Sometimes, due to disputes or the need to expand, many businesses require division. With many years of experience in consulting during the operation of businesses buying, selling, full dividing, partial dividing, and merging businesses in particular, Aladin Limited Liability Law Company hopes this article will help you better understand the procedure for dividing a limited liability company.
1. What is partial division?
According to Clause 1, Article 199 of the Enterprise Law 2020, it is stipulated: "A limited liability company or joint stock company may be partially divided by transfer part of the divided company’s assets, rights, obligations, and members/shareholders of the existing company (hereinafter referred to as the divided company) to establish one or several new liability companies or joint stock companies (hereinafter referred to as the new company) without ceasing the existence of the divided company.
For example, Limited Liability Company A wants to expand its operations, so it transfers part of its shares to a new company and establishes LLC B. After the separation, company A still operates in parallel with company B.
2. Conditions to partially divide a limited liability company
- The divided company must be a limited liability company or a joint stock company. Private enterprises and partnerships cannot divide business. This comes from the nature of private enterprises and partnerships, which are private companies with no transparency between the assets of the enterprise and the assets of the enterprise owner;
- Must have the consensus of the Board of Members (in an LLC with two or more members). The result of this consensus is the Resolution on partial division of the company;
- The divided company must register a change in charter capital, quantity of members/shareholders in proportion to the capital contribution, shares, and reduced number of members and shareholders (if any); The division of the company is completed when the new company is registered for establishment.
3. Methods of partial dividing a limited liability company
The company can be divided by one of the following methods:
- Divide a portion of the capital contribution, shares of members/shareholders along with assets in proportion with the value of the capital contribution, and shares transferred to new companies according to the ownership ratio in the divided company and in proportion with the value of assets transferred to the new company.
- All capital contributions and shares of one or more members/shareholders along with assets corresponding to the value of their shares and capital contributions are transferred to new companies.
- Divide the business by combining the above two methods. The divided company transfers capital, shares, and assets in both of the above ways to the new companies.
4. Procedures for partial dividing a limited liability company
Procedures for dividing a limited liability company are specified in Clause 3, Article 199 of the Law on Enterprises 2020, specifically:
Step 1: The divided company passes a resolution or decision on partial division
The Board of Members, the company owner of a limited liability company passes a resolution or decision on partial division of the company in accordance with the law and the company's charter before the company carries out the division.
The resolution on partial division of the company must have the following main contents:
+ Name and headquarters address of the divided company
+ Name of each new company
+ Employment plan
+ Method for division
+ Values of assets, rights and obligations transferred from the divided company to the new company/companies
+ Division time.
After being approved, the resolution or decision shall be sent to all creditors and employees within 15 days from its issuance date or ratification date.
Step 2: The company is divided through charter
Members, company owners or shareholders of the company are divided through the charter; they elect appoint Chairman of the Board of Members, Company President, Board of Directors, Director.
Step 3: Proceed with business registration
After agreeing on the list of company members and the Charter of the new company, it is necessary to register the new business to complete the division procedure.
5. Application for partial division of limited liability company
According to regulations on business division application in Article 25 of Decree 01/2021/ND-CP regulating business registration applications for companies established on the basis of company partial division. The division application includes the following documents:
a) For multiple-member limited liability companies
According to Articles 23 and 25 of Decree 01/2021/ND-CP on business registration, documents include:
- The enterprise registration application form
- Company’s charter
- List of members for multiple-member limited liability companies
- Valid copies of the following documents:
- Legal documents of an individual for the legal representative of the enterprise;
- Legal documents of an individual for company members who are individuals; Legal documents of an enterprise for members that are foreign investor that are organizations ; Legal documents of an individual for the authorized representative of the member who is an organization and the document appointing the authorized representative;
- The Certificate of Investment Registration in case the enterprise is established or participates in the establishment by foreign investors or economic organizations with foreign investment capital
- Resolutions or decisions on division of the company
- A valid copy of the meeting minutes of the Board of Members for multiple-member limited liability companies on partial division of the company
For members and shareholders who are foreign organizations, copies of the organization's legal documents must be legalized.
b) For single-member limited liability companies
- The enterprise registration application form
- Company’s charter
- Valid copies of the following documents:
- Legal documents of an individual for the legal representative of the enterprise;
- Legal documents of an individual for company owners who are individuals; Legal documents of an enterprise for the company owner being an organization (except in cases where the company owner is the State); Legal documents of the individual for the authorized representative and documents appointing the authorized representative;
- The Certificate of Investment Registration in case the enterprise is established or participates in the establishment by foreign investors or economic organizations with foreign investment capital according to the provisions of the Investment Law and its guiding documents.
- Resolutions or decisions on division of the company
For members and shareholders who are foreign organizations, copies of the organization's legal documents must be legalized.
Note
- The divided company must register a change in charter capital and quantity of shareholders in proportion to the shares and number of shareholders reduced;
- After business registration, the divided company and the new company must both be responsible for unpaid debts, labor contracts, other property obligations of the divided company, except in the case of the divided company, the new company, the creditors, customers and employees of the divided company have other agreements.
Above is information about the procedure for partial division of a limited liability company. In case you need advice, please contact us if you are having legal problems or need assistance. You can contact us through the online legal consultation hotline number 1900.57.57.73. In addition, you can also send a detailed email to the email address: luatsu@aladinlaw.vn to receive quick and effective support and answers to your questions. We appreciate your cooperation and look forward to accompanying you on every legal journey.