PwC Vietnam NewsBrief

Transcription

1 PwC Vietnam NewsBrief 12 July 2017 At a glance... Corporate Governance and Internal Audit Towards the International best practices Explore Decree No. 71/2017/ND-CP on Corporate Governance Guidance for Public Interest Companies and the Internal Audit Handbook.

2 1. Summary of Decree No. 71/2017/ND-CP

3 Decree No. 71/2017/ND-CP Corporate Governance Guidance for Public Interest Companies 1 The changes are made to reach the international best practices on corporate governance by enhancing the transparency of information in the marketplace and the efficiency and effectiveness of BoD and BoM, minimising conflict of interest, and providing better protection towards shareholders. The Decree is going to be legally enforceable on 1 st August, 2017 with a number of changes and reinforcements in corporate governance regulations that require high attention from the Board of Directors (BoD) and Board of Management (BoM) of public interest companies. The Decree has been made in line with the latest Corporate Law (2014) and has replaced Circular No. 121/2012/TT-BTC. 1 Under Law on Securities No. 70/2006/QH11 (Article 25), Public Interest Company is defined as any one of the following three types of joint-stock companies: a/ Company that has already made its initial public offering; b/ Company whose shares are listed on the Stock Exchanges or the Securities Trading Centers; c/ Company that has shares owned by at least one hundred investors, excluding professional securities investors and has the contributed charter capital of ten billion Vietnamese dong or more. PwC 3

4 Decree No. 71/2017/ND-CP Corporate Governance Guidance for Public Interest Companies Annual General Meeting (AGM) Shareholders approve the Corporate Governance Charter prepared by the BoD. They also have the rights of access to further information about the actual operations and performance of the company. The Corporate Governance Charter is approved by the shareholders through AGM (Article 7) while in Circular No. 121, it is prepared and approved by the BoD. Shareholders may now request the attendance of independent auditors at the AGM when there are significant exceptions in the audited annual financial statements (Article 8); Shareholders may also request reports prepared by independent BoD members on the performance of BoD (Article 16); and Reports on the operations of the Audit Committee (under the governance structure without a supervisory board) and of other BoD s committees, in addition to reports on performance of BoM and executives are also available to shareholders (Article 9). Board of Directors (BoD) Higher enforcement are made on the BoD member composition, BoD Committee, assessment of BoD performance to ensure the independence, transparency and effectiveness of BoD operations. Chairman must not simultaneously hold the Director/General Director position of the same public company (Article 12 - legally enforceable by 2020); BoD members of a public company must not simultaneously hold the BoD member position of more than five other companies (Article 12 - legally enforceable by 2019); BoD of a listed company must assign a member responsible for corporate governance. Roles and responsibilities of this person resemble those of the company secretary as defined in Circular No.121, with an additional role of supervising and reporting to BoD on the company s disclosure compliance (Article 18); The Decree confirms the formation of different BoD s committees comprising capable members on an as-needed basis those are headed (preferably) by an independent member and also enforces the required BoD s composition (i.e. independent vs dependent and executive vs. non-executive members) (Articles 13 and 17). Supervisory Board Professional capability and qualifications of the Supervisory Board are guaranteed to enhance the quality of supervisory activities. Head of Supervisory Board must be a registered/ recognized accountant or auditor, and must work on a fulltime basis at the company (Article 20); and For public interest companies with more than 50% interest held by the state, all members of Supervisory Board must be registered/recognized accountants or auditors (Article 20). Article 22 specifies additional rights and obligations of the Supervisory Board (compared to Article 165 Corporate Law). PwC 4

5 Decree No. 71/2017/ND-CP Corporate Governance Guidance for public interest companies The Decree also includes other positive changes that would help in fostering business activities and enhancing the transparency of information provided by public interest companies. Transactions with Related Parties Article 26 Defines a number of specific cases in which transactions (lending and/or issuing guarantees) with related parties are allowed for public interest companies, loosening the outdated regulations in Circular No. 121 where such transactions were completely forbidden. For example: A public credit institution can lend/issue guarantees to individual related parties of an individual shareholder. Provides threshold for approval of such transactions. The company s charter shall define the transaction threshold as a specific percentage of total asset value inscribed in the latest annual financial statements, under which transactions can be approved by BoD and from which transactions must be approved by Annual General Meeting. That specific percentage must not exceed 35%. Other requirements Disclosure of corporate governance model is required within 24 hours of changes in the company s operating model (Article 29). Disclosure of Director/General Director and other managers incomes in the annual financial statement is required (Article 31). Other requirements of consideration for gender balance in the composition of BoD, increased minimum number of days to announce information related to BoD candidates and State Securities Committee (SSC) s right to request data and information. PwC 5

6 2. Internal Audit Handbook

7 Internal Audit Handbook Introduction The Handbook can serve as a source of reference for organizations operating in any industry/ sector, especially public interest companies, for the purposes of: Enhancing Internal Audit function and corporate governance structure; and Designing suitable charter, organization structure, policies and/or procedures for Internal Audit function. Authors 1. Ministry of Finance (Accounting and Auditing Policies Department - AAPD) 2. World Bank (WB) Group s Internal Audit Experts Source of reference 1. IIA s standards and guidance 2. International leading practices 3. Local context and regulations Officially launched in June 2017, the Handbook Provides a standard definition of Internal Audit as per The Institute of Internal Auditors (IIA) s definition. Clarifies and highlights the independent assurance and trustworthy advisory services that Internal Audit is able to provide due to its unique characteristics: independence and objectivity. Illustrates the organization structure of Internal Audit functions with explanation on functional and administrative reporting responsibility. Provides guidance steps to establish Internal Audit function and explains the nine (09) attributes of an effective Internal Audit function. Presents the relations between Internal Audit and corporate governance, risk management and internal control. Provides implementation guidance from developing Internal Audit strategy and annual plan, executing audit engagements to quality assurance and the role of Internal Audit in fraud detection and prevention. PwC 7 PwC 6

8 2. Implementation guidance 1. Fundamental Internal Audit Handbook Key contents Chapter 1 Key contents of the Internal Audit Charter Describes the principles of an Internal Audit (IA) charter, steps to establish an IA function, and IA s position in the organization structure in line with regulatory requirements and international best practices. Chapter 2 The Internal Audit focus Describes IA in relations with corporate governance, risk management and internal control; in order to avoid confusion for relevant stakeholders. Provides instructions on internal auditing for corporate governance, risk management and internal control system. Chapter 3 Internal Audit strategy & annual planning Provides the definition, states preparing responsibility and approval authority, and describes preparing procedures of the annual audit plan. Provides examples of activities to be included in the annual audit plan. Chapter 4 Internal Audit execution Provides instructions on the implementation process of each IA engagement, from audit planning, fieldwork to reporting and follow-ups. Chapter 5 Quality assurance program Provides instructions on the IA quality assurance programme as a critical method of audit risk management. Provides factors to consider when building resources for IA. Chapter 6 Internal Audit & Frauds Provides the definition and role of IA in fraud detection and prevention, as well as instructions for Internal Audit to take part in fraud risk assessment and fraud investigation support. PwC 7

9 Contact us This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. For further information, please reach out to us. Hoang Hung Vietnam Market Leader International Expert for WB and MOF s Internal Audit Project Tel: Mobile: hoang.hung@vn.pwc.com Richard Peters Risk Assurance Leader Tel: Mobile: richard.peters@vn.pwc.com Grant Dennis Consulting Leader T: Mobile: E: dennis.a.grant@vn.pwc.com

10 facebook.com/pwcvietnam youtube.com/pwcvietnam linked.com/company/pwc-vietnam At PwC Vietnam, our purpose is to build trust in society and solve important problems. We re a member of the PwC network of firms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, advisory, tax and legal services. Find out more and tell us what matters to you by visiting us at PwC (Vietnam) Limited. All rights reserved. PwC refers to the Vietnam member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.