So how does the law provide for forms and procedures of Changing company types? What are some issues to notice when changing the type of company?
I. Introduce the forms of changing company types
1.1. Definition of changing company types
Changing the company types can be understood as business reorganization According to the definition of business reorganization provided in clause 31, Article 4 of the Law on Enterprise 2020: “business reorganization is the division, separation, consolidation, merger or transformation of the type of company.”
Transforming into another type of company is to fit its size and orientation better.
1.2. Reasons or benefits of changing the type of company
The company-type change comes for various reasons, maybe because it is subject to the case prescribed by the law or the internal business's need to transform to continue operating.
The transformation will also bring certain benefits to the company. Specifically, when transforming into the company type having the potential for attracting investment capital, and raising capital from various sources, the company will be able to turn over capital and have sufficient financial capacity to develop the company then.
At the same time, transforming into a limited company or joint stock company will help minimize the risk to the owner. Because liability when operating under this type of business is limited liability, not infinite; therefore, transformation will help minimize risks and protect the property of the owner.
II. Forms of changing company types under current law
According to the Law on Enterprise 2020, in particular, from Article 202 to Article 205, the forms of changing the type of company will include:
- Transforming a single-member limited liability company into a multi-member one and vice versa;
- Transforming a limited liability company into a joint stock company;
- Transforming a joint stock company into a single-member limited liability company;
- Transforming a joint stock company into a multi-member limited liability company;
- Transforming a private enterprise into a limited liability company, joint stock company, and Partnership.
III. Procedure for chaning company types
Depending on the type of company to be converted, the company will need to prepare different dossiers in accordance with decree 01/2021/ND-CP. For example, in the case of transforming a single-member limited liability company into a multi-member one, the dossier should be prepared according to Clause 2, Article 26 of Decree 01/2021/ ND-CP, including:
- Application for business registration.
- Company Charter.
- List of members for multi-member limited liability company.
- Copy of the following documents:
+ Legal documents of individuals for legal representatives of enterprises;
+ Legal documents of individuals for members of the company as individuals; legal documents of the organization for members as organizations; legal documents of individuals for representatives under the authorization of members as organizations and documents sending authorized representatives.
For members who are foreign organizations, a copy of the legal documents of the organization must have consular legalization.
- Attached dossier must have the following papers:
+ Transfer agreement or proof of completion of the transfer in case of transferring contributed capital; contract of donation in case of donating contributed capital; copy of the document confirming the legitimate inheritance of the heir in case of inheritance in accordance with the law;
+ Resolution and decision of the owner of the company on raising additional capital contributions of individuals, other organizations and papers certifying the contribution of new members in case of raising capital contributions of new members;
+ Documents of the investment registration agency of approval on the capital contribution, share purchase, contribution purchase of foreign investors and economic organizations with foreign investment capital in case of having to carry out the procedure for registration of capital contributions, share purchase, contribution purchase as prescribed in Law on Investment.
After full preparation of the dossier, the company will submit it to the business registration agency through the form of online application as currently, specifically:
Submit it online at the national portal of business registration through a business registration account or public digital signature.
Within 03 days from the date of receiving the dossier for company transformation, The Business Registration Office will issue a new business registration certificate and update the legal status of the company on the national database of business registration.
For the procedure for changing into other types of companies, the procedure shall be carried out as shown above. However, depending on the type of transformation, the profile prepared will differ.
IV. Some note when transforming the type of company
4.1. Is a private enterprise entitled to be transformed into a limited liability company?
Private enterprises are infinitely responsible; therefore, some enterprises will transform their types in order to minimize risks as well as increase the likelihood of raising capital for enterprise development after a period of operation. Usually, private enterprises will transform into a type of limited liability company such as Co., Ltd. or joint stock company. As stipulated in Article 205 of the Law on Enterprise 2020, private enterprises have the right to be transformed into a limited liability company if they meet the conditions prescribed in law.
4.2. Is the business transformation in the buying and selling business considered an important step to complete the investment?
The transformation in buying and selling business can not be seen as an important step to complete the investment. The reason is that it has to rely on many factors such as management capacity, financial ability, objectives, development orientation of the company,... to choose the right type of company. Therefore, businesses can transform their type if they consider a need to do that to ensure business investment activities in the process of buying and selling. Otherwise, continuing to operate according to the original type of company still has no influence on the process of completing the investment.
