Joint-Stock Company In Vietnam: How To Establish
Table of contents Corporate Structure of Joint-Stock CompanyComparison between Limited Liability Company and Joint-Stock CompanyThe article was updated on April 2023 A Joint-Stock Company (JSC) is a business entity referred to in Vietnamese legislation as a shareholding company in which shares are owned by three or more original shareholders. Within this enterprise, shareholders are entitled […]
Table of contents
The article was updated on April 2023
A Joint-Stock Company (JSC) is a business entity referred to in Vietnamese legislation as a shareholding company in which shares are owned by three or more original shareholders.
Within this enterprise, shareholders are entitled to own company stock in proportion evidenced by the shares they own. Unlike a limited liability company, a Vietnamese JSC is allowed to issue ordinary and preference shares and list them on the public stock exchange.
Corporate Structure of Joint-Stock Company
Best suited for a medium to large-size venture, a JSC can also be known as an incorporation whereby the corporate structure is more complex than that of a Limited Liability Company (LLC). Within a JSC, the corporate structure is made up of a Management Board which is supervised by an Annual General Meeting and the Inspection Committee, a Chairman of the Management Board, and a General Director, whose roles and responsibilities are described below.
Joint-stock company Vietnam structure
- General Meeting – Highest decision-making body of the company consisting of all shareholders. An Annual General Meeting must be called at least once per year where the director(s) of the company present the annual report of the company’s performance and strategy. Issues not resolved at the Annual General Meeting can be resolved at an Extraordinary General Meeting, which can be convened at any time.
- Management Board – A body of members elected by the General Meeting who jointly oversee the activities of a company.
- Inspection Committee – A committee compiled of independent inspectors appointed by the General Meeting. The committee’s role is to supervise the Management Board and the General Director. An Inspection Committee is not required if the company has less than 11 shareholders of which no shareholder holds more than 50 percent of the shares.
- Chairman of the Management Board – A member of the Management Board elected by the members to organize the work of the Management Board and to call and head the meetings at least once per quarter.
- General Director – Legal representative of the company appointed by the Management Board who is in charge of the day-to-day activities of the company. This can be a major shareholder, officer, or chief executive who represents the interests of the company’s shareholders. The General Director must be an employee of the company and reside in Vietnam.
Such a corporate structure is particularly important to manage the affairs of the company operations. Because shareholders are generally scattered in different locations, some can be passive in their matters or play an integral part in their management, thus management and ownership can be interlinked.
Within this corporate structure, shareholders, management board members, and directors are all responsible for acting in the best interests of the company and can be held accountable for any negligent actions. Shareholders are only required to contribute the amount of the face value of their original share and the management board members and directors can be held liable for any damage caused by the negligent behavior.
Limited liability of the shareholders of a Joint-Stock Company
The limited liability concept is largely the reason for the success of this form of business organization as it is dependent on the originally agreed-upon distribution of ownership.
Limited liability is greatly advantageous for the shareholders themselves. Any loss experienced by any individual shareholder cannot exceed the amount which they have already contributed as dues or payments. This eliminates the enterprise’s creditors as stakeholders and allows for anonymous shares trading.
Capital growth and public listing
In its initial establishment, a JSC is not automatically required to be listed on a public stock exchange unless its share capital exceeds US$1,290,000
In the first 3 years of establishment, shareholders are also entitled to the freedom of transferring their ownership to others without the consultation of their fellow shareholders. Because of the continuous growth of capital, JSCs are required to have in-house accountants for their management. (This is stated in Article 120.3, Law on Enterprises 2020). Remember that the transferring tax rate for that is 0.1% over the selling price)
Comparison between Limited Liability Company and Joint-Stock Company
Below are the differences in the general characteristics between a Limited Liability Company (LLC) and a Joint-Stock Company (JSC):
|Limited Liability Company (LLC)||Joint-Stock Company (JSC)|
|Company registration timeframe||Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment||Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment|
|Suitable for||Medium to large-sized businesses||Medium to large sized businesses|
|Number of founders||1 to 50 founders||At least 3 founders|
|Liability||Founders’ liability is limited to the capital contributed to the Company||Shareholder’s liability is limited to the capital contributed to the Company|
|Issuance of shares and public listing||Small to medium-sized business||A Vietnamese JSC can issue ordinary and preference shares, the shares can be listed on the public stock exchange|
*Only required if the LLC has more than 1 founder
**Only required if the LLC has more than 11 founders
***Not required if the company has less than 11 shareholders and no shareholder holds more than 50 percent of the shares, or if at least 20 percent of the members of the Management Board are independent and these members form an independent auditing committee.
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