WHAT IS A JOINT STOCK COMPANY?

The introduction of the Law on Enterprise 2020 has opened up great opportunities for the development of all types of businesses, including joint stock companies (joint stock companies). This is quite a complex business model but has a lot of advantages. However, the development speed of JSCs in Vietnam so far is still quite "cautious", mainly the internal JSC model and has not had strong bounces.

1. Legal basis.

Enterprise Law 2020

2. About joint stock companies.

According to Clause 1, Article 111 of the Enterprise Law 2020, a JSC is an enterprise in which:

- Charter capital is divided into equal parts called shares;

- Shareholders can be organizations or individuals; the minimum number of shareholders is 03 and there is no limit to the maximum number;

- Shareholders are only responsible for debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise;

- Shareholders have the right to freely transfer their shares to others, except for the cases specified in Clause 3, Article 120 and Clause 1, Article 127 of the Enterprise Law 2020. JSC has legal status from the date of issuance of the Certificate of Business Registration and has the right to issue shares, bonds and other securities of the company.

3. Features of Joint Stock Company.

3.1. Regarding shareholders of a joint stock company:

According to Clause 3 Article 4 of the Enterprise Law 2020, a shareholder is defined as an individual or organization owning at least one share of a joint-stock company. In other words, the main shareholder is the person who contributes capital to a joint-stock company and owns the contributed capital in proportion to the number of shares purchased in the company.

3.2. Regarding the capital of a JSC:

Article 112 of the Law on Enterprises has detailed capital issues for JSCs:

- The charter capital of a JSC when registering for business establishment is the total par value of shares of all kinds registered to buy and stated in the company's charter.

- When registering for the establishment of an enterprise, the shares sold are the total number of shares of all kinds that have been registered to buy.

- The number of shares entitled to be offered for sale by a joint-stock company when registering for business establishment is the total number of shares of all kinds that the company will offer for sale to raise capital, including shares that have been registered to buy and shares that have not been registered to buy.

- Unsold shares are shares that are entitled to be offered for sale and have not been paid to the company. When registering for the establishment of an enterprise, unsold shares are the total number of shares of all kinds that have not been registered to buy.

- The Company may reduce its charter capital in certain cases prescribed by law.

4.Advantages and disadvantages when choosing the type of joint stock company:  

- Advantages:

• Joint stock company is a type of enterprise with limited liability, so the level of risk is not high;
• Large scale of operation, unlimited maximum number of shareholders favorable when expanding business;
• Capital structure, high ability to raise capital through the issuance of shares - this is a prominent advantage of this type of business compared to others.
• The company has a high independence between management and ownership, the management will achieve higher efficiency

- Disadvantages:

• The number of shareholders can be very large, the management and administration of the company is relatively complicated, especially in case there are groups of shareholders opposing interests;
• Business and financial security is limited because the company must disclose and report to shareholders.