Nowadays, the need to establish a business increases day by day as the start-up trend started and grew strongly. On the other hand, the Joint-stock company appeared to people and brought a promising future to entrepreneurs. Can family members establish Joint-stock company in Vietnam? This article of LSX will answer the question.
Legal ground
- Law on Enterprise 2020
Joint-stock company
Joint stock company is one of the most popular types of businesses in Vietnam as well as in the world. Vietnamese law provides for joint stock companies in Article 111 of the Law on Enterprises 2020. Specifically:
” 1. A joint stock company is an enterprise in which:
a) The charter capital is divided into units of equal value called shares;
b) Shareholders can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders;
a) A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;
d) Shareholders may transfer their shares to other persons except for the cases specified in Clause 3 Article 120 and Clause 1 Article 127 of this Law.
- A joint stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.
- A joint stock company may issue shares, bonds and other kinds of securities.”
Accordingly, a Joint-stock company has its legal status with at least 3 shareholders and has limited liability within the registered charter capital. Shareholders means person who hold shares and have the right to run the company. The biggest advantage of a joint stock company is that it is more transparent than other types of businesses, and it is easy to raise capital through the form of issuing shares. These advantages maximized when the company develops and becomes a public company listed on the stock exchange.
Can family members establish Joint-stock company
Article 17 of the Law on Enterprises 2020 stipulates who can establish an enterprise as follows:
Article 17. The rights to establish, contribute capital, buy shares/stakes and manage enterprises
- Organizations and individuals have the right to establish and manage enterprises in Vietnam in accordance with this Law, except for the cases specified in Clause 2 of this Article.
- The following organizations and individuals do not have the right to establish and manage enterprises in Vietnam:
a) State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests;
b) Officials and public employees defined by the Law on Officials and the Law on Public Employees;
c) Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;
d) Executive officers and managers of state-owned enterprises prescribed in Point a Clause 1 Article 88 of this Law, except those who are designated as authorized representatives to manage state-owned stakes in other enterprises;
dd) Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons;
e) People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated,…
…”
Therefore, the law does not prohibit members of the same family from contributing capital to establish businesses in general and joint-stock company in particular as long as they don’t fall into cases of clause 2 of the article above.
Can family members join the Board of Directors?
The Board of Directors means the management body of the company, selected by the general meeting of shareholders. The members of the Board of Directors must fully meet the conditions specified in Article 155 of the Law on Enterprise 2020.
Article 155. Organizational structure and requirements to be fulfilled by members of the Board of Directors
- To be a member of the Board of Directors, a person shall satisfy the following requirements:
a) He/she is not one of the persons specified in Clause 2 Article 17 of this Law;
b) He/she has professional qualifications and experience of busines administration in the company’s busines lines; a member is not necessarily a shareholder of the company, unless otherwise prescribed by the company’s charter;
c) A person may hold the position of member of the Board of Directors of more than one company;
d) A member of the Board of Directors of a state-owned enterprise prescribed in Point b Clause 1 Article 88 of this Law and subsidiary companies of a state-owned enterprise prescribed in Clause 1 Article 88 of this Law must not be a relative of the Director/General Director or any other executive of the company, of the executive or the person having the power to designate the executive of the parent company.
- Unless otherwise prescribed by securities laws, an independent member of the Board of Directors prescribed in Point b Clause 1 Article 137 of this Law shall satisfy the following requirements:
a) He/she is not working for the company or its parent company or subsidiary company; did not worked for the company or its parent company or subsidiary company within the last 03 years or longer;
b) He/she is not receiving a salary from the company, except the allowances to which members of the Board of Directors are entitled as per regulations;
C) His/her spouse, biological parents, adoptive parents, biological children; adopted children and siblings are not major shareholders of the company, executives of the company or its subsidiary companies;
d) He/she is not directly or indirectly holding 1% of the company’s voting shares or more;
…
Article 137. Organizational structure of a joint stock company
“1. Unless otherwise prescribed by securities laws, a joint stock company may choose one of the following models:
a) A joint stock company with the 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.
2. If the company has only one legal representative, the President of the Board of Directors or the Director/General Director shall be the legal representative. 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.”
Depending on the organization and management model selected by the company, the structure of the board of directors differs.
If the company does not have a Control Board, then it must have an independent member on the Board of Directors. Also, the family members of the Board of Directors must not present as independent members.
LSX legal firm’s service on company establishment
When establishing a company, people must carry out the procedure following the law at the competent business registration authority (under the Law on Enterprise 2020). The process of establishing a business includes many different steps and phases. If you are not familiar with the law, this process may take a lot of time.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself. We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application; submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
Related articles
Conditions to establish Joint-stock company in Vietnam
Procedures to establish Joint-stock company in Vietnam
Why establish a Joint-stock company in Vietnam?
Related questions
This type of company has many advantages such as:
Firstly, the members of a multi-member limited liability company are only responsible for the company’s operations to the extent of the capital contributed to the company. As a result, the members take little risk.
Secondly, the members are usually people who know and trust each other. Therefore, the management and operation of the company is not too complicated.
Thirdly, the mode of capital transfer is strictly regulated; so investors can easily control the change of members.
Fourthly, members who want to transfer capital will have to give priority to the remaining members of the company. This limit the penetration of outsiders into the company.
Naming joint-stock companies in accordance with the provisions of law.
The company name must not be the same as the name of another company, state agencies, people’s armed force units, political organization, social organization,…
Then, the name of a joint-stock company must include 2 elements: Type of company + name.
Next, choose the capital level of the joint-stock company
The law stipulates that there are business lines that require legal capital and there are lines that do not require legal capital. If the company operates in a business that requires legal capital, the company will have to ensure the minimum amount of capital to be eligible to establish a company.
On the other hand, Company address
When starting a company, maybe the company does not afford to buy or rent a location for the company’s headquarters, the company can choose a temporary business location such as the home of relatives, friends,…
Contact LSX
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