Procedures for converting a limited liability company into a joint stock company

Procedures for converting a limited liability company into a joint stock company helps businesses expand capital scale, attract more shareholders and increase transparency in governance. Conversion in accordance with regulations not only creates favorable conditions for mobilizing social resources but also enhances reputation and competitiveness in the market. This is a strategic step for businesses towards sustainable and long-term development.

Is it possible to convert a limited liability company into a joint stock company?

According to the provisions of Article 202 of the Law on Enterprise 2020, current law allows the conversion of a one-member limited liability company into a joint stock company.

Accordingly, a one-member LLC can be converted into a joint stock company by mobilizing new shareholders when needed. However, a limited liability company needs to mobilize at least 2 new shareholders because a joint stock company must have a minimum of three shareholders and there is no maximum limit on the number. This conversion does not change the company’s obligations and rights regarding debts, labor contracts and other property obligations.

When converting, businesses need to ensure that the charter capital is not lower than the company’s registered charter capital before conversion. The owner of a one-member limited liability company will become a shareholder of the joint stock company or commit to contributing the full amount of registered charter capital.

Current procedures for converting a limited liability company into a joint stock company

To carry out the procedure for converting a limited liability company into a joint stock company, businesses need to pay attention to the following contents:

Document components need to be prepared

To carry out the procedure for converting a limited liability company into a joint stock company, businesses need to prepare complete documents as prescribed in Article 23 and Clause 4, Article 26 of Decree 01/2021/ND-CP. Specifically, the dossier includes:

Application for registration of establishment of a joint stock company:

1. Application for business registration according to form Appendix I-4 Circular 01/2021/TT-BKHDT;
2. Charter of joint stock company;
3. List of founding shareholders according to the form Appendix I-7, Circular 01/2021/TT-BKHDT;
4. List of shareholders who are foreign investors (if any) according to the form Appendix I-8, Circular 01/2021/TT-BKHDT;
5. Copies of the following legal documents:

• Legal documents of the legal representative;
• Legal documents of founding shareholders and shareholders who are foreign investors (if any);
• Legal documents of the authorized representative and representative appointment document (for institutional shareholders).

Documents proving the conversion:

1. Resolution and decision of the owner of the limited liability company on conversion;
2. Transfer contract or documents proving transfer completion (if any);
3. Documents confirming the capital contribution of new shareholders;
4. Document of approval from the Investment Registration Authority on capital contribution by foreign investors (if any).

In addition, businesses need to prepare a power of attorney and copies of legal documents of the individual authorized to submit the application and receive results if not the legal representative of the company. This authorization document is not required to be notarized or authenticated.

All documents in the business registration application must be fully, accurately and legally declared according to the provisions of law. Documents of foreign organizations must be consular legalized according to regulations.

Execution order

The process of converting a limited liability company into a joint stock company includes the following steps:

Step 1: Prepare conversion registration documents

Enterprises must fully prepare the above documents in accordance with regulations.

Step 2: Submit conversion registration application

Applicants can choose one of the following three methods:

• Register directly: Submit documents to the Business Registration Office where the enterprise is headquartered;
• Register via postal service: Send documents by mail to the Business Registration Office;
• Register via electronic information network: Implemented on the National Information Portal on Business Registration (https://dangkykinhdoanh.gov.vn).

After submitting the application, if the application is considered complete according to the provisions of law, the Business Registration Office will issue a Receipt and an appointment to return the results to the applicant.

Step 3: Receive conversion registration results

• If the application is valid: the Business Registration Office issues the Business Registration Certificate within 03 working days from the date of receipt of the application.
• If the dossier is not valid: the Business Registration Office shall notify the request to amend and supplement the dossier within 03 working days. The application processing time is 03 working days from the date the enterprise submits the amended and supplemented application.

Step 4: Announce the business registration content

After receiving the Business Registration Certificate, the company must publish the business registration content, including:

• Information on the Business Registration Certificate;
• Business lines and occupations;
• List of founding shareholders and list of shareholders who are foreign investors (if any).

Currently, if an enterprise conducts business registration procedures via the electronic information network (National Public Service Portal for Business Registration), the publication of business registration content will be automatically updated.

>>> See more: Effective method of establishing an joint stock company online.

Regulations on settlement deadlines

According to the provisions of Clause 5, Article 26 of the Law on Enterprises 2020, the time limit for resolving procedures for converting a one-member limited liability company into a joint stock company is as follows:

• Time limit for issuance of Business Registration Certificate: 03 working days from the date of receipt of valid documents.
• Time limit for notification of dossier amendments and supplements: 03 working days from the date of receipt of dossier if the dossier is not valid.
• Deadline for submitting amended and supplemented documents: 60 working days from the date of the first receipt.
• Deadline for completing procedures for announcing business registration contents: carried out concurrently with submitting business registration documents.

For electronic registration, after completing the submission of documents, the applicant will receive a Receipt of business registration documents via electronic information network. The Business Registration Office will process the application and notify the results via the system and the registrant’s email.

Some issues to keep in mind when converting a limited liability company into a joint stock company

When converting a limited liability company into a joint stock company, businesses need to pay special attention to the following issues to ensure the transition process goes smoothly and in accordance with the law.

Here are some issues businesses need to keep in mind:

• First, regarding charter capital: When converting, the charter capital of the joint stock company must not be lower than the charter capital of the limited liability company before conversion. The company needs to divide the capital contribution structure into shares with a determined par value and issue them to shareholders according to the corresponding capital contribution ratio.
• Second, regarding legal responsibilities, the converted joint stock company will inherit all legal rights and obligations of the previous limited liability company, including signed contracts, debts, property obligations and labor contracts.
• Third, the corporate governance structure will change significantly after the transformation. Joint stock companies require a more complex governance model with a General Meeting of Shareholders, Board of Directors, Supervisory Board (or Audit Committee for models without a Supervisory Board) and Board of Directors/General Director. Enterprises need to build an appropriate management organization structure according to regulations.
• Fourth, in cases where foreign investors participate, businesses need to pay attention to implementing capital contribution registration and share purchase procedures according to regulations. Foreign investors must be approved by the Investment Registration Authority before making capital contributions.
• Fifth, regarding taxes, businesses need to carry out procedures for converting tax codes, notify tax authorities about changing business types, and complete outstanding tax obligations (if any) before conversion.

In addition, after completing conversion procedures, businesses need to carry out post-conversion tasks such as: notifying partners and customers of changes in business type conversion; make a new seal; Open a bank account for a joint stock company; and carry out asset conversion procedures and specialized business licenses (if any).

Consulting services on procedures for converting a limited liability company into a joint stock company at Long Phan Consulting Company

Long Phan Consulting Company provides professional consulting services on procedures for converting a limited liability company into a joint stock company. With a team of experienced experts in the business field, we support customers in implementing the conversion process quickly, accurately and effectively.

Long Phan Consulting Company is committed to providing customers with quality consulting services such as:

• In-depth consulting on procedures for converting a limited liability company into a joint stock company;
• Assist customers in preparing and drafting complete and accurate documents according to legal regulations;
• Representing customers to work with competent authorities on conversion;
• Answering questions related to procedures for converting business types;
• Support customers to carry out procedures after conversion.

Converting a limited liability company into a joint stock company is an important step, opening up new development opportunities for businesses. Please contact Long Phan Consulting Company today for support in implementing conversion procedures effectively and in compliance with legal regulations.

Frequently asked questions

Below are frequently asked questions about the procedure for converting a Limited Liability Company into a Joint Stock Company.

Are the company’s current contracts still valid after converting into a joint stock company?

Yes, the joint stock company after conversion will inherit all the legal rights and obligations of the previous one-member limited liability company, including existing contracts.

How is a company’s value determined during the transition?

The article does not clearly state the pricing process. Typically, it involves evaluating a company’s assets, liabilities, and future earnings potential, often with the assistance of financial experts.

What role does the original owner have in the newly established joint stock company?

The original owners become shareholders of the joint stock company and may also hold management positions, depending on the company’s charter and the decision of the General Meeting of Shareholders.

What is the typical time for the entire conversion procedure?

Although the business registration certificate is issued within 3 working days from the date of submitting the complete application, the entire process, including application preparation and post-conversion steps, may take longer.

What are the mandatory governing bodies in a joint stock company?

A joint stock company must have a General Meeting of Shareholders, a Board of Directors and may have a Supervisory Board or Audit Committee.

Are there any immediate tax obligations arising from changing the type of company?

The company needs to notify the tax authorities about the change in legal structure and fulfill any outstanding tax obligations before the conversion is completed.

How are new shares issued to new shareholders?

New shares are issued according to the agreed investment capital and share par value, as stipulated in the company charter and investment agreements.

What are the ongoing compliance requirements for a holding company?

Joint stock companies face more stringent reporting and disclosure requirements, including annual general meetings of shareholders, audits of financial statements and regular filings with regulators.

What are the legal consequences if the charter capital is not fully contributed as planned?

Failure to contribute enough charter capital within the prescribed time limit can result in liability for shareholders and potential penalties for the company.

Conclude

Converting a limited liability company into a joint stock company requires carefulness and compliance with the correct processes and procedures according to the law. Customers need to consult experts to get advice appropriate to the specific situation of their business. Please contact Long Phan Consulting Company via the hotline: 1900636389 for in-depth consulting support and answers to all questions about procedures for converting business types.