Nowadays, enterprises play a very important role in the country's economy. However, in the process of operations, there will be times when the enterprise is at risk, so it needs to be reorganised to suit the actual situation in order to maintain its operations. In various forms of reorganisation, the separation of enterprises is a procedure chosen by many. So how is the separation of enterprises procedure regulated? Let's find out with NPLaw through the article below.

I. What is the separation of enterprises procedure?

Separation of enterprises is the transfer of a part of the assets of an existing company for the establishment of one or a number of companies of the same type, transferring a portion of the rights and obligations of the company being separated to the company that is separated without terminating the existence of the company being separated in the order regulated by the law.

II. Conditions for execution of the separation of enterprises procedure

Pursuant to Article 199 of the Law on Enterprises 2020, enterprises that wish to conduct the separation of enterprises procedure need to meet the following conditions:

- An enterprise needs to be a limited liability enterprise or a joint-stock enterprise.

- The enterprise must have written consent of the Members' Council, the company owner, or the Shareholders' Meeting, in particular resolutions, decisions to separate the company, pursuant to the Law on Enterprises 2020 and the company's Standing rules, and the enterprise shall send to all creditors and inform the employees within 15 days of the date of the decisions or passed the resolutions.

- Enterprises complete building the plan to use the labourers, divide company assets, and obtain the approval of the Members' Council and the Shareholders' Meeting.

- The new companies must inherit the rights and obligations jointly according to the resolutions, the decisions to separate the company.

- The company separated must register changes in the charter capital, number of members, shareholders corresponding to the capital contribution, shares and number of participants, shareholder reduction (if any), and enterprise registration for the companies separated.

III. Forms of separation of enterprises

Currently, the Law on Enterprises 2020 does not regulate the forms of separation of enterprises. While in Clause 2 of Article 193 of the Law on Enterprises 2014 there are regulations about methods of separation of companies. However, the regulations unintentionally restrict the self-determination of members and shareholders in the company when separating the company. Because the separation of the company takes place on the basis of the resolution of the separation, the Resolution will clearly define the principles, methods, and procedures for the division. Therefore, principles and methods by which the company will be separated will be decided and agreed upon by the owners of the company. That's why the Law on Enterprises 2020 has abolished the regulations on how to separate companies.

IV. Separation of enterprises procedure guidelines

1. Dossiers for the separation of enterprises

In the case of a company being separated, a change in the charter capital, the number of members, shareholders corresponding to the capital contribution, shares, and the number of members, shareholders being reduced shall be registered (if any). Specifically, the company being separated has to create dossiers to change the enterprise registration content for the company being separated. The dossiers pursuant to Article 61 of Decree No. 01/2021/ND-CP on the registration of enterprises include the following documents:

- Resolutions and decisions on the separation of enterprises pursuant to Article 199 of the Law on Enterprises;

- Copy of the minutes of the meeting of the Members' Council for the limited liability company of two or more members, of the Shareholders' Meeting for the joint-stock company concerning the separation of the company.

After completion of the notification dossier for changes to the contents of the enterprise registration, the company being separated needs to create dossiers for the registration of the establishment of an enterprise in respect of the company that is separated pursuant to Article 23, Article 24 of Decree 21/2021/ND-CP on the enterprise registration, including:

- Proposal for enterprise registration.

- Company's standing rules.

- List of members for limited liability companies of two or more members; list of founding shareholders and list of shareholders that are foreign investors for the joint-stock company.

- Resolutions and decisions on the separation of the company;

- Copy of the minutes of the meeting of the Members' Council for the limited liability company, copies of the minutes of the meeting of the Shareholders' Meeting for the joint-stock company concerning the separation of the company;

Copies of the following documents:

- Legal documents of the individuals for representatives under the law of the enterprises;

- Legal documents of the individuals for members of a company, founding shareholders, and shareholders that are foreign investors that are an individual;

- Legal documents of the organisations for members, founding shareholders, shareholders that are foreign investors and are organisations;

- Legal documents of the individuals for representatives authorised by the members, the founding shareholders, the shareholders that are foreign investors are organisations, and the texts that appoint the authorised representatives.

- If the members and shareholders are foreign organisations, copies of the legal documents of the organisations must be legalised by the consular department.

2. Sequence, procedure for the separation of enterprises

The separation of enterprises procedure is regulated pursuant to Clause 3 of Article 199 of the Law on Enterprises 2020, specifically:

Step 1: The Members' Council, company owners, or Shareholders' Meeting of the company being separated by resolutions, decisions to separate the company pursuant to this Law and the Company's standing rules.

The resolutions and decisions to separate the company shall contain the following main contents: the name and address of the main headquarters of the company being separated; the name of the separate companies that will be established; the plan to use the labourers; the method of separation; the value of the assets, rights, and obligations transferred from the company being separated to the company that is separated; and the deadline for the execution of the separation.

The resolutions and decisions to separate the company must be sent to all creditors and notified to the employees within 15 days from the date of the decisions or the passed resolutions;

Step 2: The members, company owners, or shareholders of the company being separated through the Standing rules elect or appoint the Chairman of the Members' Council, Chairman of the Company, Board of Directors, Director, or General Director and proceed to register the enterprise pursuant to this Law.

V. Changes to the contents of the enterprise registration for the company being separated

After the execution of the separation, if there is a change in the charter capital, number of members, shareholders corresponding to the capital contributions, shares, and number of members, the shareholder decreases, the company being separated will carry out the procedure to change the contents of the corresponding enterprise registration.

About the dossier to change the content of the enterprise registration: In accordance with the provisions of the law on enterprise registration, the registration dossier to change the content of the enterprise registration of the company being separated includes:

- Resolutions, decisions on the separation of the company pursuant to Article 199 of the Law on Enterprises;

- Copy of the minutes of the meeting of the Member's Council for the limited liability company of two or more members, of the Shareholders' Meeting for the joint-stock company concerning the separation of the company.

- Documents required by law for each type of change.

About the sequence and procedure for changing the contents of the enterprise resignation of the company being separated: 

Step 1: Submit registration dossier/notification of change of contents of enterprise registration to the Business Registration Office, Department of Planning and Investment.

Step 2: After receiving the enterprise registration file, the Business Registration Office issues the Receipt, checks the validity of the dossier, and issues the enterprise registration Certificate, the Certificate of confirmation of the change in the enterprise registration content for the enterprise.

VI. Answering questions about the separation of enterprises procedure

1. What responsibility does the employer have with the employee when carrying out the separation of enterprises procedure?

Separation of enterprises is one of the forms of structural change in the Labour Code. Therefore, when carrying out the separation of enterprises, the next employer is responsible for continuing to use all existing labourers and to carry out the amendment and supplementation of the employment contract. If not all the labourers will be used, it is necessary to develop a suitable plan to use the labourers pursuant to Article 44 of the Labour Code 2019. If a labourer has to quit the job, the company has to pay the labourer a compensation package so that the labourer's rights are guaranteed when the enterprise is separated.

2. Does an enterprise being separated have to pay taxes?

Pursuant to Point b Clause 2 Article 20 of the Circular 105/2020/TT-BTC regulates tax registration for organisations that is separated as follows:

The organisation that is separated shall carry out the tax registration procedure with the tax authority pursuant to Article 31, Article 32, Article 33 of the Law on Tax Management, and Article 7 of this Circular.

Thus, the enterprise being separated still has to pay taxes.

3. After the separation of the enterprises, who is the owner of the enterprises that are separated?

After the separation of the enterprises, there is no specific regulation in the law on who will be the owner. This, therefore, depends on the content of the resolution of the members' council for the limited liability company of two or more members, of the Shareholders' Meeting for the joint-stock company. The members' council, the shareholders' meeting, will have an agreement and unification on who will be the ones who hold the capital contribution, then these will be the people who are the owners.

VII. Advisory services for the separation of enterprises procedure

Currently, there are many law companies/law offices that offer the advisory service for the separation of enterprises procedure, among which NPLaw is a company that always meets the trust of its clients. With a team of lawyers, professionals with profound qualifications and experiences, we always ensure that the procedure is carried out quickly, safely, and at the lowest cost of service. Our company not only advises the legal regulations relating to the separation of enterprises procedure but also helps customers to prepare and complete the company separation dossiers and represents customers to conduct the separation of enterprises procedure at the competent State agencies.

Any queries readers may have about the separation of enterprises procedure can be addressed by the information provided above, according to NPLaw. Please use the following contact details to get in touch with NPLaw if any readers have any questions or concerns that require more information.