Re-organization of enterprises

Legal basis

• Law on enterprises 2020
• Decree No. 01/2021/ND-CP dated January 04, 2021, on enterprise registration
• Circular No. 01/2021/TT-BKHDT dated March 16, 2021, on guidance on enterprise registration

Re-organization of enterprises

Division of companies (Article 198 of Law on enterprises 2020)

Limited liability companies and shareholding companies may divide their assets, rights and obligations, members, or shareholders of the existing company (hereinafter referred to as the company being divided) in order to establish two or more new companies.

Procedures for division of a limited liability company or shareholding company shall be as follows:

Step 1: The Member’s Council, the company owner, or the General Meeting of Shareholders of the company being divided shall pass a resolution or decision on the division of the company in accordance with the provisions of Law on enterprises 2020 and the charter of the company. The resolution or decision on the division of the company shall have the following main details:

• The name and address of the head office of the company being divided;
• Names of companies to be established;
• The principles, methods, and procedures for division of assets of the company;
• The plans for the employment of employees;
• Methods of distribution, the time-limit, and procedures for transfer of capital contribution portions, shares, and bonds of the company being divided to the newly-established companies;
• The principles for dealing with the obligations of the company being divided; and the time-limit for implementing the division of the company.

The resolution or decision on the division of the company shall be sent to all creditors and notified to employees within fifteen (15) days from the date of issuance of the decision or passing of the resolution

Step 2: Members, company owner, or shareholders of newly-established companies shall pass the charter, elect or appoint the chairman of the Member’s Council, chairman of the company, the Board of Management, director or general director and carry out enterprise registration in accordance with Law on enterprises 2020. The enterprise registration dossier of a newly established company shall comprise the following papers (Clause 1, Article 25 of  Decree No. 01/2021/ND-CP):

• An application for enterprise registration in the forms of Appendix 2,3,4 enclosed with Circular No. 01/2021/TT-BKHDT
• The company’s charter
• A list of members, for a limited liability company with two or more members; or a list of founding shareholders and shareholders being foreign investors, for a joint-stock company.
• Copies of the following papers:
• Any of the personal identification papers of the enterprise’s representative at law
• Personal identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being individuals; organization identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations; personal identification papers of representatives authorized by the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations and their powers of attorney. If the members and shareholders are foreign organizations, copies of their organization identification papers shall be consular legalized/Personal identification papers of the company owners being individuals; organization identification papers of the company owners (except for company owner being the State) being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the company owners are foreign organizations, copies of their organization identification papers shall be consular legalized;
• The investment registration certificate, for an enterprise established by foreign investors or foreign-invested economic organizations in accordance with the Law on Investment and guiding documents.
• The resolution or decision on company division as prescribed in Article 198 of the Law on Enterprises 2020;
• A copy of the minutes of the meeting of the Members' Council, for a limited liability company with two or more members, or of the Shareholders' General Meeting, for a joint-stock company, on the company division.

Note: The company being divided ceases to exist after the new companies are issued with ERCs. The new companies must be jointly liable for unpaid obligations and debts, labour contracts, and other property obligations of the company being divided or shall agree with creditors, customers and employees in order for one of such companies to perform such obligations. The new companies shall automatically inherit all of the lawful rights, obligations, and interests which were divided pursuant to the resolution or decision dividing the company.

Step 3: The BRO shall update the legal status of the company being divided on the national enterprise registration database upon issuance of ERCs to new companies. If the head office address of a new company is located outside the province or city under central authority where the company being divided has its head office, the BRO in the locality where the new company has its head office must notify the enterprise registration for the new company to the BRO in the locality where the company being divided has its head office in order to update the legal status of the company being divided on the national enterprise registration database.

Separation of companies (Article 199 of Law on enterprises 2020)

Limited liability companies and shareholding companies may be separated by transferring part of the assets, rights, obligations, members, or shareholders of the existing company (hereinafter referred to as the company being separated) to establish one or more new LLCs or shareholding companies (hereinafter referred to as the separated company) without terminating the existence of the company being separated.

Procedures for separation of a LLC or shareholding company are as follows:

Step 1: The company being separated must register any change to the charter capital and the number of members or shareholders corresponding to their capital contribution portions or shares and the number of members or shareholders reduced (if any), and at the same time, implement enterprise registration for separated companies.

Step 2: The Member’s Council, the company owner, or the General Meeting of Shareholders of the company being separated shall pass a resolution or decision on separation of the company in accordance with the provisions of Law on enterprises 2020 and the charter of the company. The resolution or decision on separation of the company shall have the following main details:

• The name and address of the head office of the company being separated;
• The names of separated companies to be established; the plan for employment of employees;
• Method of separation of the company;
• The value of assets, rights, and obligations to be transferred from the company being separated to the separated company(ies); and the time limit for implementing the separation of the company.

The resolution or decision on separation of the company shall be sent to all creditors and notified to employees within fifteen (15) days from the date of issuance of the decision or passing of the resolution.

Step 3: Members, company owners, or shareholders of the separated companies shall pass a charter, elect or appoint a chairman of the Member’s Council, chairman of the company, the Board of Management, director or general director, and implement enterprise registration in accordance with Law on enterprises 2020. The enterprise registration dossier of the split company shall comprise the following papers (Clause 2, Article 25 of  Decree No. 01/2021/ND-CP):

• An application for enterprise registration in the forms of Appendix 2,3,4 enclosed with Circular No. 01/2021/TT-BKHDT
• The company’s charter
• A list of members, for a limited liability company with two or more members; or a list of founding shareholders and shareholders being foreign investors, for a joint-stock company.
• Copies of the following papers:
• Any of the personal identification papers of the enterprise’s representative at law
• Personal identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being individuals; organization identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations; personal identification papers of representatives authorized by the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations and their powers of attorney. If the members and shareholders are foreign organizations, copies of their organization identification papers shall be consular legalized/Personal identification papers of the company owners being individuals; organization identification papers of the company owners (except for company owner being the State) being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the company owners are foreign organizations, copies of their organization identification papers shall be consular legalized;
• The investment registration certificate, for an enterprise established by foreign investors or foreign-invested economic organizations in accordance with the Law on Investment and guiding documents.
• The resolution or decision on company split as prescribed in Article 199 of the Law on Enterprises 2020;
• A copy of the minutes of the meeting of the Members' Council, for a limited liability company with two or more members, or of the Shareholders' General Meeting, for a joint-stock company, on the company split

Note: After enterprise registration, the company being separated and the separated company(ies) must be jointly liable for unpaid obligations and debts, labour contracts, and other property obligations of the company being separated, unless otherwise agreed as between the company being separated, the separated company, creditors, customers and employees of the company being separated. The separated companies automatically inherit all the lawful rights, obligations, and interests which were separated pursuant to the resolution or decision on separation of the company.

Consolidation of companies (Article 200 of Law on enterprises 2020)

Two or more companies (hereinafter referred to as companies being consolidated) may be consolidated into a new company (hereinafter referred to as the consolidated company) and at the same time, terminate the existence of the companies being consolidated.

Procedures for consolidation of companies are as follows:

Step 1: Companies being consolidated shall prepare a consolidation contract and the draft charter of the consolidated company. The consolidation contract shall have the following main details:

• The names and head office addresses of the companies being consolidated;
• The name and address of the head office of the consolidated company;
• The procedures and conditions for consolidation;
• The plan for employment of employees;
• The time-limit, procedures, and conditions for conversion of assets, for conversion of capital contribution portions, shares, and bonds of the companies being consolidated into capital contribution portions, shares, and bonds of the consolidated company;
• The time-limit for implementing the consolidation.

The consolidation contract shall be sent to all creditors and notified to employees within fifteen (15) days from the date of its passing.

Step 2: Members, owners, or shareholders of companies being consolidated shall pass the consolidation contract and the charter of the consolidated company, elect or appoint the chairman of the Member’s Council, chairman of the company, the Board of Management, the director or general director of the consolidated company and implement enterprise registration for the consolidated company in accordance with Law on enterprises 2020. The enterprise registration dossier of the consolidating company shall comprise the following papers (Clause 3, Article 25 of  Decree No. 01/2021/ND-CP):

• An application for enterprise registration in the forms of Appendix 2,3,4,5 enclosed with Circular No. 01/2021/TT-BKHDT
• The company’s charter
• A list of members, for a limited liability company with two or more members; or a list of founding shareholders and shareholders being foreign investors, for a joint-stock company.
• Copies of the following papers:
• Any of the personal identification papers of the enterprise’s representative at law
• Personal identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being individuals; organization identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations; personal identification papers of representatives authorized by the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations and their powers of attorney. If the members and shareholders are foreign organizations, copies of their organization identification papers shall be consular legalized/ Personal identification papers of the company owners being individuals; organization identification papers of the company owners (except for company owner being the State) being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the company owners are foreign organizations, copies of their organization identification papers shall be consular legalized/ Personal identification papers of partnership members being individuals; organization identification papers of partnership members being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the members are foreign organizations, copies of their organization identification papers shall be consular legalized;
• The investment registration certificate, for an enterprise established by foreign investors or foreign-invested economic organizations in accordance with the Law on Investment and guiding documents.
• The consolidation agreement prescribed in Article 200 of the Law on Enterprises 2020;
• A copy of the minutes of the meeting of the Members’ Council for a limited liability company with two or more members or a partnership, or of the Shareholders' General Meeting, for a joint stock company, on the company consolidation.

Note:

- A company being consolidated must ensure compliance with the Law on Competition regarding consolidation of companies.

- After the consolidated company has conducted enterprise registration, the companies being consolidated cease to exist; the consolidated company is entitled to the lawful rights and interest and is liable for unpaid obligations and debts, labour contracts, and other property obligations of the companies being consolidated. The consolidated company automatically inherits all the lawful rights, obligations, and interests of the companies being consolidated pursuant to the contract for consolidation of companies.

Step 3: The business registration office [BRO] shall update the legal status of companies being consolidated on the national enterprise registration database upon issuance of an ERC to the consolidated company. If the head office address of a company being separated is located outside the province or city under central authority where the consolidated company has its head office, the BRO in the locality where the consolidated company has its head office must notify the enterprise registration to the BRO in the locality where the company being consolidated has its head office in order to update the legal status of the company being consolidated on the national enterprise registration database.

Merger of companies (Article 201 of Law on enterprises 2020)

One or more companies (hereinafter referred to as merging companies) may be merged into another company (hereinafter referred to as the merged company) by way of transfer of all lawful assets, rights, obligations, and interests to the merged company and, at the same time, terminate the existence of the merging companies.

Procedures for merger of companies shall be stipulated as follows:

Step 1: Related companies shall prepare a merger contract and a draft charter of the merged company. The merger contract must have the following main details:

• The name and address of the head office of the merged company;
• The name(s) and addresses of the head office(s) of the merging company(ies);
• The procedures and conditions for the merger;
• The plan for employment of employees; the methods, procedures, time-limit, and conditions for conversion of assets, for conversion of capital contribution portions, shares, and bonds of the merging company(ies) to capital contribution portions, shares, and bonds of the merged company;
• The time-limit for implementing the merger;

          The merger contract shall be sent to all creditors and notified to employees within fifteen (15) days from the date of its passing;

Step 2: Members, company owners, or shareholders of related companies shall pass the merger contract and the charter of the merged company and implement enterprise registration for the merged company in accordance with Law on enterprises 2020. The enterprise registration dossier of the merger company shall comprise the following papers:

• An application for enterprise registration in the forms of Appendix 2,3,4,5 enclosed with Circular No. 01/2021/TT-BKHDT
• The company’s charter
• A list of members, for a limited liability company with two or more members; or a list of founding shareholders and shareholders being foreign investors, for a joint-stock company.
• Copies of the following papers:
• Any of the personal identification papers of the enterprise’s representative at law
• Personal identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being individuals; organization identification papers of the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations; personal identification papers of representatives authorized by the company’s members, founding shareholders or shareholders, who are foreign investors, being organizations and their powers of attorney. If the members and shareholders are foreign organizations, copies of their organization identification papers shall be consular legalized/ Personal identification papers of the company owners being individuals; organization identification papers of the company owners (except for company owner being the State) being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the company owners are foreign organizations, copies of their organization identification papers shall be consular legalized/ Personal identification papers of partnership members being individuals; organization identification papers of partnership members being organizations; personal identification papers of representatives under authorization and their powers of attorney. If the members are foreign organizations, copies of their organization identification papers shall be consular legalized;
• The investment registration certificate, for an enterprise established by foreign investors or foreign-invested economic organizations in accordance with the Law on Investment and guiding documents.
• The merger agreement prescribed in Article 200 of the Law on Enterprises 2020;
• A copy of the minutes of the meeting of the Members’ Council for a limited liability company with two or more members or a partnership, or of the Shareholders' General Meeting, for a joint stock company, on the company merger.

          Note:

- Companies involved in conducting the merger must comply with the Law on Competition regarding merger of companies.

- After the merged company has conducted enterprise registration, the merging companies cease to exist; the merged company is entitled to the lawful rights and interests and is liable for unpaid obligations and debts, labour contracts, and other property obligations of the merging companies. The merged company automatically inherits all the lawful rights, obligations, and interests of the merging companies pursuant to the merger contract.

Step 3: The BRO shall update the legal status of merging companies on the national enterprise registration database and shall make amendment to the contents of enterprise registration for the merged company. If the head office address of a merging company is located outside the province or city under central authority where the merged company has its head office, the BRO in the locality where the merged company has its head office shall notify the enterprise registration to the BRO in the locality where the merging company has its head office in order to update the legal status of the merging company on the national enterprise registration database.

Conversion of limited liability companies into shareholding companies (Article 202 of Law on enterprises 2020)

- State-owned enterprises shall be converted into shareholding companies in accordance with relevant laws.

- A limited liability company may be converted into a shareholding company by the following methods:

(a) It is converted into a shareholding company without raising additional contributed capital from other organizations or individuals or without selling any portion of capital contribution to other organizations or individuals;

(b) It is converted into a shareholding company by way of raising additional contributed capital from other organizations or individuals;

(c) It is converted into a shareholding company by way of selling all or part of capital contribution portion to one or more other organizations or individuals;

(d) Combination of the methods stated in sub-clauses (a), (b) and (c) of this clause and other methods.

- A company must register its conversion with the BRO within ten (10) days from the date of completion of the conversion. Within three working days from the date of receipt of an application file for conversion, the BRO shall issue a new ERC and update the legal status of the company on the national enterprise registration database.

- The converted company automatically inherits all lawful rights and interests of the company being converted and is responsible for debts, including tax debts, labour contracts, and other obligations of the company being converted.

Conversion of shareholding companies into single-member limited liability companies (Article 203 of Law on enterprises 2020)

- A shareholding company may be converted into a single member LLC by the following methods:

(a) One shareholder receives an assignment of the entire corresponding shares of all remaining shareholders;

(b) One organization or individual not being a shareholder receives an assignment of the entire shares of all shareholders of the company;

(c) The company still has only one shareholder.

- The assignment or receipt of an investment capital contribution stipulated in clause 1 above must be implemented on the basis of market price [and/or] price determined by the asset method, the discounted cash flow method, or other methods.

- Within fifteen (15) days from the date on which the company has only one shareholder or completes assignment of shares as stipulated in clauses 1(a) and 1(b) of this article, the company shall send an application file for conversion with the BRO at the place where the enterprise implemented [business] registration. Within three working days from the date of receipt of the application file for conversion, the BRO shall issue an ERC and update the legal status of the company on the national enterprise registration database.

- A converted company automatically inherits all the lawful rights and legal interests and is responsible for all debts including tax debts and labour contracts and other obligations of the company being converted.

Conversion of shareholding companies into limited liability companies with two or more members (Article 204 of Law on enterprises 2020)

- A shareholding company may be converted into a limited liability company with two or more members [multiple LLC] by the following methods:

(a) It is converted into a multiple LLC without raising additional [capital] from or assigning shares to other organizations or individuals;

(b) It is converted into a multiple LLC at the same time as it raises contributed capital from other organizations or individuals;

(c) It is converted into a multiple LLC at the same time as it assigns all or part of shares to other capital contributing organizations or individuals;

(d) It only has two remaining shareholders;

(dd) Combination of the methods stipulated in sub-clauses (a), (b) and (c) above and other methods.

- A company must register its conversion with the BRO within ten (10) days from the date of completion of the conversion. Within three working days from the date of receipt of an application file for conversion, the BRO issues an ERC and updates the legal status of the company on the national enterprise registration database.

- A converted company automatically inherits all lawful rights and interests of the company being converted and is responsible for debts, including tax debts, labour contracts, and other obligations of the company being converted.

Conversion of private enterprises into limited liability companies, shareholding companies, or partnerships (Article 205 of Law on enterprises 2020)

- A private enterprise may be converted into a LLC, shareholding company, or partnership pursuant to a decision of the owner of the private enterprise if it satisfies all the following conditions:

(a) The converted enterprise must satisfy the conditions stipulated in article 27.1 of this Law;

(b) The owner of the private enterprise undertakes in writing to be personally responsible by all his own assets for all unpaid debts and undertakes to pay all debts when due;

(c) The owner of the private enterprise agrees in writing with parties to contracts which have not yet been discharged [liquidated] that the converted company shall take over and perform such contracts;

(d) The owner of the private enterprise provides written undertakings or enters into a written agreement with other capital contributing members on receipt and employment of existing employees of the private enterprise.

- Within three working days from the date of receipt of an application file, the BRO shall consider and issue an ERC if all the conditions stipulated in clause 1 of this article are satisfied, and update the legal status of the enterprise on the national enterprise registration database.

- A converted company automatically inherits all rights and obligations of the private enterprise from the date of issuance of the ERC. The private enterprise owner is personally responsible by his or her entire assets for all debts arising prior to the date on which the converted company is issued with the ERC.

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