What is a Joint-Stock Company?
A joint-stock company is a business association that combines the structure of a corporation with the flexibility and freedoms of a limited liability company. The shareholders buy and sell shares and own a portion of the company – in accordance with the amount they have invested. Each investor will takes a pểcntage of the company’s profits.
Pursuant to Clause 1, Article 111 of the Enterprise Law 2020, a joint-stock company is a type of enterprise in which:
- Charter capital is divided into equal portions called shares
- Shareholders may be organizations or individuals; the minimum number of shareholders is 3 and there is no restriction on the maximum number of shareholders;
- Shareholders are liable for debts and other asset obligations of the company only within their capital amounts contributed to the company;
- Shareholders may freely transfer their shares to others, except the cases specified in Clause 3, Article 120, and Clause 1, Article 127, of this Law.
Conditions for establishing a joint-stock company in Vietnam
1. Entities establishing a joint stock company
All organizations and individuals have right to establish a joint-stock company if they meet the following conditions:
- Organization with legal status;
- Individuals who reach full 18 years of age or older and have full civil act capacity;
- Not subject to the prohibition of managing and establishing enterprises according to the provisions of Article 17 of the Law on Enterprises 2020;
- There must be at least 3 shareholders contributing capital to establish the enterprise (founding shareholders), with no limit on the maximum number of shareholders. At the same time, the company must maintain at least three shareholders during its operation.
2. Company name
- The name of a joint stock company must ensure 2 elements: Joint stock company + proper name.
- The name must not be identical to or confusingly similar to other companies’ names nationwide;
- Do not use words or symbols that violate the historical, cultural, ethical and traditional customs of the nation;
- The name of the enterprise must be attached at the head office, branches, representative offices, business locations and must be printed or written on transaction documents, documents and publications issued by the enterprise.
3. Company headquarters
- The head office of a joint stock company must be located in Vietnam’s territory, is the contact address of the enterprise and shall be identified by the geographical boundary of the concerned administrative unit; and has telephone and facsimile numbers and email address (if any).
- The address must clearly identify the house number, alley, lane, street, village, hamlet, commune, ward, town, district, county, city, province, centrally run city.
- The company’s head office must not be located at an apartment building (except for apartments with commercial functions) or a dormitory.
4. Business lines
- Enterprises are entitled to register to do business in industries and professions that are not prohibited by law, but those industries and professions must be within the Vietnamese economic sector code system, as specified in Decision No. 27/2018/QD-TTg.
- As for industries and professions with conditions, enterprises must ensure that they meet the conditions of each industry and profession according to the provisions of law
5. Charter capital
The charter capital of a joint stock company is the total par value of all types of shares sold or registered for purchase when establishing the enterprise.
The law does not stipulate a minimum capital (except for industries requiring statutory capital) or a maximum when establishing an enterprise. However, depending on the financial capacity and business scale, the enterprise should register an appropriate capital amount.
However, it should be noted that the time to fully contribute capital is 90 days from the date of the enterprise registration certificate. Suppose the shareholders fail to pay fully for their shares subscribed. In that case, the company needs to change the information of founding shareholders and reduce the charter capital within 30 days of the capital contribution deadline.
6. Requirements of legal representatives:
A joint stock company can have one or more legal representatives. A representative of a joint stock company can still act as a representative of other companies, except for individuals holding the director or general director position of state-owned enterprises.
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