At present, some public companies have provisions in their charters as follows: “Members of the Board of Directors naturally lose their status as Board members upon resignation.” The question arises as to whether this provision in the charter is in accordance with the law or not.

Our answer is NO.

Incorporating such content into the charters of some current public companies may be perceived as a result of drafting the charters according to Circular 95/2017/TT-BTC dated September 22, 2017. However, Circular 95 is no longer valid and has been replaced by Circular 116/2020/TT-BTC dated December 31, 2020, which provides guidance on corporate governance for public companies. Accordingly, Circular 116 refers to the Enterprise Law as follows:

Clause 4, Article 26 of Circular 116 stipulates that “Members of the Board of Directors no longer have the status of Board members in cases where they are dismissed, relieved of duty, or replaced according to the provisions of Article 160 of the Enterprise Law by the General Meeting of Shareholders.”

According to Clause 3, Article 160 of the Enterprise Law, the General Meeting of Shareholders dismisses Board members if they resign and their resignation is approved.

Thus, the termination of the status of Board members when they resign must be approved by the General Meeting of Shareholders and reflected in the resolutions of the General Meeting of Shareholders. Any provisions in the charter such as the situation mentioned above do not comply with legal regulations.

It is recommended that internal legal teams/lawyers within the company review the company’s charter to check this issue.