In the context that the domestic economy is being more or less affected by the global military situation, as well as signs of recession in sectors that act as growth engines of the economy (in areas like the real estate, stocks, etc.) this is why corporate restructuring is quite common at this moment. In the previous article, brief information about popular options when corporate restructuring in Vietnam has been mentioned. For the content of this article, the notable points when carrying out corporate restructuring work will be mentioned so that relevant parties have a more specific view when conducting this activity. However, it should also be noted that the scope of the matters mentioned in this article is only in the legal field, to have a better overview, companies can learn more about various aspects related to business and finance, as well as many others.
Before and during the restructuring, companies should pay attention to some legal points:
Firstly, corporate restructuring is not about cutting jobs
The essence of corporate restructuring is aimed at reorganizing the company to suit the practice, and the intended plan in the future to operate business activities more efficiently without/with laying off employees. According to the Labour Code (2019), corporate restructuring is represented by the case of “structural, technological or economic changes”.
Secondly, corporate restructuring is carried out only after being approved by the owner
The Law on Enterprises (2020) stipulates that the making of decisions related to the reorganization of the company, changes in the organizational structure of the management of the company, mergers, and acquisitions of enterprises is under the competence of the owner (in a 1-member limited liability company), of the members’ council (in a limited liability company with 2 or more members), for joint stock companies is to be managed by the general meeting of shareholders. Accordingly, companies are only allowed to carry out restructuring after they have been approved by the owner in the form of a decision of the owner/members’ council/general meeting of shareholders. In many cases, companies must conduct meetings to collect opinions and vote on the approval of competent departments, typically the members’ council or the general meeting of shareholders. Carrying out a restructuring without the owner’s consent may be considered an infringement of the legal rights of these individuals/organizations and may lead to the cancelation of the restructuring due to insufficient grounds to proceed with. Therefore, to comply with the necessary conditions before taking the necessary steps, companies need to ensure that the restructuring has been known and approved in writing by their owner.
Thirdly, companies need to prepare relevant plans before and during the restructuring
Depending on the form of restructuring companies choose to implement, the impact of this process on the company’s operations may vary, specifically, the restructuring may change their number of employees, asset structure, organizational structure, legal status (whether the company’s existence is terminated or not), etc. To develop a solution to the above-mentioned impacts, companies can consult with professional parties and stakeholders such as grassroots workers’ representative organizations to form a good strategy before implementing restructuring. This preparation will help companies to provide appropriate resolutions, in accordance with prescribed procedures and avoid unnecessary disputes arising during and after the restructuring process such as disputes related to labor reduction, disputes arising from the change in their legal status, etc.
Fourthly, administrative procedures with state agencies should be carried out when conducting the restructuring
As mentioned above, some forms of corporate restructuring may affect the company’s legal status, such as mergers, acquisitions, and consolidations. In accordance with the Law, these changes must be registered with the competent authorities. In some special cases, the restructuring can only be carried out with the consent of the said party (for example, some business mergers must be approved by the National Competition Commission). To ensure legal compliance as well as the ability to carry out restructuring, companies should pay attention to the administrative procedures that need to be carried out at state agencies to make appropriate preparations.
Finally, there should be synchronization between goals, strategies, and actions when conducting the restructuring
To decide to conduct corporate restructuring, companies need to evaluate and be careful in understanding the existing issues affecting their business, preparing a structure and foundation to implement new business plans, etc. After determining the plan including the steps taken in the restructuring process, the restructuring should also be focused, streamlined, and sticking to the original plans and strategies set out. Companies should avoid complicating matters, as well but should not ignore legal issues that need to be complied with. After all, all restructuring activities are aimed at ensuring the company can operate effectively as well as ensure compliance with applicable laws.
Above are some points that companies need to pay attention to before and during the process of restructuring. To have a more comprehensive view and ensure legal compliance, companies can consider the participation of professional consultants in the process of performing this work.