TAX BLOG 02：THINGS NEED TO BE NOTE WHEN SEPARATE ENTERPRISES

In the course of operation, due to the development needs of enterprises, enterprises may conduct procedures for separating enterprises into new companies. This is one of the legal procedures that enterprises owners and investors need to research and mastery in the process of establishing, managing and operating their enterprises

1. What is “separating enterprises“? Methods of separating enterprises

According to Article 193 of Enterprise Law 2014, Separation of enterprises is considered as a form of reorganizing enterprises.

Separation of an enterprise means a separation of a limited company or a joint stock company by transferring a part of its existing assets, rights and obligations (hereinafter referred to as the company which is separated) to become establish one or several limited companies, new joint stock companies (hereinafter referred to as the companies after separated) without terminating the existence of the company which is separated.

Separating company may be conducted by one of the following methods:

+ A part of the contributed capital and shares of members and shareholders together with assets corresponding to the value of the contributed capital and shares are transferred to new companies according to the ownership ratios in the company which is separated and corresponding the value of the assets transferred to the new company.

+ All contributed capital, shares of one or several members, shareholders and assets corresponding to their value of shares, contributed capital is transferred to new companies.

+ Combining both cases above.

Note: The company which is separated must register to change its charter capital and the number of members corresponding to the capital contribution, shares and the number of members decreases at the same time as business registration of new companies.

2. Procedures for separating limited companies and joint stock companies

Procedures for separating limited companies and joint-stock companies are prescribed as follows:

+ The Members' Council, the owner of the company or the General Meeting of Shareholders of the company which is separated through a resolution to separating company..

+ The resolution on separating company must contain the following main particulars: the name and address of the head office of the company which is separated; The company after separated’s name will be established; employment plan; how to separate a company; asset value, rights and obligations transferred from the company which is separated to the company after separated; deadline for separating company.

+ The resolution on separating company must be sent to all creditors and notified to employees within 15 days from the date of adoption of the resolution;

+ The members, the company's owner or the shareholders of the company after separated through the Charter, elected or appointed Chairman of the Board of members, the company's President, the Board of Directors, Director or General Director and conduct business registration. In this case, the enterprise registration dossier must be accompanied by a resolution on separating company.

3. Enterprise separation documents

Enterprise separation documents for new separation companies

+ Application form for business registration (new separated company)

+ Charter (new separated company)

+ List of shareholders and members

+ Report of the meeting on separating company

+ Resolution on separating company

+ A copy of the company which is separated's business registration

Enterprise separation documents for the company which is separated

+ Report of meeting on reduction of capital due to company separation

+ Decision on reducing charter capital due to company separation

+ Notice of change in charter capital due to company separation

+ List of members (applicable to limited companies)

+ Results when separating the enterprise

The separation of an enterprise is the transition from an old company to an old company + a new company. Can be understood by the following formula A = A + B

4. Tax procedures when separate the company

Tax declaration and payment: Business establishments are not required to declare and pay tax in case of company separation according to Point b, Clause 7, Article 5 of Circular 219/2013/TT-BTC.

Issue invoices: as guided in Clause 2.15, Appendix 4 issued together with Circular No. 39/2014 / TT-BTC for assets transferred due to separation of enterprises must have asset transfer order, enclosed with the set of documents source of the property and not to issue invoice.

Currently, a number of foreign-invested companies (FDI) have business separation activities, in addition to the above notes as prescribed, in fact there are a number of problems related to the adjustment, grant of new rights using the land when dividing the business, for specific advice, please conctact to Win Win Audit for our experts review and advice on a case by case basis.