Comparison between Joint-Stock company vs LLC in Vietnam
24 Aug, 2019 (GMT+7)
Below are the differences in the general characteristics between a Limited Liability Company (LLC) and a Joint-Stock Company (JSC):
| Limited Liability Company (LLC) | Joint-Stock Company (JSC) | |
|---|---|---|
| Company registration timeframe | Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment | Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment |
| Suitable for | Small to medium sized business | Medium to large sized businesses |
| Number of founders | 1 to 50 founders | At least 3 founders |
| Corporate structure |
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| Liability | Founders’ liability is limited to the capital contributed to the Company | Founders’ liability is limited to the capital contributed to the Company |
| Issuance of shares and public listing | A Vietnamese LLC cannot issue shares and be publicly listed on the local stock exchange. | A Vietnamese JSC can issue ordinary and preference shares, the shares can be listed on the public stock exchange. |
*Only required if the LLC has more than 1 founder
**Only required if the LLC has more than 11 founders
***Not required if the company has less than 11 shareholders and no shareholder holds more than 50 percent of the shares, or if at least 20 percent of the members of the Management Board are independent and these members form an independent auditing committee.
Corporate Structure of Joint-Stock Company
Best suited for a medium to large size venture, a JSC can also be known as an incorporation whereby the corporate structure is more complex than that of a Limited Liability Company (LLC). Within a JSC, the corporate structure is made up of a Management Board which is supervised by an Annual General Meeting and the Inspection Committee, a Chairman of the Management Board, and a General Director, whose roles and responsibilities are described below.
Joint-stock company Vietnam structure
- General Meeting – Highest decision-making body of the company consisting of all shareholders. An Annual General Meeting must be called at least once per year where the director(s) of the company present the annual report of the company’s performance and strategy. Issues not resolved at the Annual General Meeting can be resolved at an Extraordinary General Meeting, which can be convened at any time.
- Management Board – A body of members elected by the General Meeting who jointly oversee the activities of a company.
- Inspection Committee – A committee compiled of independent inspectors appointed by the General Meeting. The committee’s role is to supervise the Management Board and the General Director. An Inspection Committee is not required if the company has less than 11 shareholders of which no shareholder holds more than 50 percent of the shares, or if at least 20 percent of the Management Board Members are independent members who form an independent auditing committee.
- Chairman of the Management Board – A member of the Management Board elected by the members to organise the work of the Management Board and to call and head the meetings at least once per quarter.
- General Director – Legal representative of the company appointed by the Management Board who is in charge of the day to day activities of the company. This can be a major shareholder, officer or chief executive who represents the interests of the company’s shareholders. The General Director must be an employee of the company and reside in Vietnam.
Such a corporate structure is particularly important to manage the affairs of the company operations. Because shareholders are generally scattered in different locations, some can be passive in its matters or play an integral part in its management, thus management and ownership can be interlinked.
Within this corporate structure, shareholders, management board members, and directors are all responsible for acting in the best interests of the company and can be held accountable for any negligent actions. Shareholders are only required to contribute the amount of the face value of their original share and the management board members and directors can be held liable for any damage caused by the negligent behaviour.
Limited liability of the shareholders of Joint-Stock Company
The limited liability concept is largely the reason for the success of this form of business organization as it is dependent on the originally agreed-upon distribution of ownership.
Limited liability is greatly advantageous for the shareholders themselves. Any loss experienced by any individual shareholder cannot exceed the amount which they have already contributed to as dues or payments. This eliminates the enterprise’s creditors as stakeholders and allows for anonymous shares trading.
Capital growth and public listing
In its initial establishment, a JSC is not automatically required to be listed on a public stock exchange unless its share capital exceeds US$ 475,000.
Upon ownership of a share, shareholders are also entitled to the freedom of transferring their ownership to others without the consultation of their fellow shareholders. Because of the continuous growth of capital, JSCs are required to have in-house accountants for its management.
