Procedures for converting a joint stock company into a limited liability company with 2 or more members

Procedures for converting a joint stock company into a limited liability company with 2 or more members helps businesses be flexible in their organizational structure, consistent with their scale of operations and new business strategies. Understanding the conversion process will help businesses ensure legality, avoid interruption of operations and effectively handle issues related to charter capital, rights and obligations of members after converting the business type.

Method of converting a joint stock company into a limited liability company with 2 or more members

According to the provisions of Article 204 of the Law on Enterprise 2020, a joint stock company can be converted into a limited liability company with two or more members by one of the following methods:

• Conversion does not mobilize additional shares or transfer shares to other organizations or individuals: The enterprise retains its existing shareholders, with no new organizations or individuals contributing capital. This method is simple and does not change the capital contribution structure of the company.
• Convert and at the same time mobilize other organizations and individuals to contribute capital: The company invites new investors to contribute capital to the business. This method helps increase charter capital and expand the scale of business operations.
• Conversion and transfer of all or part of shares to other organizations or individuals contributing capital: Existing shareholders transfer shares to other organizations and individuals. This method is often applied when shareholders want to withdraw capital or reduce their ownership ratio in the company.
• The company only has 02 remaining shareholders: This case occurs when shareholders transfer shares to each other, in the end there are only 02 shareholders left holding the entire charter capital of the company.
• Combined method: In addition to the above methods, a joint stock company can apply a combination of not mobilizing additional capital or transferring shares, mobilizing additional contributed capital and transferring shares, or other methods suitable to the actual situation of the enterprise and complying with the law.

The choice of conversion method depends on the needs, actual conditions of the business and future business development strategy.

After choosing the appropriate conversion method, the company must register the conversion with the Business Registration Authority within 10 days from the date of completion of the conversion according to the provisions of Clause 2, Article 204 of the Law on Enterprises 2020.

Documents for converting a joint stock company into a limited liability company with 2 or more members

According to the provisions of Article 23 and Article 26 of Decree 01/2021/ND-CP, the registration file to convert a joint stock company into a limited liability company with two or more members needs to fully prepare the following documents:

Profile includes:

1. Application for business registration according to the form specified in Appendix I-3 issued with Circular No. 01/2021/TT-BKHDT. The request must be signed by the company’s legal representative, stating full name.

2. Charter of a limited liability company with two or more members: The charter must be signed by all members or authorized representatives of organizational members. The charter must comply with the provisions of Article 24 of the Law on Enterprise 2020.

3. List of members of LLC with two or more members: According to the form specified in Appendix I-6 issued with Circular No. 01/2021/TT-BKHDT.

4. Copy of personal legal documents of the legal representative of a limited liability company with two or more members.

5. Copies of legal documents of members of LLCs with two or more members who are foreign investors and individuals; Legal documents for members who are foreign organizations; Personal legal documents of the authorized representative of the member who is a foreign organization/representative office.

Note: Legal documents of individuals and organizations that are foreign investors need to be consular legalized.

6. Resolution and meeting minutes of the General Meeting of Shareholders: Content on company conversion, approved in accordance with the provisions of the company’s Charter and the provisions of law.

7. Share transfer contract: Applicable in case there is a transfer of shares to another organization or individual.

8. Documents proving completion of transfer: Minutes of contract liquidation, payment documents, and other related documents.

9. Documents confirming the capital contribution of new members: Applicable in case of mobilizing capital contributions from new members. Documents include valuation records of contributed capital and bank documents confirming capital contribution.

10. Approval document from the Investment Registration Authority: Applicable to cases where foreign investors, economic organizations with foreign investment capital contribute capital, buy shares, or contribute capital in cases where registration procedures must be carried out according to the provisions of the Law on Investment.

In addition, businesses can register to change type at the same time as registering to change other contents such as legal representation, business name, and head office address. In this case, the application needs additional documents corresponding to the changed content.

Procedures for converting a joint stock company into a limited liability company with 2 or more members

The entire process of converting a company from a joint stock company to a 2-member LLC is carried out in 5 main steps. Complying with the correct process and fully implementing all steps will help businesses complete conversion procedures quickly and in accordance with legal regulations. The specific process is as follows:

Step 1: Hold the general meeting of shareholders and make a decision on converting the company type

• The joint stock company convenes a general meeting of shareholders to vote on the conversion to a limited liability company with 2 or more members. The convening must comply with regulations on notification and invitation to meetings according to the Company Charter and the Law on Enterprise.
• The meeting must be attended by a sufficient number of shareholders representing at least 65% of the total number of votes (or other ratio as prescribed by the company’s Charter). The resolution is passed when at least 75% of the total votes of shareholders attending the meeting approve.
• Prepare resolutions and meeting minutes based on the voting results of shareholders. The meeting minutes must clearly state the time, location, attendees, voting rate and approved contents.

Step 2: Transfer shares or contribute additional capital

• The relevant parties sign a share transfer contract (if the transfer method is applied). The contract must clearly state information of the transferor, transferee, number of shares transferred, and transfer value.
• Pay the transfer fee and sign the transfer contract liquidation record. Payment should be made via bank account for confirmation.
• For the method of contributing additional capital, new members contribute capital to the company according to regulations. Note that for capital contributing members who are organizations, capital contributions must be made through the company account.

Step 3: Prepare documents to convert company type

• Prepare a full set of documents as listed above. Each type of document needs to be carefully checked for content, form, signature and seal (if any).
• In the case of online applications, businesses need to scan the entire application into a PDF file. Note: The information in the paper file and the soft file file must be exactly the same.

Step 4: Submit application to change company type

• Enterprises can submit applications directly at the One-Stop Department – Provincial/City Business Registration Office or submit online via the National Business Registration Portal (https://dangkykinhdoanh.gov.vn). The agency competent to process the application is the Business Registration Office of the province or city where the enterprise is headquartered.
• Application reception time is usually from Monday to Saturday morning, morning from 8:00 a.m. to 11:00 a.m., afternoon from 1:30 p.m. to 4:30 p.m. This regulation applies to both in-person and online submissions.

Important note: Application submission can only be made after completing the capital transfer or contributing additional capital to the company. Currently, in some large provinces/cities such as Ho Chi Minh, Hanoi, Da Nang, Binh Duong, the Business Registration Office only accepts online applications.

Step 5: Get a new business license

Within 03 working days from the date of receiving valid documents, the Business Registration Office will change the company’s legal information on the National Business Registration Database and issue a new Business Registration Certificate to the company.

The Business Registration Office will send a notice of issuance of the Business Registration Certificate to the company. Enterprises will base the time on the notice to receive a new business license.

Enterprises can receive a new Business Registration Certificate by mail or in person.

Work to do after converting company type

After completing the conversion procedure and being reissued with a new Business Registration Certificate, LLCs with two or more members need to immediately perform a number of important tasks. This ensures that business operations continue continuously, without interruption.

Tasks that need to be performed include:

1. Change seals and signs

• Re-engrave the new legal entity seal according to the name of the LLC.
• Re-engrave the title seal if there is a change of legal representative.
• Redo the company signboard under the new name.
• Register the new seal sample with the competent authority according to regulations

2. Notify partners and customers

• Send widespread notice to customers and partners about the company’s transformation into a limited liability company with two or more members
• Update business information on website, business cards, marketing materials and other company documents
• Notify partners who have contracts with the company about the limited liability company inheriting all rights and obligations of the joint stock company according to the provisions of Clause 3, Article 204 of the Law on Enterprises 2020.

3. Update information at the authorities

• Adjust the company name on the business license of the branch, representative office, business location (if any).
• Update business information on digital signatures and electronic invoices.
• Register to change business information on social insurance software and electronic customs accounts.
• Update company bank account information.

4. Carry out property and tax procedures

• Change owner information on business assets (such as land, vehicles, patents…).
• Declare and pay personal income tax after transfer (in case the enterprise pays personal income tax on behalf of the shareholder transferring shares).
• Note: According to the provisions of Article 16 of Circular 151/2014/TT-BTC, a joint stock company does not need to finalize tax when converting into a limited liability company if the limited liability company inherits all tax obligations of the enterprise before conversion.

These tasks need to be done immediately to avoid legal problems arising later.

Frequently asked questions about procedures for converting a Joint Stock Company into a LLC with 2 or more members

Here are some frequently asked questions:

Does the post-conversion company inherit the rights and obligations of the pre-conversion company?

According to the provisions of Clause 3, Article 204 of the Law on Enterprises 2020, a LLC with two or more members converted from a joint stock company automatically inherits all legal rights and interests and is responsible for debts, including tax debt, labor contracts and other obligations of the joint stock company before conversion.

Is tax finalization required when converting from a joint stock company to a limited liability company?

No tax settlement required. According to the provisions of Article 16 of Circular 151/2014/TT-BTC, in case of conversion from a joint stock company to a limited liability company where the limited liability company inherits all tax obligations of the enterprise before the conversion, there is no need to declare tax finalization until the time of decision on converting the company type.

During the conversion procedure, can businesses issue invoices?

During the conversion procedure, businesses are not allowed to issue invoices to customers and partners. Enterprises can only continue to issue invoices after completing conversion procedures and being granted a new Business Registration Certificate.

Do shareholders transferring shares have to pay personal income tax?

Yes. Shareholders transferring shares must declare and pay personal income tax from securities transfer at the management tax department within 10 days after completing the signing of the share transfer contract.

Is it possible to change the type of business at the same time as changing other content?

Maybe. According to the provisions of Clause 5, Article 26 of Decree 01/2021/ND-CP, businesses can register to change the type of business and at the same time register to change the content of business registration, notify changes to the content of business registration such as changing the legal representative, head office address, and business lines.

How long does it take to process conversion documents?

According to the provisions of Clause 2, Article 204 of the Law on Enterprises 2020, within 03 working days from the date of receipt of a valid conversion application, the Business Registration Authority shall issue a Certificate of Business Registration and update the legal status of the company on the National Business Registration Database.

What is the maximum number of members in a LLC with two or more members?

According to the provisions of the Law on Enterprise 2020, LLCs with two or more members do not limit the maximum number of members. However, the company must have at least 02 members and must not exceed 50 members.

What is the voting rate to approve the resolution to convert the company type?

According to the provisions of Article 148 of the Law on Enterprises 2020, a resolution on converting the type of company is approved when the number of shareholders representing 75% or more of the total votes of all shareholders attending the meeting approves, unless the company charter stipulates a higher ratio.

Is it necessary to notarize or authenticate a share transfer contract?

The law does not require notarization or authentication of share transfer contracts. However, to ensure legality and serve as a basis to prove the completion of the transfer, the parties should notarize or authenticate the share transfer contract.

After conversion, is it necessary to change the tax code of the business?

No need to change the tax code. When converting from a joint stock company to a limited liability company with two or more members, the enterprise still retains the business code (also the tax code) previously granted.

Can the conversion decision be canceled after the application has been submitted?

It is possible, but only in cases where the Business Registration Authority has not yet issued a new Business Registration Certificate. Enterprises need to submit a written request to cancel the conversion file, accompanied by a resolution of the General Meeting of Shareholders on canceling the conversion decision.

Consulting services on procedures for converting company type at Long Phan Consulting Company

Long Phan Consulting Company provides comprehensive consulting services on procedures for converting business types, helping businesses save time, effort and ensure compliance with legal regulations. With a team of experienced consultants in the business sector, we are committed to supporting customers in completing conversion procedures quickly and effectively.

The services we provide include:

• Consulting on choosing a conversion method suitable to the needs and actual situation of the business.
• Draft conversion documents in accordance with regulations, including documents such as company charter, resolutions of the general meeting of shareholders, and share transfer contracts.
• Support the organization of the general meeting of shareholders, ensuring compliance with regulations on format, order and procedures.
• The business representative submits the application and monitors the application processing process at the Business Registration Office.
• Instructions for performing necessary work after completing conversion procedures, such as changing seals, updating information on licenses and certificates.
• Consulting on tax issues arising during the conversion process, especially personal income tax from share transfer.

Long Phan Consulting Company is committed to providing customers with high quality consulting services, helping the business conversion process go smoothly and legally.

Conclude

Procedures for converting a joint stock company into a limited liability company with 2 or more members need to be carried out properly and comply with current legal regulations. If you need detailed advice on procedures for converting company type, please contact Long Phan Consulting Company via the hotline 1900636389 for the most dedicated and professional support.