Establish a company in Vietnam based on full division

A company division is a method of corporate restructuring whereby a parent company is divided into two or more subsidiaries. Division of a company is commonly used when a business expands its business activities or focuses on core business areas while improving management efficiency or resolving conflicts among members. In this article, Viet An Law will present in detail procedures to establish a company in Vietnam based on full division, to help businesses do conveniently and effectively.

Legal basis

• Law on Enterprise 2020;
• Decree 01/2021/ND-CP on business registration.

What is the full division of a company?

• A divided company will terminate its existence after dividing the assets, rights and obligations, members, and shareholders of the existing company (hereinafter referred to as the divided company) to establish two or more new companies.
• The division of a company is carried out on the legal basis of a resolution or decision to divide the divided company.
• In addition to automatically inheriting all legal rights, liabilities, and interests of the divided company, new companies must be jointly responsible for liabilities, unpaid debts, labor contracts, and other property obligations of the previous company.

Division company procedures within an enterprise

According to the provisions of Article 198 of the Enterprise Law 2020, procedures for dividing limited liability companies and joint stock companies within enterprises are carried out as follows:

• Step 1: The Board of members, the company owner, or the General Meeting of Shareholders of the divided company passes a resolution and decision to divide the company according to the provisions of the Enterprise Law 2020 and the Company’s Charter. Resolutions and decisions to divide the company must be sent to all creditors and notified to employees within 15 days from the date of decision or adoption;
• Step 2: Members, company owners, or shareholders of the newly established company approve the Charter, elect or appoint Chairman of the Board of Members, Company President, Board of Directors, Director or General Director, and conduct new business registration.

Competent authority records company division procedures

To record the new legal status of the divided company and the newly established company after the division, the enterprise law stipulates:

• The business registration office where the divided company is headquartered updates the legal status of the divided company in the National Business Registration Database when issuing Enterprise Registration Certificates to new companies.
• In case the new company has a headquarters address outside the province with the divided company, the business registration agency where the new company’s headquarters is located must notify the new business registration to Authority where the divided company headquarters is located to update the legal status of the divided company on the National Business Registration Database.

Application to establish a company in Vietnam based on full division

Procedures to establish a company in Vietnam based on full division

• Step 1: The person applying for the authorization of the divided company can choose to apply directly or by mail to the one-stop department of the Business Registration Office – Department of Planning and Investment. In the case of an online application, the applicant uses the business registration account to declare information, download electronic documents authenticate the business registration application via an electronic information network, and pay fees and chargers according to the process on the national business registration portal (https://dangkylanhdoanh.gov.vn ).
• Step 2: After completing the registration application, the applicant will receive a receipt of the business registration application sent directly or via the electronic information network in the form of online registration.
• Step 3: The Business Registration Office issues business registration to the business in case the application is eligible and notifies the business about the issuance of business registration. In case the dossier does not meet the conditions, the Business Registration Office will send a notice via electronic information network to the enterprise to request amendments and supplements to the dossier.
• Step 4: Publish the business registration information of newly established businesses. The request for publication of business registration contents is made by the divided company at the time of submitting the new business registration application.
• Step 5: The Business Registration Office where the divided company’s headquarters is located sends information to the Tax Authority. In case the company is divided and the new company is headquartered in a different province, the Business Registration Offices will send information to each other. The tax authority is responsible for sending information to the Business Registration Office about the enterprise’s completion of settlement and transfer of tax obligations.
• Step 6: Within 01 day from the date of receiving information from the Tax Authority about the divided company completing settlement and transferring tax obligations, the Business Registration Office updates the legal status of the divided company. division based on the business registration information of the divided company, and at the same time terminate the existence of branches, representative offices, and business locations of the divided company.

Distinguish between full division and partial division of a company in Vietnam

Both are forms of restructuring by dividing to inherit corporate rights and obligations, but full division and partial division of companies in Vietnamese law has certain differences, specifically:

Company establishment services of Viet An Law based on full division

• Consulting on drafting documents to establish a business based on division or separation of the company;
• Representing customers to carry out registration procedures with competent authorities;
• Monitor and process notifications from the business registration agency during the application processing process;
• Receive results and hand over to customers;
• Providing post-establishment services, tax accounting, intellectual property registration, and regular consulting for businesses after establishment.

If you want to establish a business based on dividing a company, please contact Viet An Law for the best support.