When Is a Company Split Legally Complete in Vietnam? Legal Interpretation and Practical Points Under the 2020 Enterprise Law

NEXORA LAWFIRM has supported numerous company split, merger, and reorganization procedures, and has deep, practice-tested familiarity with the operational interpretation of Vietnam's corporate legislation. In this article, our Vietnamese attorneys clearly organize a point that is often misunderstood — the timing of registration completion for a split, when its legal effect arises, and how this relates to asset transfer.

A company split (spin-off) is one of the principal corporate reorganization mechanisms under Vietnam's 2020 Enterprise Law.
In practice, however, a problem has emerged: the law contains no clear definition of the specific point at which a company split is deemed legally complete.

➡ This can have a significant impact in situations such as the following:

The validity of the transfer of assets, rights, and obligations between the splitting company and the newly established company
The validity of transactions and contracts with third parties
Where legal liability lies, and its scope

📌 This legal "gray period" can leave the allocation of risk unclear and create practical confusion, making a careful approach essential.

01 - Gaps in the Current Legal Framework

Vietnam's 2020 Enterprise Law contains no specific provision establishing the precise point at which a company split is deemed "legally complete."

In practice, therefore, the completion of a company split must be judged based on a reasonable interpretation, along the following lines.

✅ ① The point at which the Enterprise Registration Certificate (ERC) is issued to the newly established company

➡ This is understood to mark the point at which the new company's legal personality is formally established.

✅ ② The point at which assets, rights, and obligations are transferred from the existing company to the new company, pursuant to the split resolution

➡ In other words, the point at which it can be confirmed that the financial and legal succession between the splitting company and the newly established company has been carried out in accordance with the split resolution.

The prevailing practical understanding is that a company split is deemed "legally complete" once both of these conditions are satisfied. However, this remains no more than an inferential approach, and the absence of any express statutory basis leaves a residual practical risk.

➡ In particular, this can create uncertainty over the legal effect of asset-transfer registration and the assignment of contractual relationships, and companies should proceed with caution.

02 - Legal Interpretation Drawn from Vietnam's 2020 Enterprise Law (the Current Enterprise Law)

Although the 2020 Enterprise Law does not expressly define the completion point of a company split, the legislature's intent can be indirectly inferred from the following two provisions.

✅ Point 1: Article 199(4)

"After a company split, the newly established companies and the splitting company are jointly and severally liable for unpaid debts, labor contracts, and other financial obligations."

➡ This provision suggests that joint and several liability arising from the split does not come into existence until the newly established company has been formally registered.

Accordingly, it is natural to conclude that, before the Enterprise Registration Certificate (ERC) has been issued, the legal effects of the split (such as joint and several liability) have not yet arisen.

✅ Point 2: Article 199(5)

"The newly established company automatically succeeds to the rights and obligations under the split resolution."

➡ The phrase "automatically succeeds" here can be understood to operate only once the legal precondition — the new company's formal establishment — has been satisfied.

In other words, where legal personality has not yet come into existence, the succession of rights and obligations may be regarded as invalid or not yet effective.

03 - The Role and Legal Effect of the Company Split Resolution

As noted above, the 2020 Enterprise Law provides that the succession of rights and obligations arising from a company split occurs "automatically." However, the actual legal basis for determining which assets, rights, and obligations are succeeded to, when, and how, rests on the company split resolution.

The company split resolution is not merely an internal corporate decision — it is the legal and practical foundation document for the entire split procedure, and must therefore be drafted with care.
It is recommended that the following matters be clearly stated.

✅ A detailed list of the assets, rights, and obligations to be transferred
(e.g., real estate, contracts, employees, debts, pending litigation, etc.)
✅ The effective date of the transfer
➡ This is normally based on the date the new company's Enterprise Registration Certificate (ERC) is issued, but stating it expressly helps prevent disputes with third parties.
✅ Principles for settling and allocating debts vis-à-vis third parties
➡ Set out clearly whether liability is joint or attributed individually.

04 - Practical Points to Note

The following practical points should also be kept in mind when carrying out a company split.

✅ Do not treat approval of the split resolution as equivalent to completion of the procedure.
　→ Approval of the resolution is merely an internal decision-making step and does not, by itself, produce any legal effect vis-à-vis third parties.
✅ Avoid using or transferring assets ahead of the new company's formal registration.
　→ Doing so may create risks relating to title transfer, tax treatment, and dealings with third parties.
✅ Where multiple new companies are being established, a clear split resolution and asset/liability allocation schedule must be prepared for each.
　→ Clear, documented records are essential to prevent ambiguity over rights and obligations and to avoid future disputes.