Distinguish between business division and business separation in Vietnam
Accordingly, business division and business separation are forms of business reorganizations. Indeed, many entrepreneurs might find these two forms being similar and hard to discriminate; therefore, in this article, LSX will give you more details on the topic.
Legal ground
- 2020 Enterprise Law
Definition of business division and business separation
Hence the provision of the Enterprise Law, a business division is a type of enterprise reorganization, applicable to LLCs and JSCs; thus, an LLC or a JSC may divide its shareholders, members, and company assets to establish two or more new companies.
On the other hand, a business separation is a form in which an enterprise is split into two or more enterprises without terminating the existence of the separated enterprise. Accordingly, an LLC or a JSC may be separated by transferring part of the assets, rights, obligations, members, and shareholders of the existing company to establish one or several LLCs or JSCs without terminating the existence of the separated company.
Similarities between business separation and division
- Firstly, only JSCs and LLCs are able to carry on the division and separation of business procedure
- Secondly, the new companies after division and separation will be the same type as the previous one
- Thirdly, after the division or separation, the new companies must still be responsible for the previous company. In fact, debts, employment contracts, financial obligations are all shared responsibility
- Fourthly, the procedures for division and separation of enterprises are similar, the applicant may submit the dossier at the Business Registration Office of the Department of Planning and Investment where the enterprise’s head office is located.
Differences between business division and business separation
Although these forms of business reorganization may sound identical; however, they are not the same; due to these reasons:
| Criteria | Business division | Business separation |
| Legal ground | Article 198, Enterprise Law | Article 199, Enterprise Law |
| Intention | Form two or more new companies. | Establish one or several new companies. |
| Form | Divide shareholders, members, assets of the company. A = B + C – A is the original company – B and C are the new companies | Transfer a part of assets, rights, and obligations of the existing company. A = A + B – A is the original company – B is the new company |
| Legal result | Consequently, the new company received a business license, the divided enterprise no longer exists. | Both the separated and decoupled businesses have operational existence; in which there are responsibilities and obligations to each other. |
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Related questions
The registration fee is VND 100,000, and free if register virtually.
The enterprises may receive the certificate within 03 working days from the date of receipt of complete and valid dossiers.
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