When To Establish A Control Board?

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Control Board is an important department in an enterprise, of which it is in charge of activity inspection and supervision. In reality, setting up a Control Board, in some circumstances, is compulsory yet often overlooked by enterprises.

Within the scope of this article, PLF will provide enterprises with a general view of Control Board establishment and controller appointment as well as their roles and benefits.

Obligation to establish Control Board and appoint controllers

1.  According to Enterprise Law, limited liability company (Ltd.) with 11 or more members and joint-stock company (JSC) with more than 11 shareholders being individuals or an organization holding more than 50% of total shares must have the Control Board established. In addition, an Ltd. with less 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 with 5 to 10 million Viet Nam Dongs and forced to set up the Control Board as prescribed by law.

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, etc. that apply to JSCs. Ltds, however, 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 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 and not being prohibited from establishing and managing an enterprise as provided for by law, etc. 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.

2.  The owner of a one-member Ltd. 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; not being the related person to the members of the managers of the company; having expertise or professional experience in accounting, auditing and meeting other qualifications and conditions as provided for in the company’s charter; etc.

Benefits of setting up the Control Board and assigning controllers

Based on the rights and obligations of the Control Board and controllers prescribed by law, setting up the Control Board and assigning controllers bring some benefits to the company as follows:

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 are discovered timely to help prevent and minimize potential damages 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 organizational and business management structures of the company.

PLF Law Firm 

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