Enterprise division is a form of reorganization. A joint-stock company may be divided by transfer of part of the assets, rights, obligations, and shareholders of the existing company (herein referred to as the divided company) to establish one or several new joint-stock companies (herein referred to as the new company) without terminating the existence of the divided company.
Hong Bang Law would like to provide advice and guidance on procedures for the division of joint-stock companies under the valid Enterprise Law 2020:
Legal basis
- Law on Enterprises 2020
- Decree No. 01/2021/ND-CP detailing business registration
- Circular No. 01/2021/TT-BKHDT guiding the enterprise registration
Conditions
- After registering the enterprise, the divided company and the new company must jointly be responsible for the obligations, outstanding debts of the labor contract, and other property obligations of the divided company, unless the divided company and the new company, creditors, customers, employees of the divided company have other agreements.
- Divided companies naturally inherit all legal rights, obligations, and interests divided according to the company’s resolutions and decisions.
Procedure
Step 1: Meeting of the General Meeting of Shareholders of the company on the division of the enterprise.
The General Meeting of Shareholders of the divided company shall pass resolutions and decisions on separation of the company following the Law on Enterprises and the company’s charter.
The resolution on a division of the company must include the following main contents: The head office’s name and address of the divided company, name of the divided company to be established, plan for using labor; the method of dividing company, the value of assets, rights, and obligations transferred from the divided company to the new company; deadline for division of the company.
Step 2: Send the resolution or decision to separate the above company to all creditors and notify the employee within 15 days from the date of the decision or resolution issuance.
Step 3: Shareholders of the company are divided through the Charter or appoint The President of the Board of Directors, the chairman of the company, the Board of Directors, the Director, or the General Director.
Step 4: The divided company must register the change of charter capital, the number of members, shareholders corresponding to the contributed capital, shares, and the number of members and shareholders decreased (if any);
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