Duc Giang Chemical Group (HoSE: DGC), with Chairman Dao Huu Huyen and his son, Dao Huu Duy Anh, serving as CEO, may face scrutiny for violating Vietnam’s Enterprise Law 2020. Similar cases, like that of TNG Investment and Trading, have resulted in fines and mandatory dismissals.

Potential violation of enterprise law

Under the Enterprise Law 2020, effective from January 1, 2021, public companies are prohibited from appointing a CEO with familial ties to key management or board members. Specifically, Article 162 prohibits individuals with family relationships from holding roles such as CEO or General Director if the company is a public enterprise or state-owned entity.

Duc Giang Chemical’s chairman, Dao Huu Huyen, has been in his role since 2007, while his son, Dao Huu Duy Anh, has served as CEO since March 2020. This arrangement predates the law but remains in effect, potentially violating its stipulations.

In a comparable case, TNG Investment and Trading (HNX: TNG) faced penalties on December 26, 2024, for appointing Nguyen Duc Manh, the son of its chairman, as CEO. The company was fined 25 million VND (~$1,050) and required to dismiss Manh within 10 days.

Legal and regulatory implications

According to lawyer Truong Thanh Duc from ANVI Law Firm, Duc Giang Chemical’s situation constitutes a violation of the Enterprise Law 2020. The infraction could result in fines between 20 to 30 million VND (~$840-$1,260) and the mandatory dismissal of Duy Anh as CEO, per Decree 122/2021/ND-CP.

While penalties for administrative violations are typically limited to actions detected within a one-year timeframe, this case remains active as the violation is ongoing.

Concerns over family-run enterprises

The overlapping roles of father and son in public companies raise concerns about governance and transparency. Lawyer Duc noted that such arrangements can give the impression of a family-run operation, potentially undermining investor confidence.

In a statement at the company’s 2023 Annual General Meeting, Chairman Huyen acknowledged the regulatory issue, revealing plans to step down when the board's current term ends in two years, allowing his son to remain as CEO in compliance with the law.

Professionalism and adherence to regulations, especially in public companies, are crucial for maintaining credibility among shareholders, particularly minority investors.

A billion-dollar enterprise

Duc Giang Chemical is one of Vietnam’s most prominent firms, with a market capitalization of over 43.8 trillion VND ($1.7 billion). Its shares (DGC) trade at 115,500 VND per share, buoyed by strong financial performance.

The company reported after-tax profits of 3.24 trillion VND in 2023 and a record-breaking 6 trillion VND in 2022, driven by soaring phosphorus prices. Duc Giang Chemical is the largest producer of yellow phosphorus in Vietnam and owns its own mines, cementing its dominance in the industry.

Chairman Huyen holds a 18.38% stake in the company, with a personal net worth of over 8.2 trillion VND (~$344 million), ranking him among the top 10 wealthiest business figures on Vietnam’s stock market.

Manh Ha