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Legal guide for joint stock companies after establishment
- Law on Enterprises 2020

Legal guide for joint stock companies after establishment - Law on Enterprises 2020
Legal guide for joint stock companies after establishment - Law on Enterprises 2020

Currently, with some outstanding advantages in terms of capital mobilization, a joint stock company is a popular choice among investors. However, there are many legal requirements which must be fulfilled by all joint stock companies Investors may not be fully aware of the process required to comply with the law. This article shall provide readers with some insights into such legal requirements after the issuance of enterprise registration certificate in accordance with the Enterprise Law 2020.

1. Making a seal

According to the new regulations, the enterprise law allows the company to select a form of seal from two options: seal cutting in traditional method or in the form of a digital signature in accordance with the law on electronic transactions. Retention and use of seals would be carried out in accordance with the provisions of the company’s charter or the internal regulations of the enterprise.

2. Time limit for contributing charter capital of the company post establishment

Based on the law, the time limit for shareholders to fulfill their obligations pertaining to charter capital contribution is 90 days upon the issuance of Enterprise Registration Certificates. In case the shareholders do not contribute enough or do not contribute charter capital within 90 days, company must register the change of charter capital and ownership of shareholders based on actual contribution within 30 days from the said deadline.

3. Preparing and managing the book of shareholder registration

The Law on Enterprises stipulates that after establishment, a joint stock company (“JSC”) must prepare and store the book of shareholder registration. It is an important internal document to confirm the transfer of shares and ownership of shares of shareholders, and is the basis for conducting the division of profits in JSC. Shareholder registration books are kept at the head office of the company or other organizations eligible to keep this document. After 90 days from the issuance of Enterprise Registration Certificate, the shareholder status of the owner of JSC is officially recognized only after such information is recorded in the book of the enterprise. Thus,  shareholder registration book is crucial in the operation of JSC.

4. Completing the management structure of the company

Organizational structure greatly affects the business activities of the company. Although this information must be specified in the application for JSC establishment submitted at the Department of Planning and Investment, e.i.specified in the company’s charter. However, to complete the management structure of the enterprise and to comply with the law, immediately after establishment, JSC needs to carry out the following work to complete the organizational structure of the enterprise:

(i) General Meeting of Shareholders shall elect the Board of Directors of the Company:

According to the enterprise law, the board of directors of the Company is the management department of the company, and has full rights to decide on behalf of the company and exercise the rights and obligations of the company, except for the rights and obligations under the competence of the General Meeting of Shareholders. Accordingly, the Board of Directors plays an important role in the management of the enterprise. The selection and election of members and organization of the Board of Directors of JSC must comply with the enterprise law and the company’s charter.

(ii) General Meeting of Shareholders shall determine the structure of the company’s management organization: In accordance with the law on enterprises, JSC has the right to choose the management and operation organization under one of the following two models:

  • General Meeting of Shareholders, Board of Directors, Supervisory Board and Director or General Director. In case JSC has less than 11 shareholders and the shareholders are the holding organizations that own 50% of the total shares of the company, it is not required to have a Supervisory Board.
  • General Meeting of Shareholders, Board of Directors and Director or General Director. In this case, at least 20% of the board members must be independent members and have an audit committee under the Board of Directors. Organizational structure, functions and tasks of the Audit Committee are specified in the company’s charter or the operating regulations of the Audit Committee promulgated by the Board of Directors.

Accordingly, depending on the size of JSC and the opinion of shareholders, the general meeting of shareholders may decide on the appropriate management structure of the company.

(iii) General Meeting of Shareholders shall carry out other necessary work to complete the organizational structure of the enterprise in accordance with the enterprise law and the company’s charter. It includes election of the Supervisory Board (if any), budgetor total remuneration, bonuses and other benefits to the Board of Directors and Supervisory Board, approval of internal governance regulations, regulations on operation of the Board of Directors and Control Board, etc.

(iv) The Board of Directors shall hold a meeting to elect the Chairman of the Board of Directors, select the positions of managing the company such as director, general director, etc. and perform tasks under their jurisdiction in accordance with the law.

From the above information, it can be seen that the enterprise law lays down regulations on the work that JSC must carry out post establishment. To learn more about these tasks, readers can refer to the relevant provisions in the enterprise law 2020.

The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.