What are the regulations on full and partial division, consolidation, acquisition or conversion of companies in Vietnam? - Hoang Minh (Dong Nai, Vietnam)
Article table of contents
Regulations on full and partial division, consolidation, acquisition or conversion of companies in Vietnam (Internet image)
1. Full division of companies in Vietnam
According to Article 198 of the Law on Enterprise 2020, the full division of enterprises is as follows:
- Full division is the situation in which a limited liability company or joint stock company (the divided company) divides its assets, rights, obligations, members/shareholders to establish two new companies or more.
- Full division procedures:
+ The Board of Members, the owner or General Meeting of Shareholders of the divided company shall ratify the resolution or decision on fully division of the company in accordance with this Law and the company's charter.
The resolution or decision shall contain the
++ Name and headquarters address of the divided company;
++ Names of the new companies;
++ Rules and procedures for division of the company’s assets;
++ Employment plan;
++ Method for division;
++ Time limit and procedures for transfer of shares/stakes to the divided company to the new companies;
++ Rules for settlement of the divided company’s obligations;
++ Division time.
This resolution or decision shall be sent to all creditors and employees within 15 days from its issuance date or ratification date;
+ The members, owner or shareholders of each new company shall ratify its charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director and apply for enterprise registration in accordance with Law on Enterprise 2020.
The enterprise registration application of the new company shall be enclosed with the full division resolution/decision mentioned in Point a of Article 198 of the Law on Enterprise 2020.
- The quantity of members or shareholders, their holdings of shares/stakes and charter capital of the new company shall be written according to the full division resolution/decision.
- The divided company shall cease to exist after the new companies are granted the Certificate of Enterprise Registration.
The new companies shall be jointly responsible for unpaid debts, unfulfilled liabilities, employment contracts and other obligations of the divided company or reach an agreement with the divided company’s creditors, clients and employees that one of the new companies will fulfill these obligations.
The new companies obviously inherit all rights, obligations and lawful interests of the divided company under the full division resolution/decision.
- The business registration authority shall update the status of the divided company in the national enterprise registration database when issuing the Certificate of Enterprise Registration to the new companies.
In case a new company is headquartered outside the province in which the divided company is headquartered, the business registration authority of the province in which the divided company is headquartered shall make the update.
2. Partial division of companies in Vietnam
Partial division of enterprises is prescribed in Article 199 of the Law on Enterprise 2020 as follows:
- A limited liability company or joint stock company may be partially divided by transfer part of the divided company’s assets, rights, obligations, members/shareholders to one
Or some new limited liability companies or joint stock companies without ceasing the existence of the divided company.
- The divided company shall register the change in charter capital, quantity of members/shareholders in proportion to the decrease in the stakes/shares and quantity of members/shareholders and apply for registration of the new companies.
- Partial division procedures:
+ The Board of Members, the owner or General Meeting of Shareholders of the divided company shall ratify the resolution or decision on partial division of the company in accordance with this Law and the company's charter.
The resolution or decision on partial division of the company shall contain the
++ Name and headquarters address of the divided company;
++ Name of each new company;
++ Employment plan;
++ Method for division;
++ Values of assets, rights and obligations transferred from the divided company to the new company/companies;
++ Division time.
This resolution or decision shall be sent to all creditors and employees within 15 days from its issuance date or ratification date;
+ The members, owner or shareholders of each new company shall ratify its charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director and apply for enterprise registration in accordance with Law on Enterprise 2020.
- After applying for registration, the divided company and the new company/companies shall be jointly responsible for unpaid debts, employment contracts and other obligations of the divided company or
Unless otherwise agreed upon by the divided company, the new company/companies, the divided company’s creditors, clients and employees.
The new company/companies obviously inherit all rights, obligations and lawful interests that are transferred under the partial division resolution/decision.
3. Consolidation of companies in Vietnam
- Two or more companies (consolidating companies) may be consolidated into a new company (consolidated company), after which the consolidating companies shall cease to exist.
- Consolidation procedures:
+ The consolidating companies shall prepare the consolidation contract and charter of the consolidated company.
The contract shall contain the
++ Names and addresses of the consolidating companies;
++ Name and address of the consolidated company;
++ Procedures and conditions for consolidation;
++ Employment plan;
++ Deadline and conditions for transfer of assets, shares/stakes, bonds of the consolidating companies to the consolidated company;
++ Consolidation time;
+ The members, owners or shareholders of the consolidating companies shall ratify the consolidation contract, the consolidated company’s charter, elect or designate the President of the Board of Members, President of the company, Board of Directors, the Director/General Director of the consolidated company and apply for registration of the consolidated company in accordance with Law on Enterprise 2020.
The consolidation contract shall be sent to the creditors and employees within 15 days from the day on which it is ratified.
- The consolidating companies shall comply with regulations Competition Law on consolidation of companies.
- After the consolidated company is registered, the consolidating companies shall cease to exist.
The consolidated company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts and other obligations of the consolidating companies under the consolidation contract.
- The business registration authority shall update the status of the consolidating companies to the national enterprise registration database when issuing the Certificate of Enterprise Registration to the consolidated company.
In case the consolidating companies are headquartered outside the province in which the consolidated company is headquartered, the business registration authority of the province in which the consolidated company is headquartered shall make the update.
(According to Article 200 of the Law on Enterprise 2020)
4. Acquisition of companies in Vietnam
- One or some companies (acquired companies) may be acquired by another company (acquiring company) by transfer all of the acquired company’s assets, rights, obligations and lawful interests to the acquiring company, after which the acquired company shall cease to exist.
- Acquisition procedures:
+ The acquiring company and acquired company shall prepare the acquisition contract and draft the charter of the acquiring company.
The contract shall contain the
++ Name and address of the acquiring company;
++ Name and address of the acquired company;
++ Procedures and conditions for acquisition;
++ Employment plan;
++ Method, procedures, deadline and conditions for transfer of assets, shares/stakes, bonds of the acquired company to the acquiring company;
++ Acquisition time;
+ The members, owners or shareholders of the companies shall ratify the acquisition contract and the acquiring company’s charter and apply for registration of the acquiring company in accordance with Law on Enterprise 2020.
The acquisition contract shall be sent to the creditors and employees within 15 days from the day on which it is ratified;
+ After the acquiring company is registered, the acquired companies shall cease to exist.
The acquiring company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts and other obligations of the acquired company under the acquisition contract.
- The companies shall comply with regulations Competition Law on consolidation of companies during the acquisition process.
- The business registration authority shall update the status of the acquired company to the national enterprise registration database and revise the Certificate of Enterprise Registration of the acquiring company.
In case the acquired company is headquartered outside the province in which the acquiring company is headquartered, the business registration authority of the province in which the acquiring company is headquartered shall request the business registration authority of the province in which the acquired company is headquartered to make the update.
(According to Article 201 of the Law on Enterprise 2020)
5. Conversion of a limited liability company into a joint stock company in Vietnam
- The conversion of a state-owned enterprise into a joint stock company shall comply with relevant laws.
- A limited liability company can be converted into a joint stock company:
+ without raising additional capital from other organizations and individuals or selling stakes;
+ by raising additional capital from other organizations and individuals;
+ by selling all or part of the stakes to one or some organizations and individuals; or
+ combining the methods specified in Points a, b and c of Clause 2 of Article 202 of Law on Enterprise 2020 and other methods.
- The conversion shall be registered with the business registration authority within 10 days from the day on which the conversion is complete. Within 03 working days from the receipt of the application for conversion, the business registration authority shall reissue the Certificate of Enterprise Registration and update the company’s status to the national enterprise registration database.
- The joint stock company obviously inherits all lawful rights and interests, debts including tax debts, employment contract and other obligations of the limited liability company.
(According to Article 202 of the Law on Enterprise 2020)
6. Conversion of a joint stock company into a single-member limited liability company in Vietnam
- A joint stock company can be converted into a single-member limited liability company as follows:
+ A shareholder receives all shares of the other shareholders;
+ A organization or individual other than a shareholder receives all shares of all shareholders;
+ Only 01 shareholder remains in the company.
- The transfer or receipt of shares specified in Clause 1 of this Article shall be made at market value or a value determined by asset-based method or discounted cash flow method or another method.
- Within 15 days from the occurrence of any of the events specified in Clause 1 of Article 203 of the Law on Enterprise 2020, an application for conversion shall be submitted to the business registration authority where the enterprise is registered.
Within 03 working days from the receipt of the application, the business registration authority shall issue the Certificate of Enterprise Registration and update the company’s status to the national enterprise registration database.
- The limited liability company obviously inherits all lawful rights and interests, debts including tax debts, employment contract and other obligations of the joint stock company.
(According to Article 203 of the Law on Enterprise 2020)
7. Conversion of a joint stock company into a multiple-member limited liability company in Vietnam
- A joint stock company can be converted into a multiple-member limited liability:
+ without raising additional capital or selling stakes;
+ by raising additional capital from other organizations and individuals;
+ by transfer all or part of the shares to other organizations and individuals;
+ when only 02 shareholders remain in the company; or
+ combining the methods specified in Points a, b and c of this Clause and other methods.
- The conversion shall be registered with the business registration authority within 10 days from the day on which the conversion is complete. Within 03 working days from the receipt of the application for conversion, the business registration authority shall issue the Certificate of Enterprise Registration and update the company’s status to the national enterprise registration database.
- The limited liability company obviously inherits all lawful rights and interests, debts including tax debts, employment contract and other obligations of the joint stock company.
(According to Article 204 of the Law on Enterprise 2020)
8. Conversion of a sole proprietorship into a limited liability company, joint stock company or partnership in Vietnam
- The owner of a sole proprietorship may convert it into a limited liability company, joint stock company or partnership if the following conditions are fully satisfied:
+ The sole proprietorship satisfies the conditions specified in Clause 1 Article 27 of Law on Enterprise 2020;
+ The owner makes a written commitment to take personal responsibility for all unpaid debts and pay them when they are due with all of his/her assets;
+ The owner has a written agreement with the parties of ongoing contracts that the new company will take over and continue executing these contracts.
+ The owner shas a written commitment or agreement with other limited partners to continue hiring the existing employees of the sole proprietorship.
- Within 03 working days from the receipt of the application, the business registration authority shall consider issuing the Certificate of Enterprise Registration if the conditions specified in Clause 1 of this Article are fully satisfied and update the enterprise’s status to the national enterprise registration database.
- The new company obviously inherits all rights and obligations of the sole proprietorship from the issuance date of the Certificate of Enterprise Registration. The owner of the sole proprietorship shall be personally responsible for all debts that are incurred before this day with all of his/her assets.
(According to Article 205 of the Law on Enterprise 2020)
Quoc Dat
