In the context of significant economic fluctuations during 2025-2026, many businesses will be forced to restructure to adapt, optimize resources, or expand their markets. Vietnamese law recognizes four forms of business reorganization: division, separation, merger, and acquisition. Each form carries different legal and strategic values, directly impacting the long-term survival and sustainable development of the business. Understanding these regulations is crucial not only for business owners to comply with the law but also for optimizing their operational processes.
What is business restructuring and why should businesses care about it?
The concept of business restructuring according to the 2020 Enterprise Law.
Business restructuring involves changing the legal structure, assets, and business entities through legally prescribed forms to create one or more new legal entities or to modify existing ones. According to data from the General Statistics Office, the number of businesses undergoing restructuring and changing their operating models increased by approximately 151% last year, indicating this is an inevitable market trend.
The objectives of business restructuring.
Typically, managers decide to implement forms of corporate reorganization to achieve the following core objectives:
- Optimize capital, assets, and ownership structure to focus on core business areas.
- Expand or scale operations to align with the business strategy at each stage.
- Resolving internal conflicts among shareholders or contributing members thoroughly by separating assets.
- Proactively prevent or address risks leading to bankruptcy or dissolution through mergers with stronger entities.
The core legal value of corporate restructuring
When a business undergoes restructuring, it receives important legal protections that help maintain business continuity:
- The principle of inheriting all rights and obligations ensures that ongoing contracts and projects are not interrupted.
- Protect the rights of creditors, employees, and other stakeholders through written commitments.
- Minimize the need for complex dissolution procedures for assets that are still generating income.
Dividing a business according to the 2020 Enterprise Law.
What is business division?
Business division is understood as the transfer of all assets, rights, and obligations of the existing company (the company being divided) to establish two or more new businesses. This is a radical solution when shareholder groups no longer have a common voice or want to develop completely independent brands.
Which businesses are eligible to use this distribution method?
It should be noted that not all types of businesses are eligible for division. According to Article 198 of the 2020 Enterprise Law, this form of division only applies to:
- Limited liability companies (including those with one member and those with two or more members).
- Joint-stock company.
Legal consequences of business division
After the process is complete, the business will face the following significant legal changes:
- The divided enterprise ceases to be a legal entity immediately after the new enterprises are granted certificates of registration.
- The newly formed companies are jointly liable for the outstanding debts, employment contracts, and other financial obligations of the divided company.
Basic legal procedures when dividing a business.
To legally divide a business, the owner needs to follow the steps outlined below:
- Issue a resolution or decision on the division with the consent of the Board of Members or the General Meeting of Shareholders.
- Provide written notification to all creditors and employees within 15 days of the decision being made.
- Register the new legal entity at the provincial business registration authority.
Business separation and the core differences compared to division.
What is business separation?
Unlike a division, a business split involves transferring a portion of the assets, rights, and obligations of the existing company (the company being split) to establish one or more new businesses. In this case, the split business continues to exist and operate alongside the new entities.
Strategic benefits of business separation
This form is often preferred due to its superior advantages in terms of conservation:
- Develop new, independent business sectors without affecting the overall structure.
- The core legal entity retains its brand, reputation, and subsidiary licenses.
- It's easy to manage financial risks across different business segments.
Legal considerations when splitting a business.
Because the old company still exists, the business separation requires absolute accuracy in the documentation process.
- Clearly define the financial obligations, tax liabilities, and other payables between the company being split and the company being split.
- Avoid overlapping rights, especially intellectual property rights and major commercial contracts, after the separation.
Mergers and acquisitions to increase scale and competitiveness.
What is the concept of business merger?
A business merger is the process by which two or more businesses (the merged companies) cease to exist to form a completely new business (the merged company). This is a "synergy-strength" strategy often seen in mergers and acquisitions. GHOST big.
Legal documents and procedures for mergers
For the merger process to go smoothly, businesses need to prepare foundational documents including:
- The merger agreement clearly outlines the plan for transferring assets and utilizing labor.
- The draft charter of the merged enterprise is highly consistent.
- New business registration documents have been submitted to the relevant authorities.
The issue of controlling economic concentration.
A particularly important point to note is that businesses must check the economic concentration threshold according to the 2018 Competition Law. If the combined market share exceeds the prescribed level, the business must notify the economic concentration to avoid penalties or prohibition from carrying out the merger.
Liability for debt and employees
The merged entity is obligated to inherit all debts, tax obligations, and job security from its predecessor entities. Any agreement contrary to this principle of inheritance is legally invalid for third parties.
Business mergers and the legal nature of acquisitions.
What is a business merger?
A business merger is the process by which one or more businesses transfer all their assets, rights, and obligations to another business (the acquiring company). After the merger, the merged businesses cease to exist.
Distinguishing between merger and consolidation
Although often mentioned together, mergers and consolidations are distinctly different in terms of legal entity:
- In a merger: The acquiring company continues to exist with its old tax identification number and legal entity status.
- In a merger: A completely new legal entity is created, replacing all the old legal entities.
Legal procedures for business mergers
The steps involved in a business merger require close coordination among all participating parties:
- Signing a merger agreement with detailed terms regarding the conversion ratio of capital contributions or shares.
- Carry out the procedures for changing the charter capital and registering changes to the business scope of the merged company.
Comparing different forms of business restructuring
To help business owners gain an overview and make the most informed decisions, we have compiled a comparison table based on the core criteria of the current Enterprise Law.
Below is a detailed breakdown of the differences between various forms of business restructuring:
| Criteria | Dividing the business | Separating businesses | Business merger | Business mergers |
|---|---|---|---|---|
| Former legal entity | Cease to exist | Continue to exist | Cease to exist | Cease to exist |
| New legal entity | Two or more new companies | One or more new companies | A single new company | Do not create new legal entities. |
| Main objective | Dissolve the shareholder group. | Developing new segments | Resonating power | Acquisition, expansion |
| Applicable subjects | Limited Liability Company, Joint Stock Company | Limited Liability Company, Joint Stock Company | All types of companies | All types of companies |
Note after the table: The choice of which option to adopt depends heavily on the company's current financial situation and brand expectations after restructuring.
Legal risks and penalties for violations of business restructuring regulations.
Implementing business restructuring in violation of regulations can lead to severe penalties from state agencies according to Decree 122/2021/ND-CP and related documents.
Tax obligations and risks of tax arrears
This is a major risk that businesses often face. The parties involved are jointly liable for unpaid debts. Failure to submit tax settlement notices on time can result in administrative penalties ranging from VND 10,000,000 to VND 20,000,000, depending on the severity of the violation.
Violation of notification and registration regulations
Decree 122/2021/ND-CP The regulations clearly define the penalties for violations in the procedural process:
- A fine of between VND 20,000,000 and VND 30,000,000 shall be imposed for failing to notify creditors of the restructuring decision within the prescribed time limit.
- A fine of VND 30,000,000 to VND 50,000,000 will be imposed for failing to register changes or register a new business after reorganization.
Internal disputes and labor rights
During business restructuring, opaque asset valuation often leads to protracted litigation. Furthermore, failure to establish a labor utilization plan as required by Article 44 of the 2019 Labor Code can result in temporary suspension of operations or heavy fines from labor inspectors.
Time and cost of implementation
The business restructuring process typically takes 3 to 6 months, depending on the complexity of the paperwork. Business owners need to budget for valuation fees, legal advice, and administrative costs to avoid being caught off guard by cash flow issues.
Addressing common business concerns.
To help businesses quickly grasp information, we have compiled answers to the following common real-world situations:
Can private enterprises and partnerships be divided or separated?
Is it possible to both reorganize and change the business type simultaneously?
How is the tax identification number of the merged company handled?
What documents are required to prove that there are no violations of regulations on economic concentration?
Conclude
Choosing the right form of business restructuring directly determines the effectiveness of the restructuring and the level of legal security of the organization. In the challenging economic era of 2025, flexibility in structure is a competitive advantage for businesses. However, due to the complexity of procedures related to taxes, assets, and personnel, businesses should carefully assess their strategic objectives and consult with specialized legal advisors. This not only helps minimize risks but also ensures a sustainable development path and absolute compliance with legal regulations in the long term.
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Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
