Viet Nam Joint-Stock Companies

Viet Nam Joint-Stock Companies

The Law on Enterprises (LOE) was adopted by Vietnam’s National Assembly on 26 November 2014 and took effect on 1 July 2015. The Law provides four types of legal forms of corporation for business entities, comprising:

• Limited liability company (LLC)

• Joint-stock company (JSC)

• Sole proprietorship

• Partnership A foreign entity may establish its presence in Vietnam as a limited liability company with one or more members, a joint stock company, a partnership, a branch, a business cooperation contract or a representative office. Foreign investors are also permitted to purchase an interest in existing domestic enterprises, subject to ownership restrictions; this varies depending on the relevant industry sector. The main characteristics and management structures of the common business entities are summarized below

A joint stock company

A joint stock company is a company whose charter capital is divided into shares, held by three or more organizations or individuals. It is a recognized legal entity and the only company type under Vietnamese law that can issue shares. Its shareholders are responsible for its debts and liabilities up to the amount of their contributed capital. A joint stock company (JSC) can issue securities and be listed on the Securities Exchange. A joint-stock company may either be 100 per cent foreign owned or domestically owned, or may take the form of a joint venture between foreign and domestic investors. Establishing a joint-stock company A joint stock company is established by its founding shareholders based upon their subscription for shares in the company. It is required to have at least three shareholders,

Following establishment, a number of other formalities must be carried out. These include:

• Announcing the approval and contents of the investment license in designated Vietnamese newspapers

• Opening bank accounts

• Registering labour recruitment plans with the labour office

• Registering with local tax and other relevant authorities

• Submitting the proposed accounting system to the Ministry of Finance. Capital stock and shareholders The founding shareholders of a JSC must subscribe at least 20 per cent of the total shares that the JSC is authorized to offer for sale. Shareholders can be Vietnamese or foreign nationals. A joint-stock company must issue ordinary shares and may issue preference shares and/or issue bonds. Types of preference shares include:

• Voting preference shares: only held by government authorized organizations and founding shareholder.

• Dividend preference shares

• Redeemable preference shares

• Other types of preference share, subject to the company’s charter. Shareholders are permitted to convert preference shares into ordinary shares, but not permitted to convert ordinary shares into preference shares. The company’s shares are allowed to be freely transferred among shareholders, except for voting preference shares. Company Charter The Company Charter is one of the incorporation documents of the Company and constitutes the incorporation and operation of the Company. The Company Charter determines the competence, duties and obligations conferred on the company, the board of directors and its shareholders. The Company Charter must include:

• the company name, head-office, branches and representative offices

• the list of business activities the firm undertakes

• the charter capital and any methods of raising or reducing the charter capital

• name, address, nationality and other basic identification of company owner

• rights and obligations of the owner

• management structure

• legal representative of the company

• formality for the adoption of decisions

• dispute resolution methods

• method for calculating salary, allowance and bonuses of chairman, director or general director

• principles for the distribution of profit and settlement of losses

• procedures for dissolution or liquidation.

• providing the constitution does not contravene legal obligations, the document will be binding between the company and owners. Management structure The management structure of a JSC comprises the general meeting of shareholders, the board of management, the general director and the board of supervisors (where the company has more than 10 individual shareholders). The Board of Management should consist of at least three members but no more than 11. Its members are elected by the General Shareholder Meeting for terms of up to five years. The Board of Management has authority to make decisions, exercise the company’s rights and perform the company’s obligations on behalf of the company. Filing requirements Every company established in Vietnam must comply with the Vietnamese Accounting Standards and System regulated by the Ministry of Finance. Companies are obliged to submit financial statements within 90 days of the end of each fiscal year. Annual financial statements of public joint-stock companies must be audited before being submitted to the Shareholders’ Meeting. All shareholders who held shares for at least one year are entitled to review the reports and statements at an appropriate time.

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