Splitting and separating a business are two forms of restructuring the organizational structure to align with the needs and capabilities of the enterprise, especially when the business faces management difficulties due to its large scale. However, this process requires strict adherence to legal regulations. Below is a detailed guide based on the 2020 Enterprise Law:
According to the provisions of Articles 192 and 193 of the 2020 Enterprise Law, only limited liability companies (LLCs) and joint-stock companies are permitted to carry out the division and separation. Other types of enterprises are not regulated on this issue.
- Business splitting: This is when a limited liability company or a joint-stock company divides into several new companies. After the division process is completed, the company being divided will cease to exist.
- Business separation: This is the process in which a limited liability company or a joint-stock company separates a portion of its assets to establish one or more new companies, while the separated company continues to operate.
The difference between splitting and separating a business lies in the legal consequences. Business division leads to the termination of the original company's existence, while business separation maintains the existence of the separated company.
b. Sequence Implementation:
1. The members' council, the owner, or the general meeting of shareholders of the company approves the resolution to divide the company.
2. The resolution to divide the company must be sent to creditors and notified to employees within 15 days from the date of approval.
3. Members/shareholders of the company have just approved the Charter, appointed the management board, and proceeded with the business registration.
c. Profile Preparation:
- Application for business registration.
- Draft of the new company charter.
- List of founding members/shareholders.
- Resolution to divide the company.
- Copies of personal identification documents and business registration certificates.
d. Time Resolution: 03 – 05 working days from the date of receipt of the application.
e. Result: Business registration certificate.
4. Business Separation Procedure
a. Method Business Separation:
- Separate a portion of the capital contribution and shares along with the corresponding assets to transfer to new companies.
- Transfer all contributions and shares of one or more members/shareholders to new companies.
- Combine both methods above.
b. Sequence Implementation:
1. The members' council, the owner, or the general meeting of shareholders approves the resolution to split the company.
2. The resolution to separate the company must be sent to creditors and notified to employees within 15 days from the date of approval.
3. Members/shareholders of the company have just approved the Charter, appointed the management board, and proceeded with the business registration.
c. Profile Preparation:
- Application for business registration.
- Draft of the new company charter.
- List of founding members/shareholders.
- Resolution to separate the company.
- Copies of personal identification documents and business registration certificates.
d. Time Resolution: 03 – 05 working days from the date of receipt of the application.
e. Result: Business registration certificate.
5. Note:
- After registering the business, both the split company and the new company are jointly responsible for any outstanding debts, employment contracts, and other asset obligations, unless otherwise agreed.
- Information about the split/divided company will be updated in the National Business Registration Database when the certificate is issued for the new company.
- The documents that may need to be supplemented depend on the requirements of the business registration authority.
Contact A Dong Company if you need more information or assistance:
- Address: Room F2&F3, FOSCO Building, No. 2 Phùng Khắc Khoan, Da Kao Ward, District 1, Ho Chi Minh City
- Hotline: 0903 693 301 - 0909 393 329 - 0903 641 946
- Email: info@a-dong.com.vn
- Website: https://a-dong.com.vn
