Legal regulations on division, partial division, consolidation and acquisition of enterprises

1. Concept of division, partial division, consolidation and acquisition of enterprises

• Enterprise division is simply understood as a joint stock company, a limited liability company divided to establish 2 or more new companies.

• Partial division of an enterprise means the separation of a joint stock company or a limited liability company (the separated company) into one or several new limited liability companies or joint stock companies (the separating company) without terminating the existence of the divided company.

• Consolidation is when two or more companies (consolidating companies) may be consolidated into a new company (the consolidated company), after which the consolidating companies shall cease to exist. 

• Acquisition is understood as one or some companies (acquired companies) may be acquired by another company (the acquiring company) by transferring all of the acquired company’s assets, rights, obligations and lawful interests to the acquiring company, after which the acquired company shall cease to exist.

2. Regarding the form of division, partial division, consolidation and acquisition of enterprises

• For the form of enterprise division, the assets, rights and obligations, members and shareholders of the company will be divided to proceed with the establishment of 02 or more new companies.

• When partially separating an enterprise, a part of assets, rights and obligations, members and shareholders of the company will be transferred to establish one or several new joint stock companies or limited liability companies.

• In case of business consolidation, the rights, obligations, assets as well as legitimate interests will be combined to establish a new business.

• For acquisition of enterprises, the acquired enterprise will transfer all its assets, legal rights and obligations to the acquiring enterprise.

3. Legal consequences of division, partial division, consolidation and acquisition  of enterprises

• For enterprise division: The divided enterprise will cease to exist and form two or more new legal entities.

• For partial division of enterprises: The separated enterprise still exists in parallel with the newly separating enterprise.

• Business consolidation: New businesses are formed, the consolidated business will cease to exist completely.

• For acquisition of enterprises: The acquired enterprise will cease to exist. The acquiring enterprise will maintain its existence.

4. Legal basis

Article 198, Article 199, Article 200, Article 201 of  Law on  Enterprises 2020.