Tiếng Việt
中文Non-compliant. Members of the Board of Directors must be elected by the General Meeting of Shareholders (the general principle being cumulative voting, unless the Charter provides otherwise — Clause 3, Article 148) and meet the standards and conditions in Article 155 of the Law on Enterprises 2020 (Law No. 76/2025/QH15 did not amend these Board provisions). The Charter cannot provide that someone “automatically” becomes a Board member merely for holding 30% of charter capital — this infringes the election authority of the General Meeting of Shareholders.
1. Why is the “automatic” provision unlawful?
– Election, dismissal and removal of Board members are the rights and obligations of the General Meeting of Shareholders (Article 138). The Charter may not strip this right.
– Board members must meet standards and conditions (not falling within prohibited subjects under Clause 2, Article 17; having professional qualifications and management experience) — “automatic” appointment bypasses the standards check.
– The default voting method is cumulative voting (Clause 3, Article 148): each shareholder has a total number of votes corresponding to the total shares owned multiplied by the number of members to be elected — an “automatic” provision breaks this principle.
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2. What do major shareholders get? — Nomination rights
The law protects the interests of major shareholders through the right to nominate candidates to the Board, not through “automatic” seats. Under Clause 5, Article 115 of the Law on Enterprises 2020, a shareholder or group of shareholders owning 10% or more of total ordinary shares (or a smaller ratio prescribed by the Charter) has the right to nominate persons to the Board of Directors and the Board of Supervisors. The number of candidates each group may nominate is implemented under the decision of the General Meeting of Shareholders, unless the company Charter provides otherwise. Thus, a shareholder holding 30% of capital may nominate its candidate — but that person must still be elected by the GMS to become a Board member.
3. Consequences of unlawful Charter provisions
A Charter provision granting “automatic” Board membership is contrary to the Law on Enterprises and is ineffective to the extent contrary to law. Board resolutions with the participation of a person “appointed” under an unlawful provision risk being suspended or annulled by the Court under Clause 4, Article 153 (when the resolution is contrary to law/the Charter and causes damage to the company). The company should amend the Charter, replacing it with a compliant nomination mechanism.
Notes on applying current legal regulations
The content of this article is presented for reference purposes, helping readers understand the legal issue at an overview level. Where advice is needed, you should contact an ANT Legal lawyer via 0966.475.966 for review and advice before proceeding.
Common risks to note
– Charter providing “automatic” Board seats by capital ratio.
– Confusing nomination rights with automatic appointment rights.
– Board resolutions being suspended/annulled by the Court due to invalid members.
How can ANT Legal help?
ANT Legal assists in reviewing and amending joint stock company Charters and advising on compliant Board structures. For prompt advice, please contact our lawyers via 0966.475.966.
Frequently asked questions
Can a company Charter provide that a shareholder holding 30% of capital “automatically” becomes a Board member?
Non-compliant. The Charter cannot provide that someone “automatically” becomes a Board member merely for holding 30% of charter capital — this infringes the election authority of the General Meeting of Shareholders (Article 138) and breaks the cumulative voting principle (Clause 3, Article 148 of the Law on Enterprises 2020).
What rights does a major shareholder holding 30% of capital have regarding the Board?
A shareholder or group of shareholders owning 10% or more of total ordinary shares has the right to nominate persons to the Board of Directors and the Board of Supervisors (Clause 5, Article 115 of the Law on Enterprises 2020); but the nominated person must still be elected by the General Meeting of Shareholders to become a Board member.
How are unlawful Charter provisions handled?
Provisions contrary to the Law on Enterprises are ineffective to the extent contrary to law; Board resolutions with the participation of a person “appointed” unlawfully risk being suspended or annulled by the Court (Clause 4, Article 153). The company should amend the Charter, replacing it with a compliant nomination mechanism.
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