Legal regulations on joint stock companies

1. What is a Joint stock company?

According to Clause 1 Article 111 of Law on Enterprise 2020, a joint stock company is an enterprise in which:

• The charter capital is divided into units of equal value called shares.

• Shareholders can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders.

• A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder.

• Shareholders may transfer their shares to other persons except for the case of transfering of ordinary shares of founding shareholders in the first 3 years after the establishment.

• A joint stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

• A joint stock company may issue shares, bonds and other kinds of securities.

2. Organizational structure of joint stock company

According to Clause 1, Article 137 of the Enterprise Law 2020, a joint-stock company has the right to choose one of the following two organizational models:

3. Types of shares

A joint-stock company has two types of shares: ordinary shares and preference shares. Ordinary shares are required, in addition, a joint stock company may have preference shares.

Preference shares include:

• Participating preference shares.

• Redeemable preference shares.

• Super-voting shares.

• Other types of preference shares prescribed by the company’s charter and securities laws.

In which, only organizations authorized by the Government and founding shareholders are entitled to hold super-voting preference shares for the first 3 years after establishment. At the end of that time limit, the super-voting preference shares of the founding shareholders shall be converted into ordinary shares.

4. Advantages and disadvantages of joint stock company