How to appoint and remove officers in a Vietnamese subsidiary

For Limited Liability Companies (LLCs), the mandatory corporate officers are the following:

• Chairperson of the Member Council;
• Director or General Director: the Director or General Director can be appointed by the Member Council, alternatively the Chairperson of the Member Council may concurrently act as the Director or General Director of the company. Whilst in this latter instance the same person will hold two different roles, such two roles shall always be present regardless of who holds them;
• Members of the Inspection Committee: the Inspection Committee must have from three to five members, appointed by the Members’ Council. The head of the Inspection Committee shall be elected among its members; the election, removal or discharge shall be implemented on the principle of majority vote. The rights and obligations of the head of the Inspection Committee shall be stipulated in the articles of association of the company. The majority of the members of the Inspection Committee must be permanent residents (though not citizens) of Vietnam. the Inspection Committee is not mandatory if the LLC is 100% privately owned (privately owned meaning that no shareholder is a State-owned entity).

All the other position can be appointed at will.

For Joint Stock Companies (JSCs), there are two types of internal organisation, as follows:

• a General Meeting of Shareholders, a Board of Management, an Inspection Committee and a Director or General Director. If the number of the shareholder is less than 11, the Inspection Committee is optional;
• a General Meeting of Shareholders, a Board of Management and a Director or General Director. In this case, at least twenty percent of the number of members of the Board of Management must be independent members and there an auditing committee must be established under the Board of Management.

Please note that for both LLCs and JSCs there is another figure, i.e. that of the Legal Representative, who is the person that appears in the company’s Enterprise Registration Certificate (ERC). Any company must appoint a Legal Representative, who can also serve as corporate officer.

That depends upon the company's policy. But the basic idea is the Members’ Council or General Meeting of Shareholder will vote to appoint a corporate officer.

Yes. Corporate officers that wish to resign can deliver the resignation notice to the Members’ Council that voted to appoint them and, if that resignation is approved, they leave. If the Members’ Council approves the resignation, the Membership Council shall appoint the new officer. The law does not go into details (as it does for instance in Singapore), but normally the Members’ Council would appoint a new officer or in the meantime the deputy officer (if any) would act as interim director. The company can (and should, with proper legal advice) regulate better these mechanisms in its articles of association. The law in Vietnam pays more attention to the figure of the Legal Representative, rather than other officers, because the Legal Representative is the one that appears in the Enterprise Registration Certificate (ERC, see the Legalmondo guide on setting up companies overseas). The rationale is that corporate officers may resign freely, as his or her name does not appear in the ERC.

• The company is allowed to regulate the detailed process of removing its corporate officers on its own. Such details must be written in the company’s articles of association. The law only states that the corporate officer will be removed by the decision of the Board or the General Meeting of Shareholders.
• The corporate officer shall be removed by law in the following cases: (a) no longer satisfies the criteria and conditions stipulated in article 93 of this Law; (b) makes an application for resignation which is approved in writing by the shareholders; (c) the corporate officer receives a decision on transfer, on arrangement of other work or retirement; (d) the corporate officer does not have sufficient capability or qualifications to assume or continue the assigned work; (e) the corporate officer is not in good health or is no longer creditworthy for holding his or her position.
• The Chairperson or any other member of the Members’ Council shall be dismissed in the following cases: (a) the company fails to complete its general objectives or annual targets, or fails to preserve and develop its investment capital at the request of the shareholders and it is unable to provide explanations on objective causes or provides explanations on causes but they are not accepted by the shareholders; (b) Chairperson or any other member of the Members’ Council is sentenced by a court, and the judgment or decision of the court has become enforceable; (c) the Chairperson or any other member of the Members’ Council acts dishonestly in performing his or her rights and obligations and/or abuses his or her position and power and/or uses the property of the company for his or her own personal benefit and/or for the benefit of other organisations or individuals and/or provides an untruthful report on the financial status, production and business results of the company.
  

• In the event that the corporate officer is the Chairperson of the Members’ Council, Chairperson of the General Meeting of Shareholders, even if they no longer serve as Chairpersons, they remain members of these councils. And such roles do not qualify as company employees. The removal will only result in damages if there is an agreement to that effect and damages can be proven. The same applies if the Chairperson is the Director or General Director that are not under a labour contract with the company.
• If the corporate officer is a Director or General Director who is employed by the company, labour laws apply and prevail in regulating dismissal and damages.
• Where the corporate officer of the company is a member of the Inspection Council, he or she may be an employee of the company or an independent third party. In the case of employees, labour law applies. If they are not employees, they are treated as third-party providers of supervised services, hence damages should be regulated in the relevant service contract. It is therefore highly recommended to seek legal advice in drafting such contract before appointing the mentioned officers.