Should you establish a Joint-stock or Multi-member LLC in Vietnam?
Vietnam’s economy growing more and more strongly nowadays, resulting in the establishment of businesses increases. When starting a business, business owners can choose one of five types of businesses specified in the Law on Enterprise 2020. Based on the actual needs of business owners and the company’s structure as well as the number of capital contributors to make the most suitable choice. In case you combine with others to create a business together, the most popular and optimal options are Joint Stock Company or Limited Liability Company with 2 or more members. So, to help you consider the type of business for your company, LSX legal firm provides this article: “Should you establish a Joint-stock or Multi-member LLC in Vietnam?”
Legal ground
- Law on Enterprise 2020
Similarities between Joint-stock and Multi-member LLC
First of all, these two types attract enterprises the most in Vietnam today. This is not a coincidence because they have much superiority over other types of businesses.
Both Joint Stock Company and LLC with 2 or more members are similar in form of ownership when many members/shareholders are holding the charter capital. Also, both types of companies have legal status. That means the company and its owners will be legally independent of each other.
If the company makes a loss, the company bears it. The members/shareholders of the company will only take responsibility for all risks to the extent of the capital they have contributed to the business.
Differences between Joint-stock and Multi-member LLC
Members/Shareholders
According to Article 111 of the Law on Enterprise 2020, a joint-stock company has a minimum of 3 shareholders and no limit on the maximum number. As for LLCs with 2 or more members, according to the name; and Article 46 of the Law on Enterprise 2020, there must be at least 2 members and limited to a maximum of 50 members.
Thus, the number of members/shareholders makes the fundamental difference between the two types.
The nature of company type
Counter-capital means the relationship between the owners of the company base on the percentage of shares holdings of the company. Shareholders who hold a large percentage of shares with voting rights will have a lot of influence in the company and vice versa. In fact, in joint-stock companies with several dozen to several hundred shareholders is relatively common for the shareholders in the company to not know each other.
For a multi-member limited liability company; it is considered a counterpart because the number of members of this type is often concentrated. The most common are family businesses, or capital contributors are friends of each other.
Thus, looking to the future, In case the business needs shareholders/members to contribute more capital to operate. Then, for LLCs with 2 or more members, with a smaller number of members; the mobilization of capital not as good as a joint stock company. Not to mention, if existing members don’t want to; or unable to contribute more capital to the company; it is required to raise capital contribution from outsiders.
Capital mobilization
According to the current law on enterprises, the Joint-stock company can perform fully and diversified forms of capital mobilization such as borrowing from banks, issuing shares, bonds, etc.
Limited liability companies with 2 or more members can not issue shares. They can only mobilize capital by traditional methods such as borrowing from banks, calling for additional capital contribution from members, and issuing bonds.
Capital transfer
According to Article 127 of the Law on Enterprise 2020; Shareholders in a Joint Stock Company will only be limited to transferring shares in the first 3 years since its establishment. After 3 years, if the shareholders no longer want to hold shares of the company; they can freely transfer their shares to anyone without any restrictions from other shareholders.
On the other hand, when a member of a limited liability company with 2 or more members wants to withdraw from the company, the transfer of contributed capital will be restricted. Article 52 of the Law on Enterprise 2020 stipulates that members must give priority to offering contributed capital to existing members in the company first. After that, if no existing members buy or do not buy all of the offering shares; they can transfer to outsiders.
Company management
In this phase, a joint-stock company is somewhat weaker than a limited liability company with two or more members as the organizational structure of the Joint-stock type makes it complicated. Many shareholders in the Joint-stock company hold shares, so the operation and management also have to perform in a complex way. The important decisions of the Joint Stock Company clearly depend on the General Meeting of Shareholders; Board of Directors, Board of Members…
For LLCs with 2 or more members, this complexity is slightly reduced. Because the Board of Members has the same role as the General Meeting of Shareholders.
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 article
Procedures to establish partnership in Vietnam
Can overseas Vietnamese establish a company in Vietnam?
Can family members establish Joint-stock company in Vietnam?
Related questions
The following documents need to be prepared:
Business registration application form.
Company charter.
List of Members.
Copies of the following documents: Legal papers for members as individuals or legal representatives; Power of attorney, legal papers of an authorized representative of members as organizations; For members being foreign organizations, copies of legal papers of the organization must be consular legalized, and also investment registration certificate for foreign investors in accordance with the Law on Investment.
To establish a company, the business has to prepare a valid set of documents:
Firstly, the Business registration application form.
Secondly, the Company charter
Thirdly, List of founding members/shareholders (According to the form issued by the Ministry of Planning and Investment).
Lastly, the business owner’s identity papers.
Method to submit the application
In the entire Department of Planning and Investment of provinces and cities nationwide, there are currently 02 (two) methods of business registration documents, including:
Submit business registration applications directly at the One-Stop Department of the Department of Planning and Investment where the company located.
submit online: https://dangkykinhdoanh.gov.vn
Contact LSX
Finally, hope this article is useful for you to answer the question about “Should you establish a Joint-stock or Multi-member LLC in Vietnam?”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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