VIETNAM JOINT-STOCK COMPANY

Choosing the appropriate business structure is the priority task of every foreign entity that wants to make an investment in Vietnam. One of the most famous types of business that is chosen by many international companies investing in Vietnam is the Joint Stock company. In this Article, Doanh Tri Law Firm shall make a summary about Join Stock Company under Vietnam Legal System.

I. Legal basis

- Enterprise Law 2020;

- Decree 01/2021/ND-CP on enterprise registration.

II. What is a joint-stock company?

A joint-stock company is a type of enterprise whose charter capital is divided into equal parts, each of which is called a share; shareowners are called shareholders, only responsible for the company's debts based on the number of shares they own.

III. Features of joint-stock company

According to Enterprises Law 2020, a joint-stock company has the following features:

First, the charter capital is divided into units of equal value called shares. A joint-stock company’s charter capital is the total face value of the shares sold. The initially registered charter capital of a joint-stock company is the total face value of subscribed shares and shall be written in the company's charter. The law does not limit the percentage of equity that each member can buy at maximum, but members can reach an agreement in the charter to limit the maximum number of shares that a member can buy.

Second, the minimum number of shareholders is 03 and the maximum number is not limited. Shareholders can be organizations or individuals not falling into the cases specified in Clauses 2 and 3, Article 17 of the Law on Enterprises 2020.

Third, a joint-stock company has a legal status from the date of being granted the business registration certificate.

Forth, on property liability regime. The joint-stock company is responsible for the company's debts to the extent of the company's assets. Shareholders have limited liability for the company's debts and other property obligations to the extent of the contributed capital (the value of the shares they own). Due to a limited liability regime, joint-stock companies are favored by business people. However, the limited liability regime is both an advantage and a disadvantage. The advantage is that investors will be more willing to invest in large risk areas. The downside is that it is easy to cause risks to customers and creditors.

Fifth, on the free to transfer contributed capital. The capital contribution (shares) of the members is expressed in the form of shares. Shares issued by a company are a commodity. Shares are freely transferable, except the case specified in Clause 3, Article 120 of Enterprises Law 2020 and the company's charter provide for restriction on share transfer. Where the company's charter provides for restrictions on share transfer, these provisions will only take effect when it is clearly stated in the shares of the respective shares.

Sixth, joint-stock companies have the ability to raise capital strongly through issuing securities such as stocks and bonds to the public in accordance with the law on securities.

IV. The procedure for establishing a joint-stock company

The procedure for establishing a joint-stock company normally consists of the following three basic steps:

First, the founders come together to negotiate and build a company charter, which must clearly state the name, office, business lines, charter capital, number and par value of shares, etc (according to regulations in Article 24 of Enterprise Law 2020). Members must agree on the number of shares they hold.

Second, appointing a supervisory board. The Board of Supervisors appoints an executive board to take over the company's affairs during the establishment period. The most important job is to receive capital contributions from members and prepare documents for business registration. According to Article 22 of Enterprise Law 2020, the business registration dossier includes:

- The enterprise registration application form;

- The company's charter;

- The list of founding shareholders; the list of shareholders that are foreign investors;

- Copies of: Legal documents of founding shareholders and shareholders that are foreign investors who are individuals and legal representatives; Legal documents of shareholders that are organizations, documents about the designation of authorized representatives; legal documents of authorized representatives of founding shareholders and shareholders that are foreign organizations; Legalized copies of legal documents of the members that are foreign organizations; The Certificate of Investment Registration of foreign investors as prescribed by the Law on Investment.

Third, subscribe to the commercial directory. The court proceeded to the due diligence procedures then put the name on the business directory and announced the company was established. From this point on, the company has a legal status, and only after being registered can the company issue shares to the public.

V. Charter capital

A joint-stock company must have charter capital upon its establishment. The company's charter capital must be presented in the form of ordinary shares. Founding shareholders must together hold at least 20% of the common shares authorized to be offered in the company. The company's charter capital may partly be preferred by shares. Preferred shares include: voting preference shares, dividend preference shares, redeemable preference shares, and other preference shares prescribed by the company's charter. Ordinary shares cannot be converted into preference shares, but preference shares can be converted into common shares by the decision of the general meeting of shareholders. Shares are the legal basis for a company membership regardless of whether or not they form a company. From shares will arise the rights and obligations of members. Shares are offered for sale according to the order and procedures prescribed by the securities law. Shares are sold, share buyers become shareholders of the company when correct and sufficient information about shareholder names, addresses, number of shares of each class of shareholders, date of share registration in the register shareholders of the company. After paying one time for the registered shares to buy, shareholders have the right to request the public to grant their shares.

According to the provisions of Clause 1, Article 121 of Enterprise Law 2020: “Stock is a certificate issued by a joint-stock company or a book-entry confirming the ownership of one or more shares of that company. Shares can be named or unnamed”. Stock is a valuable paper proving the status of the shareowner and also the status of a member of the company of the shareholder.

The above information is about the "Vietnam joint-stock company". For more information and advice on this issue, please contact Doanh Tri Law Firm directly via:

Hotline: (+84) 911.233.955 - (024) 6293 8326

Email: [email protected]

Doanh Tri Law Firm is pleased to accompany our Customers!