A joint-stock company is one of the most popular types of businesses in Vietnam due to its flexible capital mobilization ability and professional organizational structure. Establishing a joint-stock company offers many advantages for businesses but also comes with legal requirements that must be complied with. To help you better understand this process, the article below will guide you through the concept, conditions, required documents, as well as the rights and obligations of shareholders. If you are planning to establish a joint-stock company, let’s explore the details now!
1.What is a Joint-Stock Company?
Definition of a Joint-Stock Company
A joint-stock company is a type of business where the charter capital is divided into equal parts called shares. Individuals or organizations that own these shares are referred to as shareholders. A joint-stock company has legal entity status from the date it is granted a Business Registration Certificate and is liable within the scope of the contributed capital.
Characteristics of a Joint-Stock Company
- A minimum of 3 founding shareholders and no maximum limit on the number of shareholders.
- Shareholders are liable for the company’s debts to the extent of their capital contribution.
- It has the ability to raise capital flexibly through the issuance of shares and bonds.
- Shares of the company can be freely transferred, except in cases where restrictions are specified by the company’s charter.
Advantages and Disadvantages of a Joint-Stock Company
Advantages:
- Easily raise capital from many investors through the issuance of shares.
- Shareholders’ liability is limited to the amount of their capital contribution, reducing personal financial risk.
- The company has a professional organizational structure, ensuring transparency and sustainability.
Disadvantages:
- The management and operational processes are more complex than other business types.
- The cost of establishing and maintaining the company is higher compared to sole proprietorships or limited liability companies (LLC).
- Decision-making may take longer as it requires shareholder meetings to pass resolutions.
Comparison of Joint-Stock Company with Other Business Types
| Criteria | Joint-Stock Company | Limited Liability Company (LLC) | Sole Proprietorship |
| Number of Members | Minimum 3, no maximum limit | 1 – 50 members | 1 individual |
| Legal Liability | Limited to capital contribution | Limited to capital contribution | Unlimited, with personal assets |
| Capital Mobilization | Easily raise capital through issuing shares and bonds | More limited as it cannot issue shares | Cannot raise capital from shareholders |
| Organizational Structure | More complex, with a Board of Directors | Simpler, requires only a Director/CEO | Solely decided by the business owner |
A joint-stock company is a suitable option for businesses that have a long-term development plan and need to raise capital from multiple sources. However, entrepreneurs should carefully consider this model to ensure it aligns with their business strategy.
2. Conditions for Establishing a Joint-Stock Company
Minimum Number of Shareholders
A joint-stock company must have at least 3 founding shareholders. These shareholders can be individuals or organizations, with each shareholder contributing a portion of the company’s capital. The absence of a maximum shareholder limit allows the joint-stock company to have many opportunities to raise capital and expand its business scale. Additionally, the number of shareholders can change over time due to the flexible share transfer rights.
Legal Business Activities
A joint-stock company must register to operate in sectors allowed by Vietnamese law. Certain sectors, such as finance, banking, insurance, real estate, and securities, require specific operating licenses or must meet certain legal conditions. Before establishing the company, investors need to carefully research the legal regulations related to the industry they intend to operate in to avoid legal risks.
Conditions for Charter Capital
The charter capital of a joint-stock company is the total value of the shares that shareholders register to purchase and contribute to the company. According to regulations, a joint-stock company can register its charter capital based on its needs and business scale. However, for certain regulated industries, the company must meet the minimum capital requirements set by the law. The capital contribution must be completed within 90 days from the issuance of the Business Registration Certificate.
Requirements for the Registered Address
A joint-stock company must have a clear, legal address that is under the company’s legal ownership. This address can be a private house, office building, or commercial land, but it cannot be an apartment or a residential building designated only for living purposes. The registered address must be stated in the Business Registration Certificate and must be updated if there are any changes during the company’s operation.
3. Documents and Procedures for Establishing a Joint-Stock Company
Documents to Prepare
To establish a joint-stock company, the business needs to prepare a complete set of documents according to the legal requirements. The documents include:
- Application for business registration in the format provided by the Ministry of Planning and Investment.
- The company’s charter with the signatures of the founding shareholders.
- List of founding shareholders and foreign investors (if applicable).
- Notarized copies of the shareholders’ personal documents (ID card, passport, or citizenship ID for individuals; Business Registration Certificate for organizations).
- Investment registration certificate for foreign investors (if applicable).
- Power of attorney (if authorizing someone else to carry out the registration process).
Business Registration Procedure
After preparing the documents, the business must proceed with the following steps:
- Submit the business registration application to the Business Registration Office under the Department of Planning and Investment in the province/city where the company’s headquarters is located.
- The Business Registration Office will check the validity of the documents and request additional information if necessary.
- If the documents are valid, the business will receive the Business Registration Certificate within 3 – 5 working days.
- The business must publish the business registration content on the National Business Registration Portal.
- The company’s seal must be carved, and the seal sample must be registered as required.
- Open a bank account and notify the Department of Planning and Investment of the account details.
- File and pay initial taxes with the relevant tax authority.
Document Processing Time
The typical processing time for business registration documents is 3 – 5 working days from the submission of valid documents.
If the documents are incorrect or incomplete, the processing time may be extended to allow for corrections and adjustments.
Fees for Establishing a Joint-Stock Company
The fees for establishing a joint-stock company may vary depending on the locality, but they typically include the following:
- Business registration fee: Around 100,000 – 200,000 VND.
- Fee for publishing business registration information: Around 300,000 VND.
- Company seal carving fee: From 200,000 – 500,000 VND depending on the type of seal.
Read more: Company Establish Services – Reliable & Fast at Wacontre
4. Organizational Structure of a Joint-Stock Company
A joint-stock company has a strict organizational structure, consisting of various departments to ensure efficient management and operation. This structure helps establish clear delegation of authority, allowing the company to function in a stable, transparent, and sustainable manner.
General Meeting of Shareholders
The General Meeting of Shareholders is the highest decision-making body in a joint-stock company, consisting of all shareholders with voting rights. The rights and responsibilities of the General Meeting of Shareholders include:
- Approving the annual financial report.
- Deciding on profit distribution and dividend payout.
- Appointing or dismissing members of the Board of Directors and the Supervisory Board.
- Approving major decisions such as mergers or dissolution of the company.
Shareholders’ meetings are typically held annually. Additionally, an extraordinary meeting can be convened when there are important issues to address.
Board of Directors
The Board of Directors is the second-highest authority within the company, responsible for overseeing the general business activities and making strategic decisions for the company’s development. Members of the Board of Directors are elected by the General Meeting of Shareholders, with a maximum term of 5 years. The Board of Directors is responsible for:
- Developing long-term business strategies.
- Deciding the organizational structure of the company.
- Appointing and dismissing the CEO/Managing Director.
- Overseeing the activities of the executive board.
CEO/Managing Director
The CEO or Managing Director is responsible for directly managing the daily operations of the joint-stock company. This person is the legal representative of the company (unless the company’s charter specifies otherwise). The CEO/Managing Director’s responsibilities include:
- Managing business operations according to the strategies set by the Board of Directors.
- Signing contracts and organizing the execution of business plans.
- Managing finances, personnel, and market development.
- Reporting business performance to the Board of Directors and the General Meeting of Shareholders.
Supervisory Board
The Supervisory Board is an independent body that ensures the company’s activities are transparent and compliant with the law. The members of the Supervisory Board are elected by the General Meeting of Shareholders. The main duties of the Supervisory Board are:
- Reviewing financial reports and monitoring the company’s financial situation.
- Ensuring the legality of business activities.
- Reporting monitoring results to the General Meeting of Shareholders.
The Supervisory Board is especially important for joint-stock companies with more than 11 shareholders or companies where a shareholder organization holds more than 50% of the total shares.
This organizational structure ensures that a joint-stock company operates transparently, effectively, and in compliance with legal regulations, protecting shareholders’ interests and supporting the company’s long-term development.
5. Rights and Obligations of Shareholders in a Joint-Stock Company
Shareholders are individuals or entities that own shares in a joint-stock company and play a crucial role in guiding and developing the business. Shareholders have certain rights and obligations as stipulated by law and the company’s charter.
Rights of Shareholders
- Participate and vote at the General Meeting of Shareholders.
- Receive dividends based on the proportion of shares held.
- Have the right to transfer, buy, and sell shares according to the regulations.
- Have preferential rights to purchase new shares when the company issues additional shares.
- Monitor and supervise the company’s operations and the Board of Directors.
- Request the company to buy back shares under certain circumstances.
Financial Obligations of Shareholders
- Contribute capital as committed within the prescribed time.
- Be liable for the company’s debts and obligations to the extent of their capital contribution.
- Comply with the company’s charter and the decisions made by the General Meeting of Shareholders.
- Not misuse power to harm the company’s interests or the interests of other shareholders.
Share Transfer Process
Shareholders have the right to transfer their shares to others, except in cases where transfer restrictions are outlined in the company’s charter or by legal regulations, including:
- Voting preferred shares cannot be transferred.
- Founding shareholders may only transfer shares to other founding shareholders within the first 3 years. If transferring to outsiders, the transfer must be approved by the General Meeting of Shareholders.
- Shareholders can transfer shares through contracts, transactions on the stock market, or by inheritance.
Voting Rights in a Joint-Stock Company
- Shareholders who own common shares have voting rights in proportion to the number of shares they hold.
- Shareholders who own voting preferred shares have more votes than common shareholders but may have certain other rights restricted.
- Shareholders can authorize others to vote at the General Meeting of Shareholders.
Understanding the rights and obligations of shareholders helps ensure transparency in business operations and protects the interests of shareholders in a joint-stock company. The organizational structure of a joint-stock company is well-defined, with various departments to ensure effective management and operation. This structure helps establish clear delegation of authority, thereby ensuring the company operates smoothly, transparently, and sustainably.
Read more: WHAT YOU NEED TO KNOW ABOUT THE LIMITED COMPANY
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