Can a Board director in a Vietnamese joint stock company be removed by the courts?

A Vietnamese court does not have clear authority to remove a Board director from the Board of a Vietnamese joint stock company like other more developed jurisdictions. Under Article 156.1 of the Enterprise Law 2014,  a Board director may be dismissed (miễn nhiệm) if he/she:

  • fails to maintain the qualifications of a Board director including not having full capacity for civil acts or belonging to the types of persons who are not allowed to manage an enterprise in Vietnam;   
  • fails to participate in activities of the Board for six consecutive months, except in the case of an event of force majeure; and
  • tenders a written resignation.

Under Article 156.2 of the Enterprise 2014, a Board director could also be removed (bãi nhiệm) by a 51% simple majority of the Shareholder Meeting. Article 156.1 does not provide who has the authority to exercise the dismissal contemplated by Article 156.1. Accordingly, one could argue that the courts may have the authority to exercise such authorities. However, such argument may be considered as contrary to Article 135.1(c) of the Enterprise Law 2014 which provides that the Shareholder Meeting has the authority to dismiss and remove Board directors. Based on Article 135.1(c) of the Enterprise Law 2014, one could argue that only the Shareholder Meeting could decide to remove or dismiss a Board director. And without such a decision of the Shareholder Meeting, a Board director will remain a Board director.

The latter interpretation does not allow automatic dismissal or dismissal by the courts of a Board director. This may result in various unreasonable situations such as:

  • if a Board director is dead or missing then the Shareholder Meeting still needs pass a resolution to dismiss him/her; and
  • a controlling shareholder(s) may appoint a disqualified Board director(s) to the Board who may take illegal actions and cause damages to other minority shareholders. And the minority shareholders are unable to request the courts to remove such disqualified Board director(s).