Standards, Conditions and Responsibilities of the Supervisory Board and Controllers in Multi-Member LLCs

Short answer: Controllers of a multi-member LLC are responsible for exercising their rights and obligations honestly and carefully in the company’s interests (Article 71 of the Law on Enterprises 2020) and may be dismissed or removed under the company charter and Articles 170–174 of this Law (as cross-referenced in Clause 3, Article 65).

1. What responsibilities does a Controller of a multi-member LLC bear?

Under Article 71 of the Law on Enterprises 2020, a Controller has the following responsibilities:

• Exercising rights and obligations honestly, carefully and in the best manner to ensure the maximum lawful interests of the company;
• Being loyal to the company’s interests; not abusing his/her position and not using the company’s information, know-how, business opportunities or other assets for personal gain or to serve the interests of other organizations or individuals;
• Promptly, fully and accurately notifying the company of enterprises he/she owns or in which he/she holds shares or capital contributions, and of enterprises owned, jointly owned or majority-owned in shares or capital contributions by his/her related persons. The notification must be in writing, stating the name, enterprise code, head office address, ownership ratio and time of ownership;
• Other responsibilities as prescribed by law and the company charter.

2. When may a Controller be dismissed or removed?

Clause 3, Article 65 of the Law on Enterprises 2020 cross-references the dismissal and removal of the Supervisory Board and Controllers of a multi-member LLC to be implemented correspondingly under Articles 106, 170, 171, 172, 173 and 174 of this Law. In practice, the common cases include:

• No longer satisfying the standards and conditions for being a Controller (Articles 168, 169);
• Violating the responsibilities of honesty, care, loyalty to the company’s interests or the obligation to disclose related interests (Article 71);
• Other cases of dismissal or removal as prescribed by the company charter.

Enterprises should clearly prescribe the dismissal and removal procedures in the company charter to avoid disputes when replacing a Controller mid-term.

3. Who is qualified to be a Controller?

The Head of the Supervisory Board and Controllers must satisfy the corresponding standards and conditions in Clause 2, Article 168 and Article 169 of the Law on Enterprises 2020, notably:

• Not falling under the categories prohibited from establishing or managing enterprises (Clause 2, Article 17);
• Having been trained in one of the majors of economics, finance, accounting, auditing, law, business administration or a major suitable for the enterprise’s business activities;
• Not being a family member of a Members’ Council member, the Director/General Director or other managers; not concurrently being a company manager;
• The Head of the Supervisory Board must hold a bachelor’s degree or higher in economics, finance, accounting, auditing, law, business administration or a related major, unless the charter prescribes higher standards.

4. How is the Supervisory Board organized?

Under Article 65 of the Law on Enterprises 2020: the Supervisory Board comprises 01 to 05 Controllers; the term does not exceed 05 years and Controllers may be reappointed without limitation on the number of terms. Where there is only 01 Controller, that person is concurrently the Head of the Supervisory Board. The Government shall provide detailed regulations on this Article.

Contact a lawyer

Designing internal control mechanisms, drafting charter provisions on the dismissal and removal of Controllers, and handling conflicts of interest should be carefully reviewed before application. For specific advice on your company model, please contact a lawyer for support.