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Joint stock companies in Vietnam: definition, features and classification

Joint stock companies in Vietnam: definition, features and classification

Monday 14, 06 2021
Joint stock company is one of the most popular forms of businesses in Vietnam, which is chosen by both domestic and foreign enterprises.

What defines joint stock companies?

According to Clause 1, Article 111 of the Enterprise Law 2020, a joint stock company is a from of ownership that is identified as follows:

- Charter capital is divided into equal parts called shares;

- Shareholders of joint stock companies can be individuals or organizations. There must be at least 03 shareholders and no limit on the maximum number;

- Shareholders are only responsible for debts and other property obligations of the enterprise to the extent of the amount of capital they contribute to the enterprise;

- Shareholders have the right to freely transfer their shares to other people, except for the case of transfer of common shares of founding shareholders within the first 3 years after establishment.

joint stock companies

What are the features of joint stock companies in Vietnam?

Through the definition, it can be concluded that joint stock companies must meet the following requirements:

- There must be at least 03 founding shareholders and no limit on the maximum number of shareholders;

- Charter capital is divided into equal parts called shares, and the purchase of shares is considered a way to contribute capital to a joint-stock company;

- A shareholder is one who owns at least one share of a joint-stock company and is only responsible for debts and other financial obligations to the extent of the contributed capital;

- Joint stock companies may issue stocks and bonds to raise capital.

Types of joint stock companies in Vietnam (*)

  • Private held corporation

A private held corporation is a company that only issues shares to its founders, officers, employees and affiliates. This is a type of registered share that cannot be transferred or can only be transferred under certain conditions within the company. It is very hard to increase in the company's capital as it is only allowed to mobilize capital from credit institutions or within the company.

These are normally small and newly established companies with few shareholders, who already know each otherThe transfer of share ownership is also conducted internally between these shareholders.

A private held corporation may face a lot of difficulties in transfering shares, which hinders it from taking full advantage of its potential. Moreover, the trouble may be huge if the capital demand is too large that the current shareholders cannot meet. Therefore, most of joint stock companies of this type may become public joint stock companies to be able to mobilize maximum capital through the form of issuing shares to the public.

  • Public joint stock company

As mentioned above, a private held corporation is the baby-step for a business to become a public joint stock company. This development happens when comapny offers an initial public offering (IPO).

A public joint-stock company is a joint-stock company that issues shares to the public.

According to the Securities Law 2019, which was effective in 2021, a joint-stock company will become a public company in one of the following cases:

  • The company has a contributed charter capital of at least 30 billion VND and at least 10% of the voting shares are being held by at least 100 non-major shareholders;
  • The company has successfully made its IPO by registration with SSC as prescribed in Clause 1 Article 16 of this Law.

law 2019

In order to conduct the offering, companies must satisfy all the conditions prescribed by law. In addition, the Law on Securities regulates that a public company that registers to offer securities to the public must commit trade their stocks on the organized market within one year from the end of the offering approved by the General Meeting of Shareholders.

In other words, a public joint stock company is one that has "issued shares to the public". Whether a company is public or not does not mean it is large.

Becoming a public joint stock company will likely bring some disadvantages to the business. At that time, the enterprise is under the supervision of shareholders, and is obliged to be transparent about all information about the enterprise. In addition, the issuance of shares to the public will change the structure of shareholders in the company, possibly threatening the control of major shareholders.

However, companies will enjoy more favorable conditions to operate more and more effectively.

  • Listed joint stock company

Public joint stock companies will strive to be listed on the stock exchange and become listed joint stock companies. Their securities will be traded on centralized stock exchanges, and they will become leading joint stock companies in Vietnam, with prestige and reputation, and enjoy many advantages in production activities and capital mobilization.

Each country has its own standards for companies listed on the exchange.

In Vietnam, Hose is considered the largest exchange and has an influence on the Vietnamese financial market. Conditions for listing on this exchange are as follows:

Listed joint stock company

In addition, to be listed on Hose, enterprises must also meet a number of additional conditions on debts, stock transfer and legal representatives.

Top listed joint stock companies in Vietnam

Following is the list of largest joint stock companies in Vietnam, which is compiled by VietnamCredit based on their market capitalization in 2020.

Top largest joint stock companies in Vietnam

* The Enterprise Law of Vietnam and its guiding documents do not classify types of joint stock companies. Therefore, the classification above is for reference only.

Compiled by VietnamCredit

Vietnam Economy

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