Notes when changing business lines of a joint stock company

Changing business lines is an important decision that has a great impact on the company’s operations and development strategy. To ensure the change process goes smoothly and fully complies with legal regulations. Customers need to pay attention to following the correct processes and procedures as prescribed by law. In this article, Long Phan will provide detailed information about the necessary steps when customers want to change the business line of a joint stock company.

What is the business line?

Business line is the field of economic activity that an enterprise registers to perform. Current law does not have specific regulations on the concept of business lines and professions. However, according to Clause 1 and Clause 2, Article 7 of the Law on Enterprises 2020, enterprises have the right to:

• Freedom to conduct business in industries and occupations not prohibited by law.
• Business autonomy and choice of business organization form; proactively choose industries, occupations, locations, and forms of business; proactively adjust business scale, industry and profession.

In addition, Vietnam’s economic industry system has been regulated in Decision 27/2018/QD-TTg dated July 6, 2018 of the Prime Minister and issued with it an Appendix regulating the list of industry codes. business profession. Joint stock companies must register their business lines with the business registration agency. This registration is shown in the Business Registration Certificate.

According to the provisions of the Enterprise Law, joint stock companies have the right to do business in industries and professions that are not prohibited by law. However, for conditional business sectors and trades, enterprises can only do business when they meet all conditions prescribed by law.

When establishing a joint stock company, founding shareholders must clearly identify the main business lines and sub-business lines of the business. This helps guide business operations and ensure legal compliance. During its operations, the company may change or add business lines to suit its development strategy or adapt to the market.

Procedures for changing business lines of joint stock companies

Documents need to be prepared

To change business lines, joint stock companies need to prepare documents according to regulations. Pursuant to the content of Clause 1, Article 56 of Decree 01/2021/ND-CP dated January 4, 2021 of the Government on business registration, documents for changing the profession of a joint stock company include:

• Notice of change in business registration content according to the form in Appendix II-1 issued with Circular 01/2021/TT-BKHDT;
• Resolutions, decisions and copies of meeting minutes of the General Meeting of Shareholders for joint stock companies on changing business lines.

>>> Download: Notice of change in business lines

Document preparation must comply with regulations on form and content. Notice of change in business registration content must be fully and accurately declared with information about the company and the changed content. Resolutions and meeting minutes must clearly show the approval of shareholders or members of the Board of Directors on changing business lines.

Companies need to note that documents must be signed and stamped according to the correct authority. The company’s legal representative is responsible for the legality, honesty and accuracy of the change registration dossier.

Implementation process

Based on the content of Article 56 of the Law on  Enterprise 2020, the process of changing business lines of a joint stock company includes the following main steps:

1. Step 1: Organize a General Meeting of Shareholders to approve changes in business lines.
2. Step 2: Prepare registration documents for changes according to regulations and submit them to the Business Registration Office where the company’s headquarters is located.
3. Step 3:The Business Registration Office receives documents and performs the following tasks:

• Give a Receipt;
• Check the validity of documents;
• Check market access conditions for industries and occupations that limit market access for foreign investors according to investment laws;
• Update information about the business industry and profession of the enterprise in the National Business Registration Database.

1. Step 4: If the business needs it, the Business Registration Office will issue a confirmation of changing the business registration content to the business.

The processing time for documents to change business lines of a joint stock company is usually 03 working days from the date of receipt of complete and valid documents. In case the dossier is incomplete or invalid, the business registration agency will notify the company in writing within 03 working days from the date of receipt of the dossier.

After completing the procedures, the company needs to update new information about its business lines on the company’s papers and documents. At the same time, notify partners, customers and relevant agencies about this change.

Some things to note when changing business lines of a joint stock company

Consider the impact on shareholder structure and charter capital

Changing business lines can affect the shareholder structure and charter capital of a joint stock company. The addition or elimination of certain professions may lead to changes in the rights and obligations of shareholders.

In case of changing the industry to increase charter capital, the company needs to carry out capital increase procedures according to regulations. On the contrary, if the change leads to a reduction in charter capital, the company must ensure compliance with regulations on protecting the rights of creditors and shareholders.

The company needs to review the Charter and shareholder agreements to ensure that changing industries does not violate existing commitments. If necessary, the company must amend the Charter and approve it at the General Meeting of Shareholders.

Ensure compliance with specific business conditions

When changing to a conditional business line, a joint stock company needs to ensure it fully meets legal requirements. These conditions may include:

• Legal capital
• Personnel have professional practice certificates
• Technical facilities
• Special business license

The company needs to carefully study the legal regulations related to the new industry. This helps avoid legal risks and ensures business operations comply with the law.

Notify changes to relevant parties

After completing the procedure for changing business lines, the joint stock company needs to notify relevant parties. This helps maintain business relationships and avoid legal risks.

Subjects requiring notification include:

• Shareholders of the company;
• Business partners;
• Client;
• Tax authorities;
• Banks and credit institutions (if there is a credit relationship).

The content of the notice must clearly state the newly added or eliminated business lines. The company also needs to update this information on the website, capacity profile and other introductory documents.

Note that for some ongoing contracts, a change in industry may affect the contract terms. In this case, the company needs to discuss and agree with the partner on a handling plan.

Consulting services on changing business lines of joint stock companies

Changing business lines is a complicated procedure, requiring in-depth legal knowledge. Long Phan provides professional legal consulting services to help customers’ change process go smoothly and comply with the law.

Our consulting services include the following contents:

• Consulting on the feasibility of changing careers;
• Support in preparing documents to change business lines of joint stock companies;
• Representative to carry out procedures at state agencies;
• Consulting on legal issues arising after changes.

Using consulting services helps companies save time and avoid errors during procedures. At the same time, consultants can provide useful advice on business strategy and corporate governance related to changing industries.

Changing business lines of a joint stock company is an important step in the development and expansion process of a joint stock company. This change not only affects business strategy but also concerns legal regulations, company charter and administrative procedures. If you are having difficulty during the change process, please contact Long Phan via hotline 0906735368 for advice and support.