Private enterprises are a very common type of business entity in Vietnam. However, during their operation, many private enterprises have been looking to expand their business and wish to change their business entity type. Effective from January 1, 2021, private enterprises will be allowed to be converted into limited liability companies (LLC), joint-stock companies (JSC), and partnerships.
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From 2021, private enterprises can be converted to which types? (Illustrative photo)
To be specific, Article 199 of the Law on Enterprises 2014 only acknowledges the case where a private enterprise is permitted to convert into a limited liability company when it meets the stipulated conditions.
However, Article 205 of the Law on Enterprises 2020, which will be applied starting from January 1, 2021, acknowledges that a private enterprise is permitted to directly convert into three types, including:
- Limited liability company;- Joint-stock company;- Partnership company;
When converting, the private enterprise needs to meet the following specific conditions:
Firstly, the converting enterprise must be granted a Certificate of Enterprise Registration. The enterprise must meet the following conditions:
- The business sectors registered are not prohibited from business investment;- The enterprise’s name must be in accordance with the law;- Have a valid enterprise registration dossier;- Pay sufficient enterprise registration fees as stipulated by the law on fees and charges.
Secondly, the owner of the private enterprise must commit in writing to take personal responsibility with all their assets for all unpaid debts and commit to fully paying such debts when due.
Thirdly, the owner of the private enterprise must have a written agreement with the parties involved in unliquidated contracts regarding the acceptance and continuation of those contracts by the converted company.
Fourthly, the owner of the private enterprise must commit in writing or have a written agreement with other capital-contributing members regarding the acceptance and use of the current labor force of the private enterprise.
Within 3 working days from the date of receiving the dossier, the Business Registration Authority will review and issue the Certificate of Enterprise Registration if it meets the stipulated conditions and update the legal status of the enterprise on the National Database of Business Registration.
Note, the converted company will inherit the rights and obligations of the private enterprise from the date it is granted the Certificate of Enterprise Registration. The owner of the private enterprise takes personal responsibility with all their assets for all debts incurred before the date the converted company is granted the Certificate of Enterprise Registration.
Thus, from January 1, 2021, private enterprises will be allowed to directly convert into a limited liability company, joint-stock company, or partnership company. This is an open regulation, helping private enterprises have more development directions when the owner wants to convert their enterprise into other types of enterprises to expand their business activities.
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