It is not clear whether, in case of a de-merger of a Vietnamese company, the remaining company must comply with the procedures for transferring contractual rights and obligations under the Civil Code 2015 including obtaining consents from its contracting parties. Under Enterprise Law 2020, a limited liability company or a joint stock company (remaining company) may be de-merged by the following mechanics: 

·         transferring a part of assets held by remaining company to a new company; and/or

·         transferring a part of the rights and obligations of remaining company to new company.

And the remaining company continues to exist after the de-merger.

On the one hand, Article 199.4 of the Enterprise Law 2020 provides that the de-merged company will automatically assume all rights and obligations which are allocated to it in accordance with the de-merger decision of the shareholders or owners of the relevant company. Article 91.2 of the Civil Code 2015 provides that after a de-merger, the de-merged entity will perform the rights and obligations consistent with its operational objectives. Based on these provisions, one can argue that there is no need for the company to obtain consents from its contracting parties in case of de-merger unless the relevant contract contains a specific prohibition on de-merger or other corporate restructuring transactions.

On the other hand, a de-merger is clearly defined to include the “transfer” of rights and obligations from the remaining company to a new company. And the Civil Code 2015 provides for the specific conditions and procedures for the transfer of rights and conditions without excluding the transfer of rights and obligations as a result of a corporate restructuring. Accordingly, one could argue that the remaining company should still obtain consents from its counterparties for the transfer of rights and obligations to the new company.

This post is written by Nguyen Quang Vu.