of joint stock companies in Vietnam (Internet image) 

Regarding this matter, LawNet would like to answer as follows: 

1. Organizational structure and requirements to be fulfilled by members of the Board of Directors of a joint stock company in Vietnam

According to Article 155 of the Law on Enterprises 2020, regulations on the organizational structure and requirements to be fulfilled by members of the Board of Directors of a joint stock company in Vietnam are as follows:

- To be a member of the Board of Directors, a person shall satisfy the following requirements:

+ He/she is not one of the persons specified in Clause 2 Article 17 of the Law on Enterprises 2020;

+ He/she has professional qualifications and experience of busines administration in the company’s busines lines; a member is not necessarily a shareholder of the company, unless otherwise prescribed by the company's charter;

+ A person may hold the position of member of the Board of Directors of more than one company;

+ A member of the Board of Directors of a state-owned enterprise prescribed in Point b Clause 1 Article 88 of this Law and subsidiary companies of a state-owned enterprise prescribed in Clause 1 Article 88 of the Law on Enterprises 2020 must not be a relative of the Director/General Director or any other executive of the company, of the executive or the person having the power to designate the executive of the parent company.

- Unless otherwise prescribed by securities laws, an independent member of the Board of Directors prescribed in Point b Clause 1 Article 137 of the Law on Enterprises 2020 shall satisfy the following requirements:

+ He/she is not working for the company or its parent company or subsidiary company; did not worked for the company or its parent company or subsidiary company within the last 03 years or longer;

+ He/she is not receiving a salary from the company, except the allowances to which members of the Board of Directors are entitled as per regulations;

+ His/her spouse, biological parents, adoptive parents, biological children, adopted children and siblings are not  major shareholders of the company, executives of the company or its subsidiary companies;  

+ He/she is not directly or indirectly holding 1% of the company’s voting shares or more;

+ He/she did not hold the position of member of the Board of Directors or the Board of Controllers of the company within the last 05 years or longer unless he/she was designated in 02 consecutive terms.

- An independent member of the Board of Directors shall notify the Board of Directors if he/she no longer satisfies the requirements specified in Clause 2 of Article 155 of the Law on Enterprises 2020 and is obviously no longer an independent member from the day on which a condition is not satisfied. The Board of Directors shall the disqualification if this member at the nearest GMS or convene the GMS to elect a new independent member within 06 months from the day on which the notification is received from the member.

2. Regulations on term of office and quantity of members of the Board of Directors in Vietnam

Pursuant to Article 154 of the Law on Enterprises 2020, regulations on the term of office and quantity of members of the Board of Directors in Vietnam are as follows:

- The Board of Directors shall have 03 – 11 members. The specific quantity of members shall be prescribed by the company's charter.

- The term of office of a member of the Board of Directors shall not exceed 05 years without term limit. An individual may only be elected independent member of the Board of Directors of a company for up to 02 continuous terms.

- In case the term of office of all members of the Board of Directors ends at the same time, they shall remain members of the Board of Directors until new members are elected and take over their jobs unless otherwise prescribed by company's charter.

- The company's charter shall specify the quantity, rights, obligations of independent members of the Board of Directors; method for organizing and coordinating their activities.

To Quoc Trinh

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