From 2021, Private Enterprises Can Convert Directly into Joint Stock Companies

From 2021, private enterprises can directly convert into JSC - Illustrative photo

Specifically, at present, the Enterprise Law 2014 only allows direct conversion of a private enterprise into a limited liability company (LLC) and does not allow direct conversion of a private enterprise into a joint-stock company (JSC). If a private enterprise wishes to convert into a JSC, the conversion must be performed indirectly. Specifically:

Step 1: Convert the private enterprise into a limited liability company in accordance with Article 199 of Enterprise Law 2014.

Step 2: After completing the procedures for converting from a private enterprise to a limited liability company, the company will carry out the conversion from a limited liability company to a joint-stock company in accordance with Clauses 2, 3, 4, 5 of Article 196 of Enterprise Law 2014.

However, since the Enterprise Law 2020 takes effect, i.e., from January 1, 2021, a private enterprise can directly convert into a JSC without the need for the two steps as currently required if the following conditions are met:

- The enterprise being converted must satisfy the conditions stipulated in Clause 1, Article 27 of Enterprise Law 2020, specifically:

+ The registered business lines and trades are not prohibited from business investment;

+ The enterprise's name is in compliance with Articles 37, 38, 39, and 41 of this Law;

+ The enterprise has a valid enterprise registration dossier;

+ The enterprise has paid the registration fee as prescribed by law on fees and charges.

- The owner of the private enterprise must make a written commitment to be personally liable with all their assets for all unpaid debts and to fully pay off the debts when due;

- The owner of the private enterprise must have a written agreement with the parties of unliquidated contracts regarding the company to be converted inheriting and continuing to execute those contracts;

- The owner of the private enterprise must make a written commitment or have a written agreement with other capital-contributing members on the acceptance and use of the existing labor force of the private enterprise.

Within 03 business days from the date of receiving the dossier, the business registration authority shall review and issue the Enterprise Registration Certificate if the above conditions are met and update the legal status of the enterprise in the National Business Registration Database.

Note: The converted company shall naturally inherit all rights and obligations of the private enterprise from the date the Enterprise Registration Certificate is issued. The owner of the private enterprise shall be personally liable with all their assets for all debts incurred before the date the converted company is issued the Enterprise Registration Certificate.

Nguyen Trinh

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