The Role of the Board of Directors in Joint Stock Company

The Board of Directors is a crucial component in the organizational structure of a joint-stock company. The company’s growth depends not only on the executive management’s capabilities but also on the leadership, rigorous oversight, and sound decision-making of the Board of Directors. This article will provide a detailed analysis of the role of the Board of Directors in Joint Stock Company.

The Board of Directors in Joint Stock Company

Structure of the Board of Directors in Joint Stock Company

Number of Members and Their Term of Office

Article 154 of the Law on Enterprises 2020 stipulates the number and term of members of the Board of Directors as follows:

• The Board of Directors shall consist of between 3 to 11 members. The exact number shall be specified in the company’s Charter.
• The term of a member of the Board of Directors shall not exceed 5 years and may be re-elected for an unlimited number of terms. However, an individual may only be elected as an independent member of the Board of Directors for no more than 2 consecutive terms. In cases where all members’ terms end simultaneously, they shall continue to serve until new members are elected and take over the duties, unless otherwise stipulated in the company’s Charter.

Standards and Conditions for Board Membership

Members of the Board of Directors must meet the standards and conditions outlined in Article 155 of the Law on Enterprises 2020. Specifically:

• Members must have full civil act capacity and must not fall under any category prohibited from managing enterprises by law.
• They must possess professional qualifications and experience in business management or in the company’s area of operations.
• For state-owned enterprises and subsidiaries of state-owned enterprises, members of the Board of Directors must not be individuals who have familial relations with the Director, General Director, or other managers of the company, or with managers or individuals authorized to appoint managers of the parent company.
• The company’s charter may stipulate additional standards and conditions that align with the specific characteristics of the enterprise.

Functions of the Board of Directors in Joint Stock Company

The Board of Directors plays a leading role in managing a joint-stock company. The Law on Enterprises 2020 clearly defines the authority of the Board of Directors, specifically:

• The Board of Directors has full authority, on behalf of the company, to make decisions and execute rights and obligations that do not fall under the authority of the General Meeting of Shareholders.
• The management function of the Board of Directors is reflected in its decisions on crucial matters such as the appointment of the Board of Directors, approval of investment plans, and the orientation of market and technology development. The Board of Directors also decides on the organizational structure, issues internal regulations, and establishes subsidiaries and branches.
• In cases where there is only one legal representative, it may be either the Chairman of the Board of Directors or the General Director. If there are multiple legal representatives, the Chairman of the Board of Directors and the General Director are automatically considered legal representatives.

Legal Basis: Articles 137, 153, and 154 of the Law on Enterprises 2020.

Management Functions of the Board of Directors

Powers and Duties of the Board of Directors

According to Article 153 of the Law on  Enterprises 2020, the Board of Directors in Joint Stock Company has the following rights and duties:

• Decide on the company’s strategy, medium-term development plans, and annual business plans;
• Propose the type of shares and the total number of shares authorized for sale of each type;
• Decide on the sale of unsold shares within the scope of authorized shares of each type; decide on raising additional capital in other forms;
• Decide on the sale price of the company’s shares and bonds;
• Decide on the repurchase of shares as stipulated in Clause 1 and Clause 2 of Article 133 of this Law;
• Decide on investment plans and projects within their authority and limits according to legal regulations;
• Decide on market development solutions, marketing, and technology;
• Approve contracts for buying, selling, borrowing, lending, and other transactions with a value of 35% or more of the total asset value recorded in the company’s most recent financial statements, except as otherwise provided by the company’s charter;
• Elect, dismiss, or remove the Chairman of the Board of Directors; appoint, dismiss, sign contracts, or terminate contracts with the Director or General Director and other key managers as stipulated by the company’s charter; decide on the salary and bonus policies of these managers; appoint authorized representatives to participate in the Members’ Council or the General Meeting of Shareholders in other companies, and decide on the remuneration and other benefits of these representatives;
• Supervise and direct the Director or General Director and other managers in the daily business operations of the company;
• Decide on the company’s organizational structure, internal management regulations, decide on the establishment of subsidiaries, branches, representative offices, and the capital contribution or purchase of shares in other enterprises;
• Approve programs and materials for the General Meeting of Shareholders, convene the General Meeting of Shareholders or collect opinions for the General Meeting of Shareholders to pass resolutions;
• Present the annual financial statements to the General Meeting of Shareholders;
• Propose the dividend rate to be paid; decide on the time and procedure for paying dividends or dealing with losses incurred during the business process;
• Propose the reorganization, dissolution of the company; request the company’s bankruptcy;
• Other rights and duties as provided by this Law and the company’s charter.

These are the basic rights of the Board of Directors according to the Law on Enterprises. However, the company’s charter may further specify or add additional rights for the Board of Directors.

Consulting on the Organization of the Board of Directors in Joint Stock Company

With a team of experts experienced in the field of corporate governance, Long Phan offers our clients the best consulting services on the organization of the Board of Directors in Joint Stock Company.

This service includes the following tasks:

• Analyzing the current structure of the Board of Directors;
• Evaluating the number, composition, and performance of the Board;
• Proposing adjustments in line with the company’s scale, industry, and development strategy;
• Reviewing the Charter and internal regulations related to the Board of Directors;
• Recommending amendments and supplements to ensure compliance with the law and good governance practices;
• Developing criteria for selecting members of the Board of Directors;
• Advising on the nomination and election process to ensure transparency and objectivity;
• Creating procedures for effective Board meetings;
• Consulting on the content, voting methods, and drafting of minutes and resolutions.

Consulting on the Functions of the Board of Directors in Businesses.

The Board of Directors plays a crucial role in a joint-stock company. The structure, functions, and authority of the Board are clearly defined in the company’s charter and by law. To enhance efficiency, it is essential to establish clear working regulations, hold regular meetings, and keep comprehensive minutes. Contact Long Phan at hotline 0906735396 for consultation and support in organizing an effective Board of Directors.