Benefits of setting up a Joint Stock Company with Cekindo
Due to the more complicated corporate structure and requirements, a Joint Stock Company, also known as a JSC, is ideal for medium and large enterprises in Vietnam.
Even though the requirements are more demanding, a Joint Stock Company is preferred by the majority of large companies because it allows its owners to issue shares and list them on the Vietnamese stock exchange, and change ownership easily.
How a Joint Stock Company is Defined in Vietnam
Following Vietnamese Law, a Joint Stock Company is only possible to be set up through equal portions of shares. Furthermore, this kind of company requires at least three shareholders for its establishment. Furthermore, a Joint Stock Company can be established by any investors, both local and foreign. It can be owned 100% by foreign investors. But, it also allows a joint venture between foreign investors and local investors.
The Mandatory Corporate Structure of a JSC
To comply with the applicable regulations, it is compulsory for a Joint Stock Company to have a Management Board/Board of Directors that is supervised by General Meeting of Shareholders and an Control Board/Board of Controller, In case the Company has only 01 Legal Representative, the Chairman of the Management Board or Director/General Director shall be the person to hold such position. In case the Company has more than 01 Legal Representative, a Chairman of the Management Board and, a Director/General Director who will also play the role of the company's Legal Representative.
Vietnam Investment Law - As Related to a JSC
According to the Article 137 of Law on Enterprise:
Organizational structure of a joint stock company
- a). A joint stock company with the General Meeting of Shareholders (“GMS”), Board of Directors, Board of Controllers and Director/General Director. If the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, a Board of Controllers is not mandatory.
- b). A joint stock company with the GMS, Board of Directors and Director/General Director. In this case, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors. The organizational structure, functions and duties of the audit committee shall be specified in the company's charter or the audit committee’s operating regulations promulgated by the Board of Directors.
The President of the Board of Directors shall be the company’s legal representative unless otherwise prescribed by the company's charter. If the company has more than one legal representative, the President of the Board of Directors and the Director/General Director shall be the company’s legal representatives.
Benefits of a Joint Stock Company in Vietnam
Among the many benefits of setting up a Joint Stock Company in Vietnam, here are the most notable ones you should be aware of:
Personal Liability for shareholders
In case of bankruptcy or debts, each shareholder is only liable for the amount of loss or debts that do not exceed their contribution.
In other words, if you become an individual shareholder of a Vietnam=based JSC, you will not suffer any losses in excess of the amount you contributed yourself when the business was registered, similar to an LLC entity.
No Restrictions on the Number of Shareholders
A JSC can have as few as three shareholders, 100 shareholders, or even 500 shareholders or more. Currently, there is no limit on the maximum number of shareholders allowed in a JSC setup. Therefore this is the ideal structure of a large multinational corporation that wishes to invest in Vietnam.
Flexible Options for Raising Capital
A joint-stock corporation, on the other hand, has a lot more flexibility when it comes to increasing the business's charter capital. JSCs, in particular, are permitted under Vietnamese law to issue several types of shares to obtain money. Among the most common examples of such strategies are:
- Shares sold to other shareholders
- Shares sold to non-shareholders
- Issuance of stock to the general public or on the stock exchange
Requirements for Registering a Joint Stock Company
Investors who intend to register a JSC must satisfy the following requirements:
How to Set Up a Company in Vietnam: The Process
The incorporation process of each legal entity type is different and takes from 1 to 3 months.
In general, foreign investors should pursue the process as follows:
International investors are obliged to obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI)
An Enterprise Registration Certificate (ERC), is the second mandatory document to be obtained during the registration procedure
Taxes & Capital Contribution
After receiving both certificates, investors are obliged to proceed with their tax registration, pay business license tax and make their initial capital contribution