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Things to know for foreigners about joint stock companies in Vietnam

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Joint-stock company is a company in which the charter capital is divided into equal parts, the smallest called shares; The members of the company (shareholders) may own one or more shares and are liable only to the extent of the value of the shares they hold; The company has the right to issue shares to raise capital. LSX Lawfirm will give you an article about: “Things to know for foreigners about joint stock companies in Vietnam”, as follows:

Law on enterprises 2020

General provisions on joint stock companies

The first joint stock companies in the world were born around the 18th century. It associated with imperialist exploitation of colonial countries. In the nineteenth century, the Joint Stock Company developed strongly; thanks to the development of the mechanical industry and the widespread development of the credit system. Joint stock company was born as a human invention in social production. In Western countries, Joint Stock Company is the most popular model for enterprises with large capital scale.

The form of joint stock company in Vietnam regulated in the Enterprise Law in 2020 and currently applying the Enterprise Law in 2020; the legal status of this type of company has been basically completed.

The basic characteristics of a joint stock company from a legal perspective

  • A joint stock company is an organization with legal personality. This a type of company with highly organized, complete capital, and highly socialized activities.
  • Joint stock company is responsible for all debts of the company with its own assets. That shows: the company is only liable for the company’s debts with the company’s assets, the company’s members are only liable for the company’s debts to the extent of their capital contribute to the company.
  • The company’s charter capital divided into shares. This is the most basic attribute of a Joint Stock Company; from the category of shares, a series of other legal problems arise.
  • In the course of operation, a joint-stock company may issue all kinds of securities to the market to openly raise capital among the public. Therefore, the birth of a joint stock company associated with the birth of the stock market.
  • The transfer of contributed capital made easy through the act of buying and selling shares on the stock market.
  • Joint stock company has a very large number of members, shareholders are located all over the world; so it has the ability to raise capital widely among the public to invest in many different sectors of the economy; especially in industry.

In conclusion

The most important feature of a joint stock company (also a decisive characteristic to distinguish it from a limited company); is shares. When a company established and calls for everyone to contribute capital; the amount of capital contributed divided into equal parts called shares; shares in the company for capital are different from the capital contribution in the counterpart company; shares part is freely transferable, bought and sold like a commodity.

The owner of shares called a shareholder, the shareholder issued with a certificate of ownership of shares called a share; so a share – a deed proving the ownership of a shareholder to the capital contribution in the company the company. shareholder is a person whose shares are expressed in shares.

Characteristics of a joint stock company

Firstly

In terms of nature when established, a joint stock company is a type of company against capital. That means that when establishing a company, it is mainly interested in capital contribution; and who contributes capital is not important. Therefore, the joint stock company has an open capital structure.

Secondly

The charter capital of a joint-stock company is divided into equal parts called shares. The value per share is called the par value of the share and is reflected in the share. A share may reflect the par value of one or more shares. Capital contribution to the company is done by buying shares, each shareholder can buy many shares.

The law or the company’s charter may limit the maximum number of shares that a shareholder can buy to prevent a certain shareholder from taking control of the company due to a large amount of capital contributed (for example; limited foreign investors buy shares of domestic companies). The Law on Enterprises does not stipulate how many parts the charter capital of the company divided into; and how much each part is worth.

However, the Law on Securities of Vietnam stipulates that the par value of shares for the initial public offering is ten thousand Vietnamese dong. Thus, a joint-stock company wishing to offer shares to the public; must first convert the par value of the shares to ten thousand Vietnamese dong.

That leads to the fact that in fact; all joint stock companies determine the par value of shares at ten thousand Vietnamese dong to ensure liquidity. From this feature; it affirmed that dividing the company’s capital into shares is the most basic issue of this form of company.

Third, about company members.

As a type of company for capital, according to the tradition of corporate law of countries around the world; it has become common practice to prescribe the minimum number of members required at the time of establishment; as well as during the operation process. international during several hundred years of existence of the joint stock company.

The law only stipulates the minimum number of members and does not limit the maximum number of members. Currently, the Enterprise Law 2020 stipulates that the minimum number of members in a Joint Stock Company is 03; shareholders can be organizations or individuals.

Along with economic development, the law on companies has also changed (breaking tradition); some countries recognize a joint stock company with one shareholder, as well as a one-member limited liability company.

Fourth

The freedom to transfer the contributed capital also a feature only available in joint stock companies; then (due to the nature of capital contribution). The capital contribution (shares) expressed in the form of shares; shares issued by the Joint Stock Company are a type of commodity. Holders of shares are free to transfer in accordance with the law. The transfer done in the usual way or through trading on the stock market.

Fifth

So, about responsibility in business. Then a joint-stock company liable with all its assets for the company’s debts. Shareholders are only liable for the company’s debts; and other property obligations to the extent of the amount of capital contributed to the company.

Sixth, so in terms of capital mobilization, in the course of operation; a joint-stock company has the right to issue shares of all kinds, and has the right to issue bonds; convertible bonds and other types of bonds in accordance with law and regulations. Company Charter (Article 112 of the Enterprise Law 2020 currently applied).

Finally

A joint-stock company has legal status and therefore the company also has the status of a trader (trader by form). Shareholders or company administrators are not traders. The people who have the right to deal with the outside are the representatives of the company. Joint-stock companies have a very tight organizational structure due to the characteristics described above; requiring a professional governance structure separate from ownership.

Related questions

Answer questions about reducing charter capital of enterprises related to employees?

In the process of production and business activities of a particular enterprise, the issue of increasing or decreasing the charter capital of the enterprise is a common occurrence depending on the production and business situation of the company. 
When reducing charter capital, enterprises need to complete all procedures as prescribed at competent state agencies. 
Therefore, when increasing or decreasing charter capital, it is not related to employees

Is it possible to change the charter capital?

You can change the charter capital, according to the provisions of Clause 3, Article 74 of the Enterprise Code 2014 which stipulates: “ 
In case of failure to contribute enough charter capital within the time limit specified in Clause 2 of this Article, The company owner must register to adjust the charter capital equal to the value of the actual contributed capital within 30 days.” Thus, you have to register to adjust the charter capital according to the actual contributed capital, in this case it is 200-300 million dong so you can change the charter capital.

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