Governance manual and introduction to corporate governance

Ebook Corporate governance manual provides government officials, lawyers, judges, investors and others with a framework for assessing the level of corporate governance practices in Vietnamese companies. Finally, it serves as a reference tool for educational institutions that will train the next generation of Vietnamese managers, investors, and policy makers on good corporate governance practices.

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Second edition

Corporate Governance

Manual

Second Edition: 500 copies in English

Printed in Hanoi, Vietnam by BACSON

Copyright@ 2010 International Finance Corporation

2121 Pennsylvania Ave NW, Washington, DC 20433, United States of America

A Member of the World Bank Group

All rights reserved No part of this publication may be reproduced, stored in retrievel system, or transmitted

in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, for commercial purposes without the prior permission of the International Finance Corporation.

Disclaimer

IFC, a member of the World Bank Group, creates opportunity for people to escape

poverty and improve their lives We foster sustainable economic growth in developing

countries by supporting private sector development, mobilizing private capital, and

providing advisory and risk mitigation services to businesses and governments

The State Securities Commission of Vietnam is an organization under the ministry of

Finance of Vietnam, whose purpose is to develop capital markets, regulate securities

activities, license market participants, and enforce regulations

The Vietnamese Corporate Governance manual (manual) was commissioned by IFC

and The State Securities Commission of Vietnam as part of the Vietnam Corporate

Governance Program that IFC is implementing in Vietnam since 2008

This manual is distributed with the understanding that neither the authors, nor the

organizations, countries they represent, nor the publisher are engaged in rendering

legal or financial advice The material in this manual is set out in good faith for general

guidance, and no liability can be accepted for any possible loss or expense incurred as

a result of relying on the information contained herein

This publication is not intended to be exhaustive While the utmost care has been

taken in preparing the manual, it should not be relied upon as a basis for formulating

business decisions On all financial issues and questions, an accountant, auditor, or

other financial specialist should be consulted a lawyer should be consulted on all

legal issues and questions as the laws in the Social Republic of Vietnam are constantly

changing, legal rules referred to herein may be obsolete or superseded by new legislation

at the moment of the publication of this manual References to laws and regulations in

this manual reflect those in effect as of October, 2010

all references to the male gender throughout this manual apply to both sexes, unless

otherwise indicated

The conclusions and judgments contained in this report should not be attributed to,

and do not necessarily represent the views of, the State Securities Commission of

Vietnam, IFC or its Board of Directors or the World Bank or its Executive Directors,

or the countries they represent IFC and the World Bank and the State Securities

Commission of Vietnam do not guarantee the accuracy of the data in this publication

and accept no responsibility for any consequences of their use

This manual is distributed subject to the condition that it shall not, by way of trade or

foreworD

The Corporate Governance Program in Vietnam is implemented by International

Finance Corporation in partnership with Finland, Ireland, the Netherlands, New

Zealand, and Switzerland

The Project was launched in September 2009 with the aim of assisting companies and

banks in Vietnam to improve their corporate governance standards

Why is corporate governance important? Good corporate governance will make a

company more profitable, enable its growth and increase its access to external finance

- domestic and international, public and private A key factor when deciding to get

involved with any business is trust Without trust, which is reflected in good corporate

governance, it is very difficult to attract investors Nowadays, this is truer than ever -

especially in the aftermath of the 2008 global financial crisis Employees also want to

be certain they will obtain a fair share of return on their labor or expertise

Our Project aims to increase trust between companies and their stakeholders We

are assisting companies and their stakeholders to create an environment based on

responsibility and accountability, openness, transparency, performance evaluation

and commitments, based on recognized standards of good corporate governance

The Project is working with policy makers - assisting them to draft new, and amend

existing, legislation We are also helping stock exchanges develop national corporate

governance codes and universities to include corporate governance topics in their

curricula

By publishing this Manual, we want to contribute to the growing body of literature on

the topic of corporate governance in Vietnam We hope that this Manual will not only

be used by academics and students, but also by shareholders, managers and board

members to improve the practice of good corporate governance in their companies

Juan Carlos Fernandez Zara

Project Manager

IFC Corporate Governance Project in Vietnam

foreworD

During its past decade of operating, the Vietnamese securities market has made large strides and secured a firm position as a channel for mid- and long-term capital mobilization for national economic development However, the management and regulations of an emerging securities market have posed numerous challenges to the national securities regulator – the State Securities Commission of Vietnam The Vietnamese securities market is considered to be developing in a stable manner with

a gradually improving legal corridor in line with global securities market regulatory standards However, the facilitation of capital mobilization for companies needs to be accompanied by guidance on how to implement legal regulations in a correct manner,

to ensure transparency and thus a more stable and efficient market

The quality of commodities has received great attention amid the securities market’s establishment and development As a result of the State’s equitization and securities market development policies, the number of public and listed companies on the market has significantly increased Yet, given the greater number of enterprises transformed

to catch up with the equitization roadmap and greater number of shares issued to mobilize capital to further develop enterprises via a booming securities market, Boards

of Management and Directors have not paid due attention to the corporate governance quality of public and listed companies

In its role to establish, regulate and supervise the securities market towards international corporate governance standards and best practices, the State Securities Commission has taken the initiative in obtaining assistance from international organizations to help with the securities market’s more transparent and efficient operations In this regard, the State Securities Commission and International Finance Corporation have published this Manual to provide corporate governance international knowledge, experience and best practices by drawing on comparisons with the reality on the ground in Vietnam This Manual aims to help public companies enhance their knowledge and improve their corporate governance It also marks the 10th anniversary of the Vietnamese securities market’s opening

We hope the Manual will be a useful tool for public holding companies, especially listed companies, giving them the knowledge and experience to enhance their professionalism and value in the securities market The enhanced capacity to apply corporate governance principles also helps the State regulator enhance the application

of related international standards and best practices

state securities commission

of vietnam

The State Securities Commission supports the initiative to publish this Manual and

hopes it will serve as a valuable resource for companies We recommend that joint

stock and public companies absorb the knowledge and experiences presented in the

Manual which can be applied to local companies’ operations

Vu Bang

Chairman

State Securities Commission of Vietnam

foreworD

Since 2000, Vietnam’s private sector has grown strongly The number of companies, especially public companies, has greatly increased Hundreds of businesses have increased in size and developed towards becoming serious regional and global players Similarly, Vietnam’s economy has also integrated comprehensively, at an increasing depth, into regional and international economies

However, the language of change has translated into companies facing more ferocious competition pressures As a result, the need for developing and improving corporate governance, in compliance with national regulations and in alignment with international best practices, has become more acute To meet these challenges, this Manual will act as a guiding hand to navigate Vietnam’s private sector towards sound corporate governance standards I am confident the value of this Manual will quickly become apparent to companies for a number of reasons

The comprehensive analysis of Vietnam’s prevailing corporate governance regulatory system offers a unique insight into laws, Government decrees, related circulars and Ministry of Finance decisions The Manual also introduces international good corporate governance practices and offers an analytical comparison with local corporate governance practices within similar contexts Best practices and approaches are recommended which can be employed to perfect corporate governance within local conditions and the legal framework

The Manual offers significant value as a reference tool for relevant state agencies polishing Vietnam’s corporate governance regulatory framework and adapting international principles and best practices to deal with issues specific to local companies It will also become essential reading for researchers, graduate students and students, who wish to broaden and improve their corporate governance awareness and knowledge

The timely arrival of this Manual will provide added impetus to the local business community’s journey towards sound corporate governance practices

Nguyen Dinh Cung, PhD

Vice President

Central Institute for Economic Management

International Finance Corporation (IFC), a member of the World Bank Group, creates

opportunity for people to escape poverty and improve their lives We foster sustainable

economic growth in developing countries by supporting private sector development,

mobilizing capital for private enterprise, and providing advisory and risk mitigation

services to businesses and governments Our new investments totaled $14.5 billion

in fiscal 2009, helping channel capital into developing countries during the financial

crisis For more information, visit www.ifc.org

IFC’s Advisory Services in the Mekong Region

In the Mekong region covering Cambodia, Lao PDR, and Vietnam, IFC advises

governments, private companies, and industry sectors on how to grow businesses

sustainably and create a healthy investment climate The work includes advising

national and local governments on how to improve the investment climate, expand

access to finance for businesses, strengthen basic infrastructure, and raise social and

environmental standards In the Mekong region, our advisory services are delivered

in partnership with the European Union, Finland, Ireland, the Netherlands, New

Zealand, and Switzerland

The advisory programs are concentrated in five business lines:

Investment Climate: working with governments, civil society, and private firms to

improve conditions for private sector development

Access to Finance: working with financial institutions and regulators to extend their

outreach to smaller businesses

Environmental and Social Sustainability: working with service providers,

governments and NGOs to increase company competitiveness and upgrade labor and

environmental standards

Corporate Advice: working with firms to increase opportunities in potential growth

sectors, and supporting the promotion of international best practices in corporate

reporting and raising awareness of stakeholder and management responsibilities

Access to Infrastructure: working with government and private firms for better

infrastructure across the region to facilitate growth

About the Corporate Governance Program:

Assisting companies and investment funds to implement good corporate governance

practices, working with regulators to support establishing effective corporate

About IfC

Purpose and target Audience

This Manual provides executives, and shareholders of Vietnamese public companies with a comprehensive summary of the corporate governance framework and practices prevalent in Vietnam today, and a practical toolkit designed to help implement good governance in practice It provides readers with:

• An overview of the legislative and regulatory requirements related to corporate

governance and internationally recognized corporate governance principles

• Recommendations on how to fulfill the governance obligations of public and

listed companies

• Practical examples of how corporate governance standards can be

implemented, and guidance for executives and directors in meeting their obligations with respect to the governance of the enterprise

• General outlines of authorities, obligations, and procedures of the governing

bodies of public and listed companies

This Manual also provides government officials, lawyers, judges, investors and others with a framework for assessing the level of corporate governance practices

in Vietnamese companies Finally, it serves as a reference tool for educational institutions that will train the next generation of Vietnamese managers, investors, and policy makers on good corporate governance practices

How to use this Manual

This Manual is divided into 14 chapters:

Chapter 1: An Introduction to Corporate Governance

Chapter 2: The General Governance Structure of a Company

Chapter 3: The Internal Corporate Documents

Chapter 4: The Board of Directors

Chapter 5: The Executive Bodies

Chapter 6: The Role of the Corporate Secretary

Chapter 7: An Introduction to Shareholder Rights

Chapter 8: The General Meeting of Shareholders

Chapter 9: Corporate Governance Implications of the Charter Capital

Chapter 10: Dividends

Chapter 11: Corporate Governance Implications of Corporate Securities

Chapter 12: Material Corporate Transactions

Chapter 13: Information Disclosure

Chapter 14: Control and Audit Procedures

The 14 chapters of the Manual focus on the key corporate governance issues All issues

are closely examined through Vietnamese law and regulations and when applicable,

internationally recognized best practices While it is recommended to read the entire

Manual to gain a full understanding of the corporate governance framework in

Vietnam, it is not necessary to read all the chapters in chronological order The reader

is encouraged to begin with a topic of interest and follow the links and references

included in the text for guidance to other chapters

Examples, illustrations and checklists are included to make the Manual clear and

useful The following tools will reappear at various intervals in the text:

• The Chairman’s Checklist is intended to help the Chairman of the Board of Directors

focus Board discussions on key corporate governance issues faced by companies

as well as model company practices in good corporate governance.

• Mini-cases illustrate abstract concepts and show the real problems that companies face

• Figures, tables, and other illustrations are included to illustrate key concepts

• Detailed references to law and regulations refer the reader to original texts

Comparative Practices:

Company Practices

List of references (with Abbreviations)

Civil Code Civil Code of the National Assembly dated June 14,

2005

Company Law (CL) Company Law adopted by the National Assembly

dated December 21, 1990

Draft Law on Independent Auditing - March, 2010

Labor Code Labor Code of the National Assembly dated June

23, 1994, as amended by the National Assembly

on April 2, 2002, November 29, 2006 and April 1, 2007

Law on Bankruptcy (LOB) Law on Bankruptcy No 21/2004/QH11 adopted by

the National Assembly dated June 15, 2004

Law on Competition (LOC) Law on Competition No 27/2004/QH11 adopted

by the National Assembly dated December 3,

2004

Law on Credit Institutions (LCI) Law on Credit Institutions adopted by the National

Assembly on December 12, 1997, as amended by the National Assembly on June 15, 2004, and replaced

by the new law No 47/2010/QH12 adopted by the National Assembly on Jun 16, 2010 with effect from January 1, 2011

Law on Enterprises (LOE) Law on Enterprises No 60/2005/QH11 adopted by

the National Assembly dated November 29, 2005,

as amended by the law on amending a number

of articles of laws relating to capital construction dated June 19, 2009

Law on Foreign Investment (LFI) Law on Foreign Investment adopted by the National

Assembly dated December 29, 1987

Law on Insurance Business (LSB) Law on Insurance Business adopted by the National

Law on Investment (LOI) Law on Investment No 59/2005/QH adopted by

the National Assembly on November 29, 2005 Law on Private Enterprises (LPE) Law on Private Enterprises adopted by the National

Assembly dated December 21, 1990

Law on Real Estate Business (LREB) Law on Real Estate Business adopted by the

National Assembly dated June 29, 2006

Law on Securities (LOS) Law on Securities No 70/2006/QH11 adopted by

the National Assembly dated June 29, 2006.Law on SOEs (LOSOEs) Law on State-Owned Enterprises adopted by the

National Assembly dated April 20, 1995

Law on State Bank (LSB) Law on State Bank of Vietnam adopted by the

National Assembly on December 12, 1997, as amended by the National Assembly on June 17,

2003, and replaced by the new law No 46/2010/QH12 adopted by the National Assembly on Jun

16, 2010 with effect from January 1, 2011

Penal Code Revised Penal Code No.37/2009/QH12 of the

National Assembly dated June 19, 2009

Decree 01 Decree 01/2010/ND-CP on the private placement

of shares dated January 4, 2010

Decree 14 Decree 14/2007/ND-CP dated January 19, 2007 on

implementing the Law on Securities

Decree 27 Decree 27/2007/ND-CP dated February 23, 2007

on e-transactions in financial activities

Decree 30 Decree 30/2009/ND-CP dated March 30, 2009

amending and supplementing a number of articles

of Decree No 105/2004/ND-CP dated March 30,

2004, on independent audits

Decree 43 Decree 43/2010/ND-CP dated April 15, 2010 on

business registration (replaced Decree 88/2006/ND-CP dated August 9, 2006)

Decree 45 Decree 45/2007/ND-CP dated March 27, 2007

implementing the Law on Insurance Business.Decree 46 Decree 46/2007/ND-CP dated March 27, 2007

on the financial regime applicable to insurance businesses

Decree 52 Decree 52/2006/ND-CP dated December 28, 2006

on issuing regulations on corporate bonds

Decree 53 Decree 53/2009/ND-CP dated June 4, 2009 on the

issuance of international bonds

Decree 59 Decree 59/2009/ND-CP dated July 16, 2009 on the

organization and operation of commercial banks

Decree 84 Decree 84/2010/ND-CP dated August 2, 2010

amending and supplementing some articles of Decree 14/2007/ND-CP

Decree 85 Decree 85/2010/ND-CP dated August 2, 2010 on

the sanctioning of administrative violations in the domain of securities and the securities market (replaced Decree 36/2007/ND-CP dated March 3, 2007)

Decree 105 Decree105/2004/ND-CP dated March 30, 2004

on independent audit

Decree 109 Decree 109/2007/ND-CP dated June 26, 2007 on

the transformation of 100% state-owned companies into joint stock companies

Decree 120 Decree 120/2005/ND-CP dated September 30,

2005 on dealing with breaches in the competition sector

Decree 129 Decree 129/2004/ND-CP dated May 31, 2004 on

implementing the Law on Accounting applicable to business activities

Decree 102 Decree 102/2010/ND-CP dated October 1, 2010

on implementing a number of articles in the Law

on Enterprises (replaced Decree 139/2007/ND-CP dated September 5, 2007)

Decree 146 Decree 146/2005/ND-CP dated November 23,

2005 on the financial regime applicable to credit

Circular 06 Circular 06/2010/TT-NHNN dated February

26, 2010 guiding the organization, governance, administration, charter capital, transfer of shares and supplementation and modification of licenses

or charters of commercial banks (replaced Decision 383/2002/QD-NHNN and Decision 1087/2001/QD-NHNN)

Circular 09 Circular 09/2010/TT-BTC of the Ministry of

Finance dated January 15, 2010 guiding the disclosure of information on the securities market.Circular 17 Circular 17/2007/TT-BTC of the Ministry of

Finance dated March 13, 2007 guiding initial public offerings

Circular 18 Circular 18/2007/TT-BTC of the Ministry of

Finance dated March 13, 2007 guiding the redemption and resale of stocks and some cases of additional issuances of public company stocks.Circular 19 Circular 19/2003/TT-BTC of the Ministry of

Finance dated March 20, 2003 guiding the increase and reduction of charter capital and the management of treasury shares in joint stock companies

Circular 50 Circular 50/2009/TT-BTC of the Ministry of

Finance dated March 16, 2009 guiding electronic trading on the securities market

Circular 60 Circular 60/2004/TT-BTC of the Ministry of

Finance dated June 18, 2004 guiding the issuance

of stocks to the public

Circular 62 Circular 62/2009/TT-BTC of the Ministry of

Finance dated March 27, 2009 providing further guidance and clarification for the application of Circular 84/2008/TT-BTC dated 30 September

2008 guiding on the Law on Personal Income Tax.Circular 64 Circular 64/2004/TT-BTC of the Ministry

of Finance dated June 29, 2004 guiding the implementation of some articles of Decree 105/2004/ND-CP

Circular 84 Circular 84/2008/TT-BTC of the Ministry of

Finance dated September 30, 2008 guiding a number of articles of the Law on Personal Income Tax

Circular 86 Circular 86/2009/TT-BTC of the Ministry of

Finance dated April 28, 2009 amending some provisions of Circular 155/2007/TT-BTC dated December 20, 2007

Circular 155 Circular 155/2007/TT-BTC of the Ministry of

Finance dated December 20, 2007 guiding the implementation of a number of articles from Decree 45 dated March 27, 2007 guiding the implementation of a number of articles from the Law on Insurance, as amended by Circular 86 of the Ministry of Finance dated April 28, 2009

Circular 156 Circular 156/2007/TT-BTC of the Ministry of

Finance dated December 20, 2007 guiding the implementation of a number of articles from Decree

45 dated March 27, 2007 guiding the financial regimes applicable to insurance and insurance brokerage companies

Circular 194 Circular 194/2009/TT-BTC of the Ministry of

Finance dated October 2, 2009 guiding the public bidding offering of public company shares

Decision 01 Decision 01/2009/QD-TTg of the Prime Minister

dated January 2, 2009 on establishing the Hanoi Stock Exchange

Decision 12 Decision 12/2007/QD-BTC of the Ministry of

Finance dated March 13, 2007 promulgating corporate governance regulations applicable to companies listed on the stock exchange/securities trading center

Decision 13 Decision 13/2007/QD-BTC of the Ministry of

Finance dated March 13, 2007 promulgating regulations on the prospectus forms of companies listed on the stock exchange/securities trading

Decision 15 Decision 15/2007/QD-BTC of the Ministry of

Finance dated March 19, 2007 on the Model Charter applicable to companies listing on the stock exchange

Decision 15/2008/QD-TTLK dated April 2, 2008 issuing regulations on exercising shareholders’ rights.Decision 24 Decision 24/2007/QD-NHNN of the State Bank

of Vietnam dated June 7, 2007 issuing regulations

on the issuance of establishment and operation certificates for joint stock commercial banks.Decision 27 Decision 27/2007/QD-BTC of the Ministry of

Finance dated April 24, 2007 issuing regulations

on the organization and operation of securities companies, as amended by Decision 126/2008/QD-BTC of the Ministry of Finance dated December

26, 2008

Decision 36 Decision 36/2006/QD-NHNN dated August 1,

2006 issued by the Governor of the State Bank

of Vietnam, on the issuance of the regulation

on the internal inspection and control of credit institutions

Decision 37 Decision 37/2006/QD-NHNN dated August 1,

2006 issued by the Governor of the State Bank of Vietnam, on the issuance of the regulation on the internal audit of credit institutions

Decision 87 Decision 87/2007/QD-BTC of the Ministry

of Finance dated October 22, 2007 providing regulations on the registration, depository, clearing and payment of securities

Decision 112 Decision 112/2009/QD-TTg of Prime Minister

dated September 11, 2009 on regulating roles, responsibilities of State Securities Commission Decision 168 Decision 168/QD-SGDHCM dated December 7,

2007 issued by the Ho Chi Minh Stock Exchange general director promulgating the regulations

on listing securities on the Ho Chi Minh Stock Exchange

Decision 234 Decision 234/2003/QD-BTC of the Ministry of

Finance dated December 30, 2003 on promulgating Vietnamese Accounting Standards

Decision 324 Decision 324/QD-SGDHN dated June 4, 2010

issued by the Hanoi Stock Exchange’s director promulgating regulations for listing securities on the Hanoi Stock Exchange (replaced Decision 420/

QD-TTGDCKHN)

Decision 832 Decision 832/TC-QD-CDKT dated October

28, 1997 on the promulgation of internal audit regulations applicable to State-Owned Enterprises

OECD Principles OECD Principles of Corporate Governance (2004)

Serbian Corporate Governance Manual Second Edition Published by IFC in 2008

frequently used Abbreviations and Acronyms

AGM Annual General Meeting of Shareholders

AICPA American Institute of Certified Public Accountants

Chairman Chairman of the Board of Directors

CII Council of International Investors

CPA Certified Public Accountant

EGM Extraordinary General Meeting of Shareholders

FASB Financial Accounting Standards Board

FIEs Foreign-Invested Enterprises

GCGF Global Corporate Governance Forum

GMS General Meeting of Shareholders

IAS International Accounting Standard

IFC International Finance Corporation

IOSCO International Organization of Securities Commissions

LOSOE Law on State-Owned Enterprises

MoLISA Ministry of Labor, Invalids and Social Affairs

MPI Ministry of Planning and Investment

MPS Ministry of Public Security

NACD National Association of Corporate Directors

NASDAQ National Association of Securities Dealers Automated

Quotation

OECD Organization for Economic Cooperation and

Development OECD Principles OECD Principles of Corporate Governance

SCIC State Capital Investment Corporation

SSC State Securities Commission of Vietnam

The CG Regulations Decision 12 of the Ministry of Finance dated March 13,

2007 providing regulations on corporate governance applicable to listed companies

The Model Charter The Model Charter issued together with Decision 15 of

the Ministry of Finance dated March 19, 2007 UPCOM Unlisted Public Company Market

VACPA Vietnam Association of Certified Public Accountants VAFI Vietnam Association of Financial Investors

Acknowledgements

The preparation and publication of the Vietnamese Corporate Governance Manual (the

Vietnamese Manual) involved the participation and efforts of a significant number of

dedicated people The Vietnamese Manual was prepared based on the Serbian Manual

published by IFC’s Corporate Governance Program in Southern Europe adapted to

Vietnam’s corporate governance legal framework and practices

The Serbian Manual project (which was based on an IFC produced Russian Manual)

was led by Juan Carlos Fernandez Zara (Regional Manager, IFC Corporate Governance

Program in Southern Europe) and his IFC Serbia team

The Vietnamese Manual was produced as a part of IFC’s Corporate Governance

Program in Vietnam The Manual’s text was adapted by Hoang Thi Thanh Thuy and

Nguyen Thanh Ngan

Nguyen Nguyet Anh (Project Officer, IFC) was in charge of the contents and publication

of the Vietnamese Manual under direct supervision of Juan Carlos Fernandez Zara

(Project Manager, IFC) The development of the Manual was also contributed to by

Nguyen Van Lan (Project Manager, IFC), Pham Lien Anh (Project Officer, IFC) and

Chu Van Anh (Communication Analyst, IFC)

Overall support was provided by Simon Andrews (Regional Country Manager, IFC

Mekong) and Cerstin Sander (Regional Business Line Leader, Corporate Advice &

Sustainability, IFC) Technical support was provided by Charles Travis Canfield (Senior

Corporate Governance Officer, CG Unit, IFC)

The development of the Manual received significant contributions from the State

Securities Commission of Vietnam (SSC) Chairman Vu Bang and Vice-Chairwoman

Vu Thi Kim Lien together with the SSC’s international cooperation department

provided continuous and strong commitment towards the publication of this Manual

Especially, Bui Hoang Hai (Deputy Director of Securities Issuance Department, SSC)

reviewed and provided valuable comments on all chapters of the final draft version of

the Manual In addition, the Manual was also commented on by Nguyen Dinh Cung,

Vice President of the Central Institute For Economic Management

The final edit of the English version of this Manual was conducted by Simon Drought

The first edition of this Manual was published in June 2010 and distributed for comments

in July 2010 We would also like to thank Hanoi Stock Exchange, Ho Chi Minh Stock

XXIV

tAbLe of CoNteNtS

Corporate Governance - Manual

CHAPTER 1: An Introduction To Corporate Governance 1

A CorPorAte GoVerNANCe eXPLAINeD 6

b tHe buSINeSS CASe for CorPorAte GoVerNANCe 17

3 lowering the Company’s Cost of Capital and raising the value of assets 20

C tHe CoSt of CorPorAte GoVerNANCe 24

D tHe CorPorAte GoVerNANCe frAMeworK IN VIetNAM 26

3 the Corporate Governance regulations applicable to listed Companies in vietnam 32

CHAPTER 2 : The General Governance Structure of a Company 37

A wHAt IS A JoINt StoCK CoMPANY? 41

3 the advantages and disadvantages of Public Companies over other legal forms 45

b tHe GoVerNANCe StruCture of A JoINt StoCK CoMPANY 51

A tHe CoMPANY CHArter 66

b tHe INterNAL reGuLAtIoNS of tHe CoMPANY 73

C CoMPANY CoDe of CorPorAte GoVerNANCe 75

D CoMPANY CoDe of etHICS 79

A tHe boArD of DIreCtorS’ AutHorItY 93

3 the Board of directors’ authority in relation to strategic oversight and Control 95

4 the Board of directors’ authority in relation to shareholder rights 102

5 the Board of directors’ authority in relation to assets and the Charter Capital 102

6 the Board of directors’ authority in relation to Control, disclosure and transparency 103

b tHe eLeCtIoN AND DISMISSAL of DIreCtorS 106

C tHe CoMPoSItIoN of tHe boArD of DIreCtorS 114

D tHe StruCture AND CoMMItteeS of tHe boArD of DIreCtorS 130

e tHe worKING ProCeDureS of tHe boArD of DIreCtorS 139

f tHe DutIeS AND LIAbILItIeS of DIreCtorS 150

7 the minutes of Board of directors meetings and director liability 158

G eVALuAtIoN AND eDuCAtIoN of tHe boArD of DIreCtorS 159

H tHe reMuNerAtIoN of DIreCtorS 162

I SuMMArY CHeCKLISt to DeterMINe tHe boArD of DIreCtorS’ effeCtIVeNeSS 166

A tHe eXeCutIVe boDIeS AND tHeIr AutHorItIeS 175

b tHe CoMPoSItIoN of tHe eXeCutIVe boDIeS 180

2 qualifications of the General director and executive Board members 181

C tHe forMAtIoN AND terMINAtIoN of tHe eXeCutIVe boDIeS 184

D tHe worKING ProCeDureS of tHe eXeCutIVe boDIeS 188

e tHe DutIeS AND LIAbILItIeS of tHe MeMberS of tHe eXeCutIVe boDIeS 193

f PerforMANCe eVALuAtIoNS 193

G tHe reMuNerAtIoN AND reIMburSeMeNt of tHe eXeCutIVe boDIeS 194

3 severance Payments to the General director and executive Board members 199

CHAPTER 6: The Role of the Corporate Secretary 201

A tHe roLe of tHe CorPorAte SeCretArY 206

b tHe AutHorItY of tHe CorPorAte SeCretArY 215

C ProfeSSIoNAL ASSoCIAtIoNS of CorPorAte SeCretArIeS 224

CHAPTER 7: An Introduction to Shareholder Rights 227

A GeNerAL ProVISIoNS oN SHAreHoLDer rIGHtS 233

b SPeCIfIC SHAreHoLDer rIGHtS 242

2 the right to appeal decisions of the General meeting of shareholders 248

12 the right to nominate Candidates to be elected as members of the Board of directors and

C tHe StAte AS A SHAreHoLDer 261

D tHe SHAreHoLDer reGISter 265

e tHe ProteCtIoN of SHAreHoLDer rIGHtS 269

4 non-Governmental organizations for the Protection of shareholder rights 272

f reSPoNSIbILItIeS of SHAreHoLDerS 277

2 obligation to be liable to debts and other liabilities of the Company 277

CHAPTER 8: The General Meeting of Shareholders 281

A GeNerAL ProVISIoNS 288

b.PrePArING for tHe ANNuAL GeNerAL MeetING of SHAreHoLDerS 296

C CoNDuCtING tHe GeNerAL MeetING of SHAreHoLDerS 320

D AN oVerVIew of tHe eXtrAorDINArY GeNerAL MeetING of SHAreHoLDerS 339

1 When to Conduct an extraordinary General meeting of shareholders 339

3 Conducting the extraordinary General meeting of shareholders by Written Consent 342

e DeCISIoNS of tHe GeNerAL MeetING of SHAreHoLDerS 346

CHAPTER 9: Corporate Governance Implications of the Charter Capital 351

A GeNerAL ProVISIoNS reLAteD to tHe CHArter CAPItAL 356

b INCreASING tHe CHArter CAPItAL 362

C ProteCtING tHe CHArter CAPItAL 374

D StAtutorY AND VoLuNtArY reSerVeS 387

A GeNerAL ProVISIoNS oN DIVIDeNDS 395

b ProCeDureS for DeCLArING AND PAYING DIVIDeNDS 402

C tHe DISCLoSure of INforMAtIoN oN DIVIDeNDS 408

D DIVIDeND PoLICY 409

CHAPTER 11: Corporate Governance Implications of Corporate Securities 413

A AN oVerVIew of CorPorAte SeCurItIeS 418

b tYPeS of SeCurItIeS 423

C ISSuING SeCurItIeS 431

D tHe CoNVerSIoN of SeCurItIeS 446

e DerIVAtIVeS 447

f rAISING CAPItAL IN INterNAtIoNAL MArKetS 449

A eXtrAorDINArY trANSACtIoNS 460

b reLAteD PArtY trANSACtIoNS 469

A AN INtroDuCtIoN to INforMAtIoN DISCLoSure 488