Corporate reorganization
A manufacturing company has a thriving logistics division — big enough to stand alone, promising enough to raise its own capital. But management does not want to “tear down and rebuild” the whole company, nor let the logistics division be tied to the manufacturing division’s debts and obligations. The solution: spin off the logistics division into a new company, while the parent continues to exist and operate normally. That is a company spin-off — the most flexible of the four reorganization forms (merger, consolidation, division, spin-off), and also the one most confused with company division.
What is a company spin-off?
Under Article 199(1) of the Law on Enterprises 2020, limited liability companies and joint stock companies may spin off by transferring part of the assets, rights, obligations, members, and shareholders of the existing company (the spun-off company) to form one or more new companies (the new companies) without terminating the spun-off company.
The last phrase is the soul of this regime: the original company stays alive and well. Only a part is “cut out” to form a new entity. The remainder — including untransferred obligations — stays with the spun-off company.
Spin-off vs. division
| Criteria | Spin-off (Art. 199) | Division (Art. 198) |
|---|---|---|
| Fate of original company | Continues to exist | Ceases to exist |
| Transfer scope | Part of assets, rights, obligations | All fully allocated to new companies |
| Original company’s charter capital | Must register a corresponding reduction (if any) | Gone (company terminated) |
| Liability for old debts | Spun-off and new companies jointly liable | New companies jointly liable |
| When to use | Spinning off a business line or assets while keeping the parent intact | Shareholders want to fully part ways |
See also company division in Vietnam.
Spin-off procedure
The company spin-off resolution
The Members’ Council, company owner, or General Meeting of Shareholders of the spun-off company approves the spin-off resolution. Under Article 199(3)(a), the spin-off resolution must include these principal contents:
- Names and head office addresses of the spun-off company;
- Names of the new companies to be formed;
- Labor utilization plan;
- Spin-off method;
- Value of assets, rights, and obligations transferred from the spun-off company to the new companies;
- Spin-off implementation timeline.
The difference from a division resolution: the spin-off resolution must clearly state the value of assets, rights, and obligations transferred — i.e., the cut-out “slice” must be precisely measured. Valuing the transferred asset portion is the most important technical step, especially when assets include real estate, depreciated machinery, or intangibles.
Notification duty: the spin-off resolution must be sent to all creditors and notified to employees within 15 days of the decision or resolution approval.
Business registration
Under Article 199(2), the spun-off company must register changes to charter capital, member/shareholder counts corresponding to reduced capital contributions, shares, and member/shareholder numbers (if any); and register the new companies. The new company registration dossier follows Article 25 of Decree 168/2025/ND-CP, accompanied by the spin-off resolution.
Joint liability and succession
Under Article 199(4), after business registration, the spun-off company and the new companies are jointly and severally liable for the obligations, unpaid debts, labor contracts, and other property obligations of the spun-off company — unless the spun-off company, new companies, creditors, customers, and employees of the spun-off company agree otherwise.
At the same time, the new companies automatically inherit all rights, obligations, and lawful interests allocated under the spin-off resolution. Note the word “allocated”: the new company inherits only what the resolution expressly transfers to it — unlike mergers/consolidations where succession is total and automatic.
The practical meaning of joint liability: a spin-off cannot “launder” debts — shifting all debts to the new company and abandoning it, or conversely, shifting all good assets out and leaving the original company holding the debts. Creditors can claim against either company.
Common spin-off scenarios
- Spinning off a business line: a division big enough to operate independently, raise its own capital, or prepare for sale.
- Spinning off assets: separating real estate and factories into a dedicated company for centralized asset management (the “one company holds assets, one operates” model).
- Preparing M&A: spinning the line to be sold into a separate entity for a “clean” deal, so the buyer need not worry about other lines’ debts.
- Internal group restructuring: rearranging business lines among member companies for clarity.
- Specialized regulatory compliance: some sectors require activity separation.
Tax and labor consequences
- Tax: new-project CIT incentives (Articles 13, 14) do not apply to company spin-offs (Article 18(1) of the Law on CIT 67/2025/QH15); other incentives must be re-assessed under specific conditions. Asset transfers from the spun-off to the new companies must be reviewed for arising tax obligations — essentially, asset movements between two independent entities. From 01/7/2025, there is no VAT refund mechanism for company spin-offs.
- Labor: the labor utilization plan is a mandatory content of the spin-off resolution. Employees following the spun-off line move to the new company; labor contracts are inherited per the agreed allocation. Where many workers’ employment is affected, the Labor Code 2019’s labor utilization plan rules apply.
See also tax advice for FDI companies.
Common risks
- Inaccurate transferred-asset valuation: transferring too little (new company lacks operating resources) or too much (weakening the original company, affecting debt repayment capacity).
- Missed obligations in the resolution: unallocated obligations still exist and both companies are jointly liable.
- Forgetting change registration for the spun-off company: focusing on the new company’s registration while forgetting to adjust the original company’s charter capital and members.
- Anti-transfer contract clauses: land leases, credit agreements, and distribution contracts may prohibit or restrict rights/obligation transfers.
- Sub-licenses of the spun-off line: the new company is a new entity and must re-obtain licenses for its business line.
How FLAT LAW FIRM supports spin-offs
We advise on spin-off transaction structures fitting objectives (line spin-off, asset spin-off, M&A preparation); organize transferred-asset valuation; draft the spin-off resolution with full contents under Article 199; build the labor utilization plan; review tax consequences of asset transfers; carry out change registration for the spun-off company and establishment registration for the new companies; and review all contracts and licenses needing handling. See also M&A and corporate restructuring services.
Frequently asked questions
How do spin-off and division differ?
Spin-off (Art. 199): the original company survives; only part of assets/rights/obligations transfers to the new company. Division (Art. 198): the original company ceases; everything is allocated to 2+ new companies. Both carry joint liability for the original company’s debts.
Is the new company liable for the original company’s debts?
Yes. Under Article 199(4), the spun-off company and the new companies are jointly liable for the obligations, unpaid debts, labor contracts, and other property obligations of the spun-off company — unless otherwise agreed with creditors, customers, and employees.
Does spinning off a business line require valuation?
Yes. The spin-off resolution must state the value of assets, rights, and obligations transferred. Accurate valuation protects both the original company (against “hollowing out”) and the new company (sufficient operating resources), and is the basis for tax authorities to consider arising tax obligations.
How are employees of the spun-off line handled?
The labor utilization plan is a mandatory content of the spin-off resolution. Employees of the spun-off line move to the new company with labor contracts inherited per the agreed allocation.
Does a spin-off get tax incentives?
No. Under Article 18(1) of the Law on CIT 67/2025/QH15, CIT incentives do not apply to company spin-offs.
Useful links
You should talk to a lawyer if:
- You want to spin off a business line or asset block into a separate entity.
- You are unsure how to value and allocate assets and obligations between the two companies.
- You are preparing to sell a business line and need to “clean” the entity before the deal.
- You worry about arising tax obligations on asset transfers.
Talk to a FLAT LAW FIRM lawyer
Send information about the business line or assets planned for spin-off and the company’s objectives — we will propose a spin-off structure, roadmap, and risk handling.
Send a legal consultation requestWebsite content is for general information only and does not replace legal advice for specific matters.
Legal regulations, state agency competence, and administrative procedures may change over time, by locality, and by file. You should consult a lawyer before making decisions or transactions.
