Differences Between Limited Liability Company and Joint Stock Company

    

How to distinguish a Limited Liability Company and Joint Stock Company?

Vietnam Law allows the establishment company in Vietnam in various forms. It is an important step in investment process.

Investors could choose different forms depending on the needs and capacity on the ability to raise capital and sharing the risk in business as well as the management and operating costs. Each form will have its own organizational structure, operating mechanism, rights and obligations specified under Law on Enterprise 2014.

Currently, Limited Liability Company (“LTD”) and Joint Stock Company (“JSC”) are two popular enterprise forms operating in Vietnam.

What is the difference between these two forms of companies?

I. Organizational Structure

Number of members/shareholders:

LTD

-Single member LTD: Having only one member (member can be an organization or an individual);

-Multi members LTD: Having at least 2 members and not exceed 50 members (member can be an organization or an individual).

JSC

Joint Stock Company has at least 3 shareholders and not limit the maximum number.

Management structure

LTD

-Single member LTD

Single member LTD owner by an organization shall be organized under two models: Company president, Director/General director and Supervisor; (OR) Members Council, Director/General director and Supervisor.

Single member LTD owner by an individual shall be organized as follows: Company president, Director/General director.

-Multi members LTD

Multi members shall be organized by: LTD Council members, Chairman of the Members Council and Director/General director;

Multi members LTD having 11 members or more shall establish the Board of Supervisors.

JSC

JSC can be organized under two models: General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director/General director; (OR) General Meeting of Shareholders, Board of Directors (Board of Internal Supervisors under Board of Directors) and Director/General director.

II. Capital Contribution

Raising capital

LTD

-Single member LTD: Owner increases charter capital

-Multi members LTD: Members increase their charter capital, or increasing the number of capital contributors

JSC

Different from LTD, JSC can raise its capital by various methods as follows: Selling shares to existing shareholders; Selling shares individually to non-shareholders; Issuing shares on the stock market.

Transfer of contributed capital

LTD

-Single member LTD: Owner transfers a part of contributed capital to other persons and this could lead to changes of the type of business or other procedures if all capital is transferred (for instance in a M&A deal).

-Multi members LTD: Offer the stakes to other members in proportion to their stakes in the company under the same conditions; The stakes could only be transferred to other persons if the members do not buy or do not buy completely within 30 days from the offering date.

JSC

The shareholders of JSC are free for transfer their contributed capital after 03 years from the establishment.

Having said that, LTD is a type of enterprise that the capital contribution is not the only link between the members of the company but they are also linked together by relationship. They may be acquaintances and trust each other to jointly contribute capital to establish an enterprise. Therefore, the management of the LTD is as complicated as JSC. With the larger the number of shareholders, the level of capital mobilization, voting power to decide on issues of the company based on the ratio of capital contribution of each shareholder, the management and operation of the JSC is more complex.

The ability to raise capital of a JSC is higher than a LTD. Because, JSC can issue shares to the public in the form of securities. When the stocks are listed on stock exchange, the information of company’s business operations must be public and more transparent.

The procedure to set up a company in form of an LTD or a JSC has not much differences.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang.

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How to Determine Interest Rate for Late Payment Obligations in Commercial Transaction?

       

The most important obligation of the parties to a commercial contract is to deliver or provide services and pay in full and on time as agreed. However, in reality, there are times that one party or the parties fail to perform their payment obligations, causing damages to the other party. In particular, in the case of a breach of the payment obligation, the aggrieved party may request the person having caused damage to pay late payment obligations interest. Potential dispute on this matter might arise between parties.

Article 306 of the Commercial Law 2005 provides for the application of the interest rate due to the delay of payment as follows: Where a contract-breaching party delays making payment for goods or payment of service charges and other reasonable fees, the aggrieved party may claim an interest on such delayed payment at the average interest rate applicable to overdue debts in the market at the time of payment for the delayed period, unless otherwise agreed or provided for by law.

The interest rate for late payment of obligations in commercial business is applied according to the average interest rate on overdue debts in the market at the time of payment corresponding to the late payment period, unless otherwise agreed or otherwise provided by law.

However, the Commercial Law 2005 at that time did not have a specific regulation on the average interest rate of overdue debts on the market. The Resolution No. 01/2019/NQ-HDTP has detailed instructions on this interest rate. When determining the interest on late payments, the Court shall determine the interest rate on late payments on the basis of average interest rates on overdue debts announced by at least 03 (three) commercial banks (such as Vietcombank, VietinBank, Agribank, etc.) whose headquarters, branch or transaction office is located in the same province or central-affiliated city where the headquarters of the Court in charge of the case is located at the payment date (the date of first-instance trial), except otherwise agreed upon by the parties or regulated by laws.

In case of late payment liabilities defined in a contract which includes the parties’ agreement on interest payment, the judgment debtor is liable to pay interest on the outstanding judgment debt at the agreed interest rate which must be conformable with applicable laws; if the agreed interest rate is not available, the Court shall decide application of the interest rate prescribed in Clause 2 Article 468 of the 2015 Civil Code. In case interests are charged on amounts payable to the state budget as regulated by laws, the judgment debtor is liable to pay an interest on the judgment debt arrears calculated at the interest rate prescribed in Article 357 or Article 468 of the 2015 Civil Code, unless otherwise prescribed by laws.

In order to protect the best interest of parties, it is important to consult with dispute lawyers in Vietnam for advice.

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What Are the Order of Disciplining Employee in Vietnam?

          

Labour discipline is the provisions on compliance matters relating to work time, technology and production and business management in labor regulations. It can be understood simply that when an employee violates the labor regulations, depending on the extent and regulations of the company, he or she will be subject to disciplinary action. The order of disciplining labor is conducted in accordance with the provisions of labour code in Vietnam. Failing to follow the order of discipline would lead to potential disputes which both employer and employee should consult with dispute lawyers in Vietnam for advice to protect their best interests.

Firstly, the employer must confirm the employee’s violations

In the cases where an employee found committing a violation, the employer shall issue an offence notice, inform the employee representative organization (or the employee’s parent or legal representative if the employee is under 18) in order to hold a disciplinary meeting.

Secondly, issuing notice of the disciplinary meeting

This step is only carried out in case the employer detects violations of labor discipline after the time when the violation has occurred, there are sufficient grounds to prove the fault of the employee and the statute of limitations for disciplining.

The employer sends the notice with the content, time and place of the meeting to handle the labor discipline to the organization representing the labor collective at the grassroots level; workers; In the case of a person under 18 years old, there must be the participation of a parent or legal representative.

The employer must ensure these recipients receive notice before the meeting takes place and conduct a labor discipline meeting with the participation of the notification components.

Thirdly, conducting a disciplinary meeting

It is mandatory to have the minutes of the disciplinary meeting, which have to be approved by the participants before the end of the meeting. The minutes shall bear the participants’ signatures. If any participant that refuses to sign the minutes, there should be explanation.

Fourthly, disciplinary decisions

The person that concludes the employment contract on the employer’s side also has the power to issue the disciplinary decision. The disciplinary decision shall be issued before expiration of the original or extended time limit for penalty imposition specified the labour code.

The disciplinary decision shall be sent to the employee (or his/her parent or legal representative if the employee is under 18) and the employee representative organization.

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Draft Decree on E-transactions in the Government Management of Land

         

In the era of technology 4.0, the application of science and technology in all activities of social life in general is increasingly focused. Vietnam government has introduced a number of policies on the application of electronic technology in administrative procedures, particularly the Draft Decree on Electronic Transactions in the management of land.

Electronic transactions in the government management of land are the implementation of administrative procedures in the field of land; share and provide land information and data; share and provide documents among state agencies.

On the implementation of administrative procedures on land, according to the Draft, the Government stipulates 17 administrative procedures on land to be carried out by electronic methods, such as: land acquisition; land allocation, land lease, change of land use purpose; first registration of land and properties attached to land, first-time certificate of land use rights, ownership of houses and other land-attached assets and additional registration of assets attached to land;… However, in order to carry out electronic procedures, agencies and organizations providing/using electronic transaction services in the field of land must meet certain conditions in accordance with the provisions of this draft.

Regarding sharing and providing information and land data, in the draft, the Government clarified the cases; responsibilities of agencies that share and provide land information and data and responsibilities of land users and users of electronic data. However, the draft did not specify what information allowed to be shared.

The draft also specifies the assurance of security and safety in e-transactions on land and the settlement of arising problems. Accordingly, disputes related to e-transactions in Land areas are settled based on the provisions of the Law on Electronic Transactions, this Decree and other relevant laws. In addition, the draft also provides regulations on the right to appeal, denunciations and regulations on sanctions.

Electronic signatures in the field of land include digital signatures and other types of electronic signatures as prescribed by law. Agencies, organizations and individuals have the right to discuss and select the type of appropriate electronic signature.

The implementation of electronic transaction in the land management will improve the efficiency of land, and real estate transaction from management, development, sales and purchase, and could help reduce the inaccuracy and avoid potential disputes.

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What Are Potential Disputes over the Settlement Method for Employees When Separating Enterprises?

        

In Vietnam, reorganization of an enterprise means the division, separation, consolidation, merger or transformation of an enterprise. In particular, when separating enterprises, in addition to legal issues related to enterprise separation procedures, registration for newly formed enterprises, the introduction of a plan for the employees of the separated company is also a matter of concern. The transferor company and the transferee company need to allocate and use the existing labor force accordingly. It is important to ensure the interests of workers. Specifically, in case of continuing to employ employees, when separating an enterprise, the next employer is responsible for continuing to use up the existing workforce and proceeding with the labor contract amendment and supplement. All of this might lead to potential disputes which lawyers would be involved to provide legal advice from the early stage.

If the enterprise does not use up all the employees or the labor demand of the company does not run out of the existing number of employees, the enterprise must develop a suitable plan to use employees in accordance with the law. Specifically, an employment plan must contain the following main contents: The list and the number of employees to be continued to be used, the employee sent for retraining to continue using; List and number of employees to retire; The list and number of employees who are transferred to part-time work; the employee must terminate the labor contract; Measures and financial resources to ensure implementation of the plan. Enterprises should note that when developing plans for the employment of employees, there must be the participation of organizations representing labor collectives at the grassroots level.

In case it is imperative that the employees quit their job, the enterprise must pay the employee a job loss allowance so that the interests of the employee will still be guaranteed when separating the enterprise. The Labor Code has specified as follows: An employer shall pay a job-loss allowance to an employee who loses his/her job and has worked regularly for the employer for 12 months or longer. The job-loss allowance is equal to 1 month’s wage for each working year, but must not be lower than 2 months’ wage. The working period used for the calculation of job-loss allowance is the total time during which the employee actually works for the employer minus the time during which the employee benefits from unemployment insurance in accordance with the Law of Social Insurance and the working period for which the employer has paid a severance allowance to the employee. The wage used for the calculation of job-loss allowance is the average wage in accordance with the labor contract during 6 months preceding the time the employee loses his/her job.

It is important to have proper and proactive discussion with impacted employee and avoid disputes impacting the company’s reputation. Dispute lawyers could be of help for advice and preparation.

ANT Lawyers – A law firm in Vietnam, always follow up the labour matters to update clients on regular basis

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What Are Penalty for Violations in the Field of Construction in Hanoi?

        

In any field, mistakes can occur but differ in actual consequences. Especially in construction activities, the consequences are difficult to predict, the violations in construction activities, to any extent, affect individuals and collective users. Therefore, the Hanoi City People’s Council issued Resolution No. 07/2014/NQ-HDND prescribing the fine levels for a number of administrative violations in the field of construction.

This Resolution prescribes the fine levels for a number of administrative violations in construction activities in the Government’s Decree No. 121/2013/ND-CP of October 10, 2013 on sanctioning of violations. administration in construction activities; real estate business; exploitation, production and trading of construction materials; technical infrastructure management; housing and office development management (abbreviated to Decree No. 121/2013/ND-CP) in Hanoi city.

The Resolution provides a number of violations and penalties for corresponding acts of investors; of contractors and other organizations and individuals. In particular, the fine level prescribed for an administrative violation in the Resolution is equal to twice the fine level for the corresponding administrative violation in Decree No. 121/2013/ND-CP. The fines prescribed in Chapter II of this Resolution are those imposed on organizations. For the same administrative violation, the fine of an organization is 2 times that of an individual.

The titles competent to impose fines for administrative violations specified in Decree No. 121/2013/ND-CP are competent to impose penalties corresponding to the fines for the prescribed violations. in chapter II of this Resolution. Specifically, the subjects competent to sanction administrative violations under this Regulation include: Construction inspectors; Head of a specialized inspection team; Chief Inspector of Department of Construction; Chief Inspector of Ministry of Construction; Police; Market management; Presidents of People’s Committees at all levels

Above are the main contents of Resolution No. 07/2014/NQ-HDND of the Hanoi City People’s Council stipulating the fine level for a number of administrative violations in the field of construction, individuals and organizations should grasp to ensure their legitimate rights and interests. For compliance in the area of construction, it is important to consult with construction lawyers in Vietnam for advice.

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How Decision 942/QD-TTg on Crypto Currency Would Partly Solve Challenges for the E-Government of Vietnam?

        

With the strong development of information technology, forms of online transactions has also gradually become a trend and develop strongly in Vietnam. In recent years crypto currency has created a new phenomenon for the global economy that some countries have been deploying to use such as El-Salvador. However, not all countries accept crypto currencies especially countries such as China, Russia, Thailand… are vehemently opposed to this type of crypto currency for fear of risks to the national economy. In Vietnam, there has been a number disputes involved crypto currency transactions through investment, purchase and sales, which lacked legal framework for resolving, creating challenges for lawyers, and dispute resolving authorities.

The State Bank of Vietnam also has a document prohibiting credit institutions from using crypto currency as a currency or means of payment. However, besides the potential risks, crypto currencies with the advantages of being extremely fast, convenient features which only need an Internet connection and wide application scope should be exploited. Recently, the Prime Minister issued Decision 942/QD-TTg dated June 15, 2021 approving the Strategy for E-Government Development towards Digital Government in the period of 2021 – 2025, with orientation to 2030 pilot using crypto currency. Specifically, the Prime Minister assigned the State Bank to assume the prime responsibility for researching, building and piloting the use of crypto currency based on “blockchain” technology. This is considered a bold step, but it is suitable for the context that illegal “underground” crypto currency exchanges are sprouting up and also opening up a lot of potential for the country’s economy.

In fact, in recent years, although the state has issued a document not to recognize crypto currencies, the opening and operation of illegal crypto currency trading platforms are still common which many Vietnamese people participate. The demand for Vietnamese people to own crypto currency is quite high which crypto currency when approved by the Government will be positively received by Vietnamese people. On the other hand, recently crypto currency has appeared in the media with incidents relating to scams, illegal trading platforms which are not protected by law. But in another aspect, crypto currency transactions also help users perform many purposes such as Hence the Decision 942/QD-TTg issued timely, although still in the testing phase, would partly solve the needs of the economy as well as create strict management and control to protect people. In addition, with the pilot recognition of crypto currencies under the management of the state, it also opens up opportunities for Vietnam to promote the development of new technologies in the e-Government development strategy towards digital government.

Some positive aspects can be mentioned when crypto currency is allowed to be used such as creating convenience in transactions. Specifically, users do not have to go through any stage or intermediary and are not limited, regardless of time and location during the transaction.

Decision 942/QD-TTg also poses many challenges for the Government in management and control. With the “mobility” characteristic, the control of “virtual currency” is not simple, especially for the country which is not yet a highly developed in information technology. Therefore, in order to put “virtual currency” into use, it is necessary to ensure the development of the corresponding technology platform, and at the same time to build a strict legal framework to minimize risks for users. On the other hand, if the “virtual currency” is not well controlled, it will become a money laundering tool, transnational money transferred from illegal co-economic activities such as smuggling, opium, terrorist financing… Another important issue is that our country’s Internet system is still unstable. Therefore, in order to be able to circulate virtual money conveniently, it is necessary for Vietnam to further develop the Internet system to ensure stability in transactions.

The crypto currency in Decision 942/QD-TTg shows the Government’s aspiration for innovation and determination in moving closer to the goal of national financial inclusion and a digital economy. However, the implementation needs to have a roadmap and orientation as well as a strong legal foundation to ensure effective implementation. Our fintech lawyers at ANT Lawyers will always follow up with development of legal framework in crypto currency and blockchain technology in Vietnam to provide update to clients.

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