Joint-Stock Company In Vietnam
15 February, 2020
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.
This type of entity is most suitable for medium to large sized businesses, it has more complex corporate structure than that of a limited liability company (LLC).
Within this enterprise, shareholders are entitled to own company stock in proportion evidenced by the shares they own. Unlike a limited liability company, a Vietnam based JSC is allowed to issue ordinary and preference shares and list them on the public stock exchange.
The charter capital of a joint stock company at the time of enterprise registration is the total value of shares of all types already registered for purchase and stated in the company charter. Shareholders are only responsible for the debts and other property obligations of the enterprise within the amount of capital they have contributed.
The law does not specify the minimum or maximum amount of charter capital. No need to prove charter capital.
Assets can be contributed as capital:
- Contributed assets may be Vietnam dong (VND), freely convertible foreign currencies, gold, land using value, intellectual property rights, technology, technical secret and other assets that are denominated in Vietnam Dong.
- Intellectual property rights used to contribute capital include: copyright, rights related to copyright, industrial property rights, rights to plant varieties and other intellectual property rights as prescribed by the law on intellectual property. Only individuals and organizations that are lawful owners of the above rights may use such assets to contribute capital.
Structure of Joint-Stock Company
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:
- Management Board – A body of members elected by the General Meeting who jointly oversee the activities of a company.
- 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.
- Inspection Committee – A committee compiled of independent inspectors appointed by the General Meeting. The inspection 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 per cent of the shares, or if at least 20 per cent of the Management Board Members are independent members who form an independent auditing committee.
- Chairman of the Management Board – A member of the Management Board elected by the other members to organise 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 its matters or play an integral part in its 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 behaviour.
Limited liability of the shareholders of 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 to 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$475,000.
Upon ownership of a share, 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 its management.
Differences between LLC and JSC
Below are the differences between a Limited Liability Company (LLC) and a Joint-Stock Company (JSC):
|Limited Liability Company (LLC)||Joint-Stock Company (JSC)|
|Company registration |
|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|
|Number of |
|1 to 50 founders||At least 3 founders|
|Liability||Founders’ liability is limited to the capital contributed to the Company||Founders’ liability is limited to the capital contributed to the Company|
|Issuance of shares|
and public listing
|A Vietnamese LLC cannot issue shares and cannot be pubicly listed on the local stock exchange||A JSC can issue ordinary and preference shares, the shares can be listed on the public stock exchange|
See more at Limited liability company (LLC) .