Vietnam: Updates to appointment of enterprise managers

Vietnam sets out particular conditions governing the appointment of key managers and managerial positions. In this article, we consider the laws governing such appointments in the most popular types of company (whether owned by Vietnamese and/ or foreigners) in Vietnam.

Overview

Under the 2020 Enterprises Law as amended (LOE), a company may have one or more legal representatives with at least one legal representative residing in Vietnam. If the company has more than one legal representative, the company charter shall specify the managerial positions as well as the rights and obligations of each legal representative. If the allocation of rights and obligations of each legal representative have not yet been clearly stipulated in the company charter, each legal representative of the company will be a representative with full authority before a third party and will be jointly liable.

Single member LLC (1M-LLC)

A 1M-LLC owned by an organization may be organized, managed and operated in either of the following models: (a) a members' council (MC) and a general director (GD); or (b) a company president and a GD. A 1M-LLC owned by an individual shall only opt for only one model (b).

In model (a), the MC is the highest decision-making authority in the company and consists of three to seven members. The MC members shall be appointed or removed by the company owner and their term shall not exceed five years. In model (b), the company president will have the same authority as is vested in the MC.

The MC chair shall be appointed by the company owner or elected by the MC members, who may be re-elected for an unlimited number of terms, on the principle of majority vote in accordance with the company charter. The term of the MC chair is stipulated in the company charter but shall not exceed five years.

The GD shall be appointed or employed by the MC (or the company president) for a term not exceeding five years. The LOE is silent on the criteria and conditions for one to become the GD of 1M-LLC; however, she/he must not fall in the category of persons who are not eligible to establish and manage enterprises in Vietnam. It is noted that the chair and other members of the MC (or the company president) may concurrently act as the GD unless otherwise stipulated by law or the company charter.

The company must have at least one legal representative, who may concurrently hold the position of the MC chair (or the company President) or the GD. If the company charter is silent on this position, the MC chairman (or the company President) shall be the company’s legal representative.

Multiple member LLC

The MC is also the highest decision-making authority in a 2M-LLC and consists of all individual owners and authorized representatives of corporate owners of the company. It is noted that unless otherwise stipulated by the company charter, each corporate owner of the company holding at least 35 percent of the company’s charter capital may appoint up to three representatives to the MC.

The MC shall elect a member to be its chair, who may be re-elected for an unlimited number of terms and concurrently act as the GD. The MC chair’s term shall be stipulated in the company charter but shall not exceed five years.

The GD shall be appointed or employed by the MC. To become the GD of a 2M-LLC, an individual must:

• Not fall in the category of persons who are not eligible to establish and manage enterprises in Vietnam
• Have professional qualifications and experience in business management of the company and satisfy other conditions stipulated in the company charter.

An 2M-LLC must have at least one legal representative, who may concurrently hold the position of the MC chair or the GD. If the company charter is silent, the MC chair shall be the company’s legal representative.

Joint stock company (JSC)

Unless otherwise stipulated in the securities laws, a JSC may select either of the following models: (a) a general meeting of shareholders (GMS), a board of directors (BOD), an inspection committee (if applicable) and a GD; or (b) a GMS, a BOD and a GD. Under model (b), at least 20 percent of the BOD members must be independent members and there must be an auditing committee under the BOD.

The GMS is the highest decision-making authority and consists of all shareholders of the JSC.

The BOD shall be responsible for managing the company and have full authority to make decisions in the name of the company and to exercise the rights and perform the obligations of the company, except for those within the GMS authority. The BOD shall have three to eleven members according to the company charter, which shall also specify the number of independent members. The BOD may be re-elected for an unlimited number of five-year term, except no more than two consecutive terms for independent members.

To become a BOD member, an individual must meet the criteria and conditions for one to become the GD of a 2M-LLC mentioned above and not necessarily be a shareholder of the company, unless otherwise stipulated in the company charter.

However, unless otherwise stipulated in the securities laws, an independent member of the BOD must additionally satisfy the following specific criteria and conditions:

• Not being a person who is currently working for the company, the parent company or any subsidiary of the company; or not being a person having worked for the company, the parent company or any subsidiary of the company for at least three preceding years
• Not being a person who currently receives a salary or remuneration from the company, except for allowances which the BOD members are entitled to in accordance with regulations
• Not being a person whose spouse, natural or adoptive parent, child, adopted child or sibling is a major shareholder of the company or a manager of the company or its subsidiary 
• Not being a person directly or indirectly owning at least 1 percent of the total voting shares in the company and
• Not being a person who was a member of the BOD or the inspection committee of the company for at least five preceding years, except in the case of appointment for two consecutive terms.

The BOD chair shall be elected, removed or discharged by the BOD among its members. The BOD chair of a public company is not permitted to act concurrently as the GD.

The GD shall be appointed by the BOD among its members for an unlimited number of five-year terms or employed from other person.

The LOE is silent on the criteria and conditions for one to become the GD of a JSC; however, she/he must not fall in the category of persons who are not eligible to establish and manage enterprises in Vietnam. In the case of a public company, the GD must additionally:

• Not be a person with a family relationship with a manager of the enterprise or an inspector of the company and the parent company; or with the representative of the capital portion of the enterprise in the company and the parent company and
• Have professional qualifications and experience in business management of the company.

If the company has only one legal representative, the BOD chair or the GD shall be the company’s legal representative. If the company charter is silent on this position, the BOD chair shall be the company’s legal representative. If the company has more than one legal representative, the BOD chair and the GD shall automatically be the company’s legal representatives.

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*Luu Tien Ngoc, Partner, Business Development, Vision & Associates
**Le Tuan Anh, Partner, Legal Practice, Vision & Associates