Business type conversion fee in Vietnam

In case the enterprise no longer meets the minimum number of members as prescribed by law, it is forced to convert another type of enterprise if they do not want to be forced to dissolve.However, how much is the conversion fee is a question that many customers still wonder. And to answer your questions, Viet An Law Firm offers an article on business conversion fees below.

Legal bases

• Enterprise Law 2020.
• Decree No. 01/2021/ND-CP dated January 04, 2021 of the Government on business registration;
• Circular No. 47/2019/TT-BTC dated 05/8/2019 of the Ministry of Finance stipulating the collection rate, regime of collection, payment, management and use of fees for providing business information and business registration fees;

What does “business type conversion” mean?

Business type conversion is a form of reorganization and restructuring of an enterprise without having to completely terminate operations. In other words, that company will operate as a different type of business. Enterprises are not allowed to convert arbitrarily, but must fully meet all conditions prescribed by the law on business set up to  have the right to convert the type of enterprise. But still inherit all legal rights and interests, be responsible for debts, including tax debts, employment contract and other obligations of the converted company.

Why is it necessary to convert business type?

Each type of business will have its own characteristics. When registering for business establishment, the owner selects the type of business that suits the size and orientation of that business. However, enterprises will carry out the conversion of the type of enterprise in the following cases:

Transform according to the needs of the business:

• Enterprises that want to raise more capital (1-member limited liability company, 2-member limited liability company or more want to convert into a joint stock company to issue all kinds of shares);

• The enterprise wants to have legal status and move to limited liability mode (Private enterprises turn into other types of enterprises).

Conversion in accordance with the law

• Due to changes in member structure, shareholder structure (the number of members contributing capital to the company exceeds 50 members, a 2-member limited liability company must be converted into a joint stock company).

Note: If in case the number, structure of members and shareholders is not enough in accordance with the law on enterprises, the company must carry out dissolution procedures (according to Point c, Clause 1, Article 207 of the Enterprise Law 2020)

Fees for changing the type of business in Vietnam

Converting the type of enterprise is one of the cases of issuance of a new Certificate of Business Registration. Pursuant to Circular 47/2019/TT-BTC:

• The fee for publishing content to register for business type conversion is VND 100,000, equivalent to about USD 09.

Cases of business type conversion in Vietnam

Note:

• The converted company automatically inherits all legal rights and interests, and is liable for debts, including tax liabilities, employment contracts and other obligations of the converted company.
• For a private enterprise, the owner of the private enterprise is personally liable with all his assets for all debts incurred before the date the converted company is granted the Certificate of Business Registration

Business type conversion process in Vietnam

Step 1: Enterprises choose 1 of 6 types to be converted;

Step 2: Enterprises prepare and draft dossiers of conversion of business type suitable to each conversion case;

Step 3: Submit the prepared application in 1 of the following 2 ways:

Submit online at the National Business Registration Portal through electronic digital signatures or business registration accounts;

Submit directly at the Business Registration Office under the Department of Planning and Investment of the province / city, where the enterprise is headquartered.

Step 4: Businesses wait to receive results

Within 3-5 working days from the date of receipt of the dossier, the Business Registration Office will check the dossier, then:

Issuance of a new enterprise registration certificate (if the application is valid);

Send a notice of request to amend and supplement the dossier of enterprise type conversion (if the dossier is incomplete and valid).

Note when converting business types

In fact, the conversion of business type will affect information about the business such as business name, salary accounting, seal, other related documents … Therefore, to ensure future operations, when making the transition, businesses should pay attention to the following issues:

• Make changes to information in the company’s papers and records;
• In case the company name is changed, the enterprise needs to remake the new company sign and hang it at the head office, representative office and business locations (if any);
• The engraving of the new seal must only be carried out in case there is  information on the old seal that when changing the type of enterprise,  the information on the old seal changes the information on  the old seal (the seal content includes tax code and enterprise name);
• It is possible to simultaneously carry out procedures for changing enterprise information (address, name, business line …) and procedures for changing types (except for legal representative information);
• Change information of assets that the enterprise has registered to own such as vehicle registration certificates, license plates and certificates of home ownership, land use rights and other assets attached to land;
• Notify the conversion of business type to relevant agencies, organizations and units (partners, customers, tax authorities, specialized management agencies…) so that they can promptly update information about the enterprise;
• Update customs account information, e-tax account, digital signature (if any);
• In case a joint-stock company converts the type of enterprise due to share transfer, the share transferor needs to pay PIT;
• If the enterprise converts from a joint-stock company/limited liability company with 2 or more members into a 1-member limited liability company, the director’s salary expenses cannot be accounted for in enterprise expenses.

If you need advice on the business type conversion fee, please contact Viet An Company for the best support.