BOARD OF DIRECTORS OF A PUBLIC COMPANY, HOW IS REGULATED?

BOARD OF DIRECTORS OF A PUBLIC COMPANY, HOW IS REGULATED?

A public company is a common model established, registered with crowdfunding of investment and publicly traded shares, centralized on the stock market. Given the specific size and complexity of the organizational structure, current legislation establishes principles and regulations on public corporate governance to ensure compliance and transparency. In particular, the content of the organization and operation of the board of directors of a public company is specified by laws.

1.         What is public company?

Defined by the Law on Security 2019, a public company is a joint stock company in one of two cases:

–           The company has contributed charter capital of VND 30 billion or more and has at least 10% of voting shares held by at least 100 investors who are not major shareholders.

–           The company has successfully conducted the initial public offering of shares through registration with the State Securities Commission in accordance with regulations.

2.         An overview of the principles of public company administration

The public company administration must comply with the principles applicable to a common joint-stock company in accordance with the Law on Enterprise, and at the same time with the following principles in accordance with the Law on Securities:

–           The administration structure shall be reasonable and effective;

–           Ensure effectiveness of the Board of Directors and the Board of Controllers; strengthen the accountability of the Board of Directors to the company and its shareholders;

–           Ensure the rights and equality of shareholders;

–           Ensure the roles of investors, the securities market and intermediate organizations in assisting the company administration;

–           Respect and protect the lawful rights and interests of the parties in company administration;

–           Punctually, adequately, accurately and transparently disclose information about the company’s operation; ensure equal accessibility of information to all shareholders.

3.         Ensuring the operational efficiency of the Board of Directors of a public company

The current law sets out specific regulations for public company administration to be carried out in an orderly manner and to ensure the interests of shareholders, in which the governing bodies, including the Board of Directors, need to comply with the regulations on elections, terms and powers; pass important decisions or prevent conflicts of interest…

a.         Composition, structure, responsibilities and obligations of the Board of Directors to ensure compliance:

–           There should be a balance between the number of executive members, non-executive members and independent members of the Board of Directors of a public company in order to ensure its independence;

–           The Board of Directors shall be accountable to the shareholders for the company’s operation; ensure the company’s compliance with law, its charter and internal regulations; develop the internal regulations on company administration and submit it to the General Meeting of Shareholders for approval; designate executive officers; and have other responsibilities prescribed by law and the company’s charter;

–           The Board of Directors shall hold a meeting at least once per year following the procedures specified in the company’s charter and the company’s administration regulations. The organization, agenda and documents of a meeting of the Board of Directors shall be informed in advance to its members as prescribed by law and the company’s charter.

b.         The designation and nomination of members of the Board of Directors shall comply with the Law on Enterprises, relevant laws and the following regulations:

–           The public company shall disclose information about the candidates for members of the Board of Directors at least 10 days before its meeting date on the company’s website;

–           In case the quantity of candidates is not sufficient as prescribed by the Law on Enterprises, the current Board of Directors may nominate additional candidates or hold a nomination as prescribed by the company’s charter and the company’s administration regulations.

c.         Members of the Board of Directors shall:

–           Be provided with information and documents about the financial status and performance of the company and its units;

–           Perform their duties in a truthful and cautious manner for the best interests of the company and its shareholders;

–           Fully attend meetings of the Board of Directors and comment of the raised issues;

–           Fully and promptly inform the Board of Directors of the incomes from the subsidiaries, associate companies and other organizations;

–           Report and disclose information when trading the company’s shares as prescribed by law;

–           Have other rights and obligations prescribed by law and the company’s charter.

d.         Public company must comply with regulations on preventing conflicts of interest and disclosing transparent information:

–           Public company is obliged to report, fully, accurately and promptly disclose information as prescribed.

–           Members of the Board of Directors shall disclose their related interests; must not use the information that is obtained due to their positions for selfish purpose or to serve other organizations or individuals;

–           The public company shall implement necessary measures to prevent members of the Board of Directors and related person from interfering with the company’s operation, causing damage to the company; ensure compliance to regulations on transaction with shareholders, executive officers and their related persons; protect the lawful rights and interests of people with relevant interests;

Legal basis:

  • Law on Enterprise 2020;
  • Law on Securities 2019.

𝐋𝐈𝐍𝐂𝐎𝐍 𝐋𝐀𝐖 𝐅𝐈𝐑𝐌 – 𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐜𝐨𝐨𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧

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