Article 137 of the Enterprise Law 2020 provides that a joint stock company (JSC) can decide to organise itself in accordance with the two options below:

• Option 1: A General Meeting of Shareholders, a Board of Directors, and an Inspection Committee and general director; and

• Option 2: A General Meeting of Shareholders, a Board of Directors with at least 20% members being independent directors and a general director.

Under Option 1, the Enterprise Law 2020 further provides that if a JSC has less than 11 shareholders and the shareholders being organizations together own less than 50% of the charter capital of the company, then the company does not have to have an Inspection Committee. However, if a JSC selects option 1 and decides not to have an inspection committee, then on its face, such JSC is organised under option 2. Accordingly, it is not clear if the Board of such JSC must have at least 20% members being independent directors.

The exception provided under Option 1 is likely intended to allow a small-sized JSC where the shareholders have a closer relationship to have a simpler organisation structure. Therefore, it would be unreasonable to require a small-sized JSC which decides not to have an inspection committee to have at least 20% independent directors. This is because having independent directors can be as complicated as having an inspection committee (if not more). 

This post is written by Nguyen Quang Vu.