Why FDI joint-stock companies develop governance gaps
Many foreign-invested JSCs operate like "extended family companies": the chairman or majority shareholder decides everything, meeting minutes are produced for form's sake, the shareholder register is never updated. This works until a shareholder dispute erupts, or the company seeks funding or M&A — at which point every governance gap (late GMS, unapproved parent transactions, improper share transfers) comes under scrutiny by counterparties and authorities. The 12-item checklist below helps management review annual governance duties under the Enterprise Law 59/2020/QH14.
Foreign investors often underestimate how quickly small gaps compound. A GMS held two months late, a service contract with the parent signed without approval, a shareholder register that still names a departed investor — each is fixable alone, but together they signal weak governance to banks, auditors and prospective buyers. Running this checklist once a year turns compliance into routine instead of firefighting.
Contents
- Why FDI joint-stock companies develop governance gaps
- The 12 items
- Suggested governance calendar
- FAQ
- Legal bases
- Verification notes
The 12 items
1. Hold the annual GMS on time. The General Meeting of Shareholders must meet annually within 04 months of the fiscal year-end; the Board may extend the deadline by no more than 06 months (Article 139). Note: failure to convene on time is an administrative violation, and GMS-reserved decisions (financial statement approval, profit distribution) are left hanging. Put the meeting date in the annual calendar early: invitations, meeting dossiers and proxy arrangements for overseas shareholders take weeks to prepare.
2. Approve the audited annual financial statements. The audited annual statements (mandatory audit for FDI enterprises) must be approved by the annual GMS. Note: profit distribution or dividend payment without GMS-approved statements lacks legal basis. The audit must be finished in time for the GMS papers — a late audit is the most common reason meetings slip past the deadline.
3. Profit distribution and fund appropriations. The GMS decides dividend levels and allocations to reserve, reward and welfare funds per the charter. Note: dividends may only be paid after tax and other financial obligations are fulfilled; accumulated losses bar distribution. Record the dividend resolution precisely (rate, payment timeline, eligible shareholders): vague resolutions are a classic source of shareholder disputes.
4. Elect, dismiss and remove Board members. Review terms: Board members serve no more than 05 years, renewable without term limits, except independent members capped at 02 consecutive terms (Article 154). Note: an expired Board whose members are not re-elected continues in office until replacements are elected — a situation to remedy promptly. Keep a term matrix of all Board and Supervisory Board members so no term lapses unnoticed.
5. Board of Supervisors / internal audit. A JSC with 11 or more shareholders or with an institutional shareholder holding 50% or more of total shares must have a Board of Supervisors (Article 137, Enterprise Law 2020: exemption is available only when the company has both fewer than 11 shareholders and institutional ownership below 50%); all other cases may choose their management model. Note: even where not mandatory, FDI companies with multi-tier ownership should maintain an internal audit function — a missing supervisory layer is a recurring finding in shareholder disputes. If the company uses the single-tier model without a Board of Supervisors, assign the internal audit function clearly in writing: an informal 'someone watches the numbers' arrangement does not survive scrutiny.
6. Remuneration of the Board, Supervisors and Director. The GMS decides remuneration levels, disclosed transparently in financial statements and the annual report. Note: management remuneration is a favourite review target of tax authorities in related-party transactions. Document the remuneration decision in the GMS minutes: undisclosed or retroactively adjusted pay packages invite both shareholder challenges and tax adjustments.
7. Related-person transactions. Contracts and transactions between the company and major shareholders, managers or parent/sister companies must be approved by the GMS or the Board depending on value and authority (Article 167). Note: the biggest blind spot of FDI companies — intra-group service and loan agreements signed without approval risk being declared void in disputes. Keep a related-party register listing every recurring intra-group contract (management services, IP licences, loans, guarantees) and diary its approval renewal: most violations come from auto-renewed contracts, not new ones.
8. Shareholder register and share transfers. Update the register after each transfer; note the 03-year restriction on founding shareholders' ordinary shares: within 03 years of enterprise registration certificate issuance, transfers to non-founding persons require GMS approval (Article 120). Keep transfer contracts, payment proofs and the updated register in one file: five years later, an incomplete transfer file is the hardest gap to close.
9. Legal representative. Review: the representative remains in office and the certificate information is current; if the representative has left the country or no longer actually manages, replace promptly. Note: a "nominal" representative who does not manage is a major risk in contracting and disputes. Where the legal representative is a foreign national, diarise visa and residence-card expiries alongside the corporate review — an expired residence status can paralyse signing authority.
10. Enterprise registration and beneficial owner updates. Register every change (charter capital, Board members, address) within statutory time limits. File changes promptly: late enterprise-registration updates attract administrative penalties and create mismatches that banks and tax authorities will question. Update beneficial owner information under Articles 17–18 of Decree 168/2025/ND-CP (amended by Decree 296/2026/ND-CP).
11. Minutes and resolutions — complete archiving. GMS and Board minutes, ballots and resolutions must be properly drawn up and kept at the head office. Note: in disputes, "a real decision without minutes" is very hard to prove. Number and index resolutions sequentially each year so any missing document is immediately visible.
12. Review the company charter. The charter is the company's "constitution": review annually for consistency with the Enterprise Law 2020 and operating reality (authority, voting ratios, shareholder deadlock mechanisms). For FDI companies in particular: check clauses on share transfers to new foreign investors, existing shareholders' pre-emptive rights, and valuation mechanisms on exit — the points most often disputed when shareholder relations break down.
Suggested governance calendar
- Q1: finalise audited statements; prepare the annual GMS (invitations, meeting papers).
- Within the first 4 months: hold the annual GMS (extendable by up to 2 more months if needed).
- After the GMS: update enterprise registration (personnel/capital changes); update the shareholder register; archive minutes.
- Year-round: control related-person transactions (approve before signing); update beneficial owners upon ownership changes.
- On changes: Board or Supervisory Board membership changes, capital increases or decreases, charter amendments — update enterprise registration within the statutory time limit; do not let the file sit 'pending' past the deadline.
FAQ
When must the annual General Meeting of Shareholders be held? Once a year within 04 months from the end of the fiscal year; the Board may extend the deadline by no more than 06 months (Article 139, Enterprise Law 2020).
Must an FDI joint-stock company have a Board of Supervisors? A JSC with 11 or more shareholders, or with an institutional shareholder holding 50% or more of total shares, must have a Board of Supervisors (Article 137, Enterprise Law 2020); other companies may choose their management model under the Enterprise Law 2020.
What procedure applies to transactions with the parent/affiliates? Contracts and transactions with related persons must be approved by the GMS or the Board depending on value and authority (Article 167, Enterprise Law 2020).
Can founding shareholders freely transfer shares? No. Within 03 years from issuance of the enterprise registration certificate, founding shareholders may transfer ordinary shares to non-founding persons only with GMS approval (Article 120).
What is the term of a Board member? No more than 05 years, renewable without term limits, except independent members capped at 02 consecutive terms (Article 154).
Legal bases
- Enterprise Law 59/2020/QH14: Art. 120 (founding shareholders), Art. 139 (annual GMS), Art. 154 (Board term), Art. 167 (related-person transactions).
- Decree 168/2025/ND-CP (Arts. 17, 18), amended by Decree 296/2026/ND-CP (effective 23/7/2026) — beneficial owners.
Verification notes
Thresholds for a mandatory Board of Supervisors and management model options are stated at the general framework level of the Enterprise Law 2020; check the charter and actual structure per company. Where the checklist raises questions — for example, whether the company must maintain a Board of Supervisors, or how to document a related-party approval — resolve them against the charter and the Enterprise Law before the annual GMS, not after. Disclosure duties of non-public FDI JSCs are more limited than those of public companies.
When to work with a lawyer
If the checklist surfaces gaps — a missed GMS, unapproved related-party contracts, an outdated shareholder register or beneficial-owner filing — have counsel assess the exposure before the authorities or a counterparty do. FLAT Law Firm's corporate team helps FDI companies close governance gaps and keep the annual cycle on track. Contact our hotline 0988424851.