Procedures for separating the company according to legal regulations

Procedures for separating the company is a legal process that allows a business to transfer part of its assets, rights and obligations to establish a new company without terminating the operations of the separated company. The article below will analyze in detail the order and procedures for separating the company according to current legal regulations.

Conditions for separating the company according to legal regulations

Pursuant to Clause 1 and Clause 3, Article 199 of the Law on Enterprise 2020 on separation of enterprises stipulates:

A limited liability company or joint stock company can be separated by transferring part of the assets, rights, obligations, members, and shareholders of the existing company (hereinafter referred to as the separated company) to establish one or several new limited liability companies or joint stock companies (hereinafter referred to as the separated company) without terminating the existence of the separated company.

Enterprises must comply with a number of necessary conditions to carry out the procedure for separating the company as follows:

• The company must be a limited liability company or a joint stock company.
• The company must be operating legally, not in the process of dissolution.
• There must be a resolution or decision to separate the company passed by the Board of members, the company owner or the General Meeting of Shareholders according to regulations.
• The company must notify creditors and employees of the separation within 15 days from the date of making the decision or passing the resolution.
• The separation must not violate the prohibitions in the Law on Enterprise and must ensure the rights of related parties.

It can be seen that the process of separating the company must strictly adhere to legal regulations regarding business registration, documentation, procedures, and legal responsibilities. If the required conditions are not met, the separation of the company may be refused by the competent state authorities.

Methods of separating the company

Limited liability companies and joint stock companies can split by the following methods:

• Method 1: Part of the capital contributions and shares of members and shareholders along with assets corresponding to the value of capital contributions and shares are transferred to new companies according to the ownership ratio in the separated company and corresponding to the value of assets transferred to the new company.
• Method 2: The entire capital contribution and shares of one or several members and shareholders along with assets corresponding to the value of their shares and capital contributions are transferred to new companies.
• Method 3: Combine both methods above.

Each method of separating the company has its own advantages and disadvantages. For example, method 1 helps maintain the shareholder structure but reduces the ownership ratio, while method 2 changes the shareholder structure of the separated company. Enterprises need to carefully consider factors such as business projects, assets, capital structure and long-term development strategy before deciding on the appropriate separation method.

Standard procedure for separating the company according to current regulations

File

The company separation file includes many important legal documents. Therefore, missing one of these documents may result in the Enterprise’s registration application being rejected. According to the provisions of Clause 2, Article 25 of Decree 01/2021/ND-CP on business registration, the business registration dossier for the separated company must contain the following documents:

1. Business registration documents according to new business type, specifically:

• Application for business registration;
• Company charter;
• List of founding members/shareholders and list of shareholders who are foreign investors for joint stock companies, limited liability companies with 02 or more members and joint stock companies;
• Copies of documents for each type of enterprise as prescribed in Clause 4, Article 23 and Clause 4, Article 24 of Decree 01/2021/ND-CP.

2. Resolution and decision on separation of the company according to the provisions of Article 199 of the Law on Enterprise, including the following main contents:

• 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;
• The value of assets, rights and obligations are transferred from the separated company to the separated company;
• Time limit for separating the company;

3. Copy of the minutes of the meeting of the Board of Members for a limited liability company with two or more members, or of the General Meeting of Shareholders for a joint stock company on the separation of the company.

In addition, the separated company must send a resolution or decision to separate the company to all creditors and notify employees within 15 days from the date of decision or adoption of the resolution.

Order and procedures

According to Clause 3, Article 199 of the Law on Enterprise 2020, the procedure for separating a limited liability company and a joint stock company is prescribed as follows:

Step 1: Pass the resolution and decision to separate the company

• The Board of members, the company owner or the General Meeting of Shareholders of the separated company meets and passes a resolution and decision to separate the company. It should be noted that resolutions and decisions must include the main contents according to regulations.
• Send resolutions and decisions to all creditors and notify employees within 15 days from the date of decision or resolution adoption.

Step 2: Establish a new company

• Members, company owners or shareholders of the company are separated through the new Charter.
• Elect or appoint Chairman of the Board of Members, Chairman of the company, Board of Directors, Director or General Director.

Step 3: Register business for the separated company

• Prepare business registration documents as prescribed in Clause 2, Article 25 of Decree 01/2021/ND-CP.
• Submit the business registration application to the Business Registration Office where the company intends to locate its headquarters.

Step 4: Register to change the business registration content of the separated company (if any):

• If the separation changes the charter capital, number of members, shareholders, the separated company must carry out registration procedures to change the business registration content.
• Registration documents are changed according to the provisions of Clause 1, Article 61 of Decree 01/2021/ND-CP.

Step 5: Receive results:

• After receiving the business registration dossier, the Business Registration Office issues a receipt and checks the validity of the dossier.
• If the application is valid, the Business Registration Office will issue a Business Registration Certificate to the separated company and a Certificate of change in business registration content to the separated company (if any).

Correct implementation of the above process not only helps the business ensure the legal validity of separating the company but also ensures that the process runs smoothly and efficiently.

After separating the company, how does the separated company change its business registration content?

After completing the separation process, the separated company must carry out procedures to change the business registration content. This change reflects changes in capital structure and members/shareholders after part of the assets, rights and obligations have been transferred to the new company. Specifically, according to Clause 1, Article 61 of Decree 01/2021/ND-CP regulating registration of changes in business registration content for separated companies:

In case of separation of a limited liability company or joint stock company in which the separated company changes its 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 is reduced, the registration dossier to change the business registration content of the separated company must include the corresponding documents specified in this Chapter and the following documents:

• Resolution and decision on separation of the company according to the provisions of Article 199 of the Law on Enterprise;
• Copy of the minutes of the meeting of the Board of Members for a limited liability company with two or more members, of the General Meeting of Shareholders for a joint stock company on the separation of the company.

Thus, according to the above regulations, the changed registration content may include:

• Change in charter capital: After separation, the charter capital of the separated company will decrease corresponding to the capital transferred to the separated company. The company needs to update the new charter capital in the change registration dossier.
• Change of list of members/shareholders: In case the entire capital contribution and shares of one or several members and shareholders are transferred to the new company, the list of members/shareholders of the separated company will change.
• Change in business lines: If the separation leads to a change in business lines, the separated company needs to update this information.
• Changing the legal representative: In some cases, the separated company can change the legal representative after the separation.

According to Clause 3, Article 61 of Decree 01/2021/ND-CP, the change registration process is carried out at the Business Registration Office where the separated company’s headquarters is located. After receiving the application, the Business Registration Office will check the validity and issue a Certificate of change in business registration content to the separated company.

All-inclusive service for separating the company at Long Phan Consulting Company

Long Phan’s full company separation service includes the following items:

• Consulting on methods of separating the company in accordance with business goals;
• Draft and prepare all necessary documents and records;
• Develop a plan to divide assets, rights and obligations;
• Support for establishing new companies: Drafting Charters, preparing business registration documents;
• Carry out business registration procedures for the separated company;
• Carry out procedures to change the business registration content for the separated company;
• Consulting on solving problems that arise during the separation process.

Frequently asked questions about separating the company procedures

Below are some questions we often encounter during the consulting process, please refer to:

Is a partnership allowed to separate the company?

No, according to the provisions of the Law on Enterprise 2020, only limited liability companies and joint stock companies are allowed to separate companies.

How long does it take to complete the company separation procedure?

The time to complete the company separation procedure depends on many factors, including the complexity of the separation, document preparation and processing time of state agencies. Typically, this process can take from 1 to 3 months.

What expenses are included in the company separation costs?

Company separation costs include state fees, consulting service costs (if any), notary and authentication costs and other incurred costs.

After separating the company, does the new company need to apply for a tax code again?

After being granted a business registration license, the new company will have a new tax code.

How is the division of assets and debts done after separating the company?

The division of assets and debts is carried out according to the agreement between the parties involved and is clearly stated in the resolution/decision to separate the company.

Is the separated company responsible for debts incurred before the separation?

Yes, the separated company is still responsible for debts incurred before the separation, unless otherwise agreed with creditors.

Conclude

Thus, not all types of businesses can carry out the procedure for separating the company, only limited liability companies and joint stock companies can carry out this procedure. Long Phan Consulting Company is ready to support customers in implementing a full package of business separation procedures with the most optimal solution. Please contact hotline 0906735386 immediately to receive free advice from our team of experts on the full company separation service.