1. Sub-committees of the Board of Directors in a public company

– Pursuant to the provisions of Article 31 Section VII of Appendix I promulgated together with Circular 116/2020/TT-BTC, the sub-committees of the Board of Directors in public companies are as follows:

“1. The Board of Directors may establish subcommittees to take charge of development policies, personnel, compensation, internal audit and risk management. The number of members of the subcommittee decided by the Board of Directors is at least [03 people] including members of the Board of Directors and external members. [Independent members of the Board of Directors/non-executive Board members should constitute a majority in the subcommittee and one of these members shall be appointed as the Head of the Subcommittee at the discretion of the Board of Directors.] The operation of the subcommittee must comply with the regulations of the Board of Directors. Subcommittee resolutions take effect only when a majority of members attend and vote for approval at the subcommittee meeting.

2. The implementation of decisions of the Board of Directors, or of sub-committees under the Board of Directors must comply with current legal provisions and regulations in the company’s charter and internal regulations on corporate governance.”

Thus, the board of directors can establish a sub-committee to be in charge of development policy, human resources, compensation, internal audit and risk management.

– According to the provisions of Clause 1, Article 17 of Decree 71/2017/ND-CP:

“1. The Board of Directors of a listed company may establish subcommittees to support the operation of the Board of Directors, namely the personnel subcommittee, the compensation sub-committee and other subcommittees. The Board of Directors needs to appoint 01 independent members of the Board of Directors to head the committees of human resources subcommittees and compensation subcommittees. The establishment of subcommittees must be approved by the General Meeting of Shareholders.”

According to the above regulations, the establishment of sub-committees must be approved by the General Meeting of Shareholders. The establishment of a subcommittee of the Board of Directors will have to be submitted to the General Meeting of Shareholders (extraordinary or annual) and approved, after which, the Board of Directors can establish a sub-committee.

2. Establish an audit committee

– The Board of Directors should establish an Audit Committee, consisting of a minimum of three members of the Board of Directors, all of whom are non-executive members and a majority of independent members, including the position of committee chairman.

– This committee should have knowledge of internal audit, accounting , compliance, financial reporting, and controls. The Chairman of the Audit Committee must have financial expertise and be an independent Board member.

The roles and responsibilities of the Audit Committee must be specified in its own operating regulations, approved by the Board of Directors and published on the company’s website. The competence, structure, and operating procedures of the Audit Committee should be specified in the operation regulations of the Audit Committee, which is a practical standard against which the results of the Committee’s work can be evaluated.

– The main responsibilities of the Audit Committee include:

• Monitor the truthfulness of the financial statements and any official disclosures related to the company’s financial results;
• Review of internal controls andrisk management;
• Review transactions with related parties within the threshold approved by the Board of Directors or the general meeting of shareholders and make recommendations;
• Supervise the company’s internal audit department;
• Monitor and evaluate the independence and objectivity of the audit firm and the effectiveness of the audit process;
• Monitoring to ensure that the company complies with all laws and requirements of regulatory authorities as well as other internal regulations of the company.

3. Establishment of the GovernanceCommittee

– The Board of Directors should establish a Risk Management Committee, consisting of a minimum of three non-executive Board members, the majority of whom are independent members, including the chairmanship of this committee.

– The Board of Directors needs to approve the operation regulations of the Risk Management Committee and this regulation must be published on the company’s website. The competence, structure, and procedures set forth in the Risk Management Committee’s operating regulations should be developed into a factual benchmark against which the performance of the Committee can be assessed .

– The Risk Management Committee’s primary responsibilities include:

• Approve and monitor company processes and policies;
• Supervise and monitor the results of the work of the Executive Board related to the implementation of the company’s risk management policy;
• Review and submit to the Board of Directors for approval the risk management strategy;
• Review aspects of the Executive Board’s strategy and recommendations;
• Monitor the effectiveness of the risk management team and ensure there are sufficient resources and systems to meet the desired level of competency and exceed the minimum compliance requirement.

– Depending on the legal requirements for the size of the company, the company’s business operating environment, and other factors , the Audit Committee may combine responsibility for audit oversight and risk management.

4. Establishment of the Corporate Governance Committee

– The Board of Directors should establish a Corporate Governance, Appointment and Compensation Committee to enhance the effectiveness of the corporate governance framework and ensure that the company’s appointment and compensation policies and activities support the appointment, development, attraction and retention of talented Board members and Executive Boards.

– The Corporate Governance Committee, consisting of at least three members of the non-executive Board of Directors of professional capacity , the majority of whom are independent members, including the position of committee chairman.

– The Board of Directors needs to approve the operating regulations of the Corporate Governance Committee and this regulation needs to be published on the company’s website . The competence, structure, and operating procedures specified in the Commission’s operating regulations should be developed into practical benchmarks, upon which the results of the Commission’s work can be evaluated.

– The main responsibilities of the Corporate Governance Committee include:

• Develop, recommend and evaluate annually corporate governance policies and monitor corporate governance issues;
• Identify qualified candidates to become members of the Board of Directors and submit them to the Board of Directors for approval of the list of candidates;
• Recommendations to the Board of Directors on the appointment of relevant committees;
• Oversee the management of the company’s remuneration and benefits plan; and
• Prepare annual reports on compensation policies and activities .

Above is the content of KALF’s advice on the establishment of committees under the Board of Directors. 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.