Procedures for conversion from a two-member Ltd into a JSC in Viet Nam
Procedures for conversion from a two-member Ltd into a JSC in Viet Nam
The original article Procedures for conversion from two-member Ltd into a JSC in Viet Nam
During the business operation, a company may experience changes related to its organizational structure and development orientation. Conversion from a two-member limited liability company (two-member Ltd) into a joint stock company (JSC) is one of the changes that some companies may need to carry out. Nghiep Thanh Law would like to introduce you to a useful piece of information about procedures for conversion from a two-member Ltd into a JSC.
1. What is a two-member Ltd? What is a JSC?
First of all, these two types of companies have a point in common. That is members are only responsible for the amount of capital contributed to the company. However, in terms of the number of members, a two-member Ltd has a number of members ranging from 02 to 50[1], while a JSC needs at least 03 members and there is no limit to the maximum member numbers[2].
Here are some real-life examples of companies that have converted from two-member Ltd to JSC.
Before | After |
Truong Phu Investment Co., Ltd | FLC Group JSC[3] |
Kinh Do Construction and Food Processing Co., Ltd | Kinh Do JSC (belonging to Kinh Do Group)[4] |
T&T Technology and Trading Co., Ltd (Technology & Trade) | T&T Group JSC (T&T Group)[5] |
So what makes business owners want to convert a two-member Ltd to a JSC?
In general, here are some common reasons why the owner of a two-member Ltd when deciding to convert the company into a JSC:
Firstly, risk distribution – the more members, the fewer risks each member has to face
Second, capital-raising – the company can raise capital among the public.
Third, stock market listing – the company is listed on the stock exchange.
Fourth, member numbers – the number of members exceeds 50 people.
2. How many ways to convert from two-member Ltd to JSC?
A two-member Ltd can be converted into a JSC by[6]:
– Converting without raising capital, without selling contributed capital;
– Converting by raising more capital;
– Converting by selling all or part of contributed capital;
– Combining all 3 ways above.
Within 10 days from the date of completion of the conversion, the company must register the conversion with the Business Registration Office.
Note: If the Ltd has fewer than 3 members and wants to convert to a JSC, it needs more members. The addition of members can be done at the same time as the company conversion. Additional members may be:
– Persons who are assigned part of the capital contribution of existing members[7]; or
– Persons who contribute capital to the company[8].
3. Procedures for company conversion
Step 1: Preparing dossier
The decision to convert and the charter of the converted company will be approved by the Board of Members[9].
In which, the conversion dossier includes[10]:
+ Application for establishment of a JSC; (FORM APPENDIX I-4 – Circular No. 01/2021/TT-BKHĐT: Application for establishment of a JSC)
+ Charter of the JSC;
+ List of shareholders and copies of relevant documents[11]; (FORM APPENDIX I-7: List of shareholders AND I-8: List of foreign investors)
+ Resolution, decision and copy of the minutes of the meeting of the Board of Members;
+ Contracts or documents certifying the transfer of contributed capital; gift contract; copy of the document certifying the inheritance right;
+ Documents certifying the capital contribution of new shareholders;
+ Written approval of the investment capital contribution registration authorities.
Note: In case the applicant is authorized to carry out business registration procedures, relevant authorization documents are required in the application[12].
Step 2: Submitting the dossier[13]
Submitting the application for business registration at the Provincial Business Registration Office[14] and receive a receipt on receiving the application.
Step 3: Notifying the conversion
Within 03 (three) working days, the company will receive:
– Business registration certificate
Result: The previous two-member Ltd registration certificate expires[15]. The converted company inherits the lawful rights and interests, as well as the debt obligations of the company before being converted[16].
4. Some issues the converting company needs to solve
– Converting the type of company and transferring the contributed capital, within 10 days from the effective date of the transfer contract, the transferor must submit and declare personal income tax at the tax administration authority of the company.
– Notifying about the change of business type to relevant parties, such as tax authorities, banks, insurance agencies, partners, clients and customers, and, relevant management authorities.
– Sending the conversion decision to all creditors and notifying employees within 15 days;
– Continuing to carry out the plan of using the company’s previous employees; in case the change affects the majority of employees, a new plan shall be developed; Providing allowances to unemployed employees[17].
– Re-creating the company seal[18].
– Changing the information of the company’s properties.
For example: Certificate of vehicle registration, license plate[19], certificate of land use rights, ownership of houses, and other properties attached to land[20].
The content above is the advice of Nghiep Thanh Law on “Procedures for conversion from a two-member limited liability company into a joint-stock company in Viet Nam”.
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Content writer and Translator: Le Khanh Linh
Instructor: Nguyen Linh Chi
Admin: Lawyer Thuan
[1] Article 46 Law on Enterprise 2020.
[2] Article 111 Law on Enterprise 2020.
[3] “Open letter from the Chairman of the Board of Directors”, FLC Group, [https://www.flc.vn/thu-ngo-cua-chu-tich-hoi-dong-quan-tri/].
[4] “Tran Kim Thanh and Tran Le Nguyen, two brothers who dominate the confectionery industry”, KIDO GROUP, [https://www.kdc.vn/bai-viet/tran-kim-thanh-and-tran-le-nguyen -two-brothers-thong-tri-nganh-ball-glue].
[5] “Development history”, T&T GROUP, [https://www.ttgroup.com.vn/lich-su-phat-trien#2005].
[6] Article 202.2 Law on Enterprise 2020.
[7] Article 52.1.(b), Article 53 Law on Enterprise 2020.
[8] Article 17, Article 47 Law on Enterprise 2020.
[9] Article 55.2.(l) Law on Enterprise 2020.
[10] Articles 23 and 26.4 Decree 01/2021/ND-CP.
[11] Article 23.4.(a)(b) Decree 01/2021/ND-CP.
[12] Article 12 Decree 01/2021/ND-CP.
[13] Article 32.1 Decree 01/2021/ND-CP.
[14] Article 14.1.(a) Decree 01/2021/ND-CP.
[15] Article 34.4 Decree 01/2021/ND-CP.
[16] Article 202.4 Law on Enterprise 2020.
[17] Article 43 Labor Code 2019.
[18] Because when converting the company, its name will be changed (The company name includes: Type of enterprise. See Article 37 Law on Enterprise 2020), resulting in that the seal needs to be changed.
[19] Article 14.1 Circular 15/2014/TT-BCA.
[20] Article 95.6 Land Law 2013.
