Inspector Standards for Joint-Stock Companies in Vietnam: Requirements & Duties

What are the Supervisory Board and Inspectors of a joint-stock company?

Under Clause 1 of Article 137 of the Law on Enterprises 2020 as follows:

“Article 137. Management organizational structure of a joint-stock company

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1. Except where securities law provides otherwise, a joint-stock company may choose to organize management and operate under one of the following two models:

a) General Meeting of Shareholders, Board of Directors, Supervisory Board and Director or General Director. Where a joint-stock company has fewer than 11 shareholders and the shareholders that are organizations own less than 50% of the total shares of the company, a Supervisory Board is not mandatory;

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 is an Audit Committee under the Board of Directors. The organizational structure, functions and duties of the Audit Committee are prescribed in the company charter or the Audit Committee’s operating regulations issued by the Board of Directors.”

Clause 1 of Article 65 of the Law on Enterprises 2020 also provides:

“Article 65. Supervisory Board and Inspectors

1. The Supervisory Board has from 01 to 05 Inspectors. The term of an Inspector does not exceed 05 years and may be reappointed for an unlimited number of terms. Where the Supervisory Board has only 01 Inspector, such Inspector is concurrently the Head of the Supervisory Board and must satisfy the standards of the Head of the Supervisory Board.”

Based on the legal provisions, whether a joint-stock company has a Supervisory Board depends on the model the company chooses. Where a joint-stock company has fewer than 11 shareholders and the shareholders that are organizations own less than 50% of the total shares of the company, a Supervisory Board is not mandatory. The Supervisory Board has from 01 to 05 Inspectors. The term of an Inspector does not exceed 05 years and may be reappointed for an unlimited number of terms. Where the Supervisory Board has only 01 Inspector, such Inspector is concurrently the Head of the Supervisory Board and must satisfy the standards of the Head of the Supervisory Board.

What are the standards for appointing Inspectors of a joint-stock company?

Under Article 169 of the Law on Enterprises 2020, the standards for appointing Inspectors of a joint-stock company are as follows:

“Article 169. Standards and conditions of Inspectors

1. Inspectors must have the following standards and conditions:

a) Not falling within the subjects prescribed in Clause 2 of Article 17 of this Law;

b) Trained in one of the majors of economics, finance, accounting, auditing, law, business administration or a major appropriate to the business operations of the enterprise;

c) Not being a person with family relations to members of the Board of Directors, the Director or General Director and other managers;

d) Not being a manager of the company; not necessarily being a shareholder or employee of the company, unless the company charter provides otherwise;

đ) Other standards and conditions under other relevant legal provisions and the company charter.

2. In addition to the standards and conditions prescribed in Clause 1 of this Article, Inspectors of public companies and state-owned enterprises under point b of Clause 1 of Article 88 of this Law may not be persons with family relations to the enterprise managers of the company and the parent company; the persons representing the enterprise’s capital or the state’s capital at the parent company and at the company.”

Thus, in addition to the professional qualification conditions, a person wishing to be appointed as an Inspector of a joint-stock company must not fall within the cases prohibited from establishing, operating and managing enterprises in Vietnam, and must satisfy the other conditions stated above and under the charter of that joint-stock company.

What are the responsibilities of Inspectors of a joint-stock company?

Under Article 173 of the Law on Enterprises 2020, Inspectors of a joint-stock company have the following responsibilities:

“Article 173. Responsibilities of Inspectors

1. Strictly comply with the law, the company charter, resolutions of the General Meeting of Shareholders and professional ethics in exercising assigned rights and obligations.

2. Exercise assigned rights and obligations honestly, prudently and to the best of their ability to ensure the maximum lawful interests of the company.

3. Be loyal to the interests of the company and shareholders; not abuse their position or title and not use the company’s information, know-how, business opportunities or other assets for personal gain or to serve the interests of other organizations or individuals.

4. Other obligations as prescribed by this Law and the company charter.

5. Where violating the provisions in Clauses 1, 2, 3 and 4 of this Article and causing damage to the company or others, the Inspector must bear individual or joint liability for compensating such damage. Income and other benefits obtained by the Inspector from violations must be returned to the company.

6. Where discovering an Inspector violating in exercising assigned rights and obligations, written notice must be given to the Supervisory Board; the person committing the violation must be required to stop the violation and remedy the consequences.