Corporate governance is a cornerstone of sustainable business performance. In Vietnam, governance standards are shaped by the Law on Enterprises 2020, the Securities Law 2019, and related decrees, but their application can differ between foreign-owned enterprises (FOEs) and domestically owned enterprises (DOEs). Understanding these similarities and distinctions is important for investors, managers, and policy-makers.
1. Legal Framework
- Common Basis: All enterprises—foreign or domestic—are primarily governed by the Law on Enterprises 2020 (LOE). Provisions on organizational structure, management accountability, shareholder rights, and disclosure apply equally.
- Specific Rules for FOEs: Where foreign capital exceeds 50% or where the enterprise is wholly foreign-owned, additional rules may stem from the Law on Investment 2020 and international treaties (e.g., CPTPP, EVFTA). These regulate market entry and sometimes impose reporting duties to investment authorities.
- Listed Companies: If an enterprise is listed, the Securities Law and corporate governance code issued by the State Securities Commission impose higher transparency and board independence standards, regardless of ownership.
2. Ownership and Control
- Domestic Enterprises often have concentrated ownership (family groups, state-owned corporations). Control is usually exercised directly by founding members or via state representatives.
- Foreign-Owned Enterprises—particularly joint ventures—must balance Vietnamese and foreign shareholders’ interests. Their charters usually include detailed clauses on reserved matters, voting thresholds, and dispute resolution, reflecting cross-border investment practices.
3. Board Structure and Management
- Limited Liability Companies (LLCs): Both FOEs and DOEs may adopt a Members’ Council or a single owner model. However, FOEs frequently appoint foreign managers or board members, requiring bilingual charters and internal rules.
- Joint-Stock Companies (JSCs): Governance follows the “General Meeting – Board of Directors – Supervisory Board (or Audit Committee)” model. FOEs often insist on higher quorum or super-majority requirements to safeguard minority interests.
4. Transparency and Reporting
- FOEs are subject to dual reporting: (i) to the business registration authority, and (ii) to the investment registration authority. They must file annual reports on investment performance in addition to financial statements.
- DOEs only submit corporate reports to the business registrar and tax authority, unless they operate in a regulated sector or are listed.
5. Dispute Resolution and Compliance
- Shareholder or member disputes in DOEs typically go through Vietnamese courts or commercial arbitration.
- FOEs often include arbitration clauses (e.g., VIAC, SIAC) in their charters, reflecting foreign investors’ preference for neutral venues. They also tend to adopt compliance programs addressing anti-corruption, competition, and data protection standards consistent with parent-company policies.
6. Policy Trends
Vietnam aims to harmonize governance practices by encouraging adoption of international standards (OECD Principles, ASEAN CG Scorecard) for all enterprises. Draft regulations on related-party transactions and independent directors are likely to reduce gaps between FOEs and DOEs, especially among listed and large non-listed firms.
Conclusion
The fundamentals of corporate governance in Vietnam are uniform, but foreign-owned enterprises often operate under more complex structures and higher transparency expectations due to investment laws and cross-border practices. As Vietnam integrates further into global markets, aligning governance requirements across ownership types will strengthen accountability, investor confidence, and corporate sustainability.
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