Vietnam vs China: Comparing Board of Directors Models
A Chinese group opening a subsidiary in Vietnam, or a Vietnamese enterprise joining a venture in China — the in-house counsel's first question is always: how does the governance structure differ over there? Since 1 July 2024, China's amended Company Law has substantially rewritten the "rules of the game" on boards of directors, making a comparison with Vietnam's model more urgent than ever.
1. The Legal Frameworks
Vietnam: The 2020 Law on Enterprises (effective 01/01/2021), as amended and supplemented by Law No. 76/2025/QH15 passed on 17/6/2025.
China: The sixth amendment to the Company Law of the People's Republic of China, adopted by the Standing Committee of the National People's Congress on 29/12/2023 and effective from 01/7/2024 — 15 chapters, 266 articles, of which 112 were added or revised.
2. Basic Governance Structures
Vietnam
- Joint-stock company: General Meeting of Shareholders — Board of Directors (3–11 members) — (General) Director — Supervisory Board (mandatory when the company has more than 11 individual shareholders or an institutional shareholder holding over 50% of shares).
- Multi-member LLC: Members' Council (all members) — Chairman — Director — Controller(s)/Supervisory Board as applicable.
- Single-member LLC: the institutional owner chooses: Members' Council or company Chairman — Director — Controller.
China (from 01/7/2024)
- LLC: a board of at least 3 directors, with the previous 13-member cap abolished (Article 68). Small-scale LLCs or those with few shareholders may have a sole director instead of a board.
- Joint-stock company: the old 5–19 range is gone; aligned with LLCs (minimum 3 directors if a board exists); small joint-stock companies may also opt for a sole director.
- Flexible supervision: companies may establish an audit committee of board directors to perform supervisory functions; a small LLC may have no supervisor at all with all shareholders' agreement.
3. Side-by-Side Comparison
| Item | Vietnam | China (2024 Law) |
|---|---|---|
| Board size | Joint-stock: 3–11 | Minimum 3, no maximum |
| Sole-director model | Single-member LLC: company chairman instead of members' council | Small LLC/joint-stock company: sole director instead of board |
| Employee directors | Not mandatory | Mandatory with 300+ employees (unless already on supervisory board) |
| Supervisory body | Supervisory board (two-tier) | Supervisory board or audit committee within the board (one-tier option) |
| Legal representative | Charter designates chairman or (general) director | Must be a director/GM actively engaged; successor within 30 days of resignation |
| Employee elections | — | Democratic election via employees' congress |
4. The Biggest Difference: Employee Directors
Under Article 68 of China's 2024 Company Law, a company with 300 or more employees whose supervisory board has no employee representative must include at least one employee director, elected democratically by the employees. Previously this applied only to state-owned enterprises.
This often shocks foreign investors — including Vietnamese groups with Chinese subsidiaries: a board designed to mirror shareholding proportions must suddenly reserve a seat for an employee representative, raising confidentiality concerns. The practical workaround many companies choose: place the employee representative on the supervisory board instead, keeping decision-making untouched.
Vietnam has no equivalent: employees participate through trade unions and workplace dialogue under the Labor Code, not through board seats.
5. The Second Difference: Audit Committee Instead of Supervisory Board
China's 2024 law lets an LLC form an audit committee of board directors to perform supervisory functions — merging decision-making and supervision into one tier, closer to the Anglo-American one-tier model. Vietnam keeps the two-tier model with an independent supervisory board for qualifying joint-stock companies.
6. Legal Representatives
Vietnam: the charter designates one or more individuals — the chairman of the board/members' council or the (general) director — as legal representative.
China (2024 Law): the legal representative must be a director or general manager actively engaged in the company's business. Resigning as director/GM automatically ends the legal-representative role, and the company must appoint a successor within 30 days — fixing the old problem of departed executives remaining the registered representative indefinitely.
7. Practical Notes for Vietnam–China Businesses
- Determine the applicable law: a Chinese subsidiary follows Chinese company law; a Vietnamese company follows Vietnamese enterprise law. Never copy-paste a charter across borders.
- Review the charter: board size, supervisory mechanism (supervisory board vs audit committee in China), legal representative.
- Prepare for employee directors: with 300+ employees in China, design election procedures and board confidentiality policies early.
- Align group policies: parent-company governance, approval and reporting policies must fit each jurisdiction.
When to Involve Counsel
Designing cross-border governance is not "translating" a charter — it is restructuring for each legal system. Counsel versed in both systems helps avoid conflicts between group policy and local law, especially in Vietnam–China transactions.
FLAT LAW FIRM advises on governance structures and Vietnam–China cross-border transactions. Call our hotline 0988424851 for advice tailored to your company's situation.
<div class="jpv-language-links" markdown="1"> Language versions: Tiếng Việt · English · 中文 </div>
References
- National Assembly (2020), Law on Enterprises, Law No. 59/2020/QH14 dated 17/6/2020, effective 01/01/2021; amended by Law No. 76/2025/QH15 dated 17/6/2025.
- Standing Committee of the NPC, Company Law of the People's Republic of China, amended 29/12/2023, effective 01/7/2024 (15 chapters, 266 articles).
- CMS China, "2024 – Topics that May Concern You" (Mondaq): abolished 13-member board cap, employee representatives, audit committee.
- Haiwen & Partners, "Navigating the New PRC Company Law": Article 68 (minimum 3 directors), alignment of LLC and joint-stock rules.
- China-Britain Business Council, "Exploring China's New Company Law: Impact on Officers": legal representative, employee directors at 300+ employees.
- Gide Loyrette Nouel, "Company Law | China January 2024": Articles 68, 71 on boards and directors' rights.