The term of the Board of Directors and its members

The Board of Directors (BOD) is a management part in the structure of a Joint Stock Company (JSC), it has full authority on behalf of the company to decide and exercise the rights and obligations, except for cases under the authority of the General Meeting of Shareholders.

Because of its importance, generally, the establishment and maintenance of the BOD and the election of members of the BOD in particular, is one of the priority tasks considered for most JSCs. The term of the BOD has been different according to the changes of the law on enterprise (“LOE”), specifically, as of the Law on Enterprises No. 13/1999/QH10 is regulated by the Company’s Charter, on LOE No. 60/2005/QH11 is fixed for 5 years, without any exceptional. Turned to LOE No. 68/2014/QH13, which is now being replaced by the LOE No. 59/2020/QH14, there are general provisions on canceling the term of the BOD and only stipulating the term of the BOD members.

“The Term of BOD” stipulates that members of the same BOD have the same term. This means for each BOD, the members elected for a term will have the same period of starting time and ending time (and not exceeding 05 (five) years) according to the provisions of the enterprise law). In the event that one (or several) members of the BOD is dismissed mid-term (according to the law or the company’s charter), the new member elected to the BOD will have a term equal to “the rest of the term” of existing members (and of course, this new member also ends at the same time as the current members).

The Law on Enterprise No. 59/2020/QH14, Article 154, stipulates that a member of the BOD has a term that is not more than 5 (five) years and can be re-elected for an unlimited time. (However, an individual can only be elected as an independent member of the BOD of a company for no more than 02 (two) consecutive terms, in the case of this JSC under the structure of independent members of the BOD.)

Thus, although the current law on enterprise does not mention the general term of the BOD, but if the Company still wishes to end the term of the members of the BOD at the same time to facilitate the management process and ensure the right to nominate a person to the BOD of “weak” shareholders, the Company’s Charter may recognize that the members of the BOD of each certain term will have the same time of ending their term or may handle the technique to record different appointment times of BOD members but ensure their term end at the same time.

Contact us if you need further advice.

Note: This article is for informational purposes only and it is not a legal advice. The content of the article represents its own of TTVN Legal, it subject to change without prior notice.