What is business separation under Vietnamese Law?

by QuynhHuong

Accordingly, like business division, merger, and consolidation; business separation under the Enterprise Law is a method of reorganizing the company. Therefore, to separate the business, enterprises must follow the regulation of the Law. So, in this article, LSX will give you details on the issue.

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

What is business separation?

Basically, 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.

Forms of business separation?

Hence the regulations of 2020 Enterprise Law, businesses may separate in the following forms:

  • 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 corresponding value of assets transferred to the new company
  • The entire contributed capital, shares of one or several members and shareholders together with assets; new companies will receive it corresponding to the value of their shares and contributed capital

Order of business separation

When meeting the condition of business separation, the Members’ Council, the company owner, or the General Meeting of Shareholders of the separated company shall adopt a resolution or decision on the separation of the company; following the enterprise law and the company’s charter.

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

  • Name and head office address of the separated company
  • The name of the new company
  • Labor use plan
  • How to separate the company
  • The value of assets, rights and obligations transferred from the separated company to the separated company
  • The time limit for the separation of the company.

Besides, the resolutions, all creditors, employees will receive the decisions on the separation of the company; within 15 days from the date of issuance of the decision or adoption of the resolution.

Nonetheless, members, company owners, or shareholders of the company are separated through the Charter; elect or appoint the Chairman of the Members’ Council, the President of the company, the Board of Directors, the Director or General Director, and conduct business registration.

Dossier for business separation

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

Subsequently, the separated company and the separated company must be jointly liable for unpaid debts, labor contracts, and other property obligations of the separated company; except for the following cases: the separated company, the newly established company, creditors, customers, and employees of the separated company have other agreements.

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 separation?

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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