Business consolidation is a popular business reorganization solution in the modern business environment. Below is a detailed guide to the business consolidation process according to the latest regulations.
Business consolidation is a popular business reorganization solution in the modern business environment. Below is a detailed guide to the business consolidation process according to the latest regulations.
According to Article 200 of the Law on Enterprises 2020, enterprise consolidation is defined as follows: "Two or more companies (called a consolidated company) may merge into a new company (called a consolidated company), and the consolidated companies will cease their existence."
Consolidation can apply to types of businesses such as partnerships, limited liability companies (one member and two or more members), and joint stock companies.
Step 1: Prepare the Consolidation Agreement and Articles of Incorporation
- The consolidation contract must have the following principal contents:
- Name and address of the head office of the merged company.
- Name and address of the head office of the consolidated company.
- Procedures and conditions for consolidation. - Labor use plan.
- Methods and procedures for conversion of assets, contributed capital, shares, bonds.
- Term for consolidation.
Step 2: Election and Appointment of Positions
- Members, owners or shareholders of the merged company need to approve the consolidation agreement and the consolidated company's charter.
- Election or appointment of positions in the consolidated company such as Chairman of the Board of Members, Chairman of the company, Board of Directors, Director or General Director. Step 3: Register to establish a new business
- The dossier of registration for establishment of a consolidated company is required:
- Consolidation contracts.
- Resolutions and minutes of meetings of the consolidated companies on the approval of the consolidation contract.
- Business registration certificates of the consolidated companies.
Note: The dossier must be sent to creditors and notified to the employee within 15 days of the date of approval of the consolidation contract. Step 4: Close your tax identification number and update your legal status
- After the consolidated company is granted a business registration certificate, the consolidated company will cease to exist.
- The Business Registration Office shall update and terminate the status of the consolidated company's branches, representative offices, and business locations in the national database.
- Liability: The incorporated company inherits all the legal rights, obligations and interests of the merged companies, including unpaid debts and other property obligations.
- Violation of regulations: If the enterprise fails to comply with the regulations on sending consolidation contracts to creditors and notifying employees, the enterprise may be fined from VND 20,000,000 to VND 30,000,000 and forced to remedy the consequences.
Frequently Asked Questions
- When should a business be consolidated? Business consolidation can enhance competitive strength and generate profits. However, careful consideration should be taken to ensure that the consolidation does not become a burden on the business, especially if the merged companies are heavily indebted.
- Does the division of the company terminate the existence of the divided company? According to regulations, the divided company will cease to exist after the new companies are granted the Enterprise Registration Certificate. The new companies must be jointly responsible for the obligations, unpaid debts and labor contracts of the divided company.
If you need more information or support, please contact ADVN LAW for detailed advice.
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