What are current situations of transfer of enterprise ownership? How is enterprise ownership transfer regulated by law? Let’s follow the article below to find out necessary matters.

I. Current situations of transfer of enterprise ownership

Since 1990, Vietnam has undergone multiple phases of transferring enterprise ownership, particularly the conversion of state-owned enterprises into joint-stock companies. According to reports of the Ministry of Planning and Investment, by the end of 2022, more than 15,000 state-owned enterprises had been successfully converted into joint-stock companies, accounting for approximately 80% of the total number of state-owned enterprises.

II. Legal regulations on transfer of enterprise ownership

Legal regulations on enterprise ownership transfer are as follows:

1. What is transfer of enterprise ownership?

Transfer of enterprise ownership refers to the process of transferring ownership from the previous owner to a new owner. Such transfer can occur in various forms, including:

- Transfer of capital contributions or stocks: The previous owner transfers part or all of their capital contributions or stocks to a new owner.

- Donation of capital contributions or stocks: The previous owner donates part or all of their capital contributions or stocks to a new owner.

- Merger or consolidation of enterprises: The existing enterprise merges with or is consolidated into another enterprise, resulting in a change of ownership.

- Conversion of a new enterprise type: An enterprise changes its business structure, leading to a change in ownership.

2. Forms of transferring enterprise ownership

Pursuant to the Law on Enterprise 2020, there are five forms of enterprise ownership transfer:

- Transfer of capital contributions or stocks

- Transfer into a joint-stock company

- Merger or consolidation

- Transfer into a multi-member limited liability company (LLC)

- Transfer into a proprietorship

3. A dossier for transfer of enterprise ownership 

Pursuant to Clause 1, Article 53 of Decree 01/2021/NĐ-CP, a dossier for enterprise ownership transfer is as follows:

a) A notice of change of owner signed by the former owner or its legal representative, and a new owner or its legal representative.

b) A copy of legal documents of an individual if the transferee is an individual, or ones of an organization; and a copy of legal documents of an authorized individual, or a copy of the authorization letter if the transferee is an organization.

Note:  For foreign organizations, copies of legal documents must be implemented consular legalization by competent authorities.

c) A copy of the amended and supplemented company charter.

d) A transfer contract for capital contributions or stocks or other documents proving the completion of the transfer.

e) A document from the Investment Registration Authority approving a capital contribution, share purchase, or capital contribution purchase by a foreign investor or foreign-invested economic organization in cases where registration procedures are required under the Law on Investment.

* Specific instance of transfer dossiers and procedures for the single-member limited liability company:

- In cases where the owner of the single-member limited liability company is changed based on a decision from the competent authority regarding the reorganization or renewal of state-owned enterprises, change registration dossiers shall follow the provisions in Clause 1 of this Article. Accordingly, the transfer contract or documents proving the completion of the transfer shall be replaced with the competent authority's decision on the change of enterprise ownership.

- In cases where the owner of a single-member limited liability company changes due to inheritance, the heir shall submit the application to change the enterprise registration content to the Business Registration Office where the enterprise's headquarters is located. The application includes the following documents:

a) A notice of change of owner of the single-member limited liability company signed by a new owner or its legal representative.

b) A copy of the amended and supplemented company charter.

c) A copy of legal documents of an individual if the heir is an individual, or ones of an organization; and a copy of legal documents of an authorized individual, or a copy of the authorization letter if the heir is an organization.

d) A copy of the document confirming the heir's legal inheritance rights.

- In cases where the owner of the single-member limited liability company changes due to a donation of the entire capital contribution, the enterprise registration dossier shall include the documents specified in Clause 1 of this Article. Accordingly, the transfer contract or documents proving the completion of the transfer shall be replaced with the donation contract for the capital contribution.

- In cases where the owner of the single-member limited liability company changes due to division, separation, merger, or consolidation of the company, the enterprise registration dossier shall include the documents specified in Clause 1 of this Article. Accordingly, the transfer contract or documents proving the completion of the capital contribution transfer shall be replaced with a resolution or decision on the division, separation, merger, or consolidation of the company, and documents specified in Points a and b, Clause 3, Article 25, and Points a, b, and c, Clause 2, Article 61 of this Decree. The resolution or decision must clearly state the transfer of the entire capital contribution from the single-member limited liability company to a new company.

III. Answers to some questions regarding enterprise ownership transformation

1. Is it required to pay registration fees when transferring ownership or usage rights of assets contributed to establish the enterprise?

Pursuant to Article 35 of the Law on Enterprise 2020, when assets required ownership registration or land use rights are contributed as capital to establish an enterprise, a contributor must complete procedures to transfer the ownership of assets or land use rights to the enterprise. Simultaneously, registration fees are obliged to pay according to Article 3 of Decree 10/2022/ND-CP stating subjects bore such fees.

Accordingly, the transfer of ownership or land use rights for assets contributed as capital is subject to registration fees.

2. Can foreign currency be used for capital contribution when transferring enterprise ownership?

Clause 1, Article 4 of Circular No. 06/2019/TT-NHNN dated June 26th, 2019 issued by the State Bank of Vietnam, provides guidance on foreign exchange management concerning foreign direct investment activities in Vietnam, as follows:

- Foreign investors and Vietnamese investors are allowed to contribute capital in foreign currency or Vietnamese dong according to the capital contribution ratio stated in the Investment Registration Certificate, the License for Establishment and Operation in accordance with specialized laws (for enterprises with foreign direct investment established and operating under specialized laws), the Notification of fulfillment of conditions for capital contribution, stock purchase, or capital acquisition by foreign investors, the PPP contract signed with competent state authorities, and other documents proving the capital contribution of foreign investors in accordance with legal regulations.

Thus, foreign currency can be used for capital contribution when transferring enterprise ownership.

3. How is asset valuation conducted when transferring enterprise ownership?

Article 36 of the Law on Enterprise 2020 regulates the valuation of capital-contributed assets as follows:

- Assets contributed as capital that are not Vietnamese dong, freely convertible foreign currency, or gold must be valued by founding members, shareholders, or valuation organizations, and the value must be expressed in Vietnamese dong.

- Assets contributed when establishing an enterprise must be valued by founding members or shareholders based on a consensus or by a valuation organization. If a valuation organization is used, the value of contributed assets must be approved by more than 50% of the founding members or shareholders.

If contributed assets are overvalued compared to their actual value at the time of contribution, the founding members or shareholders must jointly contribute the difference between the appraised value and the actual value of contributed assets at the time the valuation is finalized. They are also jointly responsible for any damages caused by intentionally overvaluing contributed assets. 

- For assets contributed during the enterprise's operation, the valuation is agreed upon by the owner, the Members' Council of the limited liability companies and partnerships, the Board of Directors of joint-stock companies, and contributing parties, or it can be conducted by a valuation organization. If a valuation organization is used, the value of contributed assets must be approved by the contributing party and the owner, Members' Council, or Board of Directors.

If contributed assets are overvalued compared to their actual value at the time of contribution, the contributing party, the owner, members of the Members' Council, and members of the Board of Directors must jointly contribute the difference between the appraised value and the actual value of contributed assets at the time the valuation is finalized. They are also jointly responsible for any damages caused by intentionally overvaluing contributed assets.

The above information includes important aspects of enterprise ownership transfer. For further assistance or understanding legal regulations concerning enterprise ownership transfer, you can contact NPLaw for consultation with an experienced team of lawyers and legal professionals.