The original article Do I have to re-sign a new contract after my company is converted into a new type in Viet Nam?
Issue: My company used to a sole proprietorship. At that time, my company signed a contract to supply goods to the partner. Recently, my company has just converted into a one-member limited liability company to borrow money from a bank, but the partner requires to re-sign a new contract with the reason “Because your company has changed the type of business, so it is necessary to liquidate the old contract and re-sign a new one”. The thing is, if I re-sign a new contract, the terms of the new contract will not be as beneficial to my company as the old one. Are the liquidation of the old contract and the re-signing of a new contract when converting the type of business is mandatory? If our company refuses that request of the partner, is it against the laws?
Answer: Hi, thank you for trusting and using the legal consulting service of Nghiep Thanh Law. We have received your information and request, based on the information provided, we would like to share our opinions as follow:
The conversion of a sole proprietorship into a one-member limited liability company (one-member Ltd) is prescribed by law[1]: From the date of issuance of the Certificate of Business Registration, the converted company automatically inherits the rights and obligations of the sole proprietorship. About debts incurred before the date the converted company is granted the Certificate of Business Registration, the owner of the sole proprietorship must be responsible with all his/her properties.
In the above case, your company, after converting to a one-member Ltd, will automatically inherit the rights and obligations of the previous sole proprietorship, including ongoing contracts, labor issues in the company, tax, etc. and other obligations from the date of issuance of the new Certificate of Business Registration. The previous contract signed with the partner will still be inherited by the current one-member Ltd to continue to perform the contract without signing a new one.
Conclusion:
Liquidating the old contract and re-signing a new contract when converting the business type is not compulsory, so your company does not need to re-sign a new contract with the partner, and your refusing to sign the contract again does not violate the laws.
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Translator: Le Khanh Linh
Content writer: Huynh Ngoc Phuong Thao
Instructor: Nguyen Linh Chi
Admin: Lawyer Thuan
[1] Article 205.3 Law on Enterprise 2020.
