Regulation on Corporate Governance for Different Types of Enterprises in Vietnam

Introduction

Corporate governance plays a critical role in ensuring transparency, accountability, efficiency, and legal compliance within businesses. In Vietnam, corporate governance requirements vary significantly depending on the type of enterprise structure selected.

Under current Vietnamese laws—primarily the Enterprise Law 2020 and related regulations—different enterprise structures have different requirements regarding management bodies, decision-making authority, ownership rights, supervisory mechanisms, and legal responsibilities.

Understanding these governance structures is essential for entrepreneurs, investors, directors, and business owners when establishing or operating enterprises in Vietnam.

This article provides a comprehensive overview of corporate governance regulations for different types of enterprises in Vietnam.

1. What is Corporate Governance?

Corporate governance refers to the system through which companies are directed, controlled, and managed.

Corporate governance generally covers:

• Decision-making authority

• Organizational structure

• Rights and obligations of owners

• Management responsibilities

• Supervisory mechanisms

• Internal control systems

• Accountability and transparency requirements

Good governance helps businesses:

• Reduce operational risks

• Improve investor confidence

• Enhance compliance

• Support long-term growth

2. Corporate Governance for Private Enterprises

A private enterprise is owned entirely by one individual.

Governance Structure

The structure is relatively simple:

Owner → Business Operations

The owner:

• Makes all decisions

• Controls operations directly

• Bears unlimited liability

• Represents the enterprise legally

Key Characteristics

Full Control

The owner has authority over:

• Business strategy

• Asset management

• Financial decisions

• Employment decisions

No Separation Between Ownership and Management

Unlike corporations:

• No board of directors

• No shareholders

• No supervisory bodies

Unlimited Liability

Owners remain personally responsible for:

• Debts

• Financial obligations

• Legal liabilities

Advantages

• Simple governance

• Fast decision-making

• Minimal administrative burden

Challenges

• High personal risk

• Limited scalability

• Weak governance controls

3. Corporate Governance for Single-Member Limited Liability Companies

Single-member LLCs are owned by one individual or one organization.

Governance depends on who owns the company.

A. Single-Member LLC Owned by an Individual

Governance Structure

Owner → Chairman → Director / General Director

The owner:

• Exercises full ownership rights

• Appoints managers

• Approves important decisions

Governance Features

The owner decides:

• Capital increases

• Charter amendments

• Business strategy

• Profit distribution

Because ownership is concentrated:

• Decision-making is efficient

• Governance remains relatively simple

B. Single-Member LLC Owned by an Organization

These companies have more complex governance requirements.

Two models are generally available.

Model 1

Chairman → Director / General Director

Model 2

Members’ Council → Chairman → Director / General Director

Additionally:

• Controllers may be required

• Internal supervision is stronger

This structure introduces separation between:

• Ownership

• Management

• Supervision

4. Corporate Governance for Multi-Member LLCs

Multi-member LLCs have between 2 and 50 members.

Governance Structure

Members’ Council → Chairman → Director / General Director

The Members’ Council is the highest decision-making body.

Members’ Council Responsibilities

The council generally decides:

• Business strategies

• Capital changes

• Appointment of managers

• Investment decisions

• Charter amendments

Voting Mechanisms

Decisions often require:

• Standard approval thresholds

• Higher approval thresholds for major decisions

Voting rights generally correspond to:

Capital contribution percentages

Chairman Responsibilities

The chairman typically:

• Organizes meetings

• Coordinates decisions

• Represents the council

Director / General Director Responsibilities

Responsible for:

• Daily operations

• Employee management

• Business execution

Governance Challenges

Multi-member structures often face:

• Member conflicts

• Slower decision-making

• Minority protection issues

Proper governance procedures become increasingly important.

5. Corporate Governance for Joint Stock Companies (JSC)

Joint Stock Companies generally have the most sophisticated governance structures.

JSCs are typically used when:

• Raising capital

• Expanding ownership

• Attracting investors

• Preparing for public listing

Governance Model

Typical structure:

General Meeting of Shareholders

↓

Board of Directors

↓

Director / CEO

↓

Supervisory Mechanisms

6. General Meeting of Shareholders (GMS)

The GMS is the highest decision-making body.

Shareholders vote on:

• Strategic decisions

• Dividend distribution

• Director appointments

• Capital changes

• Corporate restructuring

Shareholder Rights

Shareholders generally have rights to:

• Attend meetings

• Vote

• Receive dividends

• Access information

• Transfer shares

7. Board of Directors (BOD)

The BOD manages strategic oversight.

Typical responsibilities include:

• Business strategy

• Major investments

• Appointment of executives

• Risk oversight

The board acts as a bridge between:

• Shareholders

• Executive management

8. Director / CEO

Responsible for:

• Daily management

• Business operations

• Executing board decisions

The CEO operates under:

• Company charter

• Board supervision

9. Supervisory Mechanisms in JSCs

Vietnamese law allows different supervisory models.

Traditional Model

Includes:

• Supervisory Board

• Board of Directors

• Executive Management

Alternative Model

Uses:

• Independent board members

• Audit committees

This flexibility aligns governance more closely with international practices.

10. Corporate Governance for Partnerships

Partnerships rely heavily on partner relationships.

Governance Structure

General Partners → Business Operations

General partners:

• Manage operations

• Represent the partnership

• Bear unlimited liability

Capital-contributing partners:

• Usually have limited management rights

Governance Challenges

Partnerships may experience:

• Disputes among partners

• Unlimited risk exposure

• Dependency on individual partners

Strong partnership agreements are essential.

11. Legal Representative Requirements

Most enterprises must appoint legal representatives.

Responsibilities often include:

• Signing contracts

• Representing the company

• Ensuring compliance

• Managing legal obligations

Companies may have:

• One legal representative

• Multiple legal representatives

Depending on enterprise structure.

12. Internal Control and Compliance Requirements

Good governance increasingly requires:

Financial Controls

• Accounting systems

• Approval processes

• Financial reporting

Compliance Controls

• Tax compliance

• Labor compliance

• Regulatory reporting

Risk Management

• Fraud prevention

• Operational monitoring

• Internal audits

These controls become more important as businesses grow.

13. Governance Issues Commonly Seen in Vietnam

Many enterprises face governance problems such as:

Founder Dominance

Too much authority concentrated in founders.

Weak Internal Controls

Poor approval processes.

Informal Decision-Making

Lack of documented procedures.

Ownership Conflicts

Disputes among shareholders or members.

These problems often create legal and operational risks.

14. Best Practices for Corporate Governance

Businesses should consider:

Clearly Define Authority

Document:

• Roles

• Responsibilities

• Approval limits

Establish Written Procedures

Create:

• Internal policies

• Meeting procedures

• Delegation rules

Maintain Proper Documentation

Keep records of:

• Meetings

• Resolutions

• Contracts

Separate Ownership and Management

As businesses grow:

• Governance complexity increases

• Professional management becomes valuable

Conclusion

Corporate governance regulations in Vietnam differ substantially depending on enterprise type. While private enterprises and single-member companies maintain relatively simple governance structures, multi-member LLCs and joint stock companies require increasingly sophisticated governance systems.

Choosing the appropriate governance structure is not simply a legal requirement—it directly impacts decision-making efficiency, risk management, fundraising capability, and long-term business success.

Businesses that establish strong governance systems early are generally better positioned for sustainable growth, investor confidence, and regulatory compliance.

Source: Internet