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Compare limited liability companies and joint stock companies in Vietnam

Limited liability companies (LLC) and joint stock companies (JSC) are the two most popular types of businesses today, favored by many traders. However, not everyone can distinguish what is a LLC and what is a JSC. Therefore, in order for customers to choose the type of company that best suits their needs, the following article of Viet An Law Firm will compare the similarities and differences between a LLC and JSC.

Compare limited liability companies and joint stock companies in Vietnam

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    Legal basis

    • The Law on Enterprise 2020;
    • Decree 47/2021/ND-CP.

    The same point

    • LLC and JSC may have one or more legal representatives.
    • Both types of companies have legal status; All have the ability to self-determine their own assets; All have the right to establish, contribute capital or buy shares of another company; Both can participate in a lawsuit as either the plaintiff or the defendant.
    • The members/shareholders have limited liability for the debts and financial obligations of the company. Because the members/shareholders are only liable to the extent of the member’s capital contribution to the company/shares owned by the shareholder.
    • Both LLC and JSC are responsible for the financial obligations and debts of the company with all of the company’s assets.
    • Assets of individuals and legal entities after transferring ownership will become the property of the company.

    Differences

    No Criteria Limited liability companies Joint stock companies
       1 Number of members in the company Single member LLC: There is only one member.

    LLC with two or more members: Minimum 02 members and maximum 50 members.

    Minimum of 03 shareholders and no maximum number of shareholders.
       2 Management structure of the company The structure of a LLC with two or more members has a Members’ Council, a chairman of the Members’ Council, a director or general director.

    A one-member LLC owned by an organization can be a model including:

    • Company President, Director or General Director (This is also the model of a single-member LLC owned by an individual).
    • Or the Board of members, the Director or the General Director.

     

    The JSC model can be one of the following two models:

    • General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director or General Director. This model may not require a Supervisory Board, if the company has less than 11 shareholders, and these shareholders are organizations holding less than 50% of the total shares of the company;
    • General Meeting of Shareholders, Board of Directors and Director or General Director. With this model, the Board of Directors must have at least 20% independent members and must have an internal audit committee.
       3 Legal representative of the company There must be at least one legal representative in the LLC who is:

    • Chairman of the Members’ Council;
    • Company President (Only applicable to the type of LLC with one member);
    • Or Director or General Manager.

    The chairman of the Members’ Council or the company’s president is the legal representative of the company, unless otherwise provided for in the company’s charter.

    There are three possible cases:

    • If the company has only one legal representative, the representative will be either the Chairman of the Board of Directors or the Director or General Director.
    • If a company has many legal representatives, both the Chairman of the Board of Directors and the Director or General Director are naturally the legal representatives of the company.
    • Unless otherwise provided in the company’s charter, the legal representative of the company is the Chairman of the Board of Directors.
       4 Increase and decrease charter capital LLC increases its charter capital when:

    • Increase the capital contribution of members/company owners to invest more;
    • Receiving capital contributions from new members.
    • LLC reduces its charter capital when:
    • Return a part of the contributed capital to the members/owners of the company in proportion to their contributed capital;
    • Or the company buys back the contributed capital of the members (Applicable only to limited liability companies with two or more members);
    • Charter capital is not fully and timely paid by the members/owners of the company.

     

    A joint-stock company increases its charter capital when:

    • The Company offers to sell additional shares;
    • Or shareholders of the company contribute more capital.

    JSC reduces its charter capital when:

    • The company returns part of the contributed capital to shareholders;
    • Or the reduction of charter capital is a legal consequence of share repurchase activities;
    • Or the charter capital is not paid in full and on time.
       5 Conditions for transferring contributed capital/shares A member of a LLC with two or more members may transfer his/her capital contribution, subject to certain conditions as follows:

    • A member may offer to sell his/her share of capital contribution to the remaining members of the company, but this offering must be in proportion to the capital contribution of the remaining members in the company, provided that the offer is for sale. same.
    • After 30 days from the date of offering, members can transfer to non-members of the company under the same offer conditions as the offer to the remaining members of the company, if these members do not buy. or do not buy all before the above deadline.

    However, if the company fails to pay the requested share of capital contribution, the member requesting the company to redeem his/her contributed capital has the right to freely transfer such contributed capital to another member or non-member. is a member of the company.

    Shareholders of a JSC have the right to freely transfer their shares to others. Unless otherwise:

    • The restriction on the transfer of shares is stipulated in the company’s charter.
    • Within the first 03 years of being granted the Enterprise Registration Certificate, only when the General Meeting of Shareholders agrees, the transfer of common shares between founding shareholders and non-founding shareholders can take place.
    • Voting preference shares of shareholders are not transferable to other people.
       6 Right to issue stocks and bonds LLC is not allowed to issue shares (if it wants to issue, it must convert its form into a JSC), but can issue bonds (issuance of bonds must comply with the provisions of law). JSC is allowed to issue both shares, as well as bonds and other securities of the company.

    Advantages and disadvantages of LLC

    Advantages of a LLC

    • The management and operation of the company is not too complicated because there are fewer members than a JSC.
    • Only limited liability to the extent of the capital contribution should limit the risk.

    Disadvantages of a LLC

    • Limited in raising capital than joint stock companies.
    • Limited number of participants. If the minimum number of members is not met or the maximum number of members is exceeded, the enterprise type must be changed.

    Advantages and disadvantages of JSC

    Advantages of JSC

    • Highly complete in terms of capital, as well as company organization.
    • Large amounts of capital can be mobilized because of the variety of forms of capital mobilization, especially through the stock market.
    • Shareholders divide shares among themselves, so the risk will also be shared among shareholders.

    Disadvantages of JSC

    • Possibility to create factions to split profits among shareholders.
    • It is difficult for creditors to collect debts, because having many shareholders is equivalent to having many “debtors” and not shareholders also pay their part of the debt to the company.
    • Compared to a LLC, the organizational structure of a JSC is more complex.

    LLC and JSC have their differences and also have their own advantages and disadvantages. Therefore, customers need to think carefully before choosing the right type. For example, if there are less than 50 members, you should choose a LLC, because the management and operation of the company will not be as complicated as a JSC.

    Customers who have questions about the types of limited liability companies and joint stock companies, please contact Viet An Law Firm by phone, Zalo or email to get the best support!

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