Procedures for selling a company according to the legal regulations in 2023

1.Definition of selling a business

Selling a business refers to the ownership transfer of an entire enterprise or a dependent accounting unit to another collective, individual, or legal entity in exchange for money. Currently, the law only provides regulations for selling businesses of private enterprises and state-owned enterprises with 100% state capital. So, are other types of business allowed to be sold?

Definition of selling a business

2.When is it allowed to sell a company?

Based on the above definition of selling a business, it can be understood that as long as a business changes its ownership or a dependent accounting unit to another collective, individual, or legal entity in exchange for money, it can be considered as selling a business. Therefore, although the Enterprise Law does not provide a specific definition of selling a business for the types of companies such as single-member limited liability companies, multi-member limited liability companies, joint-stock companies, or partnerships, whenever these businesses are able to transfer their entire ownership and receive a certain amount of money in return, it can be considered that the business has been sold.

Selling a company to another party will be carried out as follows:

• For private companies: Change of ownership.
• For single-member limited liability companies, multi-member limited liability companies, and joint-stock companies: Transfer of the entire business to another entity.
• For partnerships: Change of partnership members.

Types of businesses allowed to be sold

3. Procedures for selling a company

Each type of business follows a different procedure for selling a business. Specifically:

a.For private companies:

The owner of a private enterprise needs to prepare the following documents:

• Notice of change in business registration information, signed by the seller.
• Purchase and sale contract or documents proving the completion of the sale, in the case of selling a private enterprise.
• Legal documents proving the legal status of the transferee.

The owner of the private business shall submit the above documents to the Business Registration Office where the business is headquartered. The Business Registration Office will issue a Receipt to the applicant and verify the validity of the application. If the application is valid, a new Certificate of Business Registration will be issued to the new owner of the business.

However, after selling the business, the owner of the private business is still responsible for the debts and other property obligations of the private enterprise that arise before the date of the business transfer, unless the owner of the private enterprise, the buyer, and the creditors of the private business have agreed otherwise. The owner and the buyer of the private business must comply with the labor laws and regulations.

b.For single-member limited liability companies:

To transfer the entire contributed capital of a member in a single-member limited liability company, the company needs to prepare the following documents to submit to the Business Registration Office:

• Notice of change of owner of a single-member limited liability company, signed by the owner or the legal representative of the old owner and the new owner or the legal representative of the new owner.
• Copy of legal documents of the individual in the case where the transferee is an individual, or copy of legal documents of the organization and copy of legal documents of the authorized individual and copy of the authorization document appointing the representative in the case where the transferee is an organization.
• For owners who are foreign organizations, the copy of the legal documents of the organization must be legalized by the consular authorities.
• Copy of the amended and supplemented charter of the company;
• Transfer of capital contribution contract or documents proving the completion of the transfer of capital contribution.
• Document of the Investment Registration Authority approving the capital contribution, share purchase or capital contribution purchase of foreign investors or economic organizations with foreign investment, in cases where the registration of capital contribution, share purchase or capital contribution purchase is required under the provisions of the Investment Law.

After receiving the application, the Business Registration Office will hand over the receipt to the applicant and check the validity of the application. If the application is valid, a new business registration certificate will be issued to the business.

Procedures for selling single-member limited liability companies

c.For multi-member limited liability companies:

In order to transfer the entire contributed capital of a member in a multi-member limited liability company, the company needs to prepare the following documents to submit to the Business Registration Office:

• Notice of change of business registration information, signed by the legal representative of the business
• The list of members of the multi-member limited liability company. The list of members must include the signature of the new member and the member with the changed contributed capital, and it is not mandatory to have the signature of the member with unchanged contributed capital.
• Two copies of the transfer agreement or relevant documents proving the completion of the transfer.
• Copy of legal documents of the individual in the case where the new member is an individual, or a copy of legal documents of the organization, a copy of legal documents of the individual acting as the authorized representative, and a copy of the authorization document in case the new member is an organization.
• For members that are foreign organizations, the copy of the legal documents of the organization must be legalized by the consular authorities.
• Document of the Investment Registration Authority approving the capital contribution, share purchase or capital contribution purchase of foreign investors or economic organizations with foreign investment, in cases where the registration of capital contribution, share purchase or capital contribution purchase is required under the provisions of the Investment Law.

Upon receiving the dossier, the Business Registration Office will issue a Receipt to the applicant and verify the validity of the documents. If the dossier is valid, a new Business Registration Certificate will be issued to the business.

d. For joint-stock companies:

For founding shareholders who have contributed sufficient capital and wish to transfer their shares after the company has been operating for 3 years, it is not necessary to notify the Business Registration Office. The transfer of shares only requires a share transfer agreement and a liquidation minutes, which should be kept internally within the company. In the case where the company established and operated for less than 3 years, founding shareholders can only transfer their shares to other founding shareholders within the company.

How is the selling business procedure carried out?

e. For partnership companies:

Since not all partners are mandatory members of the company, and limited members do not have decision-making authority over the company's operations, the sale of a partnership company is typically carried out in the case of changing partnership members. After changing the partnership members, the business is required to submit a notification to the Business Registration Office, including the following documents:

• Notification of changes of the business registration information, signed by the legal representative of the business.
• List of partnership company members as prescribed in Article 25 of the Enterprise Law, excluding information regarding limited members.
• Copy of legal documents of the new partnership member.

Upon receiving the business registration application, the Business Registration Office will issue a Receipt of Submission, review the validity of the documents, and issue a Certificate of Business Registration for the company.

Conclusion:

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