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Dragon Law_COmpany conversion

Under the Law on Enterprise 2014, “enterprise restructuring is either a total division, partial division, consolidation, acquisition of an enterprise, or conversion of the type of business entity.”

Enterprise division is activity of "enterprise restructuring" in order to enhance business efficiency.

Enterprise consolidation is the two or several companies can be merged into a new company and will stop the companies being consolidated at the same time.

Legal basis of enterprise division and consolidation depends on Law on Enterprise 2014, Articles 192 - 195.

I. Total Division to Limited Liability Company or Joint-Stock Company (JSC)

1. A limited liability company or JSC may divide shareholders/members, and assets of the company (hereinafter “transferor company”) to establish two new companies or more (hereinafter “transferee company”) in one of the following cases:

a) Part of stakes/shares of members/shareholders and an amount 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;

b) All of stakes/shares of one or some members/shareholders and an amount of assets proportional to the value of stakes/shares are transferred to the transferee enterprises;

c) A combination of both cases in above Point I.1.a and Point I.1.b.

2. Procedures for total division:

a) The Board of members, the owner, or the General Meeting of Shareholders of the transferor company shall ratify the Resolution on total division in accordance with this Law and the company’s charter. The Resolution on total division must contain basic information including:

- Transferor company’s name, headquarter addresses, names of transferee companies;

- Rules, method, and procedures for asset division;

- Employment plan;

- Method, time limit, and procedures for transferring the transferor company’s stakes, shares, bonds to transferee companies;

- Rules for fulfillment of the transferor company’s obligations;

- Time limit for division.

The Resolution on total division shall be sent to all creditors and notified to all employees within 15 days from the ratification date;

b) Members, the owner, or shareholders of each of the transferee companies shall ratify its charter, elect or designate the Chairperson of the Board of members, the company's President, the Board of Directors, Director/General Director, and apply for business registration in accordance with this Law. In this case, the application for enterprise registration of the transferee companies must be enclosed with the above Resolution.

3. The number of members, shareholders, their holding of stakes/shares, quantity of shareholders and charter capital of the transferee companies are corresponding to the method of dividing, transferring stakes/shares of the transferor company to the transferee companies in the cases mentioned in Point I.1.

4. 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.

Dragon Law_Company structure

 

II. Partial Division to Limited Liability Company or JSC

1. A limited liability company or JSC may be partially divided by transferring part of its existing assets, rights and obligations (transferor company) to establish one or some new limited liability companies or JSC (transferee companies) without terminating the existence of the transferor company.

2. Partial division may be carried out using one of the following methods:

a) Part of stakes/shares of members/shareholders and an amount 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;

b) All of stakes/shares of one or some members/shareholders and an amount of assets proportional to the value of their stakes/shares are transferred to the transferee companies;

c) A combination of both cases in Point II.1.a and Point II.1.b.

3. The transferor company shall register a change to charter capital and number of members, which are proportional to the decrease in stakes/shares and quantity of members, at the same time with business registration of transferee companies.

4. Procedures for partial division:

a) The Board of members, the owner, or the General Meeting of Shareholders of the transferor company shall ratify the Resolution on partial division in accordance with this Law and the company’s charter. The Resolution on partial division must contain basic information including:

- Transferor company’s name, headquarter addresses, names of transferee companies;

- Employment plan;

- Division method;

- Value of assets, rights and obligations transferred from the transferor company to the transferee companies;

- Time limit for division.

The Resolution on partial division shall be sent to all creditors and notified to all employees within 15 days from the ratification date;

b) Members, the 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 in accordance with this Law. In this case, the application for enterprise registration must be enclosed with the above Resolution on partial division

5. 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.

III. Corporate Amalgamation

1. Two or some companies (hereinafter “consolidating companies”) may consolidate into a new company (hereinafter “consolidated company”). After that, consolidating companies shall cease to exist.

2. Procedures for consolidation:

a) The consolidating companies prepare the consolidation contract. The consolidation contract must contain:

- Consolidating companies’ names, headquarter addresses;

- Consolidated company’s name and headquarter address;

- Procedures and conditions for consolidation;

- Employment plan;

- Time limit and procedures for transferring assets, stakes, shares, bonds of the consolidating companies to the consolidated company;

- Time limit for consolidation;

- Draft charter of the consolidated company.

b) Members, the owner, or shareholders of the consolidating companies shall ratify the consolidation contract, the consolidated company’s charter, elect or designate Chairpersons of the Board of members, the company's President, the Board of Directors, Director/General Director of the consolidated company, and apply for business registration in accordance with this Law. The consolidation contract shall be sent to all creditors and notified to all employees within 15 days from the ratification date;

3. If the consolidated company has 30% - 50% of the market share, legal representatives of consolidating companies shall notify the competition authority before initiating the consolidation process, unless otherwise prescribed by the Law on Competition.

Consolidation is prohibited if the consolidated company has more than 50% of the market share after consolidation, unless otherwise prescribed by the Law on Competition.

4. Documents and procedures for registration of the consolidated company shall comply with this Law. Copies of the following documents shall be enclosed:

a) Consolidation contract;

b) Resolutions and meeting minutes that ratify the consolidation contract of the consolidating companies.

5. After business registration, the consolidating companies shall cease to exist; the consolidated company shall inherit the lawful rights and interests as well as unpaid debts, employment contract, and other liabilities of the consolidating companies.

III. Company Acquisition

1. One or some companies (hereinafter “acquired companies”) may be merged into another company (hereinafter “the acquirer”) by transferring all assets, legitimate rights, obligations, and interests to the acquirer. After that, the acquired companies shall cease to exist.

2. Procedures for acquisition:

a) Relevant companies shall prepare the acquisition contract and draft the charter of the acquirer. The acquisition contract must contain:

- Acquirer’s names, headquarter addresses;

- Acquired company’s name and headquarter address;

- Procedures and conditions for acquisition;

- Employment plan;

- Time limit and procedures for transferring assets, stakes, shares, bonds of the consolidating companies to the acquirer;

- Time limit for acquisition.

b) Members, the owners, or shareholders of each of relevant companies shall ratify the acquisition contract, charter of the acquirer, and apply for registration of the acquirer as prescribed by this Law. The acquisition contract shall be sent to all creditors and notified to all employees within 15 days from the ratification date;

c) After business registration, the acquired companies shall cease to exist; the acquirer shall inherit the lawful rights and interests as well as unpaid debts, employment contract, and other liabilities of the acquired companies.

3. If the acquirer has 30% - 50% of the market share, legal representatives of the companies shall notify the competition authority before initiating the acquisition process, unless otherwise prescribed by the Law on Competition.

Acquisition is prohibited if the acquirer has more than 50% of the market share after acquisition, unless otherwise prescribed by the Law on Competition.

4. Documents and procedures for registration of the acquirer shall comply with this Law. Copies of the following documents shall be enclosed:

a) Acquisition contract;

b) Resolutions and meeting minutes that ratify the acquisition contract of the acquirer.

c) Resolution and meeting minutes that ratify the acquisition contract of the acquired companies, unless the acquirer is a member/partner or shareholder that holds more than 65% of charter capital or voting shares of the acquired company.

Responsibility of Business Registration Office

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

If the transferee company/ new company/ acquired company’s headquarter is outside the province in which the transferor company/ divided company/ acquired company’s headquarter is situated, the business registration authority of the province in which the transferee company/ new company/ acquired company’s headquarter is situated shall notify the business registration of the transferee company/ new company/ acquired company to the business registration authority of the province in which the transferor company/ divided company/ acquirer’s headquarter is situated in order to update the legal status of the transferor company/ divided company/ acquired company on National Enterprise Registration Database.

 

For more detail, Client please contact to lawyers in enterprise conversion at Dragon Law Firm:

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