Currently, the establishment of business units has enriched the country, brought great benefits to business owners as well as created jobs. However, it also entails many procedures that arise during the operation such as division, consolidation, and acquisition of enterprises. In this article, LSX legal firm provides: “Distinguish division, consolidation, acquisition of enterprises in Vietnam”
Legal grounds
- Law on Enterprise 2020
- Decree 01/2021/ND-CP
Distinguish division, consolidation, acquisition of enterprises in Vietnam
Full division of enterprises under Vietnamese legislation
Full division: the situation in which a limited liability company or joint stock company (the divided company) divides its assets, rights, obligations, and members/shareholders to establish two new companies or more.
Procedures for full division of enterprises:
- Firstly, the Board of Members, the owner, or General Meeting of Shareholders of the divided company shall ratify the resolution or decision on the full division of the company in accordance with the Law on Enterprise 2020 and the company’s charter. The resolution or decision shall contain the name and headquarters address of the divided company; names of the new companies; rules and procedures for division of the company’s assets; employment plan; method for division; time limit and procedures for transfer of shares/stakes to the divided company to the new companies; rules for settlement of the divided company’s obligations; division time. This resolution or decision shall be sent to all creditors and employees within 15 days from its issuance date or ratification date;
- Secondly, the members, owners, or shareholders of each new company shall ratify its charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director, and apply for enterprise registration in accordance with this Law. The enterprise registration application of the new company shall be enclosed with the full division resolution/decision mentioned above.
Partial division under Vietnamese legislation
A limited liability company or joint stock company may partially divide by transferring part of the divided company’s assets, rights, obligations, and members/shareholders to one or some new limited liability companies or joint stock companies without ceasing the existence of the divided company.
The divided company shall register the change in charter capital, the number of members/shareholders in proportion to the decrease in the stakes/shares, and the quantity of members/shareholders and apply for registration of the new companies.
Partial division procedures:
- Firstly, the Board of Members, the owner, or General Meeting of Shareholders of the divided company shall ratify the resolution or decision on the full division of the company in accordance with the Law on Enterprise and the company’s charter. The resolution or decision on the partial division of the company shall contain the name and headquarters address of the divided company; the name of each new company; employment plan; method for division; values of assets, rights, and obligations transferred from the divided company to the new company/companies; division time. This resolution or decision shall be sent to all creditors and employees within 15 days from its issuance date or ratification date.
- Secondly, the members, owners, or shareholders of each new company shall ratify its charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director, and apply for enterprise registration in accordance with the Law on Enterprise 2020.
Consolidation of companies under Vietnamese legislation
Two or more companies (consolidating companies) may be consolidated into a new company (consolidated company), after which the consolidating companies shall cease to exist.
Consolidation procedures:
- Firstly, the consolidating companies shall prepare the consolidation contract and charter of the consolidated company. The contract shall contain the names and addresses of the consolidating companies; the name and address of the consolidated company; procedures and conditions for consolidation; employment plan; consolidation time; deadline and conditions for the transfer of assets, shares/stakes, as well as bonds of the consolidating companies to the consolidated company.
- Secondly, the members, owners, or shareholders of the consolidating companies shall ratify the consolidation contract, the consolidated company’s charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director of the consolidated company and apply for registration of the consolidated company in accordance with the Law on Enterprise. The consolidation contract shall sent to the creditors and employees within 15 days from the date of ratification.
Acquisition of companies under Vietnamese legislation
One or some companies (acquired companies) may acquire by another company (acquiring company) by transferring all of the acquired company’s assets, rights, obligations, and lawful interests to the acquiring company, after which the acquired company shall cease to exist.
Acquisition procedures:
- Firstly, the acquiring company and acquired company shall prepare the acquisition contract and draft the charter of the acquiring company. The contract shall contain the name and address of the acquiring company; name and address of the acquired company; procedures and conditions for acquisition; employment plan; acquisition time; method, procedures, deadline, and conditions for the transfer of assets, shares/stakes as well as bonds of the acquired company to the acquiring company.
- Secondly, the members, owners, or shareholders of the companies shall ratify the acquisition contract and the acquiring company’s charter and apply for registration of the acquiring company in accordance with this Law. Besides, the acquisition contract shall sent to the creditors and employees within 15 days from the date of ratification.
- Thirdly, after the acquiring company carries out the registration procedure, the acquired companies shall cease to exist. The acquiring company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts, and other obligations of the acquired company under the acquisition contract.
Legal service of LSX Legal Firm
LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:
- Legal advice related to new regulations;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
- Represent to submit documents, receive results, and hand them over to customers.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself; We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
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Related questions
According to the concept of a sole proprietorship, a sole proprietorship means an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets. So, no distinction between the assets of the enterprise and the assets of the owner of a sole proprietorship exists, so it cannot become a legal entity and cannot apply for reorganization forms.
After applying for registration, the divided company and the new company/companies shall be jointly responsible for unpaid debts, employment contracts and other obligations of the divided company or unless otherwise agreed upon by the divided company, the new company/companies, the divided company’s creditors, clients and employees.
The consolidated company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts and other obligations of the consolidating companies under the consolidation contract.
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