A joint stock company is one of the most common types of enterprises today, especially suitable for large-scale businesses that require capital from multiple investors. This type of company possesses distinct legal characteristics that set it apart from other types of business enterprise. In this article, TNTP presents key characteristics of a joint stock company.
1. General overview of a joint stock company
A joint stock company has full legal personality as prescribed by law. This means the company have its own assets, is independently liable for its obligations with its assets, and has the right to engage in legal relationships separately from its shareholders. Shareholders are only responsible for the company’s debts and liabilities within the amount of capital they have contributed.
The charter capital of a joint stock company is the total par value of all issued shares. A shareholder can own one or multiple shares, and their rights and obligations are determined based on the number of shares they hold. A joint stock company may issue ordinary shares and preferred shares.
2. Distinctive features of a joint stock company
a. Multi-ownership structure
• According to regulations, a joint stock company can have multiple shareholders, including both organizations and individuals. The minimum number of shareholders is three, with no upper limit. Therefore, to establish a joint stock company, the minimum shareholder requirement must be met as stipulated by law.
• With no limit on the number of shareholders, a joint stock company has the ability to raise capital from various sources. This allows joint stock company to access to large financial resources from investors through bond issuance, public stock offerings, and other types of securities.
This characteristic is a key advantage of a joint stock company compared to other types of enterprise.
b. Transferability of shares
• One of the most important features of a joint stock company is the high liquidity of its shares, reflected in the shareholders’ relatively free right to transfer shares.
• However, for founding shareholders, the law imposes restrictions on the transfer of their ordinary shares within three years from the date the company is granted Enterprise Registration Certificate. During this time limit, founding shareholders are only free to transfer shares among themselves. If they wish to transfer shares to non-founding shareholders, they must obtain approval from the General Meeting of Shareholders and have no voting rights regarding this transfer.
Thanks to this flexible transfer mechanism, a joint stock company can easily attract investors and raise capital on the market, while also enabling shareholders to actively manage their investment portfolios.
c. Corporate governance structure of a joint stock company
According to the Law on Enterprises 2020, a joint stock company has a well-structured governance system comprising the following key management bodies:
• General Meeting of Shareholders: The highest decision-making body of the company, responsible for approving major decisions such as profit distribution, amendments to the company’s charter, and election of the Board of Directors.
• Board of Directors (BOD): The governing body that makes strategic decisions, oversees the company’s operations, and appoints the General Director or Director. The term of the Board of Directors is stipulated in the company’s Charter, but cannot exceed five years. Board members may be re-elected for an unlimited number of terms.
• Board of Controllers: The body responsible for supervising the company’s operations, particularly ensuring compliance with laws and the company charter in management and administration. The Board of Controllers is tasked with verifying the accuracy of financial reports and overseeing the Board of Directors and Executive Board to protect shareholders’ interests.
In certain cases, a joint stock company is not required to have a Board of Controllers if it has fewer than 11 shareholders and if institutional shareholders own less than 50% of total shares. Alternatively, for companies without a Board of Controllers, at least 20% of the Board of Directors must be independent members, and the company must establish an Audit Committee under the Board of Directors to perform supervisory functions as stipulated in the company charter or the operating regulations issued by the Board of Directors.
• General Director or Director: The individual responsible for day-to-day business operations within the scope of authority defined by law, the company’s Charter, and the employment contract signed with the company. The General Director/Director is accountable to the Board of Directors for implementing resolutions and decisions issued by the Board.
This governance structure ensures a professional operation, with clear divisions of authority between management and executive functions.
A joint stock company is a type of enterprise that offers significant advantages, particularly in its ability to raise large amounts of capital and its flexibility in management. However, establishing and operating a joint stock company requires strict compliance with legal regulations and transparency in its activities. This type of company is well-suited for large-scale businesses or startups with plans for expansion and attracting additional investment capital.
The above article, “Distinctive features of a joint stock company” is provided by TNTP to our valued readers. We hope this article is helpful to you.
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