One of the common entities established by foreign director investors with more than 3 shareholders in Vietnam is a joint-stock company. This offers certain flexibilities for medium and large-sized companies with multiple shareholders, including profit-generating activities, listing on the stock company etc.
Joint Stock Company Definition
According to Vietnam’s law, a joint-stock company (JSC) is a legal entity that has its charter capital assigned into equal portions of shares. The minimum number of shareholders is three people. There is no restriction in regard to the maximum number of shareholders.
The shareholders can be of any nationality. They do not necessarily have to be a Vietnamese or local resident. As a result, a JSC can be solely owned by foreigners. Or, it can be a joint venture between foreigners and locals.
On the contrary to a limited liability company, a joint-stock company in Vietnam can issue shares and list them on the stock exchange publicly. By doing this, you can mobilize capital, sell shares and raise funds more easily.
In this article, we will tell you more about a joint-stock company in Vietnam, its structure, advantages, requirements, and setup process of a JSC.
Joint Stock Company in Vietnam: The Organisational Structure
The corporate structure of a joint stock company is more complex than that of a limited liability company due to its suitability to medium and large corporations.
In Vietnam, a joint-stock company must consist of the following:
- Management board supervised by an annual general meeting and an inspection committee
- A management board’s chairman
- A director or general director, who will also be appointed as the legal representative of the company
For a legal representative who is a foreign national, Vietnamese Law requires her/him to obtain a work permit. They should also be able to show at least 12-month work experience for a managing position.
A group of members who will oversee the activities of the organization.
This is the top body consisting of all shareholders for decision-making in a company. A general meeting must be held annually. It requires a director or directors to present the annual report on the strategy and performance of the company.
The general meeting will appoint the independent inspectors in this committee. These inspectors need to supervise the general director and the management board. When a company has less than 11 shareholders with none of them with more than 50% of shares, the inspection committee is not necessary.
Management Board’s Chairman
The management board elects this person to organize and hold the meeting at least once every quarter.
Director or General Director
This person is the legal representative of the entity chosen by the management board. He or she is the company’s employee residing in Vietnam. He or she is responsible for the company’s daily activities and operations.
Advantages of a Joint Stock Company in Vietnam
When talking about the limited liability of shareholders, a joint-stock company is highly beneficial to shareholders personally. Shareholders are only liable for losses or debts that will not exceed the amount they have contributed.
Hence, this also allows share trading anonymously, as well as prevents creditors of the company from becoming stakeholders.
Apart from that, shareholders can transfer their ownership of shares to others without the consent from other shareholders. With the increasing funds, a joint-stock company in Vietnam shall hire their internal accountant as well.
Public Listing on Stock Exchange
One thing to take note of is that a joint-stock company in Vietnam is not required to be listed on a stock exchange publicly during its initial stage of founding.
However, the listing is required white its capital of share goes over US$ 475,000 with over 100 shareholders, no overdue debt and the business has been profitable in the previous year.
Other than that, all founding shareholders must register and jointly subscribe at the minimum 20% of the ordinary shares that are offered for sale to the public.
Requirements for Joint Stock Company Incorporation in Vietnam
Even though this type of legal entity is quite popular, the process and requirements of establishing a joint-stock are more complicated and time-consuming, along with more stringent requirements.
Some of the required documents are as follows:
- A bank certificate to show the fund availability for investment in Vietnam
- Investment project proposals
- Documents to apply for an investment registration certificate
- Legal status certificate for all founding shareholders
- Personal details of all shareholders and amount of shares
- A capital bank account
- Land use proposal
- A foreign investment certificate
- An annual return submission
- Audited financial statements
Need more insight? You might want to read: Know How to Start a Limited Liability Company in Vietnam
A joint-stock company can be an excellent option compared to a limited liability company. This happens when you plan to join forces to raise funds with several partners — through the issuance of shares and equity.
If raising capital and joining forces are not your main objectives, a limited liability company with less complicated management system might serve you better.
In any case, Cekindo is here to assist you during from every aspect of your business, both domestically and internationally. We provide professional market-entry solutions, legal advisory, consultancy services to ensure productivity and efficiency of your business in Vietnam.