Organizational Structure of Joint Stock Companies under the 2020 Enterprise Law

 Structure of Joint Stock Companies

Overview of Joint Stock Companies

According to the regulations of the 2020 Enterprise Law, a joint stock company possesses the following characteristics:

• A joint stock company has the status of a juridical person;
• The charter capital is divided into units of equal value
• The minimum number of shareholders is 03 and there is no limit on the maximum number of shareholders
• A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;
• Shareholders may transfer their shares to other persons except for some exceptions.
• A joint stock company may issue shares, bonds and other kinds of securities to raise capital.

Models of Joint Stock Company Organization

According to Article 137 of the 2020 Enterprise Law, a joint stock company can choose one of two organizational and management models:

Model 1

In Model 1, The joint stock company is organized into four main components:

• Shareholders’ General Meeting
• Board of Directors
• Board of Controllers
• Director or General Director

However, if the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, a Board of Controllers is not mandatory

Model 2

In the second model of joint stock company organization, there will only be three main components, which is fewer than the first model by one component. Specifically, the second model will consist of the following components:

• Shareholders’ General Meeting 
• Board of Directors 
• Director or General Director

According to the 2020 Enterprise Law, in this model, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors

Construction of a Joint Stock Company

Structure the Management Board of a Joint Stock Company

General Meeting of Shareholders

According to Article 138 of the 2020 Enterprise Law, the Shareholders’ General Meeting can be understood as the supreme body of a joint stock company. It includes all shareholders with voting rights in the company, such as ordinary shareholders, preferred shareholders with voting rights, and other shareholders as stipulated in the company’s charter.

Regarding the powers of the Shareholders’ General Meeting: Because the Shareholders’ General Meeting is the highest authority in a joint stock company, it has the power to decide and approve important issues of the company, as specifically stipulated in Article 138 of the 2020 Enterprise Law.

The Board of Directors

According to Article 153 of the 2020 Enterprise Law, the Board of Directors of a joint stock company is the highest management body of the company. The Board of Directors has the right to make decisions on behalf of the joint stock company, perform rights and obligations of the company, except the rights and obligations of the General Meeting of Shareholders. 

The Board of Directors of a joint stock company has the following characteristics:

• The number of members of the Board of Directors ranges from 3 to 11 members. The specific quantity of members of the Board of Directors shall be prescribed by the company’s charter
• The term of office of a member of the Board of Directors shall not exceed 05 years without term limit
• Specific Term of Office, number of Board of Directors members required to be resident in Vietnam as specified in the company’s charter.

Board of Controllers

 According to the provisions of the 2020 Enterprise Law, the Board of Controllers has the following functions:

• Supervising internal management and business activities within the joint-stock company.
• Reviewing and appraising the company’s accounting work and financial reports.
• Inspecting the compliance with the company’s charter, resolutions, and decisions of the Board of Directors, and the Chairman of the Board of Directors.

According to the provisions of Article 168 of the 2020 Enterprise Law regarding the Board of Controllers, it has the following characteristics:

• The number of members of the Board of Controllers is from 03 to 05 member
• The term of office of a Controller shall not exceed 05 years
• The Controller may be re-elected with an unlimited term.
• The title of The Chief Controller shall be elected by the Board of Controllers among the Controllers
• The process of election, dismissal, and removal shall follow the principle of majority.
• The conditions for the title of The Chief Controller include holding a university degree or higher in one of the fields of economics, finance, accounting, auditing, law,… or related fields to the company’s business activities.
• The Board of Controllers must have more than half of its members residing in Vietnam.

The Director/General Director

According to the 2020 Enterprise Law, the title of director/general director is defined as follows:

• The title of director/general director in a joint-stock company is held by the person who manages and manage the company’s everyday business operation.
• The director/general director shall be appointed by the Board of Directors from a member of the Board of Directors or may be hired by the Board of Directors from outside.
• The director/general director is supervised by the Board of Directors
• The director/general director shall be responsible to the law and the Board of Directors for the exercise of the rights and obligations assigned.

The Director/General Director has the following rights and obligations:

• Has the authority to decide everyday operating issues of the company that are outside the jurisdiction of the Board of Directors
• Organize the implementation of resolutions and decisions of the Board of Directors;
• Organize implementation of the company’s business plans and investment plans; 
• Propose the company’s organizational structure, rules and regulations; 
• Designate, dismiss the company’s executives, except those under jurisdiction of the Board of Directors;
• And other rights as stipulated in Article 3 of Article 162 of the Enterprise Law 2020.…

Keyboard of Management of Joint Stock Company

Service for establishing joint stock companies in accordance with the Enterprise Law

At Long Phan, we provide services for establishing joint stock companies, including:

• Advising on the structure of joint stock companies; Organizational Structure of Joint Stock Companies
• Advising on procedures for establishing joint stock companies;
• Advising on licenses, business sectors of the company;
• Advising on procedures, powers of positions within joint stock companies;
• Advising on naming the company, legal representatives, charter capital of the company, Organizational Structure of Joint Stock Companies;
• Assisting in drafting documents, procedures for establishing joint stock companies;
• Acting on behalf of clients to carry out procedures for establishing joint stock companies;
• Representing clients in dealings with relevant authorities;
• Advising on legal issues after business establishment.Tư vấn cấu trúc công ty cổ phần;

Building an effective organizational structure for the company will help maximize the management of leadership levels and the operational processes of operating agencies. If you have any questions or need assistance from experienced experts in the field of business consulting, please contact us via Hotline: 0906.735.386.