Differences Between Limited Liability Company and Joint Stock Company

Vietnam Law allows the establishment of a 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 shres 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.

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Hanoi looks to boost cooperation with Germany’s Thuringia State

Establish company inVietnam

Hanoi is willing to cooperate with and create favourable conditions for German enterprises as a whole and those from Thuringia State in particular to do business in the city, Chairman of the municipal People’s Committee Nguyen Duc Chung affirmed.

Addressing a working session with a high-level delegation of Germany’s Thuringia State, led by its Minister President Bodo Ramelow, in Hanoi on April 8, Chung suggested that the two sides strengthen the sharing of experience and continue to carry out specific cooperation projects, especially in the areas of Hanoi’s demand, such as labour, vocational training, the provision of highly technical medical equipment, digitalisation of databases, and smart city building.

He informed the guests of Hanoi’s socio-economic development over the past few years and also touched on the major challenges currently faced by the city concerning the training of high-quality human resources, traffic congestion and environmental pollution.

One of Hanoi’s efforts to deal with the aforementioned challenges is to accelerate cooperation with European countries, including Germany, Chung said, stating that modern the technological equipment of Germany and Thuringia State are quite suitable for Hanoi.

For his part, Minister President of Thuringia Bodo Ramelow affirmed that relations between Thuringia and Hanoi have been growing finely over recent times, with Thuringia’s businesses highly appreciating the learners from Vietnam.

He voiced his wish that Hanoi and Vietnam would continue to be a trusted partner of Thuringia, agreeing with the Hanoi mayor on the enhancement of experience sharing between the two sides and further bilateral cooperation in the handling of environmental pollution issues and vocational training.

The high-ranking delegation of Germany’s Thuringia State, led by its Minister President Bodo Ramelow, is paying a working visit to Vietnam (Hanoi and Ho Chi Minh City) from April 6 to 13, at the invitation of Deputy Prime Minister and Foreign Minister Pham Binh Minh

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Trading Conditions on Medical Device in Viet Nam

Medical device includes device related to human health, therefore, the business of medical device in the conditional business line in accordance with the law of Vietnam. Medical device is defined as kinds of device, tools, materials for implanting activities, reagents and in vitro calibration solutions, software which are used separately or in association with each other according to the instruction of their owners for human use for the purpose of diagnostic, prevention, supervision, treatment and elimination the illness or to making up for pains.

For medical device trading purpose in Vietnam, first of all, the enterprise should classify medical device. Medical device circulated in Vietnam will be classified based on the level of potential risks associated with the technical design and manufacture of such medical device.

Pursuant to Decree No.36/2016/ND-CP on medical device management, medical device shall be classified into the following 2 groups which are divided into 4 types as follows:

– Type 1 comprises Type A medical device which is medical device with low level of risks.

– Type 2 comprises Type B, C and D medical device, where

+ Type B medical device is medical device with lower average level of risks;

+ Type C medical device is medical device with upper average level of risks;

+ Type D medical device is medical device with high level of risks.

In case medical device can be classified into two or more levels of risk, the classification by the highest risk level of such medical device shall be applied. The classification of medical device must be conducted by qualified organizations as provided by law. In addition, the law of Vietnam recognizes the results of classification of medical device made by competent regulatory body in other countries such as Korea, Japan, … on the basis of international treaties or international arrangements to which Vietnam is a party or of a country which adopts a medical device classification system similar to that adopted by Vietnam.

After classifying medical device, the enterprise shall declare applicable standards for Type A medical device or issue certificate of free-sale registration for Type B, C, D medical device. This procedure makes sure that medical device which the enterprise has trading requirements, is allowed to be distributed in Vietnam.

Finally, with the exception of medical device of type A, in order to directly sell medical device to consumers, the enterprise needs to ensure the staffing requirements as well as the material facility requirements in accordance with the law, for instance:

Trading premise must have technically qualified staffs to perform the installation and use instructions suitable to the medical device which the establishment buys and sells, including at least one qualified technical staff specialized in technical or medical or pharmaceutical medical or technical colleges of medical device or higher or college or higher degree, whose specialized training is appropriate to the type of medical device that the establishment purchase.

Trading premise needs to prepare the warehouse which has area in accordance with the type and the quantity of the medical device to be stored. The warehouse should be airy, dry, clean, separated from sources of pollution and satisfied with other storing requirement device according to its manual. In addition, trading premise shall have suitable transportation vehicles for delivering of medical devices from trading premise to received place. In case there are no storage facilities or transport means, a contract with an establishment satisfying requirements for storage facilities and transport of medical device shall be concluded

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TAX OBLIGATIONS FOR FOREIGN ENTITY DOING BUSINESS IN VIETNAM

The applicable taxes including value added tax (VAT), corporate income tax (CIT) and personal income tax (PIT).

On August 6th 2014, the Ministry of Finance issued Circular No. 103/2014/TT-BTC guiding the implementation of tax obligations that are applicable to foreign organizations and individuals doing business in Vietnam or having incomes generated in Vietnam.

Taxpayers: foreign contractors, foreign subcontractors; organizations established and operated under the law of Vietnam, organizations register to operate under the law of Vietnam, other organizations, individuals producing and trading.

The applicable taxes including value added tax (VAT), corporate income tax (CIT) and personal income tax (PIT).

Taxable income of foreign contractors and foreign subcontractors is income derived from the provision and distribution of goods; provision of service, service in association with goods in Vietnam on the basis of the contractor contract and subcontractor contract.

CIT Payable

=

Revenue subject to CIT

x

CIT rate calculated on taxable turnover

Subjects liable for VAT: services or services associated with goods provided by foreign contractors, foreign subcontractors on the basis of the contractor contract, subcontractor contract to use for manufacturing, trading and consumption in Vietnam.

Incomes arising in Vietnam of foreign contractors and foreign subcontractors are earnings received in any forms on the basis of the contractor contract, subcontractor contract (except for cases specified in Article 2, Chapter I of this Circular), regardless of the place conducting business operations of foreign contractors and foreign subcontractors.

Circular specifically instruct the following cases:

1. Pay VAT by deduction method; pay CIT on the basis of cost and revenue declaration to determine taxable income.

2. Pay VAT and CIT by percentage on turnover.

3. Pay VAT by deduction method; pay VAT by percentage on turnover.

Issued together with Circular 103 is the tax declaration form for foreign contractor.

This Circular takes effect from October 1st 2014, replaces Circular No. 60/2012/TT-BTC dated April 12th2012 of Ministry of Finance guiding the implementation of tax obligation applicable to the foreign organizations and individuals doing business in Vietnam or having income in Vietnam.

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FORMS OF DISPUTES AND APPROACHES TO SETTLEMENT

Dispute in Vietnam could be between parties in business transaction, foreign investors and Vietnam government, or between countries in implementing international treaties.

The formation of market economy in Vietnam took place in the context of the development in the width and depth of the economic ties at a significant fast pace that make Vietnam an important part of the world supply chain.  Vietnam suppliers could sell the goods and services to the world and the foreign supplier could also export their goods and services to Vietnam market.  Further, as the Vietnam market opens up, foreign investors could invest through various establish business in Vietnam i.e. acquire equities in Vietnam companies, establish business in Vietnam.  During this process, disputes are an inevitable result which has been growing in scale and complexity.

Most should agree that disputes shall be construed as the dissent, inconsistencies or conflicts of interests, rights and obligations between the parties in the economic relations at different levels. Accordingly, economic disputes can have the following basic forms:

1. Disputes in business are between the participants in a business transaction including investments, production to consumption of products or performance of services on the market for profit purposes i.e. professional and product liability, debt disputes over a business transaction, franchise disputes,intellectual property disputes, and disputes over contract for supply of goods or services…

1. Disputes between foreign investors with Vietnam government agencies, arising in the implementation of the BTO, BT, BOT, and the implementation of international agreements on promotion and protection bilateral and multilateral investment i.e. government policy and policy measures, concession to water and sewerage, power or energy supply, project or contract payment…

1. Disputes between countries in the implementation of the international bilateral and multilateral agreements.

In Vietnam, as the disputes arise, parties involved could consider resolving the matters through negotiation, mediation, arbitration, or taking court actions after taking consideration of various factors including cost, time, and the complexity of the disputes.  Litigation law firm in Vietnam with skillful dispute lawyers should be consulted to provide the suitable advice for dispute resolution.

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Forms of Disputes and Approaches to Settlement.

Dispute in Vietnam could be between parties in business transaction, foreign investors and Vietnam government, or between countries in implementing international treaties.

The formation of market economy in Vietnam took place in the context of the development in the width and depth of the economic ties at a significant fast pace that make Vietnam an important part of the world supply chain.  Vietnam suppliers could sell the goods and services to the world and the foreign supplier could also export their goods and services to Vietnam market.  Further, as the Vietnam market opens up, foreign investors could invest through various forms of investments in Vietnam i.e. acquire equities in Vietnam companies, establish business in Vietnam.  During this process, disputes are an inevitable result which has been growing in scale and complexity.

Most should agree that disputes shall be construed as the dissent, inconsistencies or conflicts of interests, rights and obligations between the parties in the economic relations at different levels. Accordingly, economic disputes can have the following basic forms:

1. Disputes in business are between the participants in a business transaction including investments, production to consumption of products or performance of services on the market for profit purposes i.e. professional and product liability, debt disputes over a business transaction, franchise disputes,intellectual property disputes, and disputes over contract for supply of goods or services…
2. Disputes between foreign investors with Vietnam government agencies, arising in the implementation of the BTO, BT, BOT, and the implementation of international agreements on promotion and protection bilateral and multilateral investment i.e. government policy and policy measures, concession to water and sewerage, power or energy supply, project or contract payment…
3. Disputes between countries in the implementation of the international bilateral and multilateral agreements.

In Vietnam, as the disputes arise, parties involved could consider resolving the matters through negotiation, mediation, arbitration, or taking court actions after taking consideration of various factors including cost, time, and the complexity of the disputes.  Litigation law firm in Vietnam with skillful dispute lawyers should be consulted to provide the suitable advice for dispute resolution.

For advise or service request, please contact us via email ant@antlawers.vn, or call +84 8 3520 2779 (HCMC Office), +84 4 39388751 (Hanoi Office).  To learn more about us, please visitwww.antlawyers.vn 

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