The Board of Directors plays an important role as the nuclear authority in a joint-stock company. This is the management body, which has the right on behalf of the company to decide and exercise the rights and obligations of the company. Play a decisive role in defining strategic objectives, while securing the financial resources and personnel needed to implement the identified strategic objectives. Therefore, members of the Board of Directors hold a lot of power and have a significant influence on the company’s operations.

According to the Enterprise Law 2020, in case a joint-stock company has an organizational structure according to the model of the General Meeting of Shareholders, the Board of Directors and the Director or General Director, at least 20% of the members of the Board of Directors must be independent members. Therefore, this member only appears when the joint stock company follows the above-mentioned model. Thus, members of the Board of Directors are independent from the rest of the members and play an important role in the management body of this company.

1. Criteria and conditions of independent members of the Board of Directors

According to the provisions of Article 155 of the Enterprise Law 2020, in addition to the general requirements for all members of the Board of Directors such as not being subject to not being allowed to manage the enterprise, having professional qualifications and experience in business administration or in the field, line of business of the company, Independent members will have to meet two separate sets of criteria and conditions.

– The first group is property relations criteria and conditions to ensure that decisions made by independent members of the Board of Directors are not intended to reap property benefits for themselves and their relatives, including: Not being a salaried person, remuneration from the company, except for allowances that members of the Board of Directors are entitled to as prescribed; not being a person who directly or indirectly owns at least 01% of the total number of voting shares of the company.

– The second group is the criteria and conditions on personal relations to ensure that independent members of the Board of Directors do not have any relationship with the company (including relationships with individuals and organizations belonging to the company) for a certain period of time, including: Not being a person who is working or has worked (at least for the previous 03 consecutive years) for the company, parent company or subsidiary of the company; not be a person who has a family relationship with a major shareholder of the company, a manager of the company or a subsidiary of the company; not being a person who has served as a member of the Board of Directors or the Supervisory Board of the company for at least 05 consecutive years, except for the case of being appointed for two consecutive terms. The Law on Credit Institutions 2010 (amended and supplemented in 2017) has its own regulations on standards and conditions of independent members of the Board of Directors in a credit institution but still similar to the spirit of the Enterprise Law 2020.

2. Rights and obligations of members of the independent Board of Directors

A member of the Board of Directors is a manager of the company, in addition to his specific rights and responsibilities, independent members must also comply with regulations on the rights and obligations of managers such as: Perform assigned rights and obligations honestly, Be careful, best to ensure the maximum legitimate interests of the company. Loyalty to the interests of the company and shareholders; not abuse their position and position and use information, know-how, business opportunities and other assets of the company for personal gain or to serve the interests of other organizations and individuals.

3. The role of independent board members

First, this entity appears to resolve conflicts between shareholders and company executives. They do not work at any position in the company, nor are they directly or indirectly the person who directly or indirectly owns at least 01% of the total voting shares of the company. Thus, the opinions and decisions of independent members will be objective because they are independent of will with the parties.

Second, independent board members act as professional arbiters to ensure the operation of the business is consistent with the goal of maximizing the value of the owner. Independent board members may make “major contributions to important decisions of the company, especially in evaluating the company’s performance, setting remuneration levels for executives and members of the Board of Directors, reviewing financial statements, etc. and resolve conflicts within the company. Independent board members give shareholders confidence that the decisions the Board makes are impartial and impartial.”

Third, independent members of the Board of Directors will help monitor and curb the actions of major shareholders of the company, prevent self-interested transactions to protect the interests of the company and minority shareholders. The participation of independent members of the Board of Directors helps maintain transparency in the organization and operation of the company, prevents company managers from withholding information related to the operation situation and acts of concealing self-interested transactions that risk leading to wrongdoing, loss, affecting the legitimate rights and interests of the company or shareholders.

Fourth, independent members of the Board of Directors have the rights and duties to supervise, evaluate and propose opinions on management activities of the Board of Directors and the Board of Directors. Provide analysis, evaluation, critical opinions on ideas, strategies, plans and implementation measures of the Board of Directors and the Board of Directors ensure multidimensionality, promote fairness and transparency in the company’s governance activities.

Fifth, independent members of the Board of Directors are external members, when making recommendations and proposing decisions on an objective basis, less dominated by interest groups in the company. At the same time, it is not governed by self-interest, so it will give objective opinions to protect the interests of the company without for the benefit of an individual or group of people.

Above is the content of KALF’s advice on independent Board Members and some related legal issues. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.