In the course of production and business activities, for many different reasons, enterprises must terminate their operations, according to the provisions of the 2014 Enterprise Law and the 2014 Bankruptcy Law, enterprises may cease to exist. According to the methods of transforming the type of enterprise such as: Division, consolidation, merger and cessation of existence by the mode of dissolution or bankruptcy, as follows:
First: When transforming the type of business:
Conversion of business type can be understood as changing the organizational form or enterprise structure from one type to another according to the provisions of law.
Currently, there are 3 modes of conversion in this form:
– Conversion of a joint stock company to a one-member limited liability company, or two or more members and vice versa;
– Converting a limited liability company from two or more members into a one-member limited liability company, and vice versa;
– Conversion of a private enterprise to a one-member limited liability company or two or more members.
Second: When dividing, consolidating or merging enterprises:
Regarding the division of enterprises: Clause 1, Article 192 of the 2014 Law on Enterprises stipulates, as follows:
“A limited liability company or a joint stock company can divide its shareholders, members and assets to form two or more new companies”.
As such, private enterprises and partnerships cannot be divided according to the provisions of the Law on Enterprises 2014. The divided enterprise ceases to exist, and its obligations and rights will be transferred to the New company from this business split. These new companies are jointly liable for the unpaid debts, employment contracts and other property obligations of the split company or agreement with creditors, customers and employees.
Regarding consolidation and merger of enterprises: Clause 1, Article 194 of the 2014 Law on Enterprises stipulates, as follows:
“Two or several companies (hereinafter referred to as merged companies) can be consolidated into a new company (hereinafter referred to as consolidating companies), and at the same time cease to exist of the merged companies Best”.
Clause 1, Article 195 of the 2014 Law on Enterprises provides for corporate merger, as follows:
“One or several companies (hereinafter referred to as the merged company) may merge into another company (hereinafter referred to as merger company) by transferring all assets, rights and obligations. and legal benefits to the merged company, at the same time terminate the existence of the merged company ”.
Thus, according to the law, the private enterprise is not allowed to consolidate, merge, the two forms of consolidation and merger all terminate the existence of the old company, the merger is the transformation of enterprises. Its rights and obligations to the merged enterprise, no new business is born and the businesses participating in the merger will cease to operate.
Third: When dissolving an enterprise
Article 201, Law on Enterprises 2014, specifies cases and conditions for dissolution of enterprises, as follows:
“first. An enterprise is dissolved in the following cases:
a) The term of operation as stated in the company’s charter expires without a decision to extend;
b) According to the decision of the enterprise owner, for a private enterprise, of all general partners, for partnerships, of the Members’ Council, company owner, for limited liability companies, of the General Meeting of Shareholders, for a joint stock company;
c) The company no longer has the minimum number of members as prescribed by this Law for a period of 06 consecutive months without carrying out procedures for enterprise conversion;
d) The enterprise registration certificate has been revoked.
An enterprise may be dissolved only when it ensures the payment of all debts and other property obligations and the enterprise is not in the process of settling disputes at a court or arbitration body. Related managers and enterprises specified at Point d, Clause 1 of this Article are jointly responsible for the debts of the enterprise. ”
According to the decision of the business owners based on many different reasons, after completing the dissolution procedure, the enterprise will completely cease to exist and no new business will continue to inherit the rights and obligations of that business too. The competent state agency will revoke the business license of the dissolved enterprise.
Fourth: When the business goes bankrupt
“Bankruptcy is the state of the enterprise or cooperative insolvency and is declared bankrupt by the People’s Court”.
Bankruptcy is a legal procedure to deal with an enterprise’s inability to pay due debts, and bankruptcy is carried out in accordance with the bankruptcy law.
Above are the cases where businesses cease to exist in accordance with the law, if you still have any problems, please contact Hung Phuc Law or via Hotline 0979 80 1111 for answers.
– Law on Enterprises 2014;
– Law on Bankruptcy 2014.