A joint stock company and a multi-member limited liability company (LLC) are both popular forms of business entities, but they differ in structure, ownership, and liability. Understanding their similarities and differences can help entrepreneurs make informed decisions when choosing the right legal framework for their business.
Similarities
– All are enterprises operating under the Enterprise Law 2014;
– All have the legal person status from the date it is granted an enterprise registration certificate.;
– There are many owners;
– Members have limited liability for the company’s debts and financial obligations;
– Insufficient and untimely contributed capital is considered a debt to the company.
Differences
| Joint Stock Company | Multi-Member Limited Liability Company | |
| Owner | Shareholders | Members contributing capital |
| Quantity of member | Minimum from 3 people and no maximum limit. (Point b, Clause 1, Article 111 of the 2020 Enterprise Law) | Minimum 2 and maximum 50 members. (Clause 1, Article 46 of the 2020 Enterprise Law) |
| At-law representative | In case the company has only one legal representative, the Chairman of the Board of Directors or Chief Executive Officer is the legal representative of the company. In case the company charter has no relevant provisions, the chairperson of the Board of Directors shall act as the company’s at-law representative. In case the company has more than one at-law representative, the chairperson of the Board of Directors and Chief Executive Officer shall automatically act as the company’s at-law representatives. (Clause 2 Article 137) | The company must have at least one legal representative who holds one of the following positions: Chairman of the Board of Members or Director or General Director. In cases where the company charter does not stipulate, the Chairman of the Board of Members is the legal representative of the company. (Clause 3 Article 54) |
| Charter capital | A joint stock company shall make and keep a register of shareholders from the date it is granted the enterprise registration certificate. The register of shareholders may be in the form of a document or an electronic file recording information on holding of shares by shareholders of the company. (Clause 1 Article 122) Charter capital is divided into equal parts called shares, shareholders own different proportions of shares depending on their abilities. Shares include common shares and preference shares (Article 114) | Charter capital of a limited liability company with two or more members upon enterprise establishment registration is the total value of capital amounts its members commit to contributing to the company and shall be stated in the company charter. (Clause 1, Article 47) Members contribute different parts to the charter capital, depending on their abilities, |
| Capital Contribution | Within 90 days from the date of issuance of the business registration certificate, all assets must be contributed as committed. Founding shareholders must register to buy at least 20% of the total shares, the remainder can be mobilized by issuing shares. | Within 90 days from the date of issuance of the business registration certificate, you must contribute all assets as committed and obtain the consent of the company members if contributing with other assets. |
| Members’ liability | Shareholders are liable for debts and other asset obligations of the company only within their capital amounts contributed to the company; (Clause 1, Article 111) Shareholders that have not yet paid for or have only partially paid for registered shares must be liable in proportion to the total par value of registered shares for purchase for financial obligations of the company arising before the company registers for adjustment of charter capital under Point d, Clause 3 of this Article. Members of the Board of Directors and the at-law representative must be jointly liable for damage caused by non-compliance with or improper implementation of Clause 1 and Point d, Clause 3 of this Article. (Clause 4, Article 113) | Members are liable for the debts and other asset obligations of the company only within their capital amounts contributed to the company; In cases where members have not yet contributed capital or have not contributed the full amount of capital as committed, they must be responsible in proportion to the committed capital contribution ratio for the company’s financial obligations arising in the period before the public date. The company registers changes in charter capital and capital contribution ratio of members. (Clause 4, Article 47) |
| Organizational structure | This type has 2 structures: * Structure 1: – General Meeting of Shareholders; – Board of Directors; – Supervisory Board; – Chief Executive Officer. (In cases where there are less than 11 shareholders and institutional shareholders own less than 50% of the company’s total shares, a Supervisory Board is not required) * Structure 2: – General Meeting of Shareholders; – Board of Directors; – Chief Executive Officer. (at least 20% of the members of the Board of Directors must be independent members and an Audit Committee shall be required in the Board of Directors. Independent members perform monitoring functions and organize and implement control for company management) (Clause 1, Article 137) | A limited liability company with two or more members must have the Members’ Council, the chairperson of the Members’ Council and the Chief Executive Officer. (Clause 1 Article 54) |
| Capital transfer | Shares may be freely transferred. (Except for the first three years, from the date the company is granted a Business Registration Certificate, founding shareholders have the right to freely transfer common shares to other founding shareholders, but can only transfer their common shares to people who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, the intended shareholder Transfer of shares does not have the right to vote on the transfer of shares and the transferee automatically becomes a founding shareholder of the company.) (Article 127) | Member of a limited liability company with two or more members has the right to transfer part or the whole of his/her/its contributed capital amount to another person in accordance with the following provisions: – Buy back capital contribution: Company members have the right to request the company to buy back their capital contribution. If the company does not repurchase the capital contribution, that member has the right to transfer his/her capital contribution to another member or person who is not a member. – Transfer of capital contribution: You are allowed to transfer part or all of your capital contribution to another person (if a member of the company does not buy). (Article 52; 53) |
In summary, while both a joint stock company and a multi-member LLC offer limited liability protection to their owners, the key differences in their management structures, ownership distribution, and regulatory requirements make each better suited to different types of businesses and goals.
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