Company law: A difference in the regulation system between Australia and Vietnam

Topics: Board of directors, Executive director, Managing director Pages: 5 (1310 words) Published: February 23, 2014
Nguyen Kieu My-s3360514

2012

Among almost every enterprise, it appears that the responsibility and performance of director plays an important part in running the company properly. Therefore, this essay will first provide information about the definition and appointment of director in Vietnamese and Australian’s company law, and then give a comparison to identify the pros and cons in both countries’ policy. Firstly, there are two different definitions of director in the law of VN and Australia. According to Vietnamese Law on enterprises, in general, the director or general director of the company is ”the person who manages the day-to-day business operation of the company and is responsible to the Members' Council for the exercise of his or her rights and the performance of his or her duties” (The National Assembly 2005, Article 55). In Vietnam, the director can also be regarded as “nguoi quan ly cong ty”, or “giam doc” , “giam doc dieu hanh”. As for Australian firms, the director is defined as a person who is appointed to the position of director or alternate director regardless of the name given to their position” (Corporations Act, 2001), and there are many types of directors such as managing director, alternate director, executive and non-executive director, etc.. From the above information, it is obvious that in Vietnamese law, there is only one general definition of director given and it is considered to be rather broad and vague. In fact, the director in a company is defined according to their job titles only. The National Assembly (2005) does not provide any further and specific explanation on different types of director like “executive director” or “non executive director and instead, it uses the term “giam doc” to refer to all of them. That is not similar to what is usually seen in Australian Corporations Act (2001), where types of directors are distinguished and labeled clearly corresponding to their task. This may raise a considerable issue when the court treats and allocates all directors the same duties regardless of what they actually have to do. Compare to Australia, it is very likely for Vietnamese firms to come into misunderstanding and inevitably poses a problem when it comes to the determination of responsibilities or obligation of directors in a company. Furthermore, it seems that the Vietnamese Law on Enterprise also neglects to mention about people who act as legal directors (de jure director) although they may not be validly appointed that position (de factor director and shadow director). If Australian law identifies a director “regardless of the name given to their position”, Vietnamese court, through the National Assembly (2005), in many circumstances, can only accuse a person of breaching director’s duty if his name is officially listed as the company director. Hence, the court may have trouble identifying and making the right defendant responsible for his liability to the company. A familiar case to this situation is the case of Tang Minh Phung –EPCO Company in the 1990s (doanhnhan.cafeland.vn, 2012). Minh Phung was the person who sat in the shadow controlling many puppet companies to make illegal profits. If using the enterprise law only, it is really hard to track the very person staying behind all of the financial crimes and legally bring him to the court judgment. In short, the limit of law on this field may create a favorable environment supporting to the existence of shadow and de facto directors , which makes it difficult to protect the interest of shareholders, creditors or other stakeholders due to lack of actual responsibility and accountability.

Nguyen Kieu My-s3360514

2012

Another feature worthy of mentioning is the appointment of directors. According to Vietnamese’s National Assembly (2005), Article 57, a director or general director must “a) have full capacity for civil acts and not to be prohibited from management of enterprises by this Law; (b) be an individual...
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