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What is a business division under Vietnamese Law?

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Accordingly, a business division under Vietnamese Law is a form of business reorganization; with the aim of increasing business efficiency. However, this activity needs to be carried out following the law. So, in this article, LSX will give you a brief on the issue.

  • 2020 Enterprise Law
  • Decree 01/2021/ND-CP

What is a business division?

Hence the provision of the Enterprise Law, a business division is a type of enterprise reorganization, applicable to LLCs and JSCs; whereby an LLC or a JSC may divide its shareholders, members, and company assets to establish two or more new companies.

Forms of a business division

Basically, JSCs and LLCs can divide their company with the following methods:

Firstly, a part of contributed capital, shares of members and shareholders together with assets corresponding to the value of contributed capital or shares are divided to new companies; according to the percentage of ownership in the divided company; and to the value of the asset for the new company.

Secondly, the new company will receive the entire contributed capital, shares of one or several members, shareholders; together with assets corresponding to the value of shares, their contributed capital.

Thirdly, the combination of the two cases specified above.

Order of a business division

When meeting the conditions for the division of the business; the Members’ Council, the company owner, or the General Meeting of Shareholders of the divided company shall agree and pass a resolution on a division of the company.

A resolution or decision on the division of the company must include the following principal contents:

  • Name, head office address of the company being divided, names of companies to be established
  • Principles, methods and procedures for dividing company assets
  • Labor use plan
  • Method of division, time limit and procedures for converting contributed capital, shares and bonds of the divided company to newly established companies
  • Principles for settling obligations of the divided company
  • Time limit for division of the company

Besides, resolutions, decisions on the division of the company must be sent to all creditors and notified to employees; within 15 days from the date of decision or resolution.

Nonetheless, members, company owners, or shareholders 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 the General Director, and business registration. In this case, the enterprise registration dossier for the new company will enclose the resolution or decision on the division of the company.

Dossier for business registration on the basis of business divisions

Correspondingly, a dossier for business registration based on business divisions will be similar to that in the case of business mergers, business consolidation.

Firstly, the divided company ceases to exist after the new company receives an Enterprise Registration Certificate.

Secondly, new companies must be jointly liable for unpaid debts, labor contracts, and other property obligations of the divided company; agree with creditors, customers, and employees to one of those companies to fulfill these obligations.

Hope that the article could help you solve your problem. In case you have any questions, please contact Lawyer X for quick and best legal services: 0833102102.

See more:

How much does it cost to change business registration contents after division?

The registration fee is VND 100,000, and free if register virtually.

How long does it take to receive the Certificate of the change in business registration contents?

The enterprises may receive the certificate within 03 working days from the date of receipt of complete and valid dossiers.

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