People who are starting a business are frequently given a variety of business structure options to choose from that can help their company to succeed in the long run. However, each of the business structures offered has its own advantages and disadvantages as well as criteria, making it challenging to select the one that is most suitable for you.
If you are looking to set up your business in Vietnam, you can select from a variety of legal forms, which include a Joint Stock Company (JSC) or a Limited Liability Company (LLC)/ However, in order to ensure long-term business success and alignment with your business needs, it is vital to comprehend the differences between a joint stock company and limited liability company in Vietnam.
This article will explore the differences between a joint stock company and a limited liability company in Vietnam that will assist you in making the right choice for your business endeavors.
Differences between a Joint Stock Company and a Limited Liability Company in Vietnam
Here are a few differences between a joint stock company and a limited liability company in Vietnam that will assist you in figuring out the most suitable structure for your organization.
|Limited Liability Company
|Joint Stock Company
|Small and medium-sized companies
|Medium-sized to large-sized companies
|Number of members or shareholders
|Single member LLC- minimum 1 shareholder Multi-member LLC-minimum 2 shareholders and maximum 50 shareholders
|Minimum 3 members, and no upper restriction on the total number of stockholders
|Issuance of shares
|Are not capable of issuing shares
|Are capable of issuing shares
|Are capable of increasing capital through increasing the charter capital
|Are capable of increasing capital by offering shares
|Annual General Meeting (AGM)
|AGMs are not required to be held by LLCs
|JSCs must convene an AGM every year
|More stringent requirements
1. Legal Structure and Ownership
One of the significant differences between a joint stock company and a limited liability company in Vietnam is in terms of ownership arrangements and legal form.
An LLC is a form of corporate entity in Vietnam that includes the benefits of a corporation and a partnership. The ownership and management options are flexible. Each member’s liability in an LLC is capped at the amount of their initial investment.
The division of the share capital into shares defines a JSC. Shares can be held by several shareholders proportionate to their ownership. JSCs are frequently appropriate for larger businesses that have substantial financial needs and the possibility of going public.
2. Members or Shareholders
One of the key differences between a joint stock company and a limited liability company in Vietnam is the number of members or shareholders in both organizations.
An LLC can be created with just one member, designated as a single-member LLC, or with more than 1 member but fewer than 50, recognized as a multi-member LLC. An LLC’s members are liable for the obligations and debts of the business to the degree of the money that they have invested in or agreed to invest in the business.
JSC is a business whose charter capital is subdivided into equal parts referred to as shares which are owned by a minimum of three shareholders. It is a business with no upper restriction on the total number of stockholders. The stockholders are liable for the obligation of the firm up to the value of the capital they have invested.
3. Issuance of shares & increasing capital
Another one of the main differences between a joint stock company and a limited liability company in Vietnam is the issuance of shares in both structures.
An LLC in Vietnam is not permitted to offer shares or hold a public listing on the stock market. In the case of a single-member LLC, the owner raises the charter capital for additional funds. In the case of multi-member LLCs, members grow their charter capital when they want to acquire funds or they grow the total amount of capital contributors.
A JSC in Vietnam may issue common and preferred shares, and those securities may be traded on the stock market.
JSC has several options for raising funds, including the following:
- Shares may be sold to current stockholders
- Shares may be sold separately to non-shareholders
- Distributing stock on the market for trading
4. Management structure
The single-member LLC owned by a company must be structured using one of two approaches:
- Directors/General Directors, Supervisors, and Company President
- Directors/General Directors, Supervisors, and Members Council
A single-member LTD owned by one person will be structured in the following manner:
- President of the business, Director/General Director.
The Chairman of the Members Council, the Director/General Director, and Council members make up a Multiple Member LLC. A Board of Supervisors shall be established by such firms when there are at least 11 members.
There are three accepted organizational and management approaches for JSCs.
- An Inspection Committee, a Board of Directors, a General Meeting of Shareholders, and a Director or Director General make up the primary form. This kind is the most widely used.
- A General Meeting of Shareholders, a Board of Directors, and a Director or Director General make up the following type: If there are fewer than 11 stockholders in the corporation and organizational stockholders collectively possess no more than fifty percent of the outstanding shares, an Inspection Committee is not necessary.
- The last structure includes a General Meeting of Shareholders, a Board of Directors, and a Director or Director General with the condition that an Auditing Committee exists within the Board of Directors along with that a minimum of 20% of the board’s overall membership is comprised of independent individuals. The corporate charter or operating guidelines adopted by the Board of Directors set forth the organizational structure, responsibilities, and activities of the Auditing Committee.
5. Reporting and Disclosure Obligations
Another one of the primary differences between a joint stock company and a limited liability company in Vietnam is that both organizations are subject to specific reporting and transparency requirements.
Compared to JSCs, LLCs are subject to lesser reporting and disclosure requirements. Except as provided in the organization’s charter, they have no obligation to disclose their financial accounts or conduct general meetings every year.
Compared to LLCs in Vietnam, JSCs must comply with stricter disclosure as well as reporting standards. Annual general meetings must be held, financial statements must be prepared and disclosed, and rules governing corporate governance and openness must be followed.
The decision between a limited liability company and a joint stock company might depend on a variety of variables, including legal requirements, capital acquisition capacity, long-term viability, the required number of members, legal framework, and ownership structure. By being aware of the differences between the two forms, you can make a clear decision regarding which type of business structure will best support your corporate goals.
At Odint Consulting, our experienced professionals have a wealth of knowledge and are committed to helping you choose the best company structure for your operation in Vietnam. We are aware of the complexities involved and will assist you in setting up the structure of your choice while ensuring strict adherence to all necessary laws. Count on our expertise to assist you in building a strong foundation for your company so that you may take advantage of the numerous prospects presented by Vietnam’s burgeoning industry.
- A JSC must have a minimum of three members to be formed in Vietnam.
- A minimum of 1 shareholder is necessary to form a single-member LLC in Vietnam
- It takes at least two members and a maximum of fifty to create an LLC with multiple members in Vietnam.
A JSC or an LLC should be chosen depending on the scope and kind of the company, its capacity to generate money, management choices, the number of shareholders, legal obligations, and long-term objectives.
- JSC is a form of business structure that is capable of issuing shares to the general population.
- There are no restrictions on the number of shareholders, and the share transfer processes are straightforward.
- They are permitted to offer and transact in shares on stock markets.
It is feasible to change a JSC into an LLC or the other way around. Nevertheless, as per Vietnamese regulations and guidelines, different processes and conditions must be fulfilled.