How to distinguish a Limited Liability Company and a Joint Stock Company?
Vietnam Law allows the establishment of a company in Vietnam in various forms. It is an important step in investment process.
Investors could choose different forms depending on the needs and capacity on the ability to raise capital and sharing the risk in business as well as the management and operating costs. Each form will have its own organizational structure, operating mechanism, rights and obligations specified under Law on Enterprise 2014.
Currently, Limited Liability Company (“LTD”) and Joint Stock Company (“JSC”) are two popular enterprise forms operating in Vietnam.
What is the difference between these two forms of companies?
I. Organizational Structure
Number of members/shareholders:
LTD
Single member LTD: Having only one member (member can be an organization or an individual);
Multi members LTD: Having at least 2 members and not exceed 50 members (member can be an organization or an individual).
JSC
Joint Stock Company has at least 3 shareholders and not limit the maximum number.
Management structure
LTD
Single member LTD
Multi members LTD
JSC
JSC can be organized under two models: General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director/General director; (OR) General Meeting of Shareholders, Board of Directors (Board of Internal Supervisors under Board of Directors) and Director/General director.
II. Capital Contribution
Raising capital
LTD
Single member LTD: Owner increases charter capital
Multi members LTD: Members increase their charter capital, or increasing the number of capital contributors
JSC
Different from LTD, JSC can raise its capital by various methods as follows: Selling shares to existing shareholders; Selling shares individually to non-shareholders; Issuing shres on the stock market.
Transfer of contributed capital
LTD
JSC
The procedure to set up a company in form of an LTD or a JSC has not much differences.
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