HOW TO CONVERT A LIMITED LIABILITY COMPANY INTO A JOINT-STOCK COMPANY

In the production and business activities process, to expand the scale of business and attract more investment capital from investors, most enterprises operating under a limited liability company type choose to convert this existing type to a joint-stock company. What are the key reasons?

For the type of joint-stock company, not only has the scope of limited liability corresponding to the stake as the type of limited liability company, but also it can raise capital quickly and flexibly. The raising of capital through the offering of all kinds of shares, issuing stocks to the public, listing and trading on the stock exchange. Moreover, the transfer of shares between shareholders is simple, and the personal income tax from the transfer of shares is not high. These are significant advantages compared to the limited liability company type.

For a Limited Liability Company to be converted into a joint-stock company, there are the following methods:

1. Converting directly into a joint-stock company without raising additional capital from other organizations and individuals, and without transferring the capital contribution to other organizations or individuals;

2. Converting into a joint-stock company by raising additional capital contribution from other organizations and individuals to contribute capital;

3. Converting into a joint-stock company by transferring all or part of the stake to one or some other organizations and individuals;

4. Combine all three methods mentioned above and others.

Note that the enterprise must register the conversion with the Business Registration Authority within 10 days from the date of completion of the conversion. Within 03 working days from the date of receipt of the conversion document, the business registration authority shall re-issue the enterprise registration certificate and update the company's legal status on the national enterprise registration database.

When the conversion is completed, the converting company automatically inherits all lawful rights and interests, and takes responsibility for all debts, including tax debts, labor contracts and other obligations of the converted company.
Regarding the procedure, the enterprises that want to convert must follow the process:

Step 1: The enterprises submit documents at the Business Registration Authorities, Department of Planning and Investment where the head office is located.

Documents including:

1. An application form for enterprise registration;

2. List of founding shareholders and shareholders being foreign investors; List of authorized representatives for foreign shareholders being organizations;

3. The charter of the joint-stock company;

4. The valid copies of the following papers:

4.1 Citizen Identity card, Identification Card, Passport or other lawful personal identification of founding shareholders and shareholders being foreign investors that are individuals;

4.2 Establishment Decision or Enterprise Registration Certificate or other equivalent documents of the organization; Citizen Identity card or Identification Card or Passport of the authorized representative of the founding shareholder and the shareholder being a foreign investor and the corresponding authorization document (refer to authorization content in Article 15 Law on Enterprise 2020);

For shareholders being a foreign organization, a copy of the Enterprise Registration Certificate or an equivalent document must be consular legalized;

4.3 Investment Registration Certificate for foreign investors under the Law on Investment;

5. Contract on transfer of stake or documents proving completion of transfer or agreement on investment capital contribution or written certification of lawful inheritance rights (if it is applicable);

6. The owner's decision on the conversion of the company.

Step 2: The Business Registration Authority checks the validity of documents and handles them; issues receipts to enterprises.

Step 3: Based on the time on the Receipt, the enterprise gets the results of the document at Business Registration Authorities.

The time- limit for handling: 05 - 07 working days from the date of getting the full and valid documents.

ADK & Co Vietnam Lawyers