1. Reorganization of enterprises the businessCorporate reorganization can be carried out under the forms of: division, split, consolidation, acquisition, conversion of types of enterprises
1.1. Division (i) A limited liability company or a joint stock company may divide its assets, rights and obligations, members/ shareholders (hereinafter referred to as the divided company) to establish two or more new companies.
(ii) Company division procedures:
a) Adopt resolutions and decisions on the division of the company. These resolutions and decisions shall be sent to all creditors and notified to employees within 15 days from the date of the adoption;
b) The newly established companies shall approve their charters, elect or appoint persons to fill in managerial positions.
(iii) The divided company shall cease to exist after the new companies are granted the Enterprise Registration Certificates. The new companies shall obviously inherit all rights, obligations and lawful interests of the divided company as distributed.
(iv) The business registration authority shall update the legal status of the divided company in the National Enterprise Registration Database when issuing the Enterprise Registration Certificates to the new companies.
1.2. Split (i) A limited liability company or joint stock company may be split by transferring a part of the assets, rights, obligations, members/ shareholders of the existing company (hereinafter referred to as the split company) to establish one or several limited liability companies or joint stock companies (hereinafter referred to as new companies) without ceasing the existence of the split company.
(ii) The split company shall register the change in charter capital, number of members/ shareholders in proportion to the decrease in the stakes/shares and number of members/shareholders (if any) and apply for registration of the new company/ companies.
(iii) Company splitting procedures:
a) Adopt resolutions and decisions on the split of the company. These resolutions and decisions shall be sent to all creditors and notified to employees within 15 days from the date of the adoption;
b) The new company/ companies shall approve their Charters, elect or appoint persons to the managerial positions and conduct the enterprise registration as stipulated.
(iv) After the enterprise registration, the split company and the new company/ companies shall be jointly responsible for the unpaid debts, employment contracts and other obligations of the split company. The new company/ companies shall obviously inherit all the rights, obligations and lawful interests as distributed.
1.3 Consolidation (i) Two or more companies (hereinafter referred to as consolidating companies) may be consolidated into a new company (hereinafter referred to as consolidated company), after which the consolidating companies shall cease to exist.
(ii) Company consolidation procedures:
a) Prepare the consolidation contract and charter of the consolidated company;
b) The consolidating companies shall adopt the consolidation contract, the consolidated company’s charter, elect or appoint persons to fill in managerial positions of the consolidated company and apply for the registration of the consolidated company. The consolidation contract shall be sent to all creditors and notified to employees within 15 days from the date of the adoption.
(iii) After the consolidated company is registered, the consolidating companies shall cease to exist. The consolidated company shall enjoy the lawful rights and interests and be responsible for the liabilities, unpaid debts, employment contracts and other property obligations of the consolidating companies. The consolidated company shall obviously inherit all rights, obligations and lawful interests of the consolidating companies under the consolidation contract.
(iv) The business registration authority shall update the status of the consolidating companies to the National Enterprise Registration Database when issuing the Enterprise Registration Certificate to the consolidated company.
1.4. Acquisition (i) One or some companies (hereinafter referred to as acquired companies) may be acquired by another company (hereinafter referred to as acquiring company) by transferring all their assets, rights, obligations and lawful interests to the acquiring company, after which the acquired companies shall cease to exist.
(ii) Company acquisition procedures:
a) The related companies shall prepare the acquisition contract and draft the charter of the acquiring company.
b) The related companies shall adopt the acquisition contract and the acquiring company’s charter and apply for registration of the acquiring company in accordance with laws. The acquisition contract shall be sent to all creditors and notified to employees within 15 days from the date of the adoption;
c) After the acquiring company is registered, the acquired companies shall cease to exist. The acquiring company shall inherit the lawful rights and interests, liabilities, unpaid debts, employment contracts and other property obligations of the acquired company under the acquisition contract.
(iii) The business registration authority shall update the status of the acquired companies to the National Enterprise Registration Database and revise the Enterprise Registration Certificate of the acquiring company.
1.5. Conversion of type of company The conversion of a company can be carried out under one of the following forms:
(i) Conversion of a State-owned enterprise into a joint-stock company
(ii) Conversion of a limited liability company into a joint stock company
(iii) Conversion of a joint stock company into a limited liability company
(iv) Conversion of a sole proprietorship into a limited liability company, a joint stock company or a partnership
The new company shall obviously inherit all lawful rights and obligations of the converted company from the date of issuance of its Enterprise Registration Certificate.
2. Temporary cease, suspension and termination of business (i) An enterprise shall send a written notification to the Business Registration Authority no later than 3 working days before the date of the temporary cease or resumption of business.
(ii) The relevant Business Registration Authority and State competent authorities are entitled to request an enterprise to temporarily cease, suspend or terminate its business activities in the following cases:
a) Suspend or terminate the conditional and conditional market access business lines for foreign investors when they are found not meeting the corresponding conditions as prescribed by law;
b) Suspend business activities at the request of relevant authorities in accordance with the laws on tax administration, environment and others as relevant;
c) Suspend or terminate one or several business lines or sectors as decided by the Court.
(iii) During the business suspension period, the enterprise shall fully pay the unpaid taxes, social insurance, health insurance, unemployment insurance premiums; continue paying debts and fulfilling contracts with clients and employees, unless otherwise agreed upon by the enterprise, creditors, clients and employees.
3. Dissolution of enterprise (i) An enterprise shall be dissolved in the following cases:
a) At the expiry of the operating period, there is no decision on extension;
b) At the enterprise's discretion;
c) The enterprise fails to maintain the sufficient number of members for 6 consecutive months without carrying out procedures for conversion of the type of enterprise;
d) The enterprise registration certificate is revoked.
(ii) An enterprise may only be dissolved after all of its debts and liabilities are fully paid and it is not involved in any dispute at the court or arbitration.
(iii) The dissolution of an enterprise shall be carried out as follows:
(a) Adoption of resolutions or decisions on the dissolution of the enterprise.
(b) Within 7 working days from the date of the adoption, resolutions or decisions on dissolution as well as minutes of meeting shall be sent to the business registration authorities, tax authorities and employees of the enterprise, posted on the National Portal on enterprise registration and publicly listed at the head office, branch offices and representative offices of the enterprise.
In case the enterprise still has unpaid debts, the resolutions or decisions on the dissolution and the debt payment plans to its creditors and persons with related rights, obligations and interests.
(c) The business registration authority shall post a notification that the enterprise is carrying out dissolution procedures on the National Portal on enterprise registration right after receiving the resolutions or decisions on its dissolution.
(iv) An enterprise’s debts shall be paid in the following order of priority:
a) Unpaid salaries, severance allowances, social insurance, health insurance, unemployment insurance and other benefits of employees;
b) Tax debts;
c) Other debts;
(v) After the dissolution costs and debts have been fully paid, the remainder value shall be divided among the owner, members/ partners, shareholders of the company in proportion to their stakes/shares;
(vi) The legal representative of the enterprise shall send its dissolution dossier to the business registration authority within 5 working days from the date of the full payment of the enterprise’s debts;
(vii) After 180 days from the receipt of the resolution or decision on the dissolution as prescribed in Clause 3 of this Article without further comments on the dissolution from the enterprise or written objections from relevant parties or within 5 working days from the receipt of the dissolution dossier, the business registration authority shall update the status of the enterprise on the National Database on Enterprise Registration;
4. Bankruptcy of enterprise Bankruptcy is the legal status of an insolvent enterprise or cooperative (having failed to meet the debt liability for 3 months from the deadline for repayment) which is declared bankrupt by the People's Court.
4.1. Peoples who have the right to request for the bankruptcy declaration of an enterprise (i) Creditors (in case the duration of 3 months commencing from the due date of the debt expires but the enterprise still fails to make the payment).
(ii) Employees, grassroots trade union, superior trade union in direct charge of the grassroots level where the grassroots trade union has not yet been established (In case the duration of 3 months commencing from the date of salary payment and the due date of other debts owed to employees expires but the enterprise still fails to make the payments).
(iii) Legal representative of the enterprise; owner of a private enterprise, Chairman of the Board of Directors of a joint stock company, Chairman of the Board of Members of a multi-member limited liability company, owner of a single-member limited liability company, partners of a partnership shall be obliged to submit a request for initiation of bankruptcy process when the enterprise is insolvent.
(iv) Shareholder or group of shareholders who owns 20% or over 20% (or a lower percentage as prescribed in the Company's Charter) of ordinary shares for an uninterrupted period of at least 6 months shall have the right to submit a request for initiation of bankruptcy process when the joint stock company becomes insolvent.
Individuals, agencies and organizations that detect the insolvency of the enterprise shall be responsible for notifying in writing about such status to the persons who have the right and obligations to submit a request for initiation of the aforementioned bankruptcy process.
4.2. Competence in bankruptcy settlement 1. The People's Courts of provinces or centrally-affiliated cities (hereinafter referred to as provincial People's Courts) have the competence in bankruptcy settlement for enterprises and cooperatives registered in their provinces and for one of the following cases:
a) There are overseas assets or involving entities;
b) The insolvent entity has branches and/or representative offices located in district and/or cities of various provinces;
c) The insolvent entity has real estate in district and/or cities of various provinces;
d) The provincial People’s Court takes the bankruptcy cases under the management of the People’s Court of a district/city of the province due to their complicacy.
2. The district People’s Court has the competence in bankruptcy settlement for enterprises and cooperatives of which the headquarters are located in the district and for the cases not mentioned in Clause 1 of this Article.
4.3. Sequence and procedures for settling a request for initiation of bankruptcy process (i) Submit a request for initiation of bankruptcy process to the competent Court;
(ii) The Court shall settle the request (advance payment, supplementation of documents, transferring the request to competent courts...);
(iii) The Court shall organize the negotiation amongst related parties at the written request of one of the parties.
(iv) The Court shall decide to receive the request if the negotiation fails and notify the related parties thereabout.
(v) The Court shall decide to initiate or not to initiate the bankruptcy process within 30 days commencing from the receipt of the request.
(vi) The Court shall issue a decision to appoint asset management officers/ entities to manage the enterprise’s assets if it decides to initiate the bankruptcy process.
(vii) The creditors shall send written requests for debt payments to asset management officers/ entities within 30 days commencing from the date when the Court decides to initiate the bankruptcy process together with documents proving the debts.
(viii) The asset management officers/ entities shall make a list of creditors and a list of debtors;
(ix) Requesting the Court to apply temporary emergency measures to preserve the enterprise’s assets;
(x) The Court shall convene and organize a creditors' meeting to adopt a resolution on the bankruptcy or suspension of the bankruptcy process (if the enterprise is not insolvent) or application of measures to resume the operation of the enterprise.
Cre: VIETBID LAW CO., LTD