Establishing financial regulations for a joint-stock company applicable to an FDI enterprise

The company’s financial regulations serve as the foundation for transparency and sustainable development of an FDI enterprise. If you require advisory support on developing financial regulations for a joint-stock company in compliance with standards and the latest legal requirements, the following article by KMC will provide detailed guidance and, more importantly, analyze practical approaches to formulating and implementing corporate financial regulations in a feasible manner, enabling you to make optimal decisions for your enterprise.

The role and importance of corporate financial regulations for FDI enterprises

For FDI enterprises, particularly Japanese companies, a well-structured financial regulation framework for a joint-stock company delivers outstanding benefits:

• Meeting dual compliance requirements: Not only complying with Vietnam’s Law on Enterprises 2020 and Law on Accounting 2015, but also satisfying stringent internal control standards imposed by the overseas parent company.
• Enhancing transparency to attract and retain shareholders/investors: Japanese investors place strong emphasis on transparency and predictability. A clear financial regulation framework serves as compelling evidence of sound corporate governance.
• Effective financial risk control: Establishing authorization limits and clear expenditure approval workflows to manage risks in related-party transactions – a highly sensitive issue for FDI enterprises.
• Establishing a foundation for smooth operations: Minimizing internal disputes and saving time in explaining and handling arising issues through predefined regulations.

Key components of financial regulations for a joint-stock company

A comprehensive financial regulation framework for a joint-stock company typically includes the following key components:

• Financial management principles: Defining fundamental principles such as legal compliance, consistency, transparency, and efficiency. This section establishes the overarching framework for the entire document.
• Financial delegation of authority and responsibilities: Clearly defining authority and responsibilities to identify who has the authority to approve expenditures and who is responsible for monitoring, approval, and oversight, thereby preventing abuse of authority or lack of accountability in cash flow management.
• Capital and asset management: Regulations on charter capital structure, capital increases and reductions, management of fixed assets, receivables and payables, and financial investments.
• Revenue, expense, and profit management: Identifying revenue sources and recognition principles; cost control procedures; and profit allocation policies after tax, including fund appropriations.
• Accounting, financial reporting, and auditing: Regulations on applicable accounting standards, internal reporting systems, annual financial statements, and statutory audit requirements.
• Internal fund management principles: Including contingency funds, development investment funds, and bonus and welfare funds, etc.Financial inspection and supervision policies: Regulations on inspection frequency, authorized personnel, evaluation methods, and sanctions for violations. This is a critical factor in ensuring compliance with the company’s financial regulations.

Depending on the scale of operations, business sector, and development objectives, each enterprise may adjust and supplement the provisions of its financial regulations to ensure suitability and optimal effectiveness.

Legal basis of the company’s financial regulations

When establishing financial management regulations, enterprises must rely on the current legal system to ensure legality, transparency, and compliance with the business environment in Vietnam.

Legal basis for establishing corporate financial regulations:

• Law on Enterprises No. 59/2020/QH14: Serves as the basis for determining the type of enterprise (joint-stock company, LLC, sole proprietorship, state-owned enterprise, FDI enterprise, etc.), as well as its scale and capital structure, thereby enabling the design of financial regulations appropriate to actual business operations.
• Accounting and statistical legislation: Including the Law on Accounting, Vietnamese Accounting Standards (VAS), and relevant guiding circulars and regulations, ensuring transparent, accurate accounting methods and financial statement preparation.
• Tax regulations: Including Corporate Income Tax (CIT), Personal Income Tax (PIT), and Value Added Tax (VAT), etc., to ensure compliance and proper cost control in accordance with legal provisions.
• Company charter: The financial regulations must also be aligned with the company’s charter provisions to avoid conflicts and ensure consistency within the overall governance system.

Roadmap for developing financial regulations for a joint-stock company

To establish a corporate financial regulation framework for a joint-stock company that ensures legal compliance and aligns with the enterprise’s specific characteristics, the following roadmap should be followed:

Step 1: Determine the drafting department for the company’s financial regulations
The company’s financial regulations are closely related to the professional functions of the Finance and Accounting Department. Therefore, the enterprise should assign the Finance and Accounting Department, under the direction of the Director/General Director, to draft the financial regulation framework.

Step 2: Review relevant legal regulations

Based on the latest legal documents, including the Law on Enterprises, the Law on Accounting, and relevant decrees and circulars related to the company’s business sector and industry, ensure that the financial regulations fully comply with applicable laws and mitigate potential legal risks.

Step 3: Develop the outline and draft the main content

Prepare a detailed outline of the financial regulations, from general structure to specific chapters, articles, and sections. Then proceed to draft each section in detail.

Step 4: Collect feedback from relevant departments

After completion of the draft, the enterprise should obtain feedback from relevant department heads and senior management. If necessary, professional advice may be sought from experts or law firms to ensure the feasibility and comprehensiveness of the financial regulations.

Step 5: Revision and issuance

Make necessary revisions (if any), then submit the document to the company’s leadership and Board of Directors for approval and official issuance of the financial regulations for the joint-stock company. Finally, disseminate the regulations to all relevant departments and employees.

Common mistakes FDI enterprises often make when developing corporate financial regulations

During the process of developing and applying corporate financial regulations, many FDI enterprises still encounter the following common mistakes:

● Rigidly copying existing templates: A standard template cannot reflect specific characteristics such as related-party transactions, transfer pricing, or the company’s special accounting policies, resulting in regulations that are not practically applicable.

● Failure to update in accordance with legal changes: Vietnam’s legal system is continuously being improved. A regulation drafted in 2022 may already contain outdated provisions compared to new decrees and guiding regulations issued in 2025 and 2026.

● Unclear delegation of authority: Vague provisions on expenditure approval limits may lead to either over-delegation beyond authority or operational bottlenecks.

● Failure to integrate with other internal regulations: Financial regulations must be consistent with other internal policies such as salary and bonus regulations, procurement regulations, and travel expense policies, to avoid conflicts and overlaps.

Should enterprises build financial regulations in-house or outsource? Cost & benefit analysis for FDI enterprises

As a manager of an FDI enterprise, you may be considering two options: either developing the company’s financial regulations in-house or outsourcing the task to a professional consulting service provider.

To help FDI enterprises make the optimal decision, the following is a more detailed comparison of the advantages and disadvantages of each solution.

It can be seen that if an enterprise has a high-quality internal team, developing the corporate financial regulations in-house may be an appropriate option. However, for FDI enterprises—where requirements for accuracy, compliance, and professionalism are always a top priority—cooperating with a team of experts who have in-depth knowledge of financial regulations and corporate legal frameworks remains a strategic choice to ensure accuracy, optimize resources, and avoid unnecessary risks.

KMC – Professional financial regulation consulting, ensuring effectiveness and full legal compliance

If you are considering selecting a consulting firm or expert partner to advise, guide, and support the development of a standard financial regulation framework for a joint-stock company that is suitable for your enterprise, please contact KMC – a specialist in providing in-depth tax, accounting, and financial consulting solutions for FDI enterprises.

KMC provides comprehensive and in-depth consulting services, supporting enterprises in planning and developing complete and effective financial regulations and labor regulations. KMC’s services offer outstanding advantages:

• Extensive experience with FDI and Japanese enterprises: We have many years of experience in providing in-depth legal and compliance advisory services for FDI enterprises, especially Japanese-invested companies.
• Highly qualified team of lawyers and experts: Our experts possess strong legal expertise and continuously updated knowledge, staying closely aligned with changes in tax, accounting, and corporate laws to ensure long-term effectiveness of the regulations.
• Professional and transparent working process: We provide detailed proposals with clear scope of work, timelines, and costs from the outset.
• Post-implementation support commitment: We are ready to address any issues arising during application and support adjustments when there are changes in business models or legal regulations.

Above is KMC’s comprehensive guidance on developing financial regulations for joint-stock companies, especially when applied to FDI enterprises.

Establishing a complete financial regulation framework is an investment in the stability and sustainable development of an enterprise. To achieve this effectively, in addition to properly assessing internal capabilities and carefully considering available options, FDI enterprises should seek a strategic consulting partner to ensure a compliant, effective regulatory system that supports long-term growth and minimizes potential risks.

For in-depth consultation from experts, please contact KMC via hotline: 081 489 4789.