Business division and separation are two forms of business restructuring to suit the needs and capabilities of the business, especially when the business faces difficulties in management due to its large scale. However, this process requires strict compliance with legal regulations
Business division and separation are two forms of business restructuring to suit the needs and capabilities of the business, especially when the business faces difficulties in management due to its large scale. However, this process requires strict compliance with legal regulations. Below is a detailed guide based on the Enterprise Law 2020:
According to the provisions of Articles 192 and 193 of the Law on Enterprises 2020, only limited liability companies (LLCs) and joint-stock companies are allowed to carry out division and separation. Other types of enterprises are not regulated in this regard.
- Business division: It is the division of a limited liability company or joint stock company into many new companies. After the division is complete, the divided company ceases to exist.
- Separation of enterprise: It is the separation of part of its assets by a limited liability company or a joint-stock company to establish one or more new companies, but the separated company continues to operate.
The difference between a split and a separate business lies in the legal consequences: Splitting a business leads to the termination of the existence of the original company, while separating a business retains the existence of the separated company.
a. Business division method:
- Divide part of the contributed capital, shares and corresponding assets to new companies according to the ownership ratio.
- Transfer the entire contributed capital and shares of one or more members/shareholders to new companies.
- Combine both of the above methods.
b. Procedure for implementation:
1. The Members' Council, the owners, or the General Meeting of Shareholders of the company shall approve the resolution on division of the company.
2. The resolution on division of the company must be sent to creditors and notified to employees within 15 days from the date of adoption.
3. Members/shareholders of the new company approve the charter, appoint the board of directors, and proceed with the business registration.
c. Preparation dossier:
- An application for enterprise registration. - Draft new company charter.
- List of founding members/shareholders. - Resolution on division of the company.
- Copies of personal identification papers, business registration certificates.
d. Processing time:
03 – 05 working days from the date of receipt of the dossier.
e. Result: Business registration certificate.
a. Business Separation Method:
- Separate part of the contributed capital, shares along with corresponding assets to transfer to new companies.
- Transfer the entire contributed capital and shares of one or more members/shareholders to new companies.
- Combine both of the above methods.
b. Procedure for implementation:
1. The Members' Council, the owners, or the General Meeting of Shareholders shall approve the resolution on separation of the company.
2. The resolution on company separation must be sent to creditors and notified to employees within 15 days from the date of adoption.
3. Members/shareholders of the new company approve the charter, appoint the board of directors, and proceed with the business registration.
c. Preparation dossier:
- An application for enterprise registration.
- Draft new company charter.
- List of founding members/shareholders.
- Resolution to separate the company.
- Copies of personal identification papers, business registration certificates.
d. Processing time: 03 – 05 working days from the date of receipt of the dossier.
e. Result: Business registration certificate.
- After registering the business, both the split/split company and the new company are jointly responsible for outstanding debts, employment contracts, and other property obligations, unless otherwise agreed.
- Information about the split/separated company will be updated in the National Business Registration Database when issuing a certificate to the new company.
- Additional documents may be required depending on the requirements of the business registration authority.
If you need more information or support, please contact ADVN LAW for detailed advice.
- Address: F2&F3, No. 2 Phung Khac Khoan, Da Kao Ward, District 1, Ho Chi Minh City
- Phone: 0903.693.301 – 0909.393.329
- Email: vanphongluatsuadvn@gmail.com; advnlaw@gmail.com
