What is a Joint-Stock Company?

What is a Joint-Stock Company? Article 111 of the Enterprise Law 2020 stipulates the concept of a joint-stock company as follows:

A joint-stock company (JSC) is an enterprise that has its charter capital assigned into equal portions of shares. The minimum number of shareholders is three people. There is no restriction in regard to the maximum number of shareholders.

Features of a joint-stock company:

As a popular type of enterprise as suitability to medium and large enterprises, a joint-stock company has the following main characteristics:

1. Company shareholder

The company member is called a shareholder. A shareholder is a person who owns at least one share of a joint-stock company.

Shareholders can be organizations or individuals. The minimum number of shareholders is three people and there is no limit to the maximum number.

When talking about the limited liability of shareholders, a joint-stock company is highly beneficial to shareholders personally. Shareholders are only liable for losses or debts that will not exceed the amount they have contributed.

A joint-stock company has 03 types of shareholders, including:

– Founding shareholders: Founding shareholders must own at least one common share and sign on the list of founding.

– Common shareholders: Common shareholders are the owners of common shares.

– Preference shareholders: The owner of preference shares is a preferred shareholder.

2. Capital

Charter capital is divided into equal parts called shares, buying shares is the main way to contribute capital to a joint-stock company.

Joint-stock companies have the ability to mobilize capital flexibly. Like other types of enterprises, joint-stock companies can raise capital from loans from domestic and foreign organizations and individuals. In addition, a joint-stock company can raise capital by issuing shares, bonds.

3. Transfers of shares

Shareholders can freely transfer their ownership of shares to others without the consent of other shareholders. However, there are still cases of transfer restrictions:

  • Within the first 03 years after the establishment, the common shares of founding shareholders are freely transferred to other founding shareholders and can only be transferred to non-founding shareholders with the approval of the founding shareholders. General Meeting of Shareholders.
  • If the company’s charter contains restrictions on the transfer of shares, these provisions will only take effect when clearly stated in the shares of the respective shares
  • The preference share of preference shareholders is non–transferable.

4. The organizational structure of the company

According to Article 137 of the Enterprise Law 2020, a joint-stock company can be organized under the following 2 models:

  • Model 1: General Meeting of Shareholders, Board of Directors, Supervisory Board and Director or General Director.

In case a joint-stock company has less than 11 shareholders and the shareholders are organizations holding less than 50% of the total shares of the company, it is not required to have a Supervisory Board.

  • Model 2: General Meeting of Shareholders, Board of Directors, Director or General Director.

In this case, at least 20% of the members of the Board of Directors must be independent members and have an Audit Committee under the Board of Directors.

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