Rules concerning corporate governance Corporate law in Vietnam

1 rules concerning corporate governance

1.1 regulation of governing bodies

1.1.1 ownership
1.1.2 executive
1.1.3 inspection


1.2 individual liability corporate actions

1.2.1 ownership representatives
1.2.2 executive
1.2.3 inspectors


1.3 restrictions on transactions owners/shareholders

rules concerning corporate governance
regulation of governing bodies
ownership

the ownership powers of enterprises vested in mc/chairman llcs , in sm , bom scs. highest decision making bodies each enterprise , tasked passing of resolutions, amending company charter , setting out general direction of company, etc. resolution can passed minimum percentage approval. such rule put in place ensure interests of shareholders protected.

executive

the director, appointed ownership institutions of enterprise, has executive powers , oversees day-to-day running of company scs , llcs. legally responsible implementation of delegated rights , obligations. directors of llcs cannot affiliated member of mc, ensuring separation of powers between company s ownership , management.

however, scs, loe permits persons take dual roles director , chairman of bom. 1 survey found 75% of chairmen of bom directors of company. furthermore, other members of bom majority shareholders , managers of company. highlights indefinite differentiation between ownership , management.

inspection

the loe prescribes formation of mandatory ic monitor , check ownership , executive powers. members of ic must minimally possess professional qualifications or accounting/auditing work experience, , cannot related members of ownership or executive bodies. ensures impartiality , prevents conflict of interests. however, in scs, while members of ic cannot hold managerial positions in company, allowed own company shares or general employee of company.

individual liability corporate actions
ownership representatives

where mc/chairman of llc fails convene requested meeting within 15 days of request, must bear personal liability damage may result company.

executive

the loe prescribes director of llc may sued shareholders should fail perform obligations , duties. in contrast, in sc, there no such provisions grant shareholders power bring action against directors not perform duties. while law lays out fiduciary duties of directors, not provide way enforce these duties. has led criticism interests of shareholders of scs not adequately protected.

inspectors

the ic legally responsible implementation of rights , duties. loe not specify circumstances under ic deemed have neglected rights , duties , hence legally liable.

restrictions on transactions owners/shareholders

the loe prescribes regulations control , approve large related-party transactions. scs, if loan agreement/contract valued @ at least 50% of company s total assets, subject approval bom.

all related-party transactions must approved shareholders. related-party include managers of enterprise or family members of shareholders, , related-party transactions business arrangements between 2 parties prior relationships.

management personnel have disclose details of , related parties ownership interests in other enterprises; latter applies related-party holds more 35% of charter capital. these measures ensure personal interests not override company s interests. in addition, shareholders or directors related transaction cannot vote on deal.

the loe, however, not provide external checking mechanism related-party transactions. bom has sole , unfettered right give approval related-party transactions, , lack of checking mechanism has resulted in lack of investor protection in vietnam.

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