Surviving separation, also known as derivative separation. It refers to a company will be part of the property or business legal separation, the establishment of two or more companies. In the survival of the separation, the original company continues to exist, the original company's debts and liabilities can be borne by the original company and the new company, or according to the agreement by the original company independently. The new company acquires legal personality, and the original company also continues to retain legal personality.
Materials to be Submitted by the Surviving Enterprise after the Surviving Separation
In the case of a surviving separation, the surviving enterprise shall submit the following documents for the registration of the change:
(1) Application for Registration of Changes in Foreign-Invested Enterprises (for the Record) signed by the legal representative;
(2) Documents of approval of the approving authority (copies of the approving reply and the certificate of approval);
(3) the resolution of the highest authority of the company on the separation of the company;
(4) the company separation agreement signed by the company to be survived or newly established due to the separation of the company;
(5) the amended articles of association of the company;
(6) the certificate of capital verification issued by the capital verification institution set up in accordance with the law;
(7) the appointment documents and copies of identification certificates of the company's directors, supervisors and managers;
(8) the application for registration of the company;
(9) the application for registration of the company;
(10) the application for registration of the company's company;
(11) the approval of the approval authority for the company;
(8) "Table of Directors, Supervisors, Managers/Joint Management Committee Members" of the Company;
(9) Sample of newspaper paper in which the Company published the announcement of the spin-off;
(10) Explanation of the situation of the debt settlement or debt guarantee made by the Company;
(11) Authorization for the service of legal documents
p>(12) Original copy of the company's business license;
(13) Other relevant documents.
Where a company changes other registration matters at the same time as it divides itself, it shall also submit the corresponding documents in accordance with the relevant provisions. Laws, administrative regulations or decisions of the State Council that the separation of companies must be submitted for approval, shall also submit the relevant approval.
Documents to be submitted by a newly established company that survives the separation
When a newly established company that survives the separation and dissolves the separation applies for the establishment registration, the following documents shall be submitted:
(1) Application for the Establishment Registration of a Foreign Invested Company signed by the proposed legal representative, and other documents required for establishment registration
(2) Resolution of the supreme power body of the original company agreeing to the separation;
(3) The resolution of the highest authority of the original company agreeing to the separation;
(4) The resolution of the highest authority of the original company agreeing to the separation;(5) The resolution of the highest authority of the original company agreeing to the separation (3) The company separation agreement signed by the company to be newly established as a result of the company separation;
(4) The newspaper paper sample of the separation announcement published by the original company;
(5) The statement of debt settlement or debt guarantee made by the original company prior to the separation;
(6) The certificate of capital verification issued by the legally established capital verification institution;
(7) Proof that the original company has registered for change or cancellation;
(8) Copy of the original company's business license;
(9) Other relevant documents.
Where the laws and administrative regulations stipulate that the establishment of a limited company must be submitted for approval, the relevant approval documents shall also be submitted; where pre-approval items or other special circumstances are involved, the approval opinions of the relevant departments shall be provided.
Comparison of Accounting Treatment under Surviving Separation
Surviving Separation refers to the separation of one or more business branches of a separated enterprise without legal personality to establish a new company, and the shares of the new company will be partially or completely distributed to the shareholders of the separated company, and the separated company will still survive and operate.
Whether or not there is a new investor in the spun-off enterprise, the spun-off enterprise only needs to carry forward the assets and liabilities into the spun-off enterprise on the basis of their original book value, and debit the liability accounts, credit the asset accounts, and debit the difference to the equity accounts. In the case of a tax-free separation, the spun-off enterprise is not required to pay tax on the income from the separated assets; in the case of a taxable separation, the spun-off enterprise is required to pay income tax on the income from the separated assets.
When there is no new investor, the original book value or appraisal value of the separated assets can be used as the book value for accounting purposes; when there is a new investor, the cost of assets and liabilities to be accepted by the spun-off enterprise is determined on the basis of the appraisal value or the value negotiated by each contributor. The tax basis varies depending on whether the spin-off is taxable or tax-exempt, as follows:
In the case of a taxable surviving spin-off, when a new investor joins the company, the recorded value of the assets accepted by the spun-off enterprise is the same as the tax basis allowed for pre-tax deduction under the tax law, which is the appraised value. When there is no new investor, the recorded value of the assets accepted by the spun-off enterprise is the original book value of the separated assets, there is a difference between the accounting and the tax law, because the tax is allowed to be deducted on the basis of the appraised value before tax; if it is the appraised value of the separated assets, the accounting and the tax law are consistent with the provisions of the law.
In the case of a tax-exempt surviving spin-off, when a new investor joins in, the spin-off enterprise accepts the book value of the assets as the appraisal value, while the tax law allows the deduction of the original book value only, and there is a temporary difference between the two. When there is no new investor to join, the separated enterprise accepts the assets of the recorded value of the original book value of the separated assets, because the tax is only allowed to deduct the original book value of the pre-tax, accounting and tax regulations are consistent with the tax law; such as for the separation of the assets of the appraisal value of the accounting and tax law, there is a difference between the accounting and tax law, because the tax is only allowed to deduct the original book value of the pre-tax deduction.
When the recorded value of an asset is greater than the tax basis, a deferred tax liability is formed, i.e., the account "Income Tax Expense" is debited and the account "Deferred Tax Liability" is credited; when the recorded value of an asset is less than the tax basis, a deferred tax asset is formed, i.e., the account "Deferred Tax Liability" is debited and the account "Income Tax Expense" is credited. When the recorded value of an asset is less than the tax basis, a deferred tax asset is created, which is debited to "Deferred tax assets" and credited to "Income tax expense". Deferred tax assets or deferred tax liabilities are written off when the assets are consumed or disposed of.