Procedures For Division And Seperation Of Enterprises

In the process of operating, large scale development of enterprises may lead to an imbalance in the company’s internal management. Therefore, enterprises need to take measures to overcome the above problem. Division and separation of enterprises are two of the ways to reorganize the enterprise structure, helping the enterprise’s management more efficient. For readers to fully understand the procedures for division and separation of enterprises, LTS LAW would like to give some legal contents related to the division and separation of enterprises under the Law on Enterprises 2014.

Objects of enterprises: Under prescribed in Article 192 and 193 of the Law on Enterprises 2014, only joint-stock company and limited liability company have the right to perform the procedures for division and separation of enterprises.

Division of enterprises: means a joint-stock company, a limited liability company divided into one or several new companies (hereinafter referred to as transferee company). After establishing the transferee company, operations of the old company (hereinafter referred to as transferor company) shall be terminated. The rights and obligations of the divided company are transferred from the divided company to the new companies.

Separation of enterprises: means a joint-stock company or a limited liability company separates a part of its assets and contribution capital to establish one or several new companies (hereinafter referred to as transferee company). The old company (hereinafter referred to as transferor company) still operates normally after the new company is established.

Methods of enterprises’ division

– Partial division: Only part of stakes/shares of members/shareholders and several assets proportional to the value of stakes/shares are transferred to the transferee companies according to their holding in the transferor company and corresponding to the value of assets transferred to the transferee companies;

– Total division: All of stakes/shares of one or some members/shareholders and several assets proportional to the value of stakes/shares are transferred to the transferee enterprises;

– A combination of both cases.

Methods of enterprises’ seperation

– Partial separation: Only part of stakes/shares of members/shareholders and several of assets proportional to the value of stakes/shares are transferred to the transferee companies according to their holding in the transferor company and corresponding to the value of assets transferred to the transferee companies;

– Total separation: All of stakes/shares of one or some members/shareholders and several of assets proportional to the value of their stakes/shares are transferred to the transferee companies;

– A combination of both cases above.

Step 1: The Board of members, Company Owner, General Meeting of Shareholders of the transferor company shall organize a meeting and notify the decision on division and separation of the enterprise.

Within 15 days from the date of ratification of the division/separation Resolution, the Company shall send the Resolution to the creditors and notify all employees.

Step 2: Members, Company Owner, or shareholders of each of the transferee companies shall ratify its charter, elect or designate Chairpersons of the Board of members, the company’s President, the Board of Directors, Director/General Director, and apply for business registration.

Step 3: Prepare all documents on the division/separation of the enterprise.

The dossier for division/separation of the enterprise includes the following documents:

• Application form for enterprise registration;
• Draft charter of the company;
• List of members of the company, founding shareholders (for multi-member limited liability company and joint-stock company);
• Resolution of division/separation of enterprises;
• Minutes of the General Meeting of Shareholders for a joint-stock company, the Members’ Council for multi-member limited liability company on the division/separation of the enterprise;
• Valid copies of the following documents:
• Valid Identification Card (or Passport) becomes effective for individual members; for individual members;
• Business Registration Certificate/ Enterprise Registration Certificate for organization members, with personal identification documents, authorization decision of the authorized representative of the organization;
• Enterprise Registration Certificate or other equivalent documents of the transferor company.

Step 4: Apply the application and return the results

–  The enterprise proceeds to submit dossiers of division/separation of enterprises to the Business Registration Authorities where the head office is located. The Business Registration Authorities is responsible for examining the documents and requesting the enterprise to amend or supplement it if necessary.

–  After 3 working days, the enterprise will receive a new Enterprise Registration Certificate if the application meets the requirements.

–  Business Registration Authorities shall update the status of termination of the transferor company on the National Business Registration Database if it is the case of the enterprise’s division.

 –  The transferee company engraves the seal and announced the seal sample.

Note:

After business registration, the transferor company and transferee companies are jointly responsible for the unpaid debts, employment contracts, and other liabilities of the transferor company, unless otherwise agreed among the transferor company, transferee companies, the transferor company’s creditors, customers, and employees.

For the division of enterprises, The transferor company shall cease to exist after the transferee companies are issued with their Certificates of Business registration. Transferee companies are jointly responsible for the unpaid debts, employment contracts, and other liabilities of the transferor company, or reach agreements with the creditors, customers, and employees to decide on one of the companies to settle such obligations.

3. The business registration authority shall update the legal status of the transferor company on the National Business Registration Database when issuing Certificates of Business registration to transferee companies.