Control Board is an important department in an enterprise, being in charge of its activity inspection and supervision. In some circumstances, it is compulsory to set up Control Boards, yet this is often overlooked by enterprises.
Within the scope of this article, PLF will provide enterprises with a general view of the Control Board establishment and controller appointment, as well as their roles and benefits.
1. Obligations to establish the Control Board and appoint Controllers
1.1 Establishing the Control Board
According to Enterprise Law (2020), limited liability companies (LLCs) with 11 or more members and joint-stock companies (JSCs) with more than 11 shareholders being individuals or an organization holding more than 50% of total shares, must establish the Control Board.
Furthermore, an LLC with fewer than 11 members may set up a Control Board to meet its management requirements. If enterprises fail to establish the Control Board where it is compulsory, they will be fined 5 to 10 million Vietnam Dongs and forced to set up the Control Board.
The existing Enterprise Law solely stipulates the number, standards, and conditions required to become members of the Control Board as well as its rights and obligations that apply to JSCs. LLCs. However, this might also take those as reference for developing the company charter, organizational regulations and activities of the Control Board (if any).
Depending on the administrative situation, the company is entitled to decide the number of members of the Control Board. Unless otherwise provided for in the company’s charter, the Control Board consists of 3 to 5 members; the term of the Control Board shall not exceed 5 years; and the members of the Control Board may be re-elected with an unlimited number of terms. Furthermore, members of the Control Board are not necessarily shareholders or employees of the company.
They must, however, satisfy statutory conditions such as:
- being 21 years old or older
- having full civil act capacity
- not being prohibited from establishing and managing an enterprise as provided for by law.
Members of the Control Board shall receive remuneration based on the work done and other benefits as decided by the General Meeting of Shareholders and shall be paid for meals, accommodation, travel expenses and fees for hiring independent consultancy services at a reasonable level.
1.2 Assigning Controllers
The owner of a one-member LLC being an organization shall appoint from 1 to 3 controllers working for a term of no more than 3 years. Controllers shall enjoy remuneration, salaries and other benefits according to the company’s business results and efficiency and be responsible to the company owner for exercising their rights and duties. In addition, Controllers must satisfy the following qualifications and condition: having civil act capacity; being unrelated to the company members of the managers; having expertise or professional experience in accounting, auditing and meeting other qualifications and conditions as provided for in the company’s charter and more.
2. Benefits of setting up the Control board and assigning Controllers
Based on the legal rights and obligations of the Control Board and controllers, setting up the Control Board and assigning controllers bring some of the following benefits to the company:
- Ordinary activities of the company are ensured to be lawful by verifying the reasonability, legality, truthfulness and carefulness of business management and operation, accounting and statistical work, and making of financial statements.
- Misconduct of the company’s managers is discovered timely to help prevent and minimize potential damage by checking accounting books and other materials of the company, management and operation of the company’s activities any time deemed necessary.
- The company shall receive consultation on measures to adjust, supplement, and improve its organizational and business management structures.
