Members of the Board of Directors are individuals entrusted with the authority to make critical decisions regarding the operations and development of a company. To ensure transparency and efficiency in corporate governance, the Law on Enterprise 2020 sets forth specific provisions on the qualifications, conditions, rights, and obligations of Board of Directors’s members. In this article, NPLaw provides a comprehensive legal analysis regarding the status and regulations applicable to members of the Board of Directors.
I. Overview of Board of Directors' members
In Joint Stock Companies, the Board of Directors serves as a principal management body, responsible for setting strategic direction, supervising business operations, and making vital corporate decisions. Members of the Board of Directors are individuals elected or appointed by the General Meeting of Shareholders, tasked with overseeing governance and control functions, and guiding the company’s long-term development. These individuals hold the authority to make significant decisions on matters such as business strategy, finance, senior personnel, and supervision of the Director/General Director.
In addition, Board of Directors' members are obligated to perform their duties with integrity and prudence, and protect the lawful interest of the company and its shareholders. To ensure effective governance and prevent conflicts of interest, the law states certain individuals not being eligible to participate in the Board of Directors, such as public officials, members of the armed forces, or individuals with specific criminal records. These provisions enhance the transparency, accountability, and efficiency of corporate governance and contribute to sustainable business development.
II. Legal provisions governing Board of Directors’ members
1. Who is considered a member of the Board of Directors?
A member of the Board of Directors is an individual elected or appointed by the General Meeting of Shareholders to the board of a joint stock company, taking responsibility for corporate governance and supervision of business activities, and making strategic decisions that orientate the company’s development.
2. Conditions to become a Board of Directors’ member
Pursuant to Clause 1, Article 155 of the Law on Enterprise 2020, conditions for becoming the Board of Directors’ member include:
- Must not fall under the categories specified in Clause 2, Article 17 of the Law on Enterprise 2020 (e.g., banned individuals);
- Must possess professional qualifications and experience in corporate governance or the company’s line of business;
- Is not required to be a shareholder unless otherwise stipulated in the company's charter;
- May concurrently serve on the Board of Directors of another company;
- In State-owned enterprises or subsidiaries of State-owned enterprises, must not have family relationships with the Director/General Director or manager of the parent company.
Accordingly, an individual must meet the criteria set forth in Clause 1, Article 155 to be eligible as a Board of Directors’ member.
3. May the Board of Directors’ member serve on one of another company?
According to Point c, Clause 1, Article 155 of the Law on Enterprise 2020, a Board of Directors’ member may concurrently serve on the Board of another company. It means that the law does not limit the number of companies in which an individual can participate as the member of the Board of Directors, unless otherwise provided in the company's Charter.
Thus, the Board of Directors’ member may hold board positions in multiple companies, promoting the involvement of experienced and qualified professionals across various enterprises.
III. Questions regarding Board of Directors’ members
1. What should be included in the latest nomination form for Board of Directors’ members? Which content is most important and why?
The nomination form for a Board of Directors’ member is a document submitted by a shareholder or group of shareholders nominating a candidate for the Board of Directors of a joint stock company. The form typically includes:
- Company information;
- Candidate’s personal and professional details;
- Candidate’s declaration and commitment;
- Signature for confirmation.
The most important section is the candidate’s professional qualifications and experience, along with their commitment to comply with legal regulations. As Board of Directors’ members are responsible for managing and supervising the company, they must possess sufficient capability and integrity to fulfill their duties effectively.
2. How are elected members of the Board of Directors determined?
Under Clause 3, Article 148 of the Law on Enterprise 2020, the election of Board of Directors’ members must follow the cumulative voting method, unless otherwise stated in the company’s charter.
- The elected candidates are determined by the number of votes from high to low, starting from the candidate with the highest number of votes until the number of members is sufficient as prescribed in the Company Charter;
- In case there are two or more candidates with the same number of votes for the last position, the company will conduct a re-election or selection according to the criteria prescribed in the election regulations or the Company Charter.
Thus, the election must use the cumulative voting method, and those with the highest number of votes will be elected. If two or more candidates have the same number of votes for the final position, the company will conduct a re-election or selection according to the criteria in the election regulations or the Company Charter.
3. What are the voting methods for Board of Directors’ members?
According to Clause 3, Article 153 of the Law on Enterprise 2020, Board of Directors’ members may vote through the following methods:
- Direct voting during Board of Directors’ meetings;
- Voting in writing (ballot);
- Other methods as specified in the company’s charter.
Therefore, members may vote either directly, via written form, or by alternative methods depending on the company’s regulations. This flexibility ensures the Board of Directors can efficiently and effectively conduct decision-making processes.
4. What are the rights and obligations of Board of Directors’ members under current law?
Clause 2, Article 153 of the Law on Enterprise 2020 outlines the main rights and obligations of the Board of Directors as follows:
- Determining the company’s development strategy and plans;
- Recommending the type and number of shares to be issued, determining the selling price of shares and bonds, and performing capital raising and share repurchase;
- Deciding on investment plans, investment projects, market development solutions, marketing and technology;
- Approving contracts involving sales, purchases, loans with a value of 35% the total asset value or more according to the most recent financial report;
- Electing or dismissing the Board of Directors’ Chairman; appointing and removing the Director/General Director and important managers; determining their salary, bonuses, and benefits;
- Overseeing company operations;
- Organizing and managing internal governance;
- Convening meetings, approving agendas, presenting financial statements, recommending dividend rates, and proposing loss-handling solutions;
- Reorganizing or dissolving the company;
- Exercising other rights and obligations as prescribed by law and the company charter.
These rights and responsibilities make the Board of Directors serve as the central authority in managing, supervising, and directing company activities. The legal provisions aim to ensure transparency, accountability, and the protection of collective corporate and shareholder interests.
5. What are conditions to become a Board of Directors’ member in joint stock companies?
According to Article 155 of the Law on Enterprise 2020, to become a member of the Board of Directors, an individual must meet following conditions:
- Must not fall under prohibited categories for establishing and managing defined in Clause 2, Article 17 of the Law on Enterprise 2020;
- Must possess the necessary qualifications and experience in corporate governance or the company's business sector;
- Is not required to be a shareholder unless otherwise stated in the charter;
- May simultaneously serve on other boards;
- No family relationship with the Director, General Director and other managers in the company or parent company if it belongs to the group of State-owned enterprises.
If the company adopts the General Meeting of Shareholders – Board of Directors – Director /General Director model, then independent Board of Directors’ members must also meet these additional conditions:
- Not employed by the company, its parent, or subsidiaries for at least three consecutive years prior;
- Not receiving salaries or remuneration from the company, except for legally prescribed allowances;
- Not having family ties with major shareholders, managers, or subsidiaries;
- Not directly or indirectly holding more than 1% of the company’s voting shares;
- Not having served on the Board of Directors or Supervisory Board for at least five years prior, unless continuously elected for two consecutive terms.
Thus, under Article 155, candidates must meet specific competency, integrity, and legal eligibility standards to serve as Board of Directors members.
IV. Legal advisory services on board of directors’ members
The above article is provided by NPLaw, offering insights into legal issues concerning members of the Board of Directors. With a team of experienced lawyers and legal professionals, NPLaw is committed to supporting and advising clients on all legal matters related to corporate governance and Board of Directors operations. For legal assistance, please contact:
