Issue 171025 – Organizational Structure and Corporate Governance in a Joint Stock Company

Dear Valued Clients,

A joint stock company (JSC) is the most complex and professional type of enterprise structure under Vietnam’s legal system. The Law on Enterprises 2020, as amended and supplemented in 2025 (“Law on Enterprises”), continues to refine the regulations on the organization, management, and operation of JSCs to ensure transparency, internal control, and alignment with modern corporate governance practices.

This article, prepared by ENT Law Firm LLC, aims to help enterprises and investors understand the organizational structure, functions, powers, and obligations of each governing body in a JSC under current law.

1. Organizational Models of Joint Stock Companies

According to Article 137 of the Law on Enterprises, a JSC may choose one of the following two management models:

a) Model 1: General Meeting of Shareholders (GMS), Board of Directors (BOD), Supervisory Board, and Director or General Director. A Supervisory Board is not mandatory if the company has fewer than 11 shareholders and institutional shareholders hold less than 50% of total shares.

b) Model 2: GMS, BOD, and Director or General Director. In this model, at least 20% of BOD members must be independent, and the company must establish an Audit Committee under the BOD.

The chosen organizational model must be specified in the company’s Charter of Organization and Operation (“Charter”).

2. General Meeting of Shareholders (GMS)

2.1. Legal Status

According to Article 138, the GMS is the highest decision-making body of the JSC, comprising all shareholders entitled to vote.

2.2. Main Powers and Duties

As the supreme authority of the company, the GMS has the following powers:

• Approve development orientation and amendments to the Charter;
• Decide on share classes, total number of shares offered, and annual dividends;
• Elect, dismiss, and remove members of the BOD and Supervisory Board;
• Decide on investment or sale of assets valued at 35% or more of total company assets;
• Approve financial statements, profit distribution, and dividends;
• Decide on reorganization or dissolution of the company;
• Approve internal governance regulations and list of independent auditors,

The JSC may elaborate and supplement specific provisions on the GMS’s powers and duties in its Charter, provided they comply with the law and the Law on Enterprises.

2.3. GMS Meetings

The annual GMS must be held within 4 months after the end of the fiscal year, extendable to 6 months. Extraordinary GMS meetings may be convened at the request of the BOD, the Supervisory Board, or a group of shareholders under Clause 2, Article 115 of the Law on Enterprises.

3. Board of Directors (BOD)

3.1. Legal Status

According to Article 153, the BOD is the company’s management body, acting on behalf of the company to exercise rights and obligations not assigned to the GMS.

3.2. Structure and Term

The BOD consists of 3 to 11 members, serving a term of up to 5 years, and may be re-elected. Independent directors may not serve more than two consecutive terms (Article 154).

3.3. Main Powers and Duties

Compared with the GMS, the BOD is the regular management body responsible for operational decisions, including:

• Determining business strategies, development plans, and annual business plans;
• Deciding on capital mobilization, share or bond issuance, and investment projects;
• Appointing, dismissing, and contracting with the Director/General Director;
• Supervising the Director/General Director’s performance;
• Determining organizational structure, and establishing subsidiaries, branches, and representative offices;
• Submitting financial statements and proposing dividends or loss treatment.

The BOD may issue resolutions to direct company activities. If a BOD resolution violates the law or causes damage to the company, members who voted in favor shall be jointly liable for compensation (Clause 4, Article 153).

4. Chairperson of the BOD

Under Article 156, the Chairperson of the BOD is elected among BOD members, responsible for organizing and coordinating BOD activities, convening and chairing BOD and GMS meetings, and supervising the implementation of BOD resolutions.

For public companies and state-controlled enterprises, the Chairperson may not concurrently hold the position of Director or General Director to ensure internal control and governance transparency.

5. Director or General Director

5.1. Legal Status

According to Article 162, the Director/General Director manages the company’s day-to-day operations under the supervision of the BOD and is responsible before the law.

5.2. Powers and Duties

In a JSC, the Director/General Director often acts as the legal representative (although the Chairperson may also assume this role). The Director/General Director represents the company in transactions and before the law. Their main powers and duties include:

• Implementing BOD resolutions and decisions;
• Managing daily business operations;
• Appointing and dismissing subordinate personnel;
• Deciding on employees’ salaries, bonuses, and benefits;
• Proposing dividends, loss treatments, and organizational structure changes.

The Director/General Director’s term may not exceed 5 years but can be renewed indefinitely. The company may specify detailed provisions on their powers and tenure in the Charter.

6. Supervisory Board and Supervisors

6.1. Structure

According to Article 170, the Supervisory Board consists of 3 to 5 members, with more than half residing in Vietnam. The Head of the Supervisory Board must hold a university degree in economics, finance, accounting, auditing, law, or related fields.

6.2. Powers and Duties

The Supervisory Board’s main powers and duties include (as detailed in the Charter):

• Supervising the management and operations of the BOD and the Director/General Director;
• Reviewing the legality and accuracy of financial and management reports;
• Checking the internal control, internal audit, and risk management systems;
• Proposing corrective measures or recommending governance structure changes;
• Attending and addressing GMS and BOD meetings.

According to Article 171, the Supervisory Board has the right to access the same information and documents as BOD members to ensure independence and objectivity in supervision.

7. Conclusion

The organizational structure and governance regime in joint stock companies under current law are designed to ensure transparency, efficiency, and internal control. Choosing the appropriate governance model, clearly defining authorities among corporate bodies, and maintaining strict oversight are key factors for sustainable and lawful business operations.

As usual, ENT Law LLC sincerely hope that the above article will be useful for our dear clients.

Best regards,

ENT Law LLC