Regulations on the election of members of the board of directors in joint-stock companies

ASLAW

Regulations on the election of members of the board of directors in joint-stock companies

The Board of Directors is a collection of talented individuals to manage and operate a giant joint stock company with tens, hundreds, even thousands, and tens of thousands of employees. The larger the joint stock company, the higher the obligations, rights and responsibilities of the members of the Board of Directors. So, what are the regulations on electing and selecting board members in a joint-stock company to ensure that the members are clearly aware of their obligations?

Board of Directors

The Board of Directors is the second-ranked governing body of a joint-stock company, after the General Meeting of Shareholders. The Board of Directors has full power on behalf of the company to decide and exercise the rights and obligations of the company that are not under the authority of the General Meeting of Shareholders.

In terms of number, the board of directors of each company will have a different number, but usually, it will be from 3 to 11 members. In fact, the above minimum and maximum number of members are clearly stated in Clause 1, Article 154 of the Enterprise Law 2020.

The company’s charter when established will specify the number of members of the Board of Directors. Depending on the organizational structure, the Board of Directors may have independent members in addition to the members of the Board of Directors.

Unlike the members of the Board of Directors, independent members of the Board of Directors are independent persons who have no personal relationship, or property relationship with the joint stock company, the managers, executives, or related people of the joint stock company

Standards for members of the Board of Directors

To become a member of the Board of Directors, members need to meet the provisions of Vietnamese law as well as the specific regulations of each company, including:

• Having full civil act capacity, not subject to not being allowed to manage a business.

• Having professional qualifications, and experience in business management and not necessarily a shareholder of the company.

In addition, members of the Board of Directors must not violate the prohibitions of the law and society in different cases, for example, for a subsidiary company in which the State holds more than 50% of the charter capital.

A member of the Board of Directors of a company may concurrently be a member of the Board of Directors of another company.

According to the provisions of Article 154 of the Enterprise Law 2020, the term of members of the Board of Directors shall not exceed 5 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.

In case all members of the Board of Directors end their terms at the same time, such members shall continue to be members of the Board of Directors until a new member is elected to replace and take over the job unless otherwise provided for in the company’s charter.

The authority to elect members of the Board of Directors belongs to the General Meeting of Shareholders. The election, dismissal, and removal of duty shall be approved by the General Meeting of Shareholders.

The number and specific duration of the term and the number of members of the Board of Directors who must permanently reside in Vietnam shall be prescribed by the company’s charter.

Independent members of the Board of Directors must notify the Board of Directors that they no longer meet the conditions for the position of independent members of the Board of Directors.

If that is the case, the Board of Directors is obliged to notify to the members of the company at the nearest General Meeting of Shareholders or convene a General Meeting of Shareholders to additionally elect or replace that independent member of the Board of Directors within 06 months from the date of receiving the notice of ineligibility.

Chairman of the Board of Directors

In the Board of Directors, the Chairman of the Board of Directors holds the highest authority.

The Chairman of the Board of Directors is the person who directs the activities of the Shareholders’ Council. In daily work as well as in an emergency situation, the Chairman of the Board of Directors will, together with the members of the Board of Directors, promptly make decisions within his/her authority to operate the company, and solve difficult issues, determine the development trend of the company in the coming time.

The Chairman of the Board of Directors may concurrently be the Director or General Director of the company. However, the Chairman of the Board of Directors of a public company and a joint-stock company is an enterprise in which more than 50% of the charter capital is owned by the State or the total number of shares with voting rights (except for enterprises owned by the State with 100% charter capital) cannot concurrently hold the position of Director or General Director.

The Chairman of the Board of Directors will be elected by the members of the Board of Directors.

Not only electing, but members of the Board of Directors also have the right to dismiss and remove the position of the Chairman of the Board of Directors.

The election of members of the Board of Directors will be done through the meeting of the Board of Directors and minutes of the meeting of the Board of Directors. Resolutions of the Board of Directors are approved when more than half of the members attending the meeting agree.

Specifically, the Chairman of the Board of Directors is elected at the first meeting of the Board of Directors within 07 working days from the end of the election of that Board of Directors.

According to Clause 3, Article 156 of the Enterprise Law 2020, the Chairman of the Board of Directors has the following rights and obligations:

a) Formulate program and plan of activities of the Board of Directors;

b) Prepare agenda, contents and documents for the meeting; convene, preside over and act as chairman of the Board of Directors meetings;

c) Organize the adoption of resolutions and decisions of the Board of Directors;

d) Supervise the implementation of resolutions and decisions of the Board of Directors;

d) Chairperson of the General Meeting of Shareholders;

e) Other rights and obligations as prescribed by the Law and the company’s charter.

Order of election of the board of directors

The order of election of the board of directors in a joint-stock company includes the following steps:

Hold a meeting of the General Meeting of Shareholders

The General Meeting of Shareholders shall be conducted when the number of shareholders attending the meeting represents more than 50% of the total number of votes. The specific rate will be decided by the company’s charter.

The list of shareholders entitled to attend the General Meeting of Shareholders is made based on the register of shareholders of the company. The list of shareholders entitled to attend the General Meeting of Shareholders shall be made no later than 10 days before the date of sending the invitation to the General Meeting of Shareholders, if the company’s charter does not provide for a shorter time limit.

Shareholders, authorized representatives of shareholders being organizations may directly attend the meeting, authorize in writing one or several other individuals and organizations to attend the meeting.

The convenor of the General Meeting of Shareholders must prepare the agenda and contents of the meeting.

In the previously approved meeting agenda, the General Meeting of Shareholders discussed and voted on each issue in the agenda. Voting is conducted by voting for, against, and abstention.

Regarding the election of the Board of Directors, the Resolution on the election, appointment and dismissal of members of the Board of Directors will be passed when it is approved by the number of shareholders representing at least 51% of the total votes of all shareholders attending the meeting approved (passed by voting at the General Meeting of Shareholders).

The results of the vote counting shall be announced by the chairperson right before the closing of the meeting, unless otherwise provided for in the company’s charter.

Holding the first meeting of the Board of Directors

Within 7 days from the date of election of members to the Board of Directors of a joint-stock company, the first meeting of the Board of Directors of the first term will be held to elect the Chairman of the Board of Directors.

This meeting is convened and chaired by the member with the highest number of votes or the highest percentage of votes in the meeting to elect members of the Board of Directors. In the rare case where the highest number of votes is equal or the ratio of the highest number of votes is equal, the members of the Board of Directors shall elect by majority rule to choose one of them to convene a meeting of the Board of Directors.

The resolution of the Board of Directors will be passed if it is approved by a majority of the members attending the meeting, that is, the Chairman will be elected if he/she obtained more than 50% of the votes.

Minutes of the election of the Board of Directors and documents used in the meeting to elect the Chairman of the Board of Directors must be kept at the head office of the company and must be made in Vietnamese.

Register now Contact us for a consultation
CONTACT ASLAW FOR ADVICE

Contact

  • ASLAW
  • 0914195266
  • 0914195266

    View more posts
    ASL LAW – Legal Partner in Business Consultation and Dispute Resolution

    ASL LAW – Legal Partner in Business Consultation and Dispute Resolution

    In the journey of business development, facing disputes is unavoidable. The crucial aspect is how we effectively and professionally resolve these disputes. ASL LAW has emerged as a reliable guide in the field of business consultation and dispute resolution. Understanding […]

    Tax and Financial Policies for Businesses in Vietnam

    Tax and Financial Policies for Businesses in Vietnam

    Vietnam employs a diverse tax system with various regulations and separate policies for Vietnamese businesses. This creates a complex legal framework, demanding a deep understanding from businesses to comply with tax obligations when operating in Vietnam. The following article will […]

    Compliance with Financial Standards for Vietnamese Businesses

    Compliance with Financial Standards for Vietnamese Businesses

    Compliance with financial standards is crucial for Vietnamese businesses to protect their reputation and avoid administrative penalties while operating. I. Financial Reporting According to Industry Specifics In Vietnam, businesses operating in various sectors often have unique characteristics, leading to diversity […]

    CONTACT ASLAW