RELATED ISSUES ON INTERNAL REGULATIONS ON GOVERNANCE OF PUBLIC COMPANIES

1. What benefits will effective internal governance of public companies bring to businesses?

– Help create a clear legal framework and rules for the company to operate. Includes regulations on organizational structure, powers and responsibilities of departments, work procedures, financial management, personnel management, and other regulations. This helps ensure that everyone in the company understands and follows the rules, which in turn creates continuity and stability in business operations.

– Increase transparency and fairness within the company. Above all, internal company regulations define processes and powers for decision-making and access to information. This ensures that everyone in the company, from members of the management-administration apparatus to ordinary members of the company, will have full legal tools to protect their rights.

– Create consistency in the company’s operating mechanism. A company’s internal regulations are processes and regulations that everyone in the company must follow. The company’s internal regulations also become the evaluation standard for the actions of members in the company, enhancing performance and quality of work.

Finally, internal regulation helps build a positive corporate culture and ethics. Create a positive working environment, promote ethics and a sense of responsibility in the company.

2. Building an internal corporate governance regulation

The legal basis for formulating internal regulations of the company based on Clause 1 Article 2 of Decree 71/2017/ND-CP stipulates as follows:

“1. Ensure a sound governance structure

2. Ensuring the performance of the Board of Directors and the Control Board
3. Ensure the interests of shareholders and related persons
4. Ensure the rights and interests of shareholders and related persons
5. Ensure fair treatment among shareholders
6. Transparent disclosure of all activities of the company.”

Accordingly, the internal regulations on corporate governance are formulated by the Board of Directors and submitted to the General Meeting of Shareholders for approval. Internal regulations on corporate governance must not be contrary to the provisions of law and the company’s charter.

Thus, internal regulations may or may not be mandatory depending on each type of internal regulation and each type of company. Internal regulations must be consistent with the company’s charter and must not be contrary to legal provisions.

3. Internal management of a public company

Also known as corporate governance rules, a principled statement of corporate governance practices. The purpose of the company’s internal governance regulations is to help the company’s governance structure be transparent and the company’s commitment to effective corporate governance. Internal corporate governance regulations are mandatory for listed companies. The company’s internal governance regulations will clarify the company’s internal regulations in terms of governance structure, i.e. the roles, responsibilities, rights, obligations and related activities of the management apparatus (board of directors, general meeting of shareholders, supervisory board, Committees under the Board of Directors, Executive Board) will be detailed here. Listed companies publish their internal governance regulations on official websites.

Public companies may choose to optimize their internal governance regulations as well as other internal regulations in general to enhance organizational strength by adding elements that shape corporate culture. Corporate culture is determined by the enterprise itself, but shaping through internal governance regulations will make this shaping process easier. Specifically, businesses can carry out the following process to include cultural elements in the company’s internal regulations:

1. Identify corporate culture values and principles.
2. Create internal regulations based on corporate culture
3. Provideopportunities for people to comment and suggest constructive opinions related to the integration of culture into internal regulations.
4. Create an environment that supports corporate culture: a friendly and supportive working environment helps employeesto be stable and demonstrate cultural values and principles in their daily work.
5. Providetraining and education on corporate culture to all employees, so that they understand the meaning and importance of applying culture in internal regulations.
6. Measure the implementation and effectiveness of integrating corporate culture into internal regulations. Assess the correlation between culture and business performance to demonstrate the importance of shaping culture within the company.
7. Continuously improve internal regulations to match the development and changes of corporate culture and market.

Thus, to build an internal regulation on governance of a public company, many factors are needed to perfect an internal regulation of the company. Internal regulations are not only a tool to regulate the company’s activities, but it is also one of the important factors contributing to building corporate culture.

Above is the content of KALF’s consultation on related issues on internal regulations on governance of public companies. 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.