On 22 September 2017, the Ministry of Finance issued a model charter of public companies under Circular 95/2017 following the new governance regulations of Decree 71/2017. This model charter (New Model Charter) is to replace the old one (Old Model Charter) provided under Circular 12/2012, which is based on the now-defunct Enterprise Law 2005. These charters are not legally compulsory, thus should be read with reference purpose only.
Most changes to the New Model Charter reflect changes in the Enterprise Law 2014 and Decree 71/2017 (find out more here). Besides, the New Model Charter introduces the following notable changes:
- The Old Model Charter contemplates that the Board may appoint an interim Board director to fill vacant seats in the board, and the new appointment has to be approved by the next shareholder meeting. The New Model Charter, however, removes this mechanism without providing a clear alternative one. This change may imply that when a board position is left vacant, the shareholder meeting needs to convene to appoint a new one.
- Under the Old Model Charter, the board may perform, amend, and terminate material contracts at its discretion. And it is not clear whether these contracts encompass contracts which may be considered as investment decision exclusive to the shareholder meeting. The New Model Charter resolves this ambiguity by explicitly excluding investment decision under the authority of the shareholder meeting. One thing to note is that the default threshold of material contracts is 35% and can be adjusted in the charter.
- The New Model Charter suggests another basis to dismiss a Board director. It follows that a board director may be stripped of his/her directorship if he/she provided the company false personal information as a Board candidate.
- The provision allowing the board to pay interim dividends under the Old Model Charter is removed. That said, the New Model Charter seems to discourage the board to pay interim dividends.
This post is contributed by Ha Thanh Phuc, a legal trainee at Venture North Law.