Reasons for adopting this topic
Vietnam is progressively integrating into the global economy, making the enhancement of its legal framework for corporate governance essential for stabilizing both private and state sectors The Vietnamese government prioritizes improving the national competition index while ensuring transparency and compliance Administrative authorities are encouraged to reference international corporate governance models to adapt to Vietnam's unique circumstances Dr Vu Bang, President of the State Securities Committee, emphasized the urgency of corporate governance during the “Building up roadmap for corporate governance” event on October 23, 2015 Mr Tran Van Dung, Chairman of the Hanoi Stock Exchange, highlighted the need for collaboration among businesses, researchers, and policymakers to develop an effective corporate governance model, aiming to elevate Vietnam's financial standing globally.
Singapore, a prominent member of ASEAN alongside Vietnam, boasts a highly developed and successful market economy Recent statistics reveal that Singapore's nominal GDP rose to $410.3 billion in 2016, up from $408.1 billion in 2015.
1 http://tinnhanhchungkhoan.vn/chung-khoan/quan-tri-cong-ty-khong-phai-la-can-thiet-ma-la-cap-thiet- 133063.html.
2 http://tinnhanhchungkhoan.vn/chung-khoan/quan-tri-cong-ty-khong-phai-la-can-thiet-ma-la-cap-thiet- 133063.html
3 https://tradingeconomics.com/singapore/gdp.
Singaporean citizens benefit from a diverse and healthy open-market economy free from corruption The nation is at the forefront of transitioning from a traditional economy to a knowledge-based economy, with the goal of becoming one of the world's top economies.
In 2018, Singapore's success can be attributed to its effective policies in investment and corporate governance, particularly through the role of the company secretary aligned with international standards This model could be beneficial for Vietnam, especially as the country seeks to improve corporate governance among its businesses By implementing the company secretary role, Vietnam can foster a culture of compliance and transparency, laying a strong foundation for its companies These factors motivate the author to explore the topic: “REGULATIONS OF COMPANY SECRETARY.”
SINGAPORE AND POSSIBILITIES TO APPLY IN VIETNAM”.
Research questions
First research question: What is company secretary? Does the role of company secretary help well with corporate governance in Singapore?
Second reseach question: Are current regulations of Vietnam available and enforceable enough for ensuring a good corporate governance for Companies in Vietnam?
Third research question: Should Vietnam consider applying company secretary as a measure to improve corporate governance in Vietnam?
Legal circumtances for adopting research questions
3.1.Circumtances in relation to the first research question i.e “What is company secretary? Does the role of company secretary help well with corporate governance in Singapore?”
Not all countries have adopted the role of company secretary, and it is not the sole measure for effective corporate governance However, the company secretary has significantly contributed to maintaining cohesive, transparent, and compliant practices in corporate governance With the increasing integration of the global economy, there is a growing recommendation for this role, particularly among large international organizations such as the World Bank and OECD, to ensure a consistent legal framework worldwide.
Singapore has effectively implemented international principles to establish a strong corporate governance framework, where the role of the company secretary, though often overlooked, is crucial for the nation's business and legal advancements Despite the economic differences between Vietnam and Singapore, examining the responsibilities of company secretaries in Singapore could provide valuable insights for developing a similar statutory role in Vietnam to improve corporate governance This leads to the research question: What is a company secretary, and how does this role contribute to corporate governance in Singapore?
3.2.Circumtances in relation to the second research question i.e “Should Vietnam consider applying company secretary as a measure to improve corporate governance in Vietnam?”
The Government of Vietnam has expressed concerns about enhancing the business environment and improving corporate governance through legal instruments such as the Law on Enterprises 2014 and Decree 71/2017/ND-CP Despite these regulatory efforts, the implementation of corporate governance practices in Vietnam remains inadequate in both state and corporate sectors Limitations and challenges in corporate governance persist without proper resolution Therefore, it is essential to analyze the underlying issues and reasons for these shortcomings to formulate effective improvement strategies.
“Are current regulations of Vietnam available and enforceable enough for ensuring a good corporate governance for Companies in Vietnam?”
3.3.Circumtances in relation to the third research question i.e “Should Vietnam take steps of applying company secretary as a measure to improve corporate governance in Vietnam?”
In light of Vietnam's recent initiatives to improve corporate governance and the established role of company secretaries in Singapore, the author suggests several strategies for implementing this role in Vietnam Acknowledging the economic disparities between the two countries, a cautious approach is essential This leads to the central research question: Should Vietnam consider adopting the company secretary role as a means to enhance its corporate governance practices?
Purpose, objects and scope of research
This thesis aims to conduct a legal analysis of the role of company secretary, exploring its application in Vietnam by referencing the model currently utilized in Singapore Additionally, it will provide recommendations for the effective implementation of this role within the Vietnamese corporate framework.
This article explores the extensive landscape of corporate governance regulations in Vietnam, highlighting practical case studies and current frameworks in Singapore It provides insights into the crucial role of company secretaries in Singapore, supported by analysis and data from reputable international organizations such as the OECD and IFC, ensuring a comprehensive understanding of the topic.
Methodology and theory framework
This article employs various methodologies from economic science, focusing on comparative analysis between the legal systems of Vietnam and Singapore It examines practical cases in corporate governance within Vietnam and incorporates expert opinions to evaluate the role of company secretaries in Vietnamese companies.
The topic includes 03 chapters which are for addressing 03 major research questions Specifically:
CHAPTER 1: What is company secretary? the role of company secretary and its benefit for corporate governance in Singapore
Chapter 1 provides a comprehensive overview of the role of company secretaries in accordance with international principles, outlines the legal framework governing company secretaries under Singaporean law, examines the relationship between company secretaries and effective corporate governance in Singapore, and concludes with key takeaways.
CHAPTER 2: Current regulations of Vietnam in corporate governance
Chapter 2 includes 03 sections: o Brief of legal framework on corporate governance in Vietnam; o Limitations in corporate governance in Vietnam – analysis on a number of practical cases; and o Key notes.
CHAPTER 3: Applying company secretary as a measure to improve corporate governance in Vietnam
Chapter 3 includes 03 sections: o Needs in looking into role of company secretary for Vietnam; o Step-by-step measures in applying company secretary in Vietnam; and o Conclusions.
WHAT IS COMPANY SECRETARY? THE ROLE OF COMPANY
Brief of legal basis of company secretary under Singaporean laws
Singapore has consistently prioritized corporate governance, implementing a range of regulations and enforcement mechanisms through various legal instruments These regulatory requirements are vital for ensuring compliance and transparency among companies in the country Key legal instruments in this area include: 10.
10 OECD, (2014), Singapore - The corporate governance framework and practices relating to risk management, , OECD Publishers, p.52
March 2001 The Corporate Governance Code was first issued by the
In January 2003, the Corporate Governance Code was implemented, mandating that listed companies detail their governance practices in annual reports for general shareholder meetings held from that date onward, with specific reference to the Code.
July 2005 The revised Code was issued following the review by the
In October 2008, the industry-led Audit Committee released the Guide Book for Audit Committees, providing essential insights for effective governance Subsequently, in July 2011, the Accounting and Corporate Regulatory Authority (ACRA) introduced its inaugural handbook for directors, titled "Being an Effective Director," aimed at enhancing director effectiveness and corporate governance practices.
In April 2012, the Singapore Exchange (SGX) revised its listing manual to incorporate requirements for sufficient internal controls, along with a formal opinion from the board regarding the adequacy of these controls.
May 2012 MAS issued a revised Code of Corporate Governance
(Code) following a comprehensive review of the 2005 Code by the Corporate Governance Council The Code replaced the 2005 Code.
Key issued addressed by the revised Code include:
The code clarifies the definition of independent directors by stipulating that they must be independent from substantial shareholders, defined as those holding 10% or more of shares Additionally, it establishes a reference period of nine years, after which a director's independence must be revalidated.
• The enhancement of risk management and internal controls
• The enhancement of disclosure on remuneration practices May 2012 The council issued a risk Governance Guidance for Listed
Boards (“Guidance”) to provide further guidance on the Board’s role on risk governance via-à-vis the Code.
Since the implementation of the Company Act in 1967, the role of the company secretary has been pivotal in corporate governance in Singapore The company secretary is responsible for overseeing compliance and management tasks, ensuring adherence to the company's charter, fulfilling shareholder commitments, and meeting statutory requirements in Singapore.
Singapore did apply fully international principles in corporate governance offered by IFC Singapore in their domestic regulations 11 :
Corporate Governance code and principles
Approach C/E: comply or explain B: binding V: voluntary
Disclosure in annual company report or corporate governance report
Basis for framework L: Law or regulations LR: Listing rule
Securities regulator SE: Stock exchange P: Private institution CB: Central Bank Singapore The Code of
2012 C/E Yes LR SR and SE
The Singapore Companies Act does not specifically outline the role, duties, and responsibilities of a company secretary; however, it designates them as an officer responsible for essential administrative and reporting functions required by law Consequently, the primary responsibilities of a company secretary under Singaporean legislation include providing crucial assistance to the company in fulfilling these legal obligations.
Directors play a crucial role in ensuring that a company adheres to its regulatory obligations, which encompass various functions as outlined by ACRA in Singapore These responsibilities include maintaining statutory registers and records, organizing shareholder and director meetings, and timely filing of necessary legal documents Additionally, directors must provide administrative support for meetings, offer comprehensive legal and administrative assistance to the board, and facilitate the effective implementation of corporate strategies Staying informed about changes in statutory and regulatory obligations and maintaining clear communication with shareholders are also essential duties to ensure compliance and effective governance.
According to Section 171 of the Companies Act in Singapore, newly incorporated companies are required to appoint a company secretary within six months of their establishment date.
Section 157, Company Act of Singapore considers company secretary as an
“officer” as well as the associated duties, specifically 13 :
An officer or agent of a company must not misuse their position or any information obtained through that position to gain an unfair advantage for themselves or others, nor should they cause harm to the company.
The scope of duties for a company secretary in Singapore is extensive, aligning with international principles and standards such as those set by the OECD and IFC Key responsibilities include ensuring compliance with legal and regulatory requirements, facilitating effective communication between the board of directors and shareholders, and maintaining corporate governance standards Additionally, the company secretary plays a crucial role in managing company records and supporting the board in its decision-making processes.
Appointment of company secretary is stipulated in Company Act Specifically 14 :
12 https://www.singaporecompanyincorporation.sg/how-to/incorporate/singapore-company-secretary/
• According to Item 1, Section 171, Company Act, company secretary must be Singapore residents (including ones having Singaporean nationality, ones having Permanent Resident and ones having Entre Pass Holders);
Section 1A mandates that company secretaries possess the necessary knowledge and experience to fulfill their responsibilities For listed companies, ACRA enforces stricter criteria regarding the qualifications of company secretaries.
Person who is apppointed to be company secretary must need to meet one or more with the following conditions: 15
• Been a secretary of a company for at least 3 of the 5 years immediately before his appointment as secretary of the public company;
• Qualified person under the Legal Profession Act (Cap 161);
• Public accountant registered under the Accountants Act (Cap 2);
• Member of the Institute of Certified Public Accountants of Singapore;
• Member of the Singapore Association of the Institute of Chartered Secretaries and
• Member of the Association of International Accountants (Singapore Branch); and
• Member of the Institute of Company Accountants, Singapore
Company secretary is individually liable for and subject to statutory sanctions if violating regulations during his/her course of exercising her role as company secretary as follows:
Administrative penalty and criminal charges
Under Company Act, an officer or agent (including a Company secretary) who commits a breach of any of the provisions of this section shall be —
(a) liable to the company for any profit made by him or for any damage suffered by the company as a result of the breach of any of those provisions; and
(b) guilty of an offence and shall be liable on conviction to a fine not exceeding
$5,000 or to imprisonment for a term not exceeding 12 months.
15 Section 171 (1AA), Company Act, Singapore.
Certain violation in acting as company secretary in singapore may cause to debarment, specifically 16 :
If the Registrar determines that a company has failed to meet a specific requirement of the Act, they have the authority to issue a debarment order against any individual serving as a director or secretary of that company at the time the order is enacted.
• Subject to subsection (3), a person who has a debarment order made against him shall not _
(a) except in respect of a company of which the person is a director immediately before the order was made, act as director of any company; or
(b) except in respect of a company of which the person is a secretary immediately before the order was made, act as secretary of any company.
• The Debarment order applied from the date that the order is made and continues in force until the Registrar cancels or suspends the order.
The Registrar has the authority to cancel or suspend a debarment order either upon request from the affected individual or independently, provided that the issues leading to the debarment have been resolved or based on other prescribed grounds This action is subject to conditions set by the Registrar.
In Singapore, there are a number of instituions and governmental agency providing training courses, and/or govrning the practice of company secretary In particular:
Established on April 1, 2004, the Accounting and Corporate Regulatory Authority (ACRA) operates as a statutory board under Singapore's Ministry of Finance ACRA serves as the national regulator overseeing business entities, public accountants, and corporate service providers in Singapore.
17 https://www.acra.gov.sg/Home/
Analysis on cohesion between company secretary and good corporate
The Asian Corporate Governance Association (ACGA), an independent non-profit organization based in Hong Kong, consistently ranks Singapore's corporate governance as a top performer This ranking reflects the organization's commitment to enhancing corporate governance practices across Asia for the benefit of investors and other stakeholders.
Corporate Governance Watch Market Score: 2010 - 2016
Source: Asian Corporate Governance Association, (2016), survey and ranking, p.12
A good corporate governance requires involvements of various parties focusing on core management principles which are provided by laws and internal constitutions within
In Singapore, the role of a company secretary is crucial for ensuring effective corporate governance As an independent and specialized professional, the company secretary ensures that all compliance matters are addressed, promoting transparency and coordination within the company This position significantly contributes to enhancing corporate governance by overseeing essential functions that facilitate adherence to regulations and best practices.
• Assurance the compliance works with competent authorities, especially 19 (ACRA - Accounting And Corporate Regulatory Authority)
The role of a company secretary involves managing routine administrative tasks such as notices, reporting, and filing on a monthly, quarterly, and annual basis This includes handling information related to shareholders, management positions, share value, share transfers, and the company head office By ensuring that these details are communicated to the relevant authorities in a compliant and timely manner, the company secretary plays a crucial role in keeping stakeholders informed about changes within the company, thereby enhancing their confidence in its operations.
• Undertaking implements provisions stipulated in the Company’s charter/article of associations
The role of the company secretary is crucial for overseeing the execution of duties by the Board of Directors and other executives in accordance with the company's charter and shareholder-approved policies This includes implementing resolutions and decisions made by the board and ensuring their enforcement Additionally, the company secretary is responsible for ensuring compliance with meeting procedures, such as calling meetings and voting rules, while also having the authority to amend charter provisions based on company resolutions and notifying ACRA of these changes Ultimately, this position is vital for guiding the company in alignment with shareholder interests and legal requirements.
• Retention of company documents and information
19 https://www.acra.gov.sg
20 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.7.
21 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publsiher, p.11.
The company secretary plays a crucial role beyond registering new information with ACRA, as they are responsible for the retention and custody of essential documents, including shareholder details, board of executives, capital ratios, financial statements, and operational reports This ensures that all company information is securely maintained throughout its operational duration, enhancing transparency by providing access to historical documents over time.
• Convening annual meetings or extraordinary meeting of shareholders, board of excutive in line with company’s charter
In Singapore, companies are mandated by law to hold at least one annual meeting, with the option to conduct additional ordinary meetings as specified in the company's charter The charter outlines the procedures for organizing meetings, voting rules, and the implementation of resolutions It is essential for the company secretary to attend these meetings to record minutes, maintain documentation of resolutions, and oversee their execution by relevant parties This role is crucial for ensuring organizational integrity and enhancing the enforcement of decisions made by the company's board of executives or shareholders.
The company secretary plays a crucial role in ensuring compliance by submitting timely statutory reports to relevant authorities This position serves as a vital link among various divisions within the organization, facilitating collaboration and coordination for the completion of compliance tasks, such as the submission of financial reports, tax returns, and operational reports Additionally, the company secretary is responsible for managing the company seal, ensuring that all legal documents are properly executed and issued in accordance with the law.
Appointment and maintenance of company secretary under law of Singapore (and in other countries) can ensure practical rights and requirements of people/organisations
22 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.11.
23 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.11.
24 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.11.
28 involving in economic activities which are various among shareholders, directors, authorities, etc Particularly, role of company secretary shall ensure the following benefit:
• Transperancy in investment activities between shareholders/owners
The company secretary plays a crucial role in recording, updating, and registering changes in shareholder information, ensuring compliance with regulations This oversight helps prevent hidden and illicit activities among shareholders that could undermine the company's integrity Additionally, the company secretary's responsibilities are vital for minority shareholders, as they safeguard their rights to access sufficient and accurate information regarding the company.
• Internal compliance with company’s policy 25
Company compliance encompasses two key components: internal compliance and external compliance The company secretary plays a vital role in ensuring that all shareholder resolutions and decisions are effectively implemented by the board of executives, aligning with the organization's business plans, strategies, and objectives.
In addition, company secretary also helps the board of executive with supervising and controlling other company’s divisions to comply with their commands/instructions to ensure the company’s operations.
A company secretary plays a crucial role in ensuring external compliance by overseeing, supervising, and reporting all statutory requirements to the relevant authorities Achieving full compliance with external regulations is vital for demonstrating a company's operational integrity and transparency.
• Consultations to company’s plans and strategy 27
In Singapore, company secretaries, often working alongside the legal division, play a crucial role in ensuring compliance with regulatory requirements Their expertise allows them to provide valuable insights, oversee operational plans, and ensure that all relevant matters adhere to legal standards.
26 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.82.
27 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.16.
25 IFC, (2016), The Corporate Secretary: the governance professional, IFC, Publisher, p.82.
26 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.82.
27 IFC, (2016), The Corporate Secretary: the governance professional, IFC Publisher, p.16.
• Ensuring that all the company’s legal documents and value are kept by thoroughly by time 28
Company secretaries are highly trained professionals with expertise in various legal fields, possessing a deep understanding of the importance of different legal documents They excel in organizational secretarial skills and are adept at restoring, extracting, and providing information to those who request it Consequently, company data and documents are securely maintained throughout the company's lifespan and even beyond.
• Ensuring the specialisation – increase operational effectiveness of the Company
As companies grow, specialization becomes crucial for operational efficiency and effectiveness A director cannot simultaneously manage multiple roles, such as executive, finance, and compliance, as this can lead to over-control and hidden risks An independent company secretary plays a vital role in ensuring compliance, allowing the executive board and directors to concentrate on management and execution without distraction.
• Increase commercial value for the company 29
The presence of a company secretary enhances transparency and compliance in investment and business activities throughout the company's lifecycle, significantly increasing its intangible value During mergers and acquisitions (M&A), a robust corporate governance system can elevate the company's competitiveness and lead to a higher valuation compared to firms lacking such governance.
In another aspect, when there is an M&A transaction, the due diligence and valuation shall cause all parties time and cost to assess the compliance level of the target.
A high-level compliant target can help parties complete the assessment process quickly,save time and as well as add more value to the sale.
CURRENT REGULATIONS OF VIETNAM IN CORPORATE
Brief of legal framework on corporate governance in Vietnam
In 1990, following the economic reforms of 1986, Vietnam introduced its first Company and Enterprises Law, which established the framework for the incorporation and operation of shareholding and limited liability corporations At that time, corporate governance regulations were basic, reflecting the government's cautious approach to recognizing private economic sectors and its limited experience in market-oriented business practices.
The LOE 1999 replaced the 1990 Law on Company, creating new opportunities for businesses by officially acknowledging the private economic sector and foreign investment Its implementation led to a notable rise in registered companies in Vietnam, marking a significant improvement over previous laws However, the corporate governance framework introduced by the LOE 1999 faced challenges, including rigid governance provisions, ambiguous roles between the management board and managing directors, and insufficient protections for investors.
The Law on Enterprise (LOE) 2005 replaced the 1999 version, facilitating Vietnam's accession to the WTO and marking a significant shift for businesses by officially recognizing various company types, including private enterprises, limited liability companies, joint-stock companies, and partnerships This legislation established a foundation for improved corporate governance in Vietnam, allowing companies to manage their operations independently while emphasizing the importance of compliance and transparency Despite these advancements, several corporate governance challenges emerged that remained unresolved until the enactment of the subsequent Law on Enterprise.
Between 2005 and 2015, a pivotal moment occurred when the Ministry of Finance implemented Decision 12/2007/QD-BTC on March 13, 2007, establishing regulations for corporate governance in listed companies at the stock exchange center.
School of Law, University of South Australia, p.65.
34 OLASUPO OWOEYE, (2016), Corporate governance in Vietnam - its significance and challenges, School of Law, University of South Australia, p.65.
35 OLASUPO OWOEYE, (2016), Corporate governance in Vietnam - its significance and challenges,
School of Law, University of South Australia, p.65.
The Law on Enterprises (LOE) 2014, which replaced LOE 2005 on July 1, 2015, aimed to enhance national business competitiveness Following its implementation, a series of guiding decrees and circulars were introduced to quickly complement the legal framework In relation to corporate governance for listed companies, the Government advanced Decision 12 by issuing Decree 71/2017/ND-CP on June 6, 2017, which provided guidance on corporate governance for listed companies and took effect on August 1, 2017.
Vietnam currently lacks a dedicated institute of directors or a corporate governance organization to oversee corporate governance practices In response to this gap, the International Finance Corporation (IFC) initiated the Vietnam Corporate Governance Project (VCGP) to enhance governance standards within the country.
The VCGP has developed a comprehensive Corporate Governance Manual for Vietnam, encompassing best practices alongside essential legal and regulatory requirements This initiative includes training and advisory services for the private sector, in collaboration with key organizations such as the SSC, HNX, and HOSE Additionally, the VCGP has created a Corporate Governance Scorecard in partnership with the SSC, evaluating the governance of the 100 largest listed companies based on publicly available data.
The State Securities Commission (SSC) serves as the primary regulator of capital markets, overseeing market intermediaries as well as public and listed companies The operations of the SSC and the capital markets are regulated under the Law on Securities 2006 (LoS), which has undergone revisions.
In 2010, the State Securities Commission (SSC) of Vietnam, operating under the Ministry of Finance (MoF), took charge of the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) The SSC implemented Corporate Governance Regulations (CG Regulations) and a Model Charter for public companies, which were first introduced in 2007 and revised in 2012 These regulations and charter reflect the recommendations from the 2006 Corporate Governance Report on the Observance of Standards and Codes (CG ROSC) for Vietnam.
The State Bank of Vietnam (SBV) serves as the central bank, overseeing the regulation and licensing of financial institutions Governed by the Law on Credit Institutions 2010, which replaced the 1997 law, the SBV ensures effective bank governance through its Bank Supervisory Agency (BSA) This agency is responsible for enforcing compliance with corporate governance standards Additionally, the SBV holds significant shares in several major banks, including those listed on the stock exchange.
36 Pulication on Corporate governance ROSC for Vietnam, World Bank, 2013
In the absence of a national company registrar, the 63 Department of Planning and Investment (DPIs) are tasked with company registration and enforcing the Law on Enterprises (LoE) While DPIs in major cities like Hanoi and Ho Chi Minh City are beginning to implement automation and online access to information, challenges remain due to overburdened staff and difficult access to corporate data Consequently, the DPIs' role in enforcing the LoE is often restricted to ensuring compliance with basic registration requirements.
The Ministry of Finance (MoF) regulates the insurance industry and oversees the SSC, having issued 26 Vietnamese Accounting Standards (VAS) and 37 Vietnamese Standards on Auditing (VSA), partly based on older international standards The Law on Independent Audit 2011 (LoIA) governs the audit profession, while the Vietnamese Association of Certified Public Accountants (VACPA), established by the MoF, aims to enhance capacity and uphold professional standards.
Corporate governance in Vietnam is primarily governed by the Law on Enterprises and specific industry regulations, which can differ based on the type of company Currently, there are limited regulations regarding the role of a company secretary, mainly addressing the title within joint-stock and listed companies, which outlines minimal responsibilities An overview of corporate governance practices across various company types in Vietnam reveals these distinctions.
The prevailing LOE adjusting the scope of private enterprise from Article 183 to 187 and a number of other regulations concerning the establishment procedures, etc 37
The common organisational structure is as follows:
37 Article 183 to 187, Law on Enterprise No.68/2014/QH13 dated 26 November 2014, taking effect from 01 July 2015.
Representatives Individual owner(s) Individual owner(s) and/or hired Director
Private enterprises are not mandated to adopt stringent corporate governance practices due to their unique characteristics However, transitioning to a limited liability company structure is advisable, as it imposes more rigorous governance requirements that can enhance compliance and provide business advantages.
Limited liability company, including one member and two members and more, is stipulated from Article 47 to Article 87, LOE 2014 38
The organizational structure of a limited liability company (LLC) is straightforward, particularly for those with fewer than 11 members, where the member council holds the highest authority In contrast, companies with more than 11 members have a more complex structure that includes a board of controllers responsible for overseeing operations, execution, and compliance The roles of shareholders, executives, and legal representatives are clearly defined within an LLC, enhancing operational functions and specialization Additionally, there is increased oversight and transparency in the operations of limited liability companies.
General Director and/or Directors
Inspectors or Board of Inspectors
President and/or General Directors and/or Directors and/or any managerial persons
38 Article 47 to 87, Law on Enterprise No.68/2014/QH13 dated 26 November 2014, taking effect from
Limitations in corporate governance in Vietnam – analysis on a number of
2.2.1 Limitations in corporate governance in Vietnam
A number of outstanding issues in corporate governance in Vietnam are outlined as follows:
• Rights/interests of minor shareholders are not fully ensured
Under LOE 2014, minority shareholders holding at least 10% of ordinary shares for a consecutive six-month period, as stipulated in the Company’s charter, are entitled to several rights These include the ability to propose candidates for the Board of Executive and Board of Supervision, access to company information such as financial reports and resolutions, the right to inquire about specific operational matters and management actions, as well as other rights as defined by regulations and the Company Charter.
The existing regulations lack clarity on how the rights of minor shareholders should be implemented, making it challenging for them to participate effectively in the Annual General Meetings (AGMs) With the Board of Executive required to hold only one AGM per year at a location of their choosing, minor shareholders may struggle to access the latest information Furthermore, the regulations do not impose strict mandates or legal consequences for actions that intentionally obstruct minor shareholders from obtaining company information, such as holding AGMs in remote locations or delaying responses to their inquiries.
40 Article 114, Law on Enterprise – 2014 on rights of minor shareholders
This issue causes a need to have an independent role to ensure all the rights of minor shareholders to be properly protected.
• Insufficiently and/or delay in disclosing information
Disclosure of information is crucial for public companies as it provides timely insights into their operational health and fosters transparency for stakeholders, including shareholders, investors, creditors, authorities, and employees.
Duties of disclosing information line with the Company’s Board of Executive as stipulated in Article 28 Decree 71, if the Company is a listed company and Article
In a Joint-Stock Company, the disclosure of information is mandated, while Limited Liability Companies are not required to provide such disclosures The decision to share information with members and investors rests at the discretion of the Member Council of the Company.
Current regulations indicate that companies may intentionally withhold or delay information for various reasons According to a recent announcement by HOSE in 2007, by September 2017, there have been numerous instances of such practices.
A recent report reveals that 100 listed companies failed to submit required disclosures on time, highlighting their inadequate compliance with legal obligations This lack of timely information can adversely affect shareholders' and investors' decisions regarding securities trading on the Ho Chi Minh Stock Exchange (HOSE).
The company and authorities must prioritize disclosure responsibilities, potentially assigning these duties to a qualified independent third party, such as a company secretary, who adheres to specific regulatory requirements.
According to Article 20 of the LOE 2014 regarding the Board of Supervision, the board must consist of a minimum of three and a maximum of five supervisors These supervisors do not need to be shareholders of the company and must not be employees involved in accounting or finance.
41 https://www.hsx.vn/Modules/Listed/Web/IdrViolatingListView?fidefc88c5c9c46ce858f5388459f3 bb3.
The regulations permit that supervisors may be either employees or shareholders of the company, potentially compromising their ability to effectively supervise the Board of Executive Furthermore, the statutory penalties for violating regulations or the company's charter are insufficient to deter intentional misconduct by supervisors.
Under the applicable laws, the supervision board receives essential information, including annual financial reports, business performance reports, and minutes from both shareholder and board of management meetings, along with decisions made by the director This information is equally accessible to all members of the supervision board and shareholders, ensuring transparency and accountability.
Public companies are not mandated to offer a written analysis of their financial statements or trends impacting future performance However, if a company serves as the parent of another entity, its annual financial statements must encompass both its own financial statements and the related consolidated financial statements.
2012 shows that all the public companies reviewed had their financials audited by an authorized external auditor, but in 86 percent of the cases financial statement disclosure was not considered timely.
The board must guarantee the integrity of financial statements and information, which is reviewed by the inspection committee 30 days before the General Meeting of Shareholders (GMS) and ultimately approved by the GMS Unlike financial institutions, the board is not obligated to establish internal controls or manage risk While current laws mandate that public companies maintain an internal audit function, they offer limited guidance on its operation, resulting in few non-financial listed companies having such a function.
Supervision may only address the necessary information upon request or when available, leading to delays in document requests and deliveries If the oversight and reporting conducted by the board of Supervision are mandatory and routine as per legal requirements, all parties should feel confident in requesting and delivering documents without hesitation Therefore, enhancing the practicality and effectiveness of supervision is essential.
• Weak control in internal transactions
Internal transactions between companies and related parties are defined in Article 159 and Article 162 LOE 2014 and Article 24 to 27, Decree 71 on providing guidance on corporate governance in public company.
The law provides minimal guidance on related party transactions (RPTs) and the necessary disclosures, particularly when a major shareholder is involved, as the CG Regulations do not mandate shareholder approval in such cases Additionally, insufficient disclosure of beneficial ownership and control complicates the effective regulation of RPTs Consequently, significant transactions with related parties often occur without shareholder consent or, in some instances, without being disclosed to shareholders.
The current regulations allow internal transactions between the Company and related parties, provided they are transparent and disclosed, thus ensuring business flexibility However, the regulations lack specific guidelines on how disclosures should be filed or approved, exposing parties to potential liabilities for damages or losses arising from undisclosed transactions This situation can lead to significant challenges, including time and costs associated with resolving disputes To mitigate legal complaints and enhance oversight, it is crucial to strengthen supervision of these transactions In addition to the existing roles of the Board of Executive and Board of Supervision, appointing independent individuals not employed by the Company may be necessary to ensure proper oversight of transaction flows.
2.2.2 Analysis on a number of practical cases
Case 1: Case No.01/2015/KDTM-ST dated 13 February 2015 settling disputes between limited liability company and members of company handled by People’s Court of Soc Trang Province 42
Private Enterprise Kim Anh has its establishment license No 02T/GP.UBT9 on
APPLYING COMPANY SECRETARY AS A MEASURE TO
Step-by-step measures in applying company secretary in Vietnam
The role of the company secretary is crucial in enhancing corporate governance, necessitating the development of regulations that align with international standards, particularly those familiar to foreign investors from Singapore and the OECD However, a complete adoption of these models is impractical due to differing political and social contexts Instead, a gradual and flexible approach to implementing these governance practices will be more effective in fostering a robust corporate governance framework.
Step-by-step measures can be performed as follows:
3.2.1.Regularising role of company secretary into regulations of corporate governance in Vietnam.
In Vietnam, corporate governance is primarily regulated by the Law on Enterprises (LOE) 2014, with listed companies also adhering to Decree 71 Additionally, companies in specific sectors like banking, insurance, and publishing must comply with industry-specific regulations To effectively recognize and implement the role of company secretary in Vietnam, it is essential for the country to prepare and undertake specific actions.
The National Assembly should consider formalizing the role of the company secretary across all types of companies, as outlined in various provisions of the Law on Enterprises (LOE) Establishing a clear statutory framework for the duties and responsibilities of the company secretary is essential, as it will facilitate the implementation of key governance elements such as qualifications, training, licensing, and reporting Initially, the scope of the company secretary's duties may be limited, but it can be expanded progressively as the role becomes more integrated and enforceable within Vietnam's corporate landscape.
The regulations governing company secretaries in Vietnam include a clear definition of the role under national laws, an outline of the specific duties assigned to company secretaries based on the type of company, guidelines for the appointment process along with mandatory requirements for such appointments, and a framework for administrative sanctions and debarment applicable to company secretaries.
The government has issued decrees outlining the guidelines for the appointment of company secretaries, including the conditions, tenure, scope of responsibilities, and sanctions These regulations also cover the registration and notification of company secretaries to the relevant authorities, as well as the required presentations and disclosures of this role in the company's legal documents and on the national data portal.
Relevant ministries, including the Ministry of Justice, Ministry of Finance, and Ministry of Education and Training, are establishing guidelines for the training and recognition of company secretaries, similar to other professions like accountants, auditors, and lawyers Initially, these ministries may offer free training courses to support the early generations of company secretaries, helping to create a pool of qualified professionals in the corporate sector This initiative is particularly beneficial for small companies that may face financial challenges in maintaining such essential roles.
The Ministry of Justice and the Ministry of Planning and Investment should consider developing regulations for company secretaries based on international principles recommended by organizations such as the OECD, IFC, and AISCA Numerous seminars and training sessions hosted by these entities are particularly beneficial for developing countries like Vietnam Experts from the OECD could be engaged to assist Vietnam in conducting research and feasibility studies on the implementation of company secretaries and corporate governance, exemplified by the Corporate Governance Manual published in collaboration with the State Securities Commission of Vietnam and the IFC in 2010 Leveraging the expertise of these organizations will enable Vietnam to accelerate its progress toward meeting international standards.
Efforts to establish a comprehensive legal framework for corporate governance should encompass not only major and listed companies but also small and medium enterprises (SMEs) that require motivation for healthy and rapid growth A key concern in this initiative is the cost associated with mandating SMEs to adopt and maintain a company secretary role To address this, the government could explore options to reduce taxes or financial obligations, providing SMEs with the necessary resources to support this function This strategy parallels the R&D funding available to large-scale manufacturing and high-tech firms By implementing such favorable policies, the government can demonstrate its commitment to enhancing the role of company secretaries and advancing corporate governance in Vietnam.
3.2.2.Establishment of professional associations for company secretary to ensure the practising and improve corporate governance quality.
Vietnam could benefit from establishing the Vietnam Association of the Institute of Chartered Secretaries and Administrators (VAICSA) to enhance the recognition and governance of company secretaries in corporate governance This initiative would align with similar organizations in the region, such as the Singapore Association of the Institute of Chartered Secretaries and Administrators (SAICSA), the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA), and the Hong Kong Institute of Chartered Corporate Secretaries (HKICS) By creating such an association, Vietnam could mirror the structures of professional bodies like the Bar Association for lawyers, VACPA for auditors, and VTCA for tax advisors, thereby strengthening the profession and its regulatory framework.
3.2.3.Actively participate in international company secretary organisations to learn and take experience in this field
Numerous official international organizations provide principles and standards for corporate governance and company secretaries, guiding countries in their application and membership processes.
• OECD 50 include 35 official members (Vietnam is not a member of this organisation) is an active one offering assistance and guidance in filed of corporate goverance;
Founded in London in 1891, ICSA 51 aims to elevate the status of company secretaries and establish professional conduct standards for its members The Institute of Chartered Secretaries plays a crucial role in defining these standards and promoting excellence in the profession.
Administrators(ICSA) is an independent, self-regulating body operating under a Royal Charter granted in 1902;
47 http://www.saicsa.org.sg
48 http://www.maicsa.org.my/profile.aspx
49 https://www.hkics.org.hk/index.php?_room=4
51 https://www.icsa.org.uk
• IFC 52 a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.
Vietnam can leverage its unique history, geography, politics, and economy to effectively adapt and integrate into international organizations for company secretaries By doing so, it can seek technical assistance and gain valuable experience to enhance the role of company secretary within the country.
Participation in international organizations enables Vietnamese company secretaries to work abroad as recognized professionals, bridging the gap in corporate governance standards between Vietnam and other countries.
3.2.4.Carrying out propaganda activities for promoting the role of company secretary
Governments and authorities should enhance awareness of the company secretary's role in corporate governance through targeted promotional activities This is essential to ensure that Vietnamese companies recognize the genuine benefits of this position, rather than viewing it as merely a formality As M&A activities gain traction in Vietnam, foreign investors are increasingly looking for promising local companies to acquire By adhering to robust corporate governance practices, Vietnamese firms can elevate their value and appeal to potential buyers, ultimately facilitating more successful capital offerings.
3.2.5.Buiding up and training professional company secretary force
The building up and training of company secretary shall require to focus on two important elements i.e (i) expertise and (ii) ethics.
Company secretaries are professionals with comprehensive legal knowledge, specializing in corporate governance issues While individuals with a legal background are essential for this role, it is also beneficial to encourage those with expertise and experience in corporate governance to pursue the position of company secretary.
Familiarity with Legal Documents in relation to the company's…
Well understanding of the company's business Interpersonal skills (good communication, responsibility)
Well-trained on professional knowledge
Conclusions 40 APPENDIX 1
Vietnam should explore the implementation of the company secretary role to enhance corporate governance It is essential that all measures involve relevant stakeholders, including companies at all governance levels Given the existing gaps in economic development, legal awareness, and the political and social landscape, a gradual approach to adopting these measures is advisable to minimize disruption to business operations Successfully integrating the company secretary role will significantly boost transparency and compliance within Vietnam's business environment.
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2 Circular 20/2015/TT-BKHDT providing guidelines on business registration dated 15 January 2016, Vietnam;
3 Code of Corporate Governance, Singapore, 2 May 2012, Singapore;
4 Code of Governance of Charities and Institutions of a Public Character, April
5 Company Act, original Enactment – Act No 42 of 1967, Revised version
6 Decree 01/2010/ND-CP on the private placement of shares dated January 4,
7 Decree 102/2010/ND-CP dated October 1, 2010 on implementing a number of articles in the Law on Enterprises (replaced Decree 139/2007/ND-CP dated September 5, 2007), Vietnam; and
8 Decree 118/2015/NĐ-CP providing guidelines on implementation of Law on Investment dated 27 December 2015, Vietnam;
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11 Decree 78/2015/ND-CP providing guidelines on business registration dated
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A SAMPLE OF ANNUAL RETURN OF SINGAPORE (secretary parts)
A SAMPLE OF ANNUAL RETURN OF HONG KONG (secretary parts)