Drafting charter for joint stock company in Vietnam

Every joint stock company must have a company charter. The law has regulations to adjust the company’s charter to suit the company’s specific orientation and business situation but still within a general legal framework and must not violate the provisions of the Law on Enterprises, Tax Law, Accounting Law, and Labor Code. Some clients have difficulty drafting the company charter following the law. To answer clients’ questions, Viet An Law would like to present the following article on drafting charter for joint stock company in Vietnam.

Joint stock company in Vietnam

A joint stock company is a popular type of business in our country’s economy today.

The charter of a joint stock company is understood as an agreement between the founders and shareholders or between shareholders, to commit and bind members in general regulations and a joint stock company, to agree on the way of capital establishment, contribution, organizational structure, management, operations, etc. approved by the company members and confirmed by the business registration agency. Or, to put it another way, the charter of a joint stock company has the same meaning as the Constitution of that company.

According to Clause 1, Article 24 of the Law on Enterprises 2020, the company charter includes:

• Charter when registering a business;
• Charter is amended and supplemented during operation.

Necessary substances when drafting charter for joint stock company in Vietnam

Pursuant to Clause 2, Article 24 of the Law on Enterprises 2020, the substances that must be included when drafting the charter for a company, including joint stock company, specifically as follows:

Basis information of the joint stock company

• Name and address of the company’s headquarters; name and address of branch and representative office (if any);
• Business sector: sector name, business code.

Information on capital and share

• Authorized capital; Total number of shares, types of shares, and par value of each type of share: Charter capital of a joint stock company is the total par value of shares sold of all types. The charter capital of a joint stock company at the time of enterprise establishment is the total par value of all types of shares registered to buy and recorded in the company charter.
• Full name, contact address, nationality of founding shareholder.
• Number of shares, types of shares, par value of each type of shares of founding shareholders
  • A founding shareholder is a shareholder who owns at least one common share and signs on the list of founding shareholders of a joint stock company.
  • A newly established joint stock company must have at least 03 founding shareholders.

Rights and obligations of shareholders towards joint stock companies

• General rights of shareholders such as attending and addressing the General Meeting of Shareholders; Receiving dividends, and freely transferring your shares to others (Except for the case specified in Clause 1, Article 127 of the Law on Enterprises 2020), when the company dissolves or goes bankrupt, they will receive a portion of the remaining assets corresponding to their share ownership ratio in the company, etc.
• Rights of major shareholders and groups of major shareholders.
• Obligations of shareholders: pay in full and on time for the number of committed shares to purchase, comply with the Charter and internal regulations of the company, comply with resolutions and decisions of the General Meeting of Shareholders and the Board of Directors, …

Organizational structure

• Management organization structure: management model.
• Number, management titles and rights, obligations of the legal representative of the business; division of rights and obligations of the legal representative in case the company has more than one legal representative;
• Principles for resolving internal disputes: According to regulations on internal disputes, principles for resolving internal disputes. For example, when internal disputes arise, the Parties must first conduct conciliation. If conciliation is not possible, one of the parties must notify the immediate superior for resolution. If the immediate superior has not resolved the matter satisfactorily, one of the parties may refer the case to a higher management level; file a case to the People’s Court; or exercise other rights and obligations according to the provisions of the charter, the Law on Enterprises and other relevant laws.

Some specific regulations of the joint stock company on internal organization:

• Procedure for approving company decisions: Company Decisions are Decisions of the General Meeting of Shareholders or decisions of the Board of Directors within the scope of authority specified in the charter and the Law on Enterprises;
• Salaries, remunerations, and bonuses of managers and controllers: can be based on the company’s regulations on remuneration, salaries, and bonuses.
• Repurchase shares: Cases where shareholders have the right to request the company to repurchase shares;
• Distributing post-tax profits and handling losses: Conditions for profit sharing; Handling losses; Rate of appropriation of funds.
• Dissolution, and liquidation: Some cases of company dissolution (according to the decision of the General Meeting of Shareholders, the minimum number of shareholders cannot be maintained without changing the type of business). The dissolution procedure is as prescribed in the Law on Enterprises.
• Procedures for amending and supplementing the company’s charter: for example, the company’s charter can be amended and supplemented according to the decision of the General Meeting of Shareholders according to the order and procedures specified in the Charter, Law on Enterprises, and other relevant legal regulations.

Principles to follow when drafting charter for joint stock company in Vietnam

To draft the charter of a joint stock company properly according to regulations, it is necessary to pay attention to complying with the following basic principles:

• Voluntary and agreed within the framework of the law. The Company’s Charter is built voluntarily and agreement is given top priority, therefore, when drafting amending, and supplementing the Charter, shareholders must discuss, agree, and consider each problem because they directly affect the rights of members and the operation and development of the company. At the same time, the provisions of the Charter must not be contrary to the Law and must not infringe on the interests of Third Parties.
• The contents of the Company’s Charter must be approved by all founding members. Clause 3, Article 25 of the Law on Enterprises stipulates that when registering a joint stock company, the Charter must include the full name and signature of the individual Founding Shareholder and the legal representative or authorized representative of the Company. Founding shareholders are organizations for joint stock companies. Accordingly, this shows that the Charter is built entirely based on the will and consent of all founders of the company.

If clients need to draft a company charter or establish a company in Vietnam, please contact Viet An Law Firm for the best support.