Division and separation of enterprises are two forms of corporate restructuring. However, the procedure for dividing and separating a business is quite complicated, not every organization or individual can do it. LSX Lawfirm will give you an article about: “Procedures for division and separation of businesses in Vietnam”, as follows:
Legal grounds
– Enterprise Law 2020
– Decree 01/2021/ND-CP on business registration
– Circular 01/2021/ TT-BKHDT guiding business registration
– Other relevant legal documents (Law on Banking, Law on Credit Institutions, Law on Tourism, Law on Insurance Business, etc.)
The concept and method of division and separation of businesses
Enterprise division or separation is the reorganization of an enterprise for the purpose of improving business efficiency. Division and separation of enterprises are two different concepts specified in Articles 198 and 199 of the Enterprise Law 2020 as follows:
First, Enterprise division: A limited liability company, a joint stock company may divide the assets, rights and obligations, members and shareholders of the existing company (hereinafter referred to as the divided company). to form two or more new companies.
A limited liability company or a joint-stock company may divide its shareholders, members and assets to establish two or more new companies by one of the following methods:
+ A part of contributed capital, shares of members and shareholders together with assets corresponding to the value of contributed capital or shares divided to new companies according to the percentage of ownership in the divided company and corresponding value of assets transferred to the new company;
+ The entire capital contribution and shares of one or several members and shareholders together with assets corresponding to the value of their shares and contributed capital transferred to new companies;
Second, Separation of enterprises: A limited liability company or a joint stock company separated by transferring part of the assets, rights, obligations, members and shareholders of the existing company (hereinafter referred to as the company). separated company) to establish one or several new limited liability companies or joint stock companies (hereinafter referred to as the separated company) without terminating the existence of the separated company.
A limited liability company and a joint stock company may separate an enterprise in the following ways:
+ Separation of a part of contributed capital, shares of members and shareholders together with assets corresponding to the value of contributed capital, shares are transferred to new companies according to the percentage of ownership in the separated company and the corresponding value of assets transferred to the new company.
+ Separation of all contributed capital and shares of one or several members and shareholders together with assets corresponding to the value of shares, their contributed capital is transferred to new companies.
Conditions for division/separation of enterprises
The division and separation of the company is an extremely important issue, because this directly affects the existence, assets, contributed capital/shares, and members/shareholders of the company.
In order to conduct business division and separation smoothly and without facing legal risks in the future, business owners need to understand clearly whether their business type allowed to divide or split, and at the same time rely on The difference between dividing an enterprise and separating an enterprise is to choose the form that is suitable for their business.
Conditions for division of enterprises
+ Enterprises must have the type of enterprise as a limited liability company or a joint stock company.
+ The written consent of the Members’ Council, the company owner or the General Meeting of Shareholders required, specifically the resolution or decision on division of the company. The agreement on division of the company must comply with the provisions of the Enterprise Law 2020 and the company’s charter, and at the same time, the content of the resolution and decision on division of the company must contain all the required contents at Point a, Clause 2. Article 198 of the Enterprise Law 2020.
+ The divided company must cease to exist, the owners of new companies must register the establishment of an enterprise according to the provisions of Decree No. 01/2021/ND-CP.
Conditions for separation of enterprises
+ Enterprises must have the type of enterprise as a limited liability company or a joint stock company.
+ The written consent of the Members’ Council, the company owner or the General Meeting of Shareholders required, specifically a resolution or decision on separation of the company. The agreement on separation of the company must comply with the provisions of the Enterprise Law 2020 and the company’s charter, and at the same time, the content of the resolution and decision on separation of the company must contain all the required contents at Point a, Clause 2. Article 199 of the Enterprise Law 2020.
+ The separated company must register to change its charter capital, the number of members and shareholders corresponding to the contributed capital and shares and the decrease in the number of members and shareholders (if any); concurrently register the business for the separated companies.
Procedures for business division/separation
Division and separation of companies is a form of enterprise reorganization, in which not all types of enterprises allowed to perform division and separation activities. According to the provisions of the Enterprise Law 2020, only joint stock companies and limited companies allowed to carry out this activity. Other types of enterprises such as private enterprises, partnerships cannot divide or separated.
Pursuant to Articles 198 and 199 of the Enterprise Law 2020, specific regulations on the order of division/separation of enterprises are as follows:
Step 1: The Members’ Council, the company owner or the General Meeting of Shareholders of the divided company adopts a resolution or decision on division of the company in accordance with this Law and the company’s charter.
A resolution or decision on division of the company must include the following principal contents:
+ Name, head office address of the company divided, names of companies established;
+ Principles, methods and procedures for dividing company assets; labor use plan; distribution method, time limit
+ Procedures for converting contributed capital, shares and bonds of the divided company to newly established companies;
+ Principles for settling the obligations of the divided company; time limit for division of the company.
Resolutions or decisions on division of the company sent to creditors and notified to employees within 15 days from the date of issuance or adoption of the resolution.
Step 2: A member, company owner or shareholder of a newly established company ratifies the Charter, elects or appoints the Chairman of the Members’ Council, the President of the company, the Board of Directors, the Director or General Director and conduct enterprise registration in accordance with the provisions of this Law. In this case, the enterprise registration dossier for the new company enclosed with a resolution or decision on division of the company in accordance with the provisions of the Enterprise Law 2020.
A dossier of business division/separation includes:
– Application for registration of new business establishment (Appendix I-4 issued together with Circular No. 01/2021/TT-BKHDT dated March 16, 2021)
– Charter of the new company
List of founding members and shareholders of the new company (for limited liability companies with two or more members and joint stock companies)
– Minutes of the meeting of the General Meeting of Shareholders for joint-stock companies, the Members’ Council for limited liability companies with two or more members on the division/separation of the company.
– Resolution on business division/separation
– A valid copy of the Certificate of Business Registration or another equivalent document of the divided/separated company
– Valid copies of the following documents:
+ Valid ID card (or Passport) for individual members;
+ Certificate of business registration/Certificate of business registration for members being organizations, together with personal identification papers, authorization decision of the authorized representative of the organization.
Step 3: Submit the application and receive the result
Enterprises submit 01 application to the Business Registration Office – Department of Planning and Investment of the province/city under central authority where the enterprise is located.
Within 03 working days after receiving complete and valid dossiers, the Business Registration Office shall issue the Certificate of Business Registration and update the legal status of the divided/separated company in the National Database of Registration. Enterprise registration when issuing the Certificate of Business Registration to a new company (According to Clause 3, Article 61 of Decree No. 01/2021/ND-CP on enterprise registration)
Related articles
Conditions for establishing specialized libraries in Vietnam
Which court to file a lawsuit when fired illegally in Vietnam?
Experiences for foreigners to rent houses in Vietnam should note
Related questions
A general partner has the right to request a meeting of the Board of Partners to discuss and decide its business. The requesting partner shall prepare the meeting documents and agenda.
General partners shall assume different managerial positions in the partnership under agreement.
When some or all general partners perform certain business activities together, it will be decided under the majority rule.
A general partner’s activities beyond the scope of operation of the partnership are not responsibility of the partnership unless they are accepted by the other partners.
1. A general partner must not be the owner of a sole proprietorship, a general partner of another partnership unless it is accepted by the other general partners.
2. A general partner must not, in their own names or others’ names, do business in the same business lines as those of the partnership for personal gain or to serve the interests of another organization or individual.
3. A general partner must not transfer part or all of his/her stake in the company to another organization or individual unless it is accepted by the other general partners.
Contact LSX Lawfirm
Finally, hope this article is useful for you to answer the question about: “Procedures for division and separation of businesses in Vietnam”. If you need any further information, please contact LSX Law firm : +84846175333 or Email: [email protected]
Conclusion: So the above is Procedures for division and separation of businesses in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
