A new decree will help improve the quality of corporate governance in public companies and benefit small, individual investors, a senior official on 28th July.
Corporate governance has become an urgent issue for public companies as it affects a firm’s sustainability when its size and scale develops at a fast speed, Pham Hong Son, vice chairman of the State Securities Commission (SSC), said at a conference.
According to the SSC, Viet Nam’s stock market has developed strongly since the beginning of the year. The benchmark VN Index on the HCM Stock Exchange jumped nearly 17 per cent during this period to close on Friday at 777.09 points and the HNX Index on the Ha Noi Stock Exchange has gained 25.5 per cent to end at 100.55 points. Market capitalisation has increased by 30.5 per cent.
Son said that listed companies on both local exchanges have improved the quality of corporate governance and are aware of its essential importance.
“The better corporate governance is, the more benefits small individual investors will get,” Son said. “The Government’s Decree 71/2017/ND-CP (Decree 71) enumerating the principles of corporate governance for public companies will help them manage their businesses better.”
Decree 71, an upgrade of Circular 121/2012/TT_BTC (Circular 121) issued by the Finance Ministry on July 26, 2012, will take effect on August 1. It has eight chapters and 38 articles on the company’s shareholders, shareholder meetings, board managers, and the board of supervisors.
It will help companies reduce the chance of conflicts between shareholders over their benefits, enhance information disclosure, and monitor and deal with business violations in a timely manner.
Under the new decree, the chairman of the management board cannot be the general director at the same time – a difference from Circular 121, which stated that a chairman of the company’s management board can become the general director if he gets approval at the annual shareholder meeting.
The new regulation separates the obligations and duties of the chairman and the general director, improving business management of the firm.
Each member of a public company’s management board cannot be a board member at more than five other companies. In Circular 121, this restriction only applied to listed companies.