Establishing Board of Directors Operating Regulations to Ensure Transparency of Authority and Responsibilities

Establishing Board of Directors Operating Regulations may lead to disputed resolutions, invalid transactions that exceed delegated authority, and compensation liabilities for board members. This document should clearly define the powers of the Board of Directors (BOD), General Meeting of Shareholders (GMS), Chairman of the BOD, and General Director, while also regulating conflicts of interest, related-party transactions, and disclosure obligations. Businesses should review their Charter, delegation-of-authority matrix, and Law on Enterprises and Businesses before issuing these regulations with Long Phan Consulting company.

Legal Nature and Scope of Application of BOD Operational Regulations

Board of Directors operational regulations function as a critical layer of internal legal control, delineating strategic management from day-to-day executive administration. In the absence of a comprehensive regulatory framework, enterprises frequently encounter jurisdiction disputes, unenforceable board resolutions, or commercial contracts subject to judicial invalidation.

Defining the Boundary Between Strategic Management and Executive Operation

In practice, Board of Directors operational regulations are not a mere bureaucratic formality to complete internal corporate files. Instead, they serve as a legally binding instrument that establishes clear operational boundaries among the Board of Directors (BOD), the General Meeting of Shareholders (GMS), the Chairman of the BOD, and the General Director / Chief Executive Officer (CEO).

Enterprises must structurally design these regulations to mitigate three core corporate governance risks:

• Delineation of Management Power: Pursuant to Article 153 of the Law on Enterprises 2020, the BOD is the governing body of the company, possessing the authority to make decisions on behalf of the company on all matters falling outside the exclusive jurisdiction of the GMS.
• Executive Oversight: The General Director/CEO executes daily business operations but cannot usurp or supersede the strategic decision-making authority of the BOD.
• Liability Mitigation: Public companies must review, issue, and align their corporate governance frameworks with current regulatory mandates, presenting these regulations to the GMS for formal adoption at the nearest meeting pursuant to Clause 20, Article 310 of Decree No. 155/2020/ND-CP.

Retaining outdated internal regulations that conflict with the Corporate Charter, the Law on Enterprises 2020, or public company governance standards poses a severe material risk. It exposes corporate resolutions to legal challenges on the grounds of ultra vires actions or defective internal approval mechanisms.

Mandatory Subjects of Application in Joint Stock and Public Companies

An effective set of internal regulations must explicitly define its scope of application. Omitting key governance titles or administrative support units disrupts the procedural integrity of board meetings, voting mechanisms, information disclosure, and internal auditing.

The regulatory scope must comprehensively govern the following subject groups:

• The Board of Directors and the Chairman: The primary actors responsible for organizing governance activities, convening meetings, coordinating resolutions, and supervising the execution of board decisions.
• Independent Board Members and BOD Sub-committees: These entities require distinct mechanisms to access corporate records, exercise independent evaluation, and monitor potential conflicts of interest.
• The General Director / Chief Executive Officer: The regulations must clearly restrict executive authority, define the scope of permissible sub-delegation, and establish explicit financial thresholds for entering into commercial transactions.
• The Corporate Governance Officer and Company Secretary: Support units tasked with preparing dossiers, recording comprehensive board minutes, archiving resolutions, and monitoring compliance with information disclosure obligations.

For public companies, the BOD bears the statutory obligation to draft and submit these operational regulations to the GMS for ratification pursuant to Clause 4, Article 278 of Decree No. 155/2020/ND-CP. The regulatory templates provided under Articles 1, 2, and 5 of Circular No. 116/2020/TT-BTC serve strictly as baseline frameworks and do not substitute for a customized structure tailored to the corporate charter and operational reality of the enterprise.

Personnel Structure and Eligibility Standards for Board Members

The composition of the Board of Directors directly dictates the quality of corporate oversight, independent debate, and risk management within a Joint Stock Company. A robust set of operational regulations must transform statutory personnel requirements into practical internal mechanisms rather than treating them as mere checklists for elections.

Eligibility Criteria, Tenures, and Governance Information Rights

Enterprises must explicitly stipulate the exact size, tenure, and information access rights allocated to each board member. This clear definition forms the legal bedrock for the BOD to supervise the General Director, evaluate financial exposures, and respond immediately to unauthorized actions.

The internal regulations must integrate the following core personnel matters:

• Board Size: The BOD must comprise between 3 and 11 members, allowing the enterprise to structure its governance body in alignment with its ownership scale and organizational complexity pursuant to Clause 1, Article 154 of the Law on Enterprises 2020.
• Tenure Limits: Individual board members face a maximum term of 5 years, though they may be re-elected for an unlimited number of terms pursuant to Clause 2, Article 154 of the Law on Enterprises 2020.
• Rights to Corporate Information: Board members possess the statutory right to demand that the General Director, CEO, and other executive managers provide financial and operational documentation concerning any unit within the enterprise pursuant to Clause 1 and Clause 2, Article 159 of the Law on Enterprises 2020.
• Tenure Grandfathering: Corporate managers who do not fully meet newly enacted statutory qualifications may continue executing their duties until the expiration of their current active tenure pursuant to Clause 2, Article 218 of the Law on Enterprises 2020.

For public companies, the regulations must formalize the timeline for nominee dossier submission, independent screening, and pre-meeting disclosures. Candidate information must be disclosed to shareholders at least 10 days prior to the opening date of the General Meeting of Shareholders pursuant to Clause 1, Article 274 of Decree No. 155/2020/ND-CP.

Independent Board Member Ratios for Public Companies

Independent board members provide an essential internal check and balance, especially in companies dominated by controlling shareholders or characterized by frequent related-party dealings. Failing to maintain the statutory ratio of independent members exposes all subsequent board resolutions to objectivity disputes and shareholder litigation.

The operational regulations must explicitly detail the distinct powers, obligations, and information access channels dedicated to independent directors. If an enterprise merely replicates statutory percentages in its text without designing specific rights to dissent, request records, or report to shareholders, independent oversight will exist only on paper.

Authority Delegation Matrix: GMS, BOD, and the General Director

The authority delegation matrix constitutes the core operational engine of the Board of Directors internal regulations. Failing to demarcate explicit financial and administrative boundaries across governance levels directly exposes an enterprise to unauthorized transactions, internal deadlock, and civil liabilities for the signing executive.

Strategic Decision-Making Boundaries and Investment Project Approvals

While the BOD holds the primary mandate to dictate corporate strategy, outline development paths, and approve critical management matters, it cannot usurp the statutory authority reserved exclusively for the highest corporate body, the GMS.

Enterprises must structurally design their delegation matrix based on transaction types, asset values, and explicit approval thresholds:

Internal regulations must avoid broad phrases such as “the BOD decides all material matters.” Such vague language lacks practical legal enforceability. Companies must quantify administrative boundaries using asset percentages, hard currency caps, and specific transaction categories requiring mandatory board approval.

Authorization Mechanisms and Executive Power Controls

Power delegation is an operational necessity, but it must not be structured in a manner that allows the General Director/CEO to displace the oversight role of the BOD. Regulations must implement clear definitions regarding which matters can be delegated, their maximum financial values, and mandatory post-execution reporting.

Executive power controls must incorporate the following statutory layers:

• Dual-Role Restrictions: The Chairman of the BOD of a public company must not concurrently hold the position of General Director/CEO, ensuring a clear separation between strategic oversight and day-to-day execution pursuant to Clause 2, Article 156 of the Law on Enterprises 2020.
• Executive Boundaries: The General Director/CEO organizes the implementation of board resolutions and manages daily business affairs, but remains under the constant supervision of the BOD pursuant to Clause 3, Article 162 of the Law on Enterprises 2020.
• Transaction Thresholds: All investment contracts, financing facilities, corporate guarantees, asset sales, and related-party transactions must map to explicit monetary approval tiers.
• Post-Audit Reporting: The General Director/CEO must periodically report all executed contracts under delegated authority, allowing the BOD to track cumulative financial exposure and compliance risks.

If an executive executes an agreement exceeding their authorized threshold or signs a contract without following the proper internal approval sequence, the transaction may be declared null and void by a competent court. In such events, the signing executive, involved board members, or the General Director/CEO can be held personally and jointly liable for damages and forced to return all financial gains to the company pursuant to Clause 5, Article 167 of the Law on Enterprises 2020.

Meeting Procedures and Resolution Validity Risks

Procedural defects represent the single greatest threat to the validity of Board of Directors resolutions. A resolution that contains flawless business logic can still be rendered legally void if the underlying procedures for convening, voting, or minuting violate statutory requirements, creating severe litigation exposure among shareholders, directors, and executive managers.

Convening Conditions, Meeting Formats, and Valid Voting Ratios

The internal regulations must fully standardize the entire lifecycle of a board meeting, from the initial notification to the final adoption of a resolution. The core objective is to construct a clear, legally sound paper trail demonstrating that every corporate decision was validly enacted.

Enterprises should structure their board meeting framework according to the following statutory steps:

• Statutory Triggers for Convening: The Chairman of the BOD must convene regular meetings at least once every quarter, and must call extraordinary sessions immediately upon the emergence of critical governance matters pursuant to Clause 1 and Clause 2, Article 157 of the Law on Enterprises 2020.
• Dossier and Agenda Preparation: Meeting materials must be comprehensive enough to allow board members to evaluate risks, exercise dissent, and cast informed votes. Regulations must specify exact delivery timelines, permissible digital formats, and formal acknowledgment procedures.
• Quorum Verification: A board meeting can only validly proceed and conduct business if at least three-quarters (75%) of the total board members are present or represented pursuant to Clause 8, Article 157 of the Law on Enterprises 2020.
• Flexible Attendance Tracking: Board members may participate via physical attendance, online video conferencing, or by appointing an authorized proxy to attend, provided the proxy appointment is approved by a majority of the board members pursuant to Clause 11, Article 157 of the Law on Enterprises 2020.
• Voting Tiers and Tie-Breakers: Board resolutions are adopted when supported by a majority of attending members. In the event of a tie vote, the final outcome is decided by the casting vote of the Chairman of the BOD pursuant to Clause 12, Article 157 of the Law on Enterprises 2020.

The more detailed the internal procedures are regarding meeting steps, the lower the risk that a resolution will be challenged on technical or formal grounds. This procedural precision serves as a vital shield protecting directors when executing corporate decisions.

Board Minutes Principles and the Legal Consequences of Procedural Defects

Board meeting minutes are the central piece of legal evidence used to determine the validity of a board session. If the minutes omit mandatory details or inaccurately reflect the voting positions of individual directors, the enterprise faces substantial internal conflict and regulatory exposure.

Enterprises must enforce strict compliance regarding the creation, signing, and archiving of minutes:

• Mandatory Language and Content: Every board meeting must be recorded in written minutes in the Vietnamese language, detailing the core discussions, individual director opinions, and exact voting tallies pursuant to Clause 1, Article 158 of the Law on Enterprises 2020.
• Joint Liability of the Chairperson and Secretary: The chairperson of the meeting and the secretary bear joint personal liability for ensuring that the minutes are absolutely accurate, complete, and truthful pursuant to Clause 3, Article 158 of the Law on Enterprises 2020.
• Resolution Dossier Archiving: Internal policies should require that the meeting convocation notice, underlying financial sheets, signed attendance logs, physical ballots, and written dissents be permanently archived alongside the issued resolution.
• Nullification Risk Control: Contracts executed via unauthorized resolutions or defective procedures remain highly vulnerable to judicial nullification. The signing officer, negligent board members, or the General Director/CEO can be held jointly and severally liable to indemnify the company for resulting commercial losses pursuant to Clause 5, Article 167 of the Law on Enterprises 2020.

For joint stock structures managing significant asset disposals or high-value foreign investments, meeting minutes are not an administrative formality. They are a binding compliance asset that safeguards corporate accountability and protects shareholder equity.

Material Interest Disclosures and Related-Party Transaction Thresholds

Enterprises must legally compel board members, the General Director/CEO, and senior managers to transparently disclose their interconnected interests before participating in any corporate decision. This disclosure is the prerequisite to determine voting eligibility and enforce proper recusal.

The operational regulations must codify the following critical compliance obligations:

• Disclosure of Material Interconnected Interests: Board members, the General Director/CEO, and senior executive managers must disclose in writing their ownership stakes in other enterprises and details of their related parties within 7 business days from the date of occurrence or modification pursuant to Clause 2 and Clause 3, Article 164 of the Law on Enterprises 2020.
• Mandatory Voting Recusal: Board members are strictly prohibited from casting votes on contracts, transactions, or projects that yield a direct or indirect benefit to themselves or their related parties pursuant to Clause 4, Article 291 of Decree No. 155/2020/ND-CP.
• Written Contract Requirements: Public companies must execute all related-party transactions in written contracts under the principles of market equality and mutual voluntariness pursuant to Clause 1, Article 292 of Decree No. 155/2020/ND-CP.
• GMS Approval Thresholds: Any transaction or series of connected transactions valued at 35% or more of the company’s total asset value must be submitted to the GMS for formal ratification before execution pursuant to Point b, Clause 4, Article 293 of Decree No. 155/2020/ND-CP.
• Controlling Shareholder Transaction Caps: Any credit facility, loan, or asset sale exceeding 10% of total assets conducted with a shareholder holding 51% or more of voting shares must be approved by the GMS pursuant to Point c, Clause 4, Article 293 of Decree No. 155/2020/ND-CP.

Furthermore, public companies must absolutely block all loans, credit extensions, or financial guarantees to shareholders and their related parties, except for specific statutory carve-outs:

• The public company operates as a licensed credit institution.
• The shareholder is a subsidiary within the corporate structure that contains no state-owned capital, and whose capital contribution was finalized prior to July 1, 2015.
• The transaction occurs between entities within an integrated corporate group or holding company structure and has been formally approved by either the GMS or the BOD.

These exceptions must be interpreted strictly within the regulation text. Granting unauthorized loans or guarantees outside these statutory boundaries constitutes a severe breach of fiduciary duty, triggering immediate personal restitution demands.

For State-Owned Enterprises (SOEs), the regulations must integrate the latest anti-corruption asset transparency mandates. Effective July 1, 2026, senior corporate executives must file supplementary declarations detailing any asset or income fluctuations valued at 1 billion VND or more pursuant to Clause 12, Article 1 and Article 2 of the Law on Amendments to the Anti-Corruption Law (Law No. 132/2025/QH15).

Reporting Frameworks, Information Disclosure, and Accountability

The BOD does not merely rule on corporate strategy; it bears a statutory accountability mandate to the market and its shareholders. The operational regulations must transform reporting duties into structured schedules, standardized forms, and pre-disclosure verification workflows.

The transparency framework must be designed across three corporate layers:

• Annual Reporting to the GMS: The BOD must present an analytical report detailing corporate performance, financial realities, and executive oversight results at the Annual General Meeting of Shareholders pursuant to Clause 3, Article 139 of the Law on Enterprises 2020 and Article 280 of Decree No. 155/2020/ND-CP.
• Executive Remuneration Transparency: All salaries, bonuses, allowances, and non-monetary benefits paid to individual board members and the General Director/CEO must be itemized as a distinct section in the annual audited financial statements pursuant to Clause 2, Article 162 of the Law on Enterprises 2020 and Article 298 of Decree No. 155/2020/ND-CP.
• Appointment of a Corporate Governance Officer: Public companies must appoint at least 1 dedicated Corporate Governance Officer to assist the BOD, oversee meeting notifications, archive minutes, and manage compliance workflows pursuant to Clause 1, Article 281 of Decree No. 155/2020/ND-CP.

Moreover, all inside information capable of materially impacting stock valuations or enterprise operations must be disclosed accurately, completely, and within statutory timelines pursuant to Clause 1, Article 295 of Decree No. 155/2020/ND-CP. Failure to meet these thresholds exposes the entity to severe enforcement actions, with corporate governance fine caps reaching up to 3 billion VND under Clause 4, Article 132 of the Law on Securities 2019.

Enactment Procedures and Strategic Optimization of Corporate Governance Regulations

Enacting internal Board of Directors regulations must never be approached as a simple template-copying exercise. To ensure operational feasibility and enforceability, an enterprise must construct its governance regulations directly from its Corporate Charter, specific corporate model, structural delegation matrix, and day-to-day transactional risk profile.

Drafting, Consultation, and Adoption Workflows for BOD Regulations

The enactment process requires a complete documentary trail spanning from the initial drafting stage through formal approval. For public corporate structures, the BOD carries the statutory mandate to spearhead the drafting process and submit the operational regulations to the GMS for final ratification pursuant to Clause 4 and Clause 6, Article 278 of Decree No. 155/2020/ND-CP.

Enterprises must structure their regulatory enactment process across the following four core phases:

• Charter Realignment and Model Assessment: The enterprise must evaluate whether it operates under a Board of Supervisors structure or an Audit Committee framework directly under the BOD to define the precise regulatory scope.
• Drafting Custom Governance Layers: The initial draft must explicitly codify the exact board composition, the distinct powers of the Chairman, independent director oversight mechanisms, meeting convocation timelines, and voting thresholds.
• Cross-Departmental Internal Consultation: The BOD must formally solicit technical feedback from the Board of Supervisors, the Audit Committee, the General Director/CEO, the Corporate Governance Officer, and internal legal counsel.
• GMS Ratification and Public Disclosure: Upon receiving shareholder approval, the operational regulations must be formally issued and publicly uploaded to the corporate website within statutory timelines pursuant to Clause 4, Article 278 of Decree No. 155/2020/ND-CP.

Failing to maintain written consultation records or neglecting to publish the finalized regulations via approved public channels compromises the enforceability of the document, leaving subsequent board resolutions vulnerable to procedural challenges during internal corporate disputes.

Establishing Optimal Financial and Transactional Authority Tiers

A frequent corporate governance failure occurs when an enterprise adopts a visually appealing template that directly conflicts with its Corporate Charter, internal financial rules, and actual management dynamics. Such a mismatch fails to restrict executive overreach while simultaneously inflating the monitoring liabilities of individual board members.

To establish an effective internal control framework, enterprises must quantify exact financial authorization tiers across the following critical transactional groups:

• Capital Investments and New Projects: Specify the precise asset valuations that the General Director/CEO may independently execute, the thresholds requiring BOD approval, and the high-value projects that must be elevated to the GMS.
• Corporate Financing, Guarantees, and Credit Lines: Define distinct monetary limits, debt-to-equity percentages, and specific approval tiers for external debt sourcing or internal group financing.
• Asset Disposals and Major Commercial Contracts: Segment transactions into routine operational agreements and extraordinary corporate transfers that could fundamentally alter the financial structure of the company.
• Related-Party Dealings: Align all internal approval levels directly with the statutory 35% asset valuation threshold, implementing lower internal tiers if necessitated by the risk profile of the company or required by the Corporate Charter.

BOD operational regulations only deliver genuine protective value when authority is converted into precise numbers, clear workflows, and personal accountability measures. Without this quantitative clarity, an executive can easily execute unauthorized deals while the board faces regulatory exposure for failing to maintain active supervision.

Comprehensive Board of Directors Internal Regulations Advisory Services

Corporate governance regulations dictate the legal validity of board resolutions, the scope of executive liability, and the structural safety of corporate transactions. Long Phan Consulting company provides comprehensive legal advisory services to design, audit, and realign corporate regulations with the underlying Corporate Charter, statutory compliance frameworks, and actual management practices.

Our core legal corporate governance capabilities include:

• Charter and Governance Model Alignment: Reviewing the corporate structure, Board of Supervisors, or Audit Committee to determine the necessary regulatory modifications.
• Authority Matrix Engineering: Designing clear financial and administrative approval tiers for investments, financing facilities, corporate guarantees, asset disposals, and related-party transactions.
• BOD Regulations Drafting: Formalizing meeting convocation steps, voting methods, minutes recording protocols, resolution archiving, and written opinion collection mechanisms.
• Corporate Governance Due Diligence: Conducting comprehensive legal audits to identify and eliminate contradictions between BOD regulations, financial policies, the Charter, and actual operational practices.
• Conflict of Interest Controls: Constructing robust disclosure workflows, voting recusal protocols, and validation sequences for related-party commercial dealings.
• Governance Dispute Representation: Providing strategic counsel, legal defense, and direct representation during corporate deadlocks or authority disputes among shareholders, directors, and executive managers.

Corporate governance frameworks require precise customization to safeguard management operations and eliminate transaction risks under Vietnamese law. Foreign investors and enterprises are invited to submit their current Corporate Charter, active internal regulations, and corporate structures via Email (info@longphanpmt.com) or Zalo/WhatsApp (+84 906 735 386) for an initial legal evaluation.

Frequently Asked Questions under the title “Establishing Board of Directors’ Operating Regulations to Ensure Transparency of Rights and Responsibilities”

Establishing comprehensive “Board of Directors Operating Regulations” helps businesses prevent the risk of abuse of power and tightly control conflicts of interest arising in operational practice. Understanding the limits of authority and compliance deadlines not only protects the legal safety of managers but also ensures that commercial transactions are not declared invalid. The following explanations clarify complex legal situations commonly encountered when operating this governance structure.

Conclusion

Board of Directors operational regulations constitute the foundational mechanism required to maintain corporate transparency, restrict executive overreach, and safeguard shareholder equity within a Joint Stock Company. Enterprises must structurally engineer these internal rules to align perfectly with their Corporate Charter, financial delegation matrices, meeting protocols, voting thresholds, related-party transaction controls, and statutory disclosure mandates. Operating under vague authority boundaries or outdated templates directly exposes corporate resolutions and high-value transactions to validity challenges and judicial nullification.

To protect your management operations and align your corporate governance framework with current statutory mandates, contact our Long Phan Consulting Company immediately via Hotline 1900636389 for elite dossier appraisal and structural execution.