Criteria for becoming a member of the board of directors

A member of the board of directors’ standards meet corporate law regulations. The sustainable development of a business is the result of the positive activities of the members of the Board of Directors. Criteria for appointing members of the Board of Directors are therefore also determined so that the selection process complies with the necessary requirements. Let’s learn about these conditions with Long Phan in the following article.

The importance of the Board of Directors in a business

What is the Board of Directors?

The Board of Directors is the company’s management agency, with full authority on behalf of the company to make decisions and exercise the rights and obligations of the company, except for the rights and obligations under the authority of the General Meeting of Shareholders.

The Board of Directors is an agency that only appears and operates within the organizational structure of a joint stock company. The functions of the Board of Directors are always associated with the goal of maintaining stability and long-term development of the enterprise. The Board of Directors has the main responsibility for building the corporate organizational structure, deciding on business strategy and ensuring legal compliance.

Legal basis: Article 153 of the Law on Enterprise 2020.

Role of the Board of Directors

The Board of Directors is an agency established to perform corporate management functions, promptly responding to domestic and world market trends. Therefore, the Board of Directors plays a particularly important role in a joint stock company. Specifically:

• The Board of Directors is the body that decides and supervises the operations of the enterprise, ensuring sustainable development and effective enterprise management;
• Members of the Board of Directors have the right to issue decisions on strategy, policy and business operations. The Board of Directors’ decisions directly affect the operating efficiency and long-term success of the business;
• The role of the Board of Directors is expressed through the appointment and dismissal of key management positions such as Director or General Director;
• The Board of Directors has the right to decide on the organizational structure, internal management regulations and approve the company’s annual business plan. During regular or extraordinary meetings, the Board of Directors discusses and makes strategic decisions on investment, market expansion, stock issuance and other important issues;
• The Board of Directors acts as a bridge between shareholders and management, ensuring the rights of shareholders;
• Through monitoring the activities of the Director and the management apparatus, the Board of Directors contributes to creating transparency and efficiency in corporate governance. Board members have the obligation to perform their duties honestly and carefully for the best interests of the company and shareholders.

Thus, the role of the Board of Directors has a direct impact on the effectiveness of management activities in a joint stock company.

Legal basis: Article 153 of the Law on Enterprise 2020.

Organizational structure and size of the Board of Directors

The organizational structure and size of the Board of Directors are specified in the company’s Charter, in accordance with the provisions of law. The specific scale depends on the business characteristics, scale and management needs of each enterprise. In terms of basic principles, the organizational structure of the Board of Directors needs to comply with the following contents:

First, the structure of the Board of Directors usually includes the Chairman of the Board of Directors, Vice Chairman (if any) and members. The Chairman of the Board of Directors is elected, dismissed, and dismissed by the Board of Directors from among the members of the Board of Directors. The number of members of the Board of Directors of a joint stock company will include:

• Members of the Board of Directors: There are at least 03 and no more than 11 members. The company charter specifies the number of members of the Board of Directors;
• Independent members of the Board of Directors: The company charter specifies the number, rights, obligations, organization and coordination of activities of independent members of the Board of Directors.

For listed companies and large-scale public companies, the structure of the Board of Directors must ensure a balance between executive and non-executive members. At least one-third (1/3) of the total members of the Board of Directors must be independent members.

Second, regarding the term of office, members of the Board of Directors have a term of no more than 5 years and can be re-elected for an unlimited number of terms. An individual can only be elected as an independent member of the Board of Directors of a company for no more than 02 consecutive terms. In case all members of the Board of Directors end their terms at the same time, those members will continue to be members of the Board of Directors until a new member is elected to replace them and take over the work.

Legal basis: Article 154 of the Law on Enterprises 2020.

Standards to become a member of the board of directors according to law

To become a member of the board of directors, an individual must meet the standards, conditions and appointment process as prescribed by law and the company’s Charter. In particular, Article 155 of the Law on Enterprises 2020 stipulates the following basic conditions:

1. Not subject to provisions in Clause 2, Article 17 of this Law.

Members of the Board of Directors must have the right to manage the enterprise according to the provisions of law. This requires that the candidate is not banned from managing an enterprise according to the provisions of Clause 2, Article 17 of the Law on Enterprises.

1. Professional qualifications and skills.

Board members need to have professional qualifications and experience in business management is an important factor. Many companies require candidates to have a certain number of years of experience in a related field or in a senior management position, not necessarily being a shareholder of the company, unless the company charter stipulates otherwise. .

In addition, knowledge of corporate governance, finance, law and fields related to the company’s operations are also factors considered when selecting members of the Board of Directors.

For listed companies or large-scale public companies, qualifications and experience requirements are often higher.

This requirement is often specifically stipulated in the company charter, appropriate to the field of operation and scale of the business. Helps Board members have the ability to make strategic decisions and monitor the performance of the business.

1. Regulations on member independence

A member of the Board of Directors of a company may simultaneously be a member of the Board of Directors of another company;

For state-owned enterprises as prescribed in Point b, Clause 1, Article 88 of this Law and subsidiaries of state-owned enterprises as prescribed in Clause 1, Article 88 of this Law, a member of the Board of Directors cannot be a person. have family relationships of the Director, General Director and other managers of the company; of the manager, the person with authority to appoint the parent company’s manager as follows:

• Not a person working for the company, its parent company or a subsidiary of the company; not be a person who has worked for the company, parent company or subsidiary of the company for at least 3 consecutive years;
• Not be a person receiving salary or remuneration from the company, except for the allowances that members of the Board of Directors are entitled to according to regulations;
• Not a person whose spouse, biological father, adoptive father, biological mother, adoptive mother, biological child, adopted child, biological brother, biological sister, or younger sibling is a major shareholder of the company; is a manager of the company or a subsidiary of the company;
• Not a person who directly or indirectly owns at least 01% of the company’s total voting shares;
• Must not be a person who has served as a member of the Board of Directors or Supervisory Board of the company for at least the previous 5 consecutive years, unless appointed for 2 consecutive terms.

Board member standards serve as a measure of capacity in corporate governance activities. The selection, appointment and dismissal of members comply with strict legal regulations, ensuring independence and expertise.

Business management consulting services

Corporate governance consulting services at Long Phan are the process of supporting and providing comprehensive solutions for corporate governance including joint stock companies. We support our customers in building a suitable Board of Directors structure that meets international standards of corporate governance. From there, improve operational efficiency and business value in the market. Our consulting services include:

• Consulting on standards for selecting members of the Board of Directors;
• Consulting on the appointment and dismissal process;
• Consulting on the organizational structure of the Board of Directors;
• Support the development of criteria to evaluate the performance of the Council and each member and issues related to corporate governance;
• Support businesses in developing internal regulations on corporate governance, ensuring compliance with current legal regulations;
• Consulting on building sustainable development strategies;
• Risk management and increased transparency in corporate governance activities.

Corporate governance activities play a key role in bringing profits and enhancing a business’s position in the market. Consulting services at Long Phan provide management solutions to help customers build optimal operating processes and improve business performance. If you want to learn more details, please contact us via Hotline 0906735386 to get the most optimal solution for your business.