REGULATION OF THE SUPERVISORY BOARD IN JOINT STOCK COMPANY

To enhance the role of control in the Company, the Enterprise Law has provisions related to the establishment of the Supervisory Board in a joint stock company. Along with strengthening the corporate governance, the Prime Minister issued Decree No. 71/2017 / ND-CP of June 6, 2017, on Corporate Governance, which applies to public companies. Along with the development of enterprises, on January 22, 2019, the Government issued Decree 05/2019 / ND-CP stipulating the internal audit work in state agencies and public non-business units and business.

This article will describe the role and authority of the Supervisory Board in the Enterprise.

According to the Enterprise Law 2014, a Joint Stock Company is an enterprise with a minimum number of shareholders of 03 and no maximum number of shareholders. In case the Joint Stock Company has less than 11 shareholders and institutional shareholders own less than 50% of the total shares of the company, the Company does not need the Supervisory Board.

In the remaining cases, the Enterprise Law requires the company to have the Supervisory Board - an important part that performs the supervision of the Management Board, the Board of Directors in the management, administration and inspection of rationality, validity, integrity and prudence in management and administration of business operations.

1.     Structure of the Supervisory Board of joint stock company:

According to Article 163 of the Enterprises Law, the Supervisory Board should have from 3 members to 5 members which term of office less than 05 years and the Supervisors may be re-elected with an unlimited number of terms.

The Supervisors elect one of them to be the Head of the Supervisory Board according to the majority principle.

For companies, the Supervisory Board must have more than half of the members permanently residing in Vietnam (probably foreigners residing in Vietnam).

2.     Criteria of Supervisors and the Head of Supervisory Board:

According to Article 164 of the Enterprises Law, supervisors must meet the following criteria and conditions:

  • Having full civil capacity and not being prohibited from establishing and managing enterprises in accordance with this Law;
  • Not being a spouse, natural father, adoptive father, natural mother, adoptive mother, natural children, adopted children, biological siblings of any member of the Board of Directors, the director or general director and people other managers;
  • Do not hold company management positions; It is not necessary to be the shareholder or employee of the company, unless otherwise prescribed by the company's charter;
  • Other standards and conditions prescribed by other relevant laws and the company's charter.
  • Note: The Supervisors of listed joint stock companies and companies with over 50% of charter capital held by the State must be certified auditors or certified accountants.

According to the enterprise law, the Head of the Supervisory Board must meet the following criteria:

  • Head of the Supervisory Board must be a professional accountant or auditor and must work full-time at the company, unless the company charter stipulates other standards (usually the listed company will require The Head of the Supervisory Board must work full time at the company).
  • In Vietnam, professional accountants and auditors: Individuals who are granted certificates of auditor or certificate of accounting practice by an authorized organization (currently the Ministry of Finance). Auditors / accountants with international certificates such as ACCA, ICAEW, CPA Australia can take the conversion test (every year the Ministry of Finance organizes a one-time exam - in Vietnamese) to be granted a Vietnamese practice certificate in Vietnam.
  • Currently, the law only specifies that the Head of Supervisory Board is a dedicated employee - that is, only in charge of works and responsibilities belong to the Supervisory Board but does not participate in other jobs / departments in company.

3.     Supervisory Board members of public companies:

Decree 71/2017 / ND-CP stipulates that Supervisory Board members of public companies must meet the standards and conditions prescribed in Clause 1, Article 164 of the Enterprise Law mentioned above, the company's charter and NOT in the accounting and finance department of the company and are NOT members or employees of the independent auditing company who audits the financial statements of the company in the previous 03 years.

The model charter of a public company is issued in Appendix 01 together with the Ministry of Finance's Circular No. 95/2017 / TT-BTC of September 22, 2017, guiding a number of articles of Decree No. 71 / 2017 / ND-CP dated 6 June 2017 of the Government providing guidance on corporate governance applicable to public companies.

The Supervisors elect one of them to be the Head of the Supervisory Board according to the majority principle.

4.     Roles of the Supervisory Board:

Article 165 of the Law on Enterprises clearly states the role of the Supervisory Board. The Supervisory Board assists the Shareholders in supervising the management and administration of the Board of Directors, Director, General Director. At the request of the Shareholders, the Supervisory Board shall check and give explanatory reports on the issues that are required to verify.

Specific tasks include:

  • Checking the reasonableness, honesty, and prudence in managing and operating the business activities of the Board of Directors, the Board of Management, including the review of accounting books, notes, documents related to the management and operation under the resolution of the general meeting of shareholders, or at the request of a shareholder / group of shareholders.
  • Check the system, consistency and suitability of accounting work, statistics, and financial statements
  • Evaluating the completeness, legality and integrity of the company's business situation, annual and semi-annual financial statements, management evaluation report of the board of directors, and submission of evaluation reports at the Annual General Meeting of Shareholders
  • Review, check and evaluate the effectiveness and efficiency of the internal control system, internal audit, risk management and early warning of the company.
  • The Supervisory Board has the right to request departments of the Company, including the Internal Audit Department, to perform certain tasks as required.
  • Upon the request of a shareholder / group of shareholders as prescribed in Clause 2, Article 114 of this Law, the Supervisory Board shall inspect and report explanations on issues that are required to be inspected to the Board of Directors and the shareholder or group of shareholders required.
  • The Supervisory Board may propose to the Board of Directors or the General Meeting of Shareholders measures to amend, supplement and improve the organization structure to manage, supervise and operate the company.
  • In case of detecting violations of law or the company's charter of members of the Board of Directors, CEOs and other business executives, the Supervisory Board must notify in writing to the Board of Directors to request violators to stop violations and take remedial measures;

The Supervisory Board is a very important board in the operating structure of a multi-shareholder joint stock company in order to ensure transparency in the management and governance of the Board of Directors, Director, General Director and benefits of Shareholders and groups of Shareholders. With the goal of developing the management of listed and public companies, the role of the Supervisory Board / Audit Committee (and the Internal Audit Department) is becoming increasingly important.

Clients can contact Russell Bedford KTC for advice on setting up the Supervisory Board and Internal Audit, Hanoi office - email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it or Ho Chi Minh City office hcm @ ktcvietnam.com or call + 84-974 589 163 for advice on the structure of the Supervisory Board and Internal Audit.