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Internal operational regulations vital in joint stock companies

Update: August, 26/2015 - 08:58

Therefore, enterprises may develop their own regulations that they find appropriate to their culture and operational needs, as long as such regulations are not in conflict with the Charter and existing legislation. — Illustrative image/ Photo vneconomy

Internal regulations, along with the Company Charter, serve as a practical tool to administer the internal activities of joint stock companies, some of whose characteristics are deemed quite distinct.

Internal regulations in enterprises are construed as documents governing issues related to internal management activities, such as governance policies, human resources management, and decentralisation of the power that different departments have. While Vietnamese legislation does not require enterprises to promulgate internal company regulations, the law nevertheless recognises the de facto legality of such regulations.

The role of internal regulations in joint stock companies

Joint stock companies often find certain aspects of corporate management difficult due to a relatively large number of members contributing capital and jointly engaging in business. Promulgation of internal regulations is thus considered beneficial to the administration of corporate apparatus, in addition to the Company Charter under which the firm operates.

Unlike the Company Charter, there is no mandatory content or form prescribed by law for internal regulations. Therefore, enterprises may develop their own regulations that they find appropriate to their culture and operational needs, as long as such regulations are not in conflict with the Charter and existing legislation.

In addition, since charter capital is divided into equal parts and the number of members eligible to purchase shares for capital contribution is unlimited in a joint stock company, internal regulations help the contributing or founding shareholders in managing the company in a stricter and more professional manner.

The content of internal regulations in joint stock companies

In principle, corporate internal regulations are developed based on Enterprise Law and other legal documents relevant to the enterprise's business sectors. Joint stock companies may select to either formulate general regulations with all provisions related to internal governance, or have separate, more specific regulations for each department. A joint stock company's internal regulations shall generally consist of the following:

General provision about the organisational structure of the company's operational apparatus;

Specific provisions guiding internal activities, such as order and procedures for convening meetings and delegations, standards and conditions to become member of Board of Management, order and procedures for selecting managerial officials, co-ordination process between departments within the company, etc.

Provisions about administration and personnel, such as regulations regarding business trips, salary and allowance, reward and discipline, financial management and auditing, etc.

Any other particular content related to the company's internal governance.

PLF – LAW FIRM

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