What conditions must a member of the Board of Directors of a Joint Stock Company meet to be appointed?

What types of models are joint stock companies organized?

According to the provisions of Article 137 of the Law on Enterprises 2020 on the organizational and management structure of Joint Stock Companies as follows:

“Article 137. Organizational structure and management of joint stock companies

1. Unless otherwise prescribed by securities laws, a joint stock company has the right to choose a management organization and operate according to one of the following two models:

a) General Meeting of Shareholders, Board of Directors, Supervisory Board and Director or General Director. In cases where a joint stock company has less than 11 shareholders and institutional shareholders own less than 50% of the company’s total shares, a Supervisory Board is not required;

b) General Meeting of Shareholders, Board of Directors and Director or General Director. In this case, at least 20% of the members of the Board of Directors must be independent members and there must be an Audit Committee under the Board of Directors. The organizational structure, functions, and tasks of the Audit Committee are specified in the Company Charter or the operating regulations of the Audit Committee issued by the Board of Directors.

2. In case the company has only one legal representative, the Chairman of the Board of Directors or Director or General Director is the legal representative of the company. In case there is no regulation in the Charter, the Chairman of the Board of Directors is the legal representative of the company. In case the company has more than one legal representative, the Chairman of the Board of Directors and the Director or General Director are of course the legal representatives of the company.

Pursuant to legal regulations, a Joint Stock Company can be organized according to two models, and for both models there is a Board of Directors as a mandatory component.

Who has the right to appoint members of the Board of Directors of a Joint Stock Company?

According to the provisions of Point c, Clause 2, Article 138 of the Law on Enterprises 2020, as follows:

“Article 138. Rights and obligations of the General Meeting of Shareholders

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2. The General Meeting of Shareholders has the following rights and obligations:

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c) Election, dismissal, removal of members of the Board of Directors, Supervisors;”

In Clause 5, Article 115 of the Law on Enterprises 2020, there are also provisions:

“Article 115. Rights of common shareholders information

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5. Shareholders or groups of shareholders owning 10% or more of the total number of common shares or a smaller percentage as prescribed in the Company’s Charter have the right to nominate people to the Board of Directors and Supervisory Board. In cases where the Company Charter does not have other provisions, the nomination of people to the Board of Directors and the Supervisory Board shall be carried out as follows:

a) Common shareholders forming a group to nominate people to the Board of Directors and the Supervisory Board must notify the group meeting to attending shareholders before the opening of the General Meeting of Shareholders;

b) Based on the number of members of the Board of Directors and the Supervisory Board shareholders or groups of shareholders specified in this Clause have the right to nominate one or more people according to the decision of the General Meeting of Shareholders as candidates for the Board of Directors and the Supervisory Board. In case the number of candidates nominated by a shareholder or group of shareholders is lower than the number of candidates they are entitled to nominate according to the decision of the General Meeting of Shareholders, the remaining number of candidates shall be nominated by the Board of Directors, Supervisory Board and other shareholders.”

Pursuant to legal regulations, members of the Board of Directors may be elected by the General Meeting of Shareholders or by shareholders or groups of shareholders owning 10% or more of the total common shares or a smaller percentage as prescribed in the Company’s Charter who have the right to nominate.

What are the standards and conditions for becoming a member of the Board of Directors of a Joint Stock Company?

According to the provisions of Article 155 of the Law on Enterprises 2020, the standards and conditions for becoming a Member of the Board of Directors of a Joint Stock Company are specifically as follows:

“Article 155. Organizational structure, standards and Conditions to become a member of the Board of Directors

1. Members of the Board of Directors must have the following standards and conditions:

a) Not subject to the provisions of Clause 2, Article 17 of this Law;

b) Have professional qualifications and experience in business administration or in the company’s field, industry, and business lines and do not necessarily have to be a shareholder of the company, unless otherwise prescribed by the company’s Charter;

c) A member of the Board of Directors of a company may simultaneously be a member of the Board of Directors of another company;

d) For state-owned enterprises as prescribed in Point b, Clause 1, Article 88 of this Law and subsidiaries of state-owned enterprises as prescribed in Clause 1, Article 88 of this Law, members of the Board of Directors must not be family members of the Director, General Director and other managers of the company; of the manager, the person with authority to appoint managers of the parent company.

2. Unless otherwise prescribed by securities laws, independent members of the Board of Directors as prescribed in Point b, Clause 1, Article 137 of this Law must have the following standards and conditions:

a) Not a person working for the company, parent company or subsidiary of the company; not be a person who has worked for the company, parent company or subsidiary of the company for at least 3 consecutive years;

b) Not a person receiving salary or remuneration from the company, except for the allowances that members of the Board of Directors are entitled to according to regulations;

c) Not a person whose spouse, biological father, adoptive father, biological mother, adoptive mother, biological child, adopted child, biological brother, biological sister, or younger sibling is a major shareholder of the company; is a manager of the company or a subsidiary of the company;

d) Not a person who directly or indirectly owns at least 01% of the company’s total voting shares;

d) Not be a person who has served as a member of the Board of Directors or Supervisory Board of the company for at least 5 consecutive years, except in cases of consecutive appointment for 02 terms.

3. Independent members of the Board of Directors must notify the Board of Directors that they no longer meet the standards and conditions specified in Clause 2 of this Article and of course no longer be independent members of the Board of Directors from the date they do not fully meet the standards and conditions. The Board of Directors must notify the case of an independent member of the Board of Directors that no longer meets the standards and conditions at the nearest General Meeting of Shareholders or convene a meeting of the General Meeting of Shareholders to elect additional or replace independent members of the Board of Directors within 06 months from the date of receiving the notice from the relevant independent member of the Board of Directors.

Regulations on the term of office of members of the Board of Directors of a Joint Stock Company are mentioned in Article 154 of the Law on Enterprises 2020 as follows:

“Article 154. Term and number of members of the Board of Directors

1. The Board of Directors has from 03 to 11 members. The company charter stipulates specifically the number of members of the Board of Directors.

2. The term of a member of the Board of Directors shall not exceed 05 years and may be re-elected for an unlimited number of terms. An individual may only be elected as an independent member of the Board of Directors of a company for no more than 02 consecutive terms.

3. In case all members of the Board of Directors end their terms at the same time continue to be a member of the Board of Directors until a new member is elected to replace and take over the work, unless otherwise stipulated in the Company’s Charter.

4. The Company’s Charter specifies the number, rights, obligations, organization and coordination of activities of the independent members of the Board of Directors.”

Members of the Board of Directors of a Joint Stock Company may not continue to hold the position in In what cases?

Pursuant to the provisions of Article 160 of the Law on Enterprises 2020, a member of the Board of Directors of a Joint Stock Company may not continue to hold position in the following cases:

“Article 160. Dismissal, dismissal, replacement and addition of members of the Board of Directors

1. General Meeting of Shareholders Removal of members of the Board of Directors in the following cases:

a) Not meeting the qualifications and conditions as prescribed in Article 155 of this Law;

b) Having a resignation letter and being accepted;

c) Other cases specified in the company’s Charter.

2 member of the Board of Directors in the following cases:

a) Not participating in the activities of the Board of Directors for 06 consecutive months, except in cases of force majeure;

b) Other cases specified in the Company’s Charter.

3. When deemed necessary, the General Meeting of Shareholders decides to replace members of the Board of Directors; members of the Board of Directors other than the cases specified in Clauses 1 and 2 of this Article.

4. The Board of Directors must convene a meeting of the General Meeting of Shareholders to elect additional members of the Board of Directors in the following cases:

a) The number of members of the Board of Directors is reduced by more than one-third compared to the number specified in the company’s Charter. In this case, the Board of Directors must convene a General Meeting of Shareholders within 60 days from the date the number of members is reduced by more than one-third;

b) The number of independent members of the Board of Directors is reduced, not ensuring the ratio as prescribed in Point b, Clause 1, Article 137 of this Law;

c) Except for the cases specified in Points a and b of this Clause, the General Meeting of Shareholders shall elect new members to replace members of the Board of Directors who were dismissed or dismissed at the most recent meeting.”