Procedures for separating a joint stock company: Detailed instructions from A-Z

Procedures for separating a joint stock company require businesses to strictly comply with legal regulations. A company separation can take place for many reasons, from business strategy, implementing new projects to resolving internal issues. This article will guide you in detail on how to separate your company quickly and according to regulations.

Current cases of separation of joint stock companies

Separating a joint stock company is an important strategy in the business development process. There are a number of specific cases in which businesses may consider separating the company:

• Increase stock liquidity: Stock splits help reduce the value of each share, making it easier for individual investors to access. This expands investment opportunities for retail investors, who previously found it difficult to buy high-value stocks.
• Business development and expansion: When a business needs to expand its scale or needs capital for new projects, separating the company can attract more investors. This method helps mobilize capital without affecting the shares of current shareholders.
• Capital restructuring: Separating a company is an effective solution when a business wants to adjust its capital structure to suit a new business strategy or deal with an emergency situation.
• Attract strategic partners: Splitting the company creates a larger number of shares, making it easier for potential partners to invest. This facilitates the negotiation process and opens up long-term development opportunities.

Thus, when falling into one of the above cases, the enterprise can consider implementing procedures to separate the joint stock company.

Procedures for separating a joint stock company

Below, we will provide you with detailed regulations on procedures for separating a joint stock company:

File

According to the provisions of Clause 3, Article 199 of the Law on Enterprises 2020, businesses need to prepare the following documents:

1. Copy of the Minutes of the General Meeting of Shareholders on the separation of the company.
2. Resolutions and decisions of the General Meeting of Shareholders on separation of the company, including:

• Name and head office address of the separated company;
• Name of the split company to be established;
• Labor use plan;
• How to separate the company;
• Value of assets, rights and obligations transferred;
• Time limit for separating the company.

3. Business registration documents of the separated company.

Enterprises need to prepare complete and accurate documents so that the company separation process can go smoothly and avoid unnecessary risks.

Procedure

According to the provisions of Clause 3, Article 199 of the Law on Enterprise 2020, the procedures for separating the company are as follows:

1. The General Meeting of Shareholders passed a resolution to separate the company.
2. Require at least 65% of the total votes of shareholders attending the meeting to agree (Clause 1, Article 148 of the Law on Enterprises 2020.
3. Send resolution to creditors and notify employees within: 15 days from the date of decision;
4. Members and shareholders of the company are separated:

• Approving the Charter;
• Elect or appoint management positions;
• Proceed with business registration.

Thus, when separating a joint stock company, businesses need to comply with the above processes and procedures so that the settlement can take place quickly and effectively.

Rights and obligations of shareholders after separating a joint stock company

After separating a joint stock company, the rights and obligations of shareholders are determined based on the resolution and decision to separate the company as well as the agreement between the parties involved. Specifically:

1. Rights of shareholders:

• Shareholders have the right to own shares in the new company (separated company) according to the determined distribution ratio;
• Shareholders continue to enjoy benefits corresponding to the number of shares they own, including voting rights, rights to receive dividends, rights to transfer shares,…;
• If the separated company has another agreement, shareholders can choose to stay in the old company or become shareholders of the new company.

2. Obligations of shareholders:

• Shareholders are responsible for fulfilling financial obligations to the separated company according to the number of shares they own;
• Shareholders may be jointly liable for the debts and other property obligations of the separated company if there is no other agreement between the parties involved;
• Comply with the provisions of law and new company charter.

Thus, the rights and obligations of shareholders after separating the company are determined based on the resolution and decision to separate the company as well as the agreement between the parties involved.

Notes after separating a joint stock company

For companies established on the basis of separation of companies

According to the provisions of Clause 2, Article 25 of Decree 01/2021/ND-CP on business registration, after separating the company, the company established on the basis of separation must conduct business registration. The procedure for establishment registration includes 2 steps:

Step 1: Prepare documents including:

1. Application for business registration.
2. Company charter.
3. Copies of the following documents:

• Legal documents of the individual for the legal representative of the enterprise;
• Personal legal documents for company owners who are individuals; Legal documents of the organization for the company owner being an organization (except in cases where the company owner is the State); Legal documents of the individual for the authorized representative and document appointing the authorized representative. For company owners who are foreign organizations, copies of the organization’s legal documents must be consular legalized;
• Investment registration certificate in case the enterprise is established by a foreign investor or an economic organization with foreign investment capital according to the provisions of the Law on Investment and its guiding documents.

4. Resolutions and decisions on company separation.
5. Copy of the minutes of the General Assembly meeting on the separation of the company.

Step 2: Proceed with establishment registration:

• Enterprises prepare business registration documents according to the provisions of law and submit business registration documents to the Business Registration Authority (Business Registration Office);
• Enterprises pay business registration fees and charges;
• The business registration agency reviews the dossier and decides to issue a business registration certificate, issue a notice to amend or supplement the dossier, or refuse the registration dossier within 3 working days.

In addition, after establishment, the company established on the basis of separation of the company must carry out post-establishment procedures such as: Seal engraving, opening a bank account, tax declaration, digital signature registration,…

For separated companies

The separated company must make a notification to change the content of business registration according to Clause 1, Article 61 of Decree 01/2021/ND-CP on business registration. Accordingly, the split joint stock company leads to a change in charter capital, the number of members and shareholders who are foreign investors corresponding to the capital contribution and shares and the number of members and shareholders who are foreign investors decrease, as follows:

Step 1: Prepare documents including:

• Documents notifying changes to business registration contents corresponding to the changed contents;
• Resolutions and decisions on company separation;
• Copy of the minutes of the General Assembly meeting on the separation.

Step 2: Notice of change in business registration content:

Enterprises submit prepared documents to the Business Registration Office where the enterprise is headquartered. The application processing time is 3 working days from the date of receipt of application.

You need to pay attention to the above issues to ensure that the procedure for separating a joint stock company goes smoothly and successfully.

Joint stock company separation service at Long Phan Consulting Company

We provide joint stock company separation consulting services. The company’s services include:

• Advice on separation of joint stock companies: Answering issues related to conditions, procedures and process of separation of companies according to the provisions of law.​
• Drafting company separation documents: Prepare necessary documents such as company separation resolution, new company charter, list of shareholders and other related documents.​
• Representative to carry out procedures: Submit documents on behalf of the enterprise and work with competent state agencies to complete the company separation process.
• Receive and hand over results to the business.

We provide you with diverse service packages depending on your needs and finances. Full package service to support you from A to Z with procedures for separating a joint stock company, ensuring compliance with legal regulations.

Some frequently asked questions about separating a joint stock company

What specific documents are needed to begin the process of separating a joint stock company?

To begin the company separation process, necessary documents include copies of the minutes of the General Meeting of Shareholders on the separation, resolutions and decisions of the General Meeting of Shareholders on the separation, and business registration documents of the newly established companies.

What is the minimum percentage of votes required for the General Meeting of Shareholders to approve the separation of the company?

Approving the separation of the company requires at least 65% of the total votes of shareholders present at the meeting to agree.

What important details must be included in the resolution of the General Meeting of Shareholders on the separation of the company?

The resolution must include the name and head office address of the company being separated, the names of the newly established companies, the employment plan, the method of separation, the value of assets and obligations to be transferred, and the time limit for the separation.

What are the company’s obligations after the separation resolution has been approved by the General Meeting of Shareholders?

Once approved, the company must send the resolution to creditors and notify employees within 15 days of the decision.

What actions should members or shareholders of newly formed companies take after separation?

Members or shareholders of new companies must approve the company’s charter, elect or appoint managers, and register the business.

Conclude

Thus, to separate a joint stock company, you need to prepare complete documents and procedures according to the law. If you have any questions related to separating a joint stock company, please immediately contact the hotline: 0906735386 to receive detailed guidance and comprehensive support from Long Phan Consulting Company’s team of experts.