Written By PLF Law Firm

Internal regulations, along with the Company Charter, serve as a practical tool to administrate internal activities of joint stock companies, whose characteristics are deemed quite distinctive from others.

Internal regulations in enterprises are construed as documents governing the issues related to internal management activities, e.g. governance policies, human resources regime, and power decentralisation of departments. While Vietnamese legislation does not require enterprises to promulgate company internal regulations, the legality of such regulations is still recognised by law in reality.”

1. The roles of internal regulations in joint stock companies

Joint stock companies often find difficulties when it comes to corporate management due to a relatively large number of members contributing capital and jointly engaging in business. Internal regulation promulgation is thus considered beneficial to the administration of corporate apparatus in addition to Company Charter.  

Unlike the Company Charter, there is no mandatory content or form prescribed by law for internal regulations. Therefore, enterprises may flexibly develop their own regulations to be appropriate to their culture and the way they operate, as long as such regulations are not contrary to the Charter and current legislation.

In addition, since charter capital is divided into equal parts and the number of members eligible to purchase shares for capital contribution is unlimited in a joint stock company, internal regulations shall help the contributing or founding shareholders manage the company in a stricter and more professional manner.    

2. The content of internal regulations in joint stock companies

In principle, corporate internal regulations are developed based on Enterprise Law and other legal documents relevant to the enterprise’s business sectors. Joint stock companies may select to either build a general regulation with all provisions related to internal governance, or separate into smaller and more specific regulations for each department. A joint stock company’s internal regulations shall generally consist of the following:  

  • General provision on the organizational structure of the company’s operational apparatus;
  • Specific provisions on internal activities, e.g. order and procedures for convening meetings and delegation, standards and conditions to become member of Board of Management, order and procedures for selecting managerial officials, coordination process between departments in the company, etc.
  • Provisions on administration and personnel, e.g. regulations on business trips, salary and allowance, reward and discipline, financial management and auditing, etc. 
  • Other particular content related to the company’s internal governance.

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