Reorganize enterprise is carried out to meet the needs of the enterprise in the process of production and business in order to adjust the scale and organizational structure in accordance with the development strategy of the enterprise. When reorganizing the enterprise, the enterprise will have to comply with the regulations on enterprise reorganization for each type of enterprise reorganization. In this article, TNTP will share with you the legal regulations on the types of enterprise reorganization, including consolidation of enterprises, merger of enterprises and transformation of enterprises.
1. Consolidation of enterprises
Enterprise consolidation is a type of enterprise reorganization, whereby two or more enterprises are combined into a new enterprise by transferring all assets, rights and property obligations to the new enterprise and terminating the existence of the consolidated enterprises.
The Law on Enterprises 2020 does not stipulate enterprise consolidation, but stipulates company consolidation in Article 200 of the Law on Enterprises 2020. Accordingly, Clause 1 of Article 200 stipulates that two or several companies may be consolidated into a new company, and at the same time terminate the existence of the consolidated companies. From the provisions of Clause 1, Article 200 of the Law on Enterprises, it may be understood that partnerships, limited liability companies and joint stock companies may reorganize their enterprises in the type of enterprise consolidation.
Article 200 of the Law on Enterprises 2020 stipulates company consolidation as follows:
– Regarding the way of consolidation: Two or several companies may consolidate the assets, rights and obligations, members, shareholders of the existing company to form a new company. Concurrently, the consolidated companies will cease to exist.
– Regarding the time when the consolidated company ceases to exist: It is after the new company makes enterprise registration.
– Regarding the compliance with the Competition law: Because company consolidation aims to establish a stronger company in the market, company consolidation is always economically concentrated and may lead to competition restrictions. Clause 3, Article 200 of the Law on Enterprises 2020 stipulates that the consolidated company must ensure compliance with the provisions of the Competition Law on company consolidation.
– Regarding the inheritance and transfer of legal rights and obligations: The new company is entitled to legal rights and interests and is responsible for obligations, unpaid debts, labor contracts and other property obligations of the consolidated companies. The consolidated company naturally inherits all the legal rights, obligations and interests of the companies that are consolidated under the company consolidation contract.
2. Merger of enterprises
Enterprise merger is a type of enterprise reorganization, whereby one or several enterprises may be merged into another enterprise by transferring all assets, rights and obligations and legitimate interests to the merging enterprise and terminating the existence of the merged enterprise.
Similar to enterprise consolidation, the enterprise law does not regulate enterprise mergers but only company mergers. Clause 1, Article 201 of the Law on Enterprises 2020 stipulates that one or several companies may merge into another company by transferring all assets, rights, obligations and legitimate interests to the merging company, and at the same time terminating the existence of the merged company. Accordingly, enterprises may choose to merge enterprises including partnerships, limited liability companies and joint stock companies.
Article 201 of the Law on Enterprises 2020 stipulates the merger of enterprises as follows:
– About the way of merger: One or several companies may transfer all assets, rights, obligations and legal interests to the merging company. At the same time, the merged company will cease to exist.
– Regarding the time when the merged company ceases to exist: After the merged company makes enterprise registration.
– Regarding the compliance with the competition law: Similar to enterprise consolidation, company merger is also a type of economic concentration, so companies implementing the merger must also ensure compliance with the provisions of the Competition Law on the merger of companies.
– Regarding the inheritance and transfer of legal rights and obligations: The merging companies are entitled to legal rights and interests, are responsible for obligations, unpaid debts, labor contracts and other property obligations of the merged company. The merging companies naturally inherit all the rights, obligations, and legitimate interests of the merged company under the merger contract.
3. Transformation of enterprises
Transformation of enterprise type is a type of enterprise reorganization, whereby an enterprise exercises the right to transform into another type of enterprise in the continuous existence of the enterprise. Accordingly, when transformating enterprise, the business activities of the enterprise still take place normally before, during and after the transformation of the type. Concurrently, unlike the above-mentioned types of enterprise reorganization, when transformating enterprise, the enterprise may keep the same or change the size of capital and members.
The Law on Enterprises 2020 stipulates the transformation of the type of enterprise from Article 202 to Article 205. Specifically, as follows:
– Forms of transformation: Enterprises may choose the following types of enterprise transformation: A limited liability company into a joint stock company; A joint stock company into a one-member limited liability company; A joint stock company into a limited liability company with two or more members, and Sole proprietorships into limited liability companies (one member or two or more members).
– Regarding the inheritance and transfer of legal rights and obligations: After the transfer, the new enterprise naturally inherits all legal rights and obligations of the enterprise before the transformation.
In addition, Articles 202 to 205 of the Law on Enterprises 2020 also stipulate the mode of transformation and the obligation to register for transformation for each form of transformation of the type of enterprise mentioned above.
Above is the content of the article “Legal provisions on types of enterprise reorganization: Merger, consolidation and transformation of enterprise” TNTP sends to readers. Hope the article is useful for those who are interested in this issue.
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