The Board of Directors is an indispensable part in the organizational structure of Joint Stock Companies and plays a very significant role in the company's operation. So how does the law regulate this department? Let's find out with NPLaw in the following article!

I. What is the Board of Directors?

Pursuant to Clause 1, Article 153 of the Law on Enterprise 2020, the Board of Directors is the management body of a company with full authority to represent the company in making decisions and exercising the rights and obligations of the company, except for the rights and obligations under the authority of the General Meeting of Shareholders.

From the above concept, we can understand some following characteristics for Board of Directors:

Firstly, the Board of Directors is an agency, which means that it will have an obvious and specific organizational structure, tasks and authorities.

Secondly, this agency has management functions. It will decide on issues that have great impacts on the existence and development of the company.

Thirdly, the Board of Directors has full authority to represent the company in exercising the company’s rights and obligations, except for the rights and obligations under the authority of the General Meeting of Shareholders. In Joint Stock Companies, the General Meeting of Shareholders is the highest body.

However, the General Meeting of Shareholders does not operate regularly, only meeting annually once a year and may meet extraordinarily. Therefore, the Board of Directors was established to resolve major problems of the company when the General Meeting of Shareholders is not in operation.

II. Rights and Obligations

Pursuant to Clause 2, Article 153 of the Law on Enterprise 2020, the Board of Directors has the following rights and obligations:

- Making decisions on the company's strategies, medium-term development plans and annual business plans;

- Making decisions on issues related to the offerings and repurchases of shares and bonds;

- Making decisions on investment solutions and investment projects within the authority as prescribed by Law;

- Making decisions on market development, marketing and technology solutions;

- Approving contracts for purchase, sale, borrowing, lending, and other contracts and transactions, except for cases where the Company's Charter provides otherwise and contracts and transactions under the authority of the General Meeting of Shareholders;

- Making decisions on the position assumption of Chairman of the Board of Directors, Director or General Director and other important managers as specified in the Company's Charter; decisions on the salaries, allowances, bonuses and other benefits of such managers;

- Delegating authorized representatives to participate in the Board of Members or General Meeting of Shareholders at other companies, deciding on other remuneration and benefits of such persons;

- Supervising and directing the Director or General Director and other managers in the day-to-day business operations of the company;

- Making decisions on the organizational structures and internal management regulations of the company; the establishments of subsidiaries, branches and representative offices, and capital contribution and purchases of shares of other enterprises;

- Approving the programs and contents of documents for meetings of the General Meeting of Shareholders, convening the General Meeting of Shareholders, or soliciting opinions for the General Meeting of Shareholders to adopt resolutions;

- Submitting annual financial reports to the General Meeting of Shareholders;

- Proposing the dividend rate to be paid; deciding on the duration and procedures for paying dividends or handling losses arising during business operations;

- Proposing the reorganization or dissolution of the company; requesting bankruptcy of the company;

- Other rights and obligations as prescribed by this Law and the Company's Charter.

Thus, we can consider that the Board of Directors holds considerable authority in the company. This body decides on major issues related to the company's operations and developments.

III. Organizational Structures

Pursuant to Article 154 of the Law on Enterprise, the Board of Directors consists of 03 to 11 members. The specific number of members will be specified in the Company’s Charter. In addition, the term of office of a member of the Board of Directors shall not exceed 05 years and this member 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. Thus, the independent member’s term of the Board of Directors is limited compared to a member of the Board of Directors.

IV. Working Methods

Pursuant to Article 153 of the Law on Enterprise 2020, the Board of Directors adopts resolutions and decisions by voting at meetings and soliciting opinions in writing or in other forms as specified in the Company's Charter. Each member of the Board of Directors has one vote.

In case the resolutions or decisions adopted by the Board of Directors are contrary to the provisions of the Law, the resolutions of the General Meeting of Shareholders and the Company's Charter, causing damages to the company, the members who agree to adopt such resolutions or decisions shall be jointly and severally liable for them.

At the same time, these persons must be responsible for compensating the company for the damages. For members who object to adopt the above resolutions or decisions shall be exempted from liabilities. In this case, the company’s shareholders have the right to request the Court to suspend the implementation or rescind such resolutions or decisions.

Thus, the Board of Directors is one of the important bodies and plays a significant role in Joint Stock Companies with an obvious organizational structure and specifically regulated in the Law on Enterprise 2020. Moreover, this body’s decisions also have large impacts on the company's operations. Therefore, it is necessary to learn about this issue. Through this article, NPLaw hopes to help readers have a better understanding of this management body.