ESOP for Vietnamese Startups: Why an LLC Can't Grant Real Stock Options

Most Vietnamese startups incorporate as a limited liability company, and an LLC has no shares to grant — it has capital contribution portions, a different legal instrument entirely. Vietnam's Law on Enterprises only lets a company issue real shares once it converts into a joint stock company, so the ESOP question for a lot of founders isn't "how do we structure the pool," it's "we can't run a share-based ESOP yet." Once a company is a JSC, the ESOP mechanism itself still rests on thinner statutory ground than founders assume.

Search "ESOP Vietnam startup" and the results split the way they do for most underserved markets: securities-law commentary written for listed companies issuing bonus shares to executives, and generic cap table marketing that never names a Vietnamese statute. Here's what actually governs the grant, and where the real gaps sit.

LLC or JSC decides whether you even have shares

Vietnam gives founders two realistic entity choices: Công ty TNHH (limited liability company) and Công ty Cổ phần (joint stock company). They are not interchangeable labels for the same structure.

An LLC's ownership is denominated in capital contribution portions (phần vốn góp), not shares. The Law on Enterprises is specific: a multi-member LLC may not issue shares, with one exception — converting into a JSC. If your company is still an LLC, there is no share instrument to put an ESOP grant into, no matter how the plan is drafted. Founders sometimes substitute a contractual profit-share arrangement pegged to the LLC's capital contribution value — a reasonable retention tool, but not a share grant, and it puts the employee on no shareholder register.

A JSC is the only entity type Vietnamese law lets issue shares at all. Most startups that start as an LLC — simpler and cheaper to set up — convert to a JSC once they're raising outside capital, partly because investors expect preferred shares an LLC structurally cannot issue. The conversion is itself a real cap table event: an LLC can convert without raising new capital, by bringing in new investors, by selling existing stakes, or some combination, and the new JSC must register the change within ten days, inheriting the old entity's contracts, debts, and tax obligations. A tool tracking the LLC's capital-contribution ledger has to switch models entirely the day that closes — it isn't the same cap table with new labels.

Private JSC ESOPs: legal, but on thinner ground than founders assume

Once a company is a JSC, the picture most comparable to "can we run an ESOP" gets genuinely unsettled for anything short of a listed company.

Circular 162/2015 gives public companies a clear path to issue ESOP shares, and listed issuers use it routinely — Vingroup and VIB have both run share-based ESOP issuances under rules built for this. For an ordinary, private JSC, the statutory picture is thinner. Legal commentary disagrees with itself here: some analysis notes Vietnam has no specific ESOP definition in its current enterprise-law documents, and that the one circular addressing ESOP for ordinary joint stock companies — Circular 19/2003 — predates the current Law on Enterprises by roughly two decades. Other practitioner commentary takes the more permissive view that any JSC can design its own ESOP under its general right to issue shares, full stop.

What this means in practice: a private Vietnamese JSC running an ESOP today relies on the company's general share-issuance powers, with the board proposing the plan and the General Meeting of Shareholders (ĐHĐCĐ) approving it and amending charter capital accordingly — not a dedicated ESOP statute the way a public company has. There's no SEC- or FRA-style regulator pre-approving the plan the way a 409A process gates things in the US. The shareholder meeting is the real checkpoint, and its resolution is the document that matters if the grant is ever challenged — far more than any plan document modeled on a US or Singaporean template.

Circular 23/2024 fixed the one part of this that was genuinely broken

The clearest, most recent change doesn't touch domestic ESOPs at all — it touches the structure a lot of Vietnamese startups actually use.

Where a foreign holding company — a Delaware C-corp or a Singapore Pte Ltd above a Vietnamese operating entity — wants to grant its own shares to employees of its Vietnamese subsidiary, that used to require State Bank of Vietnam approval and registration under the country's foreign-exchange control rules. Circular 23/2024/TT-NHNN, effective August 12, 2024, removed that requirement entirely for qualifying offshore ESOPs, and widened eligibility to Vietnamese entities linked to the foreign grantor through capital contribution, not just a direct commercial presence.

The liberalization has a real limit: permitted award forms stay restricted to free shares or discounted awards that don't require the Vietnamese employee to remit money abroad to pay for them. A scheme asking a Vietnamese employee to wire funds overseas to purchase parent-company shares still needs the older, heavier foreign-exchange approval path. For the common pattern of a Singapore or Delaware holdco granting free or discounted shares to the Vietnamese team underneath it, though, this closed a real administrative gap that existed as recently as mid-2024.

The 2025 beneficial ownership law changes the nominee calculus

Law No. 76/2025/QH15, the latest amendment to the Law on Enterprises, took effect July 1, 2025, and introduced Vietnam's first beneficial ownership disclosure regime. Companies now have to report who ultimately controls or benefits from them at registration — name, nationality, ownership stake, identification — using a concept of control broad enough to reach indirect decision-making power over director appointments or charter changes, not just people holding shares in their own name.

That matters for cap table accuracy in sectors where foreign ownership caps have historically pushed founders toward nominee shareholder arrangements — a Vietnamese individual holding shares on a foreign investor's behalf, on paper, to stay under a sector cap. That arrangement depended on the real ownership staying opaque, and a disclosure regime built around look-through control removes most of that cover. A cap table that still shows a nominee as the real owner, rather than flagging the underlying arrangement, now carries more legal risk than it did a year ago, separate from whether the nominee structure was ever defensible.

Where this lands on the cap table

Put together, a Vietnamese startup's ownership record has to hold several different truths at once: capital contribution portions if it's still an LLC, real shares under general JSC powers and a GMS resolution if it's converted, a parent-company share award tracked separately under the Circular 23/2024 path, and now a beneficial-ownership disclosure obligation a nominee arrangement can't quietly sit outside of. None of this is unusual by Vietnamese standards — it's what founders who've done a conversion and a holdco round already track, typically split across a lawyer's memo, a Singapore corporate secretary's filings, and whatever spreadsheet is meant to reconcile the two.

Where Govy fits — and where it honestly doesn't yet

Govy's ledger holds more than one entity's ownership record under one login — a Vietnamese JSC's share register and a Singapore or Delaware parent's, with history preserved through a conversion or a cross-border grant rather than restarted the day the structure changes. Shares issued under a JSC's general powers, including ESOP grants, get tracked as real issuance events tied to the resolution that approved them, not as an abstract option sitting outside the register until exercise. We cover the broader Singapore holdco pattern most Vietnamese startups land in once outside capital shows up in our breakdown of cap table software for Southeast Asian startups.

To be direct about the boundary: Govy's jurisdiction-aware legal template pack currently covers Saudi Arabia, the UAE, US-Delaware, and the UK. It doesn't generate a Vietnamese share-issuance resolution, an LLC-to-JSC conversion filing, or a Circular 23/2024-compliant offshore award agreement — that paperwork still needs Vietnamese counsel. Sizing the pool and deciding what needs a lawyer's judgment versus what's repeatable tracking work is covered in our piece on running an ESOP without lawyers. What Govy replaces is the fragmented part underneath: a spreadsheet holding an LLC's capital contributions and a JSC's shares in the same columns, a holdco's grants tracked nowhere near the Vietnamese entity's own register, and an ownership picture a nominee arrangement used to be able to keep vague.

See how Govy tracks ownership and governance across more than one entity at govy.tech.

FAQ

Can a Vietnamese startup legally grant stock options to employees?

Only if it's a joint stock company (Công ty Cổ phần). A limited liability company — the entity type most Vietnamese startups actually incorporate as — has no shares to grant; it has capital contribution portions, and the Law on Enterprises only lets an LLC issue shares once it converts into a JSC. Once a company is a JSC, ESOP grants are commonly structured as real share issuances approved by the General Meeting of Shareholders.

Does a Vietnamese LLC need to convert to a joint stock company to run an ESOP?

Yes, if the plan is to issue actual shares. An LLC can approximate equity incentives through a contractual profit-share arrangement tied to its capital contribution value, but that isn't a share grant and puts the employee on no shareholder register. Most founders convert to a JSC once they're raising outside capital anyway, since investors expect preferred shares an LLC structurally cannot issue.

What changed in Vietnam's ESOP rules with Circular 23/2024?

Circular 23/2024/TT-NHNN, effective August 12, 2024, removed the State Bank of Vietnam's prior approval and registration requirement for offshore ESOPs — the common case of a foreign parent (a Delaware or Singapore holding entity) granting its own shares to employees of its Vietnamese subsidiary. Permitted award forms are still limited to free or discounted shares that don't require remitting funds abroad; a scheme requiring a cash transfer overseas still falls outside what the circular liberalized.

Does Vietnam's 2025 beneficial ownership law affect startup nominee shareholder structures?

It makes them considerably riskier. Law No. 76/2025/QH15, effective July 1, 2025, requires companies to disclose ultimate beneficial owners at registration, using a definition broad enough to reach indirect control over director appointments or charter amendments, not just direct shareholders. Nominee arrangements used to dodge foreign-ownership caps depended on that ownership staying opaque, and this law removes most of that cover.

Do Vietnamese startups need a Singapore holding company to raise venture funding?

Not legally, but it's the common pattern once institutional or cross-border investors get involved, because Singapore company law has clean statutory mechanics for preferred shares and convertible instruments that Vietnam's Law on Enterprises doesn't provide natively. The Vietnamese entity still has to exist, still runs its own ESOP and shareholder meetings under Vietnamese law, and still has its own cap table — the Singapore layer sits on top of that, not in place of it.