Meaning and characteristics of shares in a joint stock company in Vietnam

BichNgoc May 9, 2022

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Legal grounds

Law on enterprises 2020

Meaning and characteristics of shares in a joint stock company in Vietnam

Meaning and characteristics of shares in a joint stock company

Firstly, as part of the company’s charter capital: Each share must represent an actual value in money (called par value).
Secondly Shares proving shareholder’s membership: shares are expressed in the form of papers called shares, shares are a type of securities which are freely circulated and transferred on the market.

Shares have the following common characteristics:

Firstly Each share represents the actual initial value in money called par value.
Secondly Shares freely circulated and transferred on the market as a commodity. shares inherited and used as collateral, pledge in credit relationships.
Thirdly Common stock has no expiration date, it exists with the existence of the company.
Finally Based on the nature of the right to use, shares divided into registered shares (with the name of a certain person) and unregistered shares (without name, without specifying the owner, usually with a small amount). . Based on the form of shares, people divide shares into two types: common shares and preferred shares.

Common shares, also known as common shares, have the same general characteristics as mentioned above, preferred shares are also a certificate of ownership to the contributed capital in the company.

Divided into many classes with different incentives such as voting preference shares, dividend preference shares, redeemable preference shares, liquidation preference shares, interest accrual preference shares, and preference shares cumulative incentives.

However, holders of preference shares may be restricted in certain rights such as not having the right to vote; to attend the General Meeting of Shareholders, to nominate people to the Board of Directors, to the Supervisory Board.

The process of setting up a joint stock company in Vietnam

The procedure for setting up a joint stock company very complicated, usually it has to go through the following steps:

Step 1: First of all, the founders together agree and develop a charter of the company; which must clearly state: Name, head office, objectives, charter capital, quantity and par value of shares. .. The founders must agree on the number of shares they undertake.
Step 2: Appoint a supervisory council. The Supervisory Board appoints an executive board to undertake the work of the company during its establishment. The most important job is to receive capital contributions from members and prepare documents for company registration.
Step 3: Register in the commercial directory. The court carried out the verification procedures, then entered the commercial directory and announced the company incorporated. From this point on; the company has legal status ;and only after it registered can the company issue shares to the public. Any shares sold prior to company registration considered null and void.

Depending on the laws of each country, the establishment of a joint stock company has different regulations.

About the management organization of a joint stock company: the management of a joint stock company very complicated and must be very strict. The management of the Joint Stock Company carried out through three agencies: the General Meeting of Shareholders; the Executive Board, and the Supervisory Board. The management of the company divided equally in terms of power between agencies and there is mutual supervision.

Basic characteristics of joint stock companies in Vietnam

According to the current law of Vietnam, a joint stock company has the following characteristics:
1) So, the company has legal status, from the date of issuance of the business registration certificate; it is responsible for the company’s debts and property obligations within the value of the company’s assets;

2) Charter capital divided into equal parts called shares. A joint-stock company must have ordinary shares and may issue preferred shares of all kinds such as dividend preference shares; redeemable preference shares, voting preference shares; and other preferred shares as prescribed by the company. Shares are freely transferable, except for voting preference shares which are non-transferable. During the first 3 years, from the date the company registered for business; common shares of founding shareholders may only transferred to outsiders; if approved by the general meeting of shareholders;

3) Shareholders can be organizations or individuals with the minimum number of 3 and unlimited maximum number;

4) The company entitled to issue securities of all kinds to raise capital among the public.

A joint stock company a type of enterprise with a highly organized; complete capital; capable of mobilizing large capital sources and flexibly moving capital between investors; suitable for business activities on a large scale large tissue.

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