Differences Between Limited Liability Company and Joint Stock Company | ANT Lawyers

How to distinguish a Limited Liability Company and a Joint Stock Company?”

Vietnam Law allows the establishment of a company in Vietnam in various forms. It is an important step in investment process.

Investors could choose different forms depending on the needs and capacity on the ability to raise capital and sharing the risk in business as well as the management and operating costs. Each form will have its own organizational structure, operating mechanism, rights and obligations specified under Law on Enterprise 2014.

Currently, Limited Liability Company (“LTD”) and Joint Stock Company (“JSC”) are two popular enterprise forms operating in Vietnam.

What is the difference between these two forms of companies?

I. Organizational Structure

Number of members/shareholders:

LTD

Single member LTD: Having only one member (member can be an organization or an individual);

Multi members LTD: Having at least 2 members and not exceed 50 members (member can be an organization or an individual).

JSC

Joint Stock Company has at least 3 shareholders and not limit the maximum number.

Management structure

LTD

Single member LTD

Single member LTD owner by an organization shall be organized under two models: Company president, Director/General director and Supervisor; (OR) Members Council, Director/General director and Supervisor.

Single member LTD owner by an individual shall be organized as follows: Company president, Director/General director.

Multi members LTD

Multi members shall be organized by: LTD Council members, Chairman of the Members Council and Director/General director;

Multi members LTD having 11 members or more shall establish the Board of Supervisors.

JSC

JSC can be organized under two models: General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director/General director; (OR) General Meeting of Shareholders, Board of Directors (Board of Internal Supervisors under Board of Directors) and Director/General director.

II. Capital Contribution

Raising capital

LTD

Single member LTD: Owner increases charter capital

Multi members LTD: Members increase their charter capital, or increasing the number of capital contributors

JSC

Different from LTD, JSC can raise its capital by various methods as follows: Selling shares to existing shareholders; Selling shares individually to non-shareholders; Issuing shres on the stock market.

Transfer of contributed capital

LTD

Single member LTD: Owner transfers a part of contributed capital to other persons and this could lead to changes of the type of business or other procedures if all capital is transferred (for instance in a M&A deal).

Multi members LTD: Offer the stakes to other members in proportion to their stakes in the company under the same conditions; The stakes could only be transferred to other persons if the members do not buy or do not buy completely within 30 days from the offering date.

JSC

The shareholders of JSC are free for transfer their contributed capital after 03 years from the establishment.

Having said that, LTD is a type of enterprise that the capital contribution is not the only link between the members of the company but they are also linked together by relationship. They may be acquaintances and trust each other to jointly contribute capital to establish an enterprise. Therefore, the management of the LTD is as complicated as JSC. With the larger the number of shareholders, the level of capital mobilization, voting power to decide on issues of the company based on the ratio of capital contribution of each shareholder, the management and operation of the JSC is more complex.

The ability to raise capital of a JSC is higher than a LTD. Because, JSC can issue shares to the public in the form of securities. When the stocks are listed on stock exchange, the information of company’s business operations must be public and more transparent.

The procedure to set up a company in form of an LTD or a JSC has not much differences.

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How Foreign Entity Could Set-up a Branch Office in Vietnam | ANT Lawyers

A foreign business entity or a foreign trader is allowed to set-up a branch in Vietnam to conduct business activities.

Having the right to conduct business activities and make profit are how a branch differs from a representative office in Vietnam. A branch depends on the foreign business entity that set-up the branch while a foreign owned company set-up in Vietnam exists by itself. The Vietnam Department of Industry and Trade will be approving the establishment of a branch in Vietnam while Vietnam Ministry of Planning and Investment will be the State agency that coordinate the setting up a company in Vietnam.

In particular, the branch of a foreign business entity in Vietnam (referred to as the “Branch”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to enter into contracts in Vietnam and conduct activities being the purchase and sale of goods and other commercial activities consistent with its licence for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

The Branch will need to apply and obtain the establishment license; and have a seal bearing the name of the Branch.

1. Rights of the Branch

To rent offices and to lease or purchase the equipment and facilities necessary for the operation of the branch.

To recruit Vietnamese and foreign employees to work for the branch in accordance with the law of Vietnam.

To enter into contracts in Vietnam in accordance with the activities stated in the license for establishment of such branch and in accordance with the Vietnam Law.

To open Vietnamese dong and foreign currency accounts at banks which are licensed to operate in Vietnam.

To remit profits abroad in accordance with the law of Vietnam.

To have a seal bearing the name of the branch in accordance with the law of Vietnam.

To conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

2. Requested conditions for establishment the Branch in Vietnam

A foreign company which has effectiveness business activities will be allowed to open the Branch in Vietnam if this company has real demand to open the market in Vietnam and meet some conditions as below:

Being a trader recognized by the law of the country where it has been lawfully established or made its business registration;

Having been operating for at least five years after its lawful establishment or business registration.

3. Issuance the Certificate of Branch:

The issuance of the Certificate of Branch will be implemented by the Department of Industry and Trade Department after the foreign company meets all of conditions as Vietnam legal requirements.

The issuing period will be within 20 working-days after the date of submitting the full valid documents as requested.

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What Important Step-by-Step Guide to Establish Company in Vietnam? | ANT Lawyers

When foreign investors invest in Vietnam, they could establish company in Vietnam. Foreign investors have the right to choose the appropriate forms of enterprise such as a limited liability company, joint stock company, etc. with specific steps are as follows:

Step 1: Register the investment project
Investors submit an investment project registration file to the Business Registration office of the province or city or the management board of an industrial zone, an export processing zone or a high-tech zone for the approval of an investment project during the period within 15 days (without time for clarification).


Step 2: Apply for Certificate of investment registration
After approval of the investment project, investors submit a valid record to the Department of Planning and Investment within 10 days to apply for a business registration certificate.

Step 3: Apply for the certificate of business registration
After obtaining the business registration certificate, the investor shall submit the application for enterprise registration certificate to the enterprise registration office within 3 days.

Step 4: Publish the content of the business registration
After being granted the certificate of enterprise registration, the investor shall disclose information about the enterprise on the national enterprise registration portal within 30 days, including the following information:
i, Business lines;
ii, List of founding shareholders and shareholders being foreign investors for joint-stock companies.

Step 5: Registered business stamp
The enterprise has the right to decide on the form, quantity and contents of the stamp of the enterprise. The content of the stamp must show the following information:
– Company’s name;
– Business code.
After receiving the legal entity stamp and before using the business stamp, the enterprise must send a notice on the stamp of the enterprise to the business registration office for publication in the National Information Portal on the business registration.

Step 6: Notice of use of stamp:
After having stamp made, investors submit notices on use of stamp forms to the Investment registration agency. After receiving the record, the Investment registration agency issues a receipt for the enterprise, publishes the notice of the enterprise on the National Business Information Portal and issues a notice of the posting, stamp samples of enterprises, branches and representative offices for enterprises.

Step 7: Open bank account:
Investors need to open two types of bank accounts, namely the investment capital account to receive the investment amount and the transaction account for conducting daily transaction in Vietnam.

Step 8: The post licensing procedures:
For the conditional business lines:
Investors investing in conditional businesses lines as regulated in Appendix 4 of the Investment Law 2014 must apply certificate of business qualification, practicing certificates, professional liability insurance, legal capital requirements, etc. before conducting business in Vietnam.

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How to establish company in Vietnam? | ANT Lawyers

Foreign investors may invest in the form of 100% capital to establish company in Vietnam, being limited liability company, joint stock company, partnership company.

Foreign investors that invest in Vietnam for the first time must have investment projects and fill in investment registration or examination procedures at state agencies in charge of investment in order to be granted investment registration certificates. Investment certificates shall concurrently be business registration certificates. Company with 100% foreign capital has founded and operated from the date of issuance of the investment certificate.

A project dossier for establishing company in Vietnam shall comprise:

Registration/Request for issuance of Investment Certificate;

A report on financial capability of the investor;

Draft of the company’s charter;

List of members of company;

Copy of the people’s identity card, passport or other lawful personal certification, for individual members;

Copy of the establishment decision, business registration certificate or other equivalent document, for member organizations;

Copies of the authorization document, the people’s identity card, passport or other lawful personal certification, for authorized representatives.

Copies of the business registration certificates of the foreign member organizations must be authenticated within three months before the date of submission of the business registration dossier by agencies where such organizations are registered;

Written authorization of the investor in case investor is organization and valid copy of the lawful personal certification of the authorized representative. Documents in foreign languages must be translated into Vietnamese, notarized and legalized;

The joint-venture contract or Business Cooperation Contract (BCC);

Other documents required by Vietnam law.

The establishment of a company in Vietnam would take from 30 days. The extra time might be needed in case the investment area is conditional or the State government needs to examine the investment project. Minimum capital, special licenses or other conditions might be required in certain investment projects.

The law on investment constantly changes which ANT Lawyers will monitor and provide relevant update.

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