Company Dissolution in Vietnam

After establishment and operation, the business does not operate effectively, or cannot find a development direction as proposed, many businesses are no longer able to continue doing business or do not have the need to continue doing business besides choosing to do business. If you choose the solution of temporary business suspension procedures, you can choose to completely withdraw from the market through business dissolution procedures. Viet An Law Firm sends clients all procedures for company dissolution in Vietnam to grasp under the current Vietnamese law.

Cases where businesses carry out company dissolution procedures

According to the provisions of Article 207 of the Law on Enterprises 2020, enterprises carry out dissolution procedures when there are the following reasons:

• According to the resolutions and decisions of the business owners for private enterprises, the Board of Members for partnerships, the Board of Members and company owners for limited liability companies, and the General Meeting of Shareholders for joint stock companies. Note that the procedure for dissolution of an enterprise when the company does not need to continue operating is according to the decision of the business owner for private enterprises, of all partners in the case of partnerships, and of the Association. The co-members and company owners for limited liability companies, and the General Meeting of Shareholders for joint stock companies must ensure that the company has fulfilled its obligations. Unlike corporate bankruptcy procedures, the company can no longer pay its debt obligations.
• Expiration of the operating term stated in the company charter without a decision to extend;
• The company no longer has the minimum number of members as prescribed by the Law on Enterprises for 06 consecutive months without carrying out procedures for converting the type of business;
• Enterprise Registration Certificate has been revoked unless the Law on Tax Administration has other provisions.

Basis for dissolution of enterprises

The dissolution of an enterprise in the cases specified in Points a, b and c, Clause 1, Article 207 of the Enterprise Law is carried out according to the following provisions:

• Pass resolutions and decisions to dissolve the enterprise. Resolutions and decisions on enterprise dissolution must include the following main contents:
  • Name and address of the enterprise’s headquarters;
  • Reason for dissolution;
  • Time limit and procedures for liquidating contracts and paying debts of the enterprise;
  • Plan for handling obligations arising from labor contracts;
  • Full name and signature of the private enterprise owner, company owner, Chairman of the Board of Members, Chairman of the Board of Directors;
• The owner of a private enterprise, the Board of Members or company owner, and the Board of Directors directly organize the liquidation of enterprise assets, except in cases where the company charter stipulates the establishment of a separate liquidation organization;
• Within 07 working days from the date of approval, the resolution, dissolution decision, and meeting minutes must be sent to the business registration agency, tax agency, and employees in the enterprise. Resolutions and dissolution decisions must be posted on the National Business Registration Portal and publicly posted at the enterprise’s headquarters, branches, and representative offices.
• In case the enterprise has unpaid financial obligations, it must attach a resolution, dissolution decision, and debt settlement plan to creditors, people with relevant rights, obligations, and interests. The debt settlement plan must include the name and address of the creditor; debt amount, term, location, and method of payment of that debt; and method and time limit for resolving creditors’ complaints.

The business registration agency must notify the status of an enterprise undergoing dissolution procedures on the National Business Registration Portal immediately after receiving the resolution or decision on the dissolution of the enterprise. Along with the notice, resolution and decision on dissolution, and debt settlement plan (if any) must be posted;

• Enterprise debts are paid in the following order of priority:
  • Salary arrears, severance pay, social insurance, health insurance, unemployment insurance as prescribed by law, and other employee benefits according to the collective labor agreement and labor contract signed contract;
  • Tax debt;
  • Other debts.
• After paying the business dissolution costs and debts, the remaining amount is divided among the private business owner, members, shareholders, or company owners according to the ratio of capital contribution and shares. ;
• The legal representative of the enterprise sends the enterprise dissolution documents to the Business Registration Authority within 05 working days from the date of payment of all debts of the enterprise;
• After 180 days from the date of receipt of the resolution or decision on dissolution as prescribed in Clause 3 of this Article, without receiving comments on dissolution from the enterprise or objections from relevant parties in writing or Within 05 working days from the date of receipt of the dissolution dossier, the Business Registration Authority updates the legal status of the enterprise on the National Business Registration Database;
• The Government regulates in detail the order and procedures for dissolution of enterprises.

Documents and procedures for business dissolution/ company dissolution in Vietnam

Step 1: Approve the decision to dissolve the enterprise

The decision to dissolve an enterprise must have the following main contents:

• Name and address of the enterprise’s headquarters;
• Reason for dissolution;
• Time limit and procedures for liquidating contracts and paying debts of the enterprise; The time limit for debt payment and contract liquidation must not exceed 06 months from the date of approval of the dissolution decision;
• Plan for handling obligations arising from labor contracts;
• Full name, and signature of the legal representative of the enterprise.

Step 2: Liquidate the company assets

The owner of a private enterprise, the Board of Members or company owner, and the Board of Directors directly organize the liquidation of enterprise assets, except in cases where the company charter stipulates the establishment of a separate liquidation organization.

Step 3: Send notice of enterprise dissolution

• Send to the Department of Planning and Investment: carry out procedures to announce enterprise dissolution;
• Send to the Customs office to complete customs duty confirmation procedures;
• Send to the insurance agency to complete procedures for finalizing insurance obligations and closing insurance books;
• Send to the Tax Authority: finalization procedures to close the tax code;
• Sent to employees in the enterprise to ensure employee rights;
• Send the decision on dissolution of the debt settlement plan to creditors and people with relevant rights and obligations. The notice must contain the name and address of the creditor; debt amount, term, location, and method of payment of that debt; and method and time limit for resolving creditors’ complaints.
• Must be publicly posted at the head office, branches, and representative offices of the enterprise.

Application deadline: 07 days from the date the company issues the decision to dissolve the enterprise.

The business registration agency must notify the status of the enterprise undergoing dissolution procedures on the National Business Registration Portal immediately after receiving the enterprise’s dissolution decision. Along with the notice, the dissolution decision and debt settlement plan (if any) must be published.

Customs authorities are responsible for confirming customs obligations for businesses;

The tax authority, based on the enterprise’s tax finalization dossier, issues a tax inspection record and transmits the data to the Department of Planning and Investment so that the enterprise can continue to carry out the procedures for closing the tax code and dissolving the enterprise at the location Department of Planning and Investment.

Step 4: Publish company dissolution information

Post the dissolution decision on the National Business Registration Portal which must be publicly posted at the enterprise’s headquarters, branches, and representative offices.

Documents disclosing information on enterprise dissolution

• Notice of dissolution;
• Decision on the dissolution of the company owner for a single-member limited liability company;
• Decision and valid copy of the meeting minutes of the Board of Members for multiple-member limited liability companies, of the General Meeting of Shareholders for joint stock companies, and general partners for joint stock partnership companies on business dissolution.

Application deadline: Within 07 working days from the date of approval of the dissolution decision.

The time limit for processing dossiers announcing dissolution decisions: 03 working days from the date the dossier is received on the national business registration information system.

Implementing agency: Business registration office – Department of Planning and Investment.

Step 5: Determine customs obligations at the customs office

After the enterprise posts the dissolution decision on the National Business Registration Portal which must be publicly posted at the enterprise’s headquarters, branches, and representative offices, the enterprise shall send an official dispatch. Go to the General Department of Customs to confirm customs obligations to dissolve the enterprise. Within 10-15 days, the Customs agency will issue a notice about the status of the enterprise’s customs documents.

Step 6: Procedures for closing tax code at the tax office

• Send an official letter requesting enterprise dissolution to the Tax Department (attached with notarized copies of the Enterprise Registration Certificate and Tax Registration Certificate, if any);
• Send an official letter requesting tax finalization;
• Pay outstanding taxes;
• Pay fine (if any).

The tax authority, based on the enterprise’s tax finalization dossier, issues a tax inspection record and transmits the data to the Department of Planning and Investment so that the enterprise can continue to carry out the procedures for closing the tax code and dissolving the enterprise at the location. Department of Planning and Investment.

Step 7: Return the company legal seal (if required)

• For businesses using seals issued by the Police, the business is responsible for returning the seal and the Certificate of seal sample registration to the Police to receive a certificate of seal recovery. In this case, the seal and seal sample certificate in the enterprise dissolution dossier are replaced by a certificate of seal revocation.
• For businesses that have engraved their seals from July 1, 2015, up to now, the enterprise is responsible for not continuing to use the seal without having to carry out procedures to return the seal to a state agency.

Step 8: Application for dissolution at the business registration agency

The legal representative of the enterprise sends a request for dissolution to the Business Registration Authority within 05 working days from the date of payment of all debts of the enterprise.

Enterprise dissolution documents include:

• Notice of enterprise dissolution;
• Report on liquidation of corporate assets; list of creditors and paid debts, including payment of all tax debts and social insurance payments owed to employees after deciding to dissolve the enterprise (if any);
• Seal and seal sample certificate (if any);
• The original Enterprise Registration Certificate.

Executive time

• The Business Registration Office sends information about the enterprise’s dissolution registration to the tax authority. Within 02 working days from the date of receiving information from the Business Registration Office, the tax authority sends comments on the dissolution of the enterprise to the Business Registration Office. Within 05 working days from the date of receipt of the dissolution dossier, the Business Registration Office will change the legal status of the enterprise in the National Business Registration Database to dissolution status if it does not receive a refusal from the tax authority, and simultaneously issue a Notice of dissolution of the enterprise.
• In case the dissolution documents are inaccurate or fake, the company members/shareholders/owners must be jointly responsible for paying the unpaid debts, unpaid taxes, and unpaid employee benefits and take personal responsibility before the law for the consequences arising within 05 years from the date of submitting the enterprise dissolution dossier to the Business Registration Agency.

Paying off business debts

According to Clause 5, Article 208, Enterprise Law 2020, corporate debts of enterprises are paid in the following order of priority:

• Salary arrears, severance pay, social insurance according to the provisions of law, and other benefits of employees according to the collective labor agreement and signed labor contract;
• Tax debt;
• Other debts.
• After all debts and business dissolution costs have been paid, the remaining portion is divided among the private business owner, members, shareholders, or company owners according to the ratio of ownership of capital contributions and shares.

The legal representative of the enterprise sends a request for dissolution to the Business Registration Authority within 05 working days from the date of payment of all debts of the enterprise.

Prohibited activities after the decision to dissolve the enterprise/company

Article 211 of the Enterprise Law 2020 stipulates that since the decision to dissolve the enterprise, business managers are strictly prohibited from performing the following activities:

• Hiding and dispersing assets;
• Waiver or reduction of debt collection rights;
• Convert unsecured debts into debts secured by the business’s assets;
• Sign a new contract, except in case of dissolution of the enterprise;
• Pledge, mortgage, donate or lease property;
• Terminate the performance of an effective contract;
• Mobilize capital in all forms.

Documents needed to prepare procedures for dissolution of business/company

• Minutes of tax settlement with tax authorities or Notice of tax code closure due to dissolution. In case a business ask Viet An Law to carry out tax finalization procedures or close the tax code, we will provide full support to clients;
• Receipt of announcement of the decision to dissolve the enterprise;
• Confirmation of completion of customs procedures (Viet An Law accepts customs confirmation procedures for businesses);
• Confirmation of bank account closure/or commitment to not open a bank account
• Original Enterprise Registration Certificate;
• Register the original seal sample (if any);
• Legal entity seal;
• Termination of operations of branches, representative offices, and locations;
• Dissolution dossier (Based on the information provided by the enterprise, Viet An Law Firm prepares the enterprise dissolution dossier and sends it to the enterprise to sign).

The difference between dissolution and bankruptcy of a business

Concept

• Dissolution of an enterprise is the termination of the existence of an enterprise according to the will of the enterprise or a competent authority.
• Bankruptcy is a situation in which an enterprise or cooperative loses its ability to pay and is declared bankrupt by the People’s Court.

Reason

Having difference with 4 cases leading to the dissolution of a company in Vietnam, corporate bankruptcy shall satisfy two (02) conditions simultaneously:

• The enterprise is unable to pay its debts, meaning the enterprise does not fulfill its debt payment obligation within 3 months from the payment due date.
• The enterprise was declared bankrupt by the People’s Court.

Regulated Procedure

• Dissolution is a type of administrative procedure carried out by a competent person in the enterprise working with the Business Registration Authority.
• Bankruptcy is a type of judicial procedure decided by a competent Court after receiving a valid request.

The person has the right to request the application

For dissolution of enterprises

• Business owner for private businesses;
• General Meeting of Shareholders for joint stock companies;
• Board of members and company owners for limited liability companies;
• All general partners for a partnership company.

For Bankruptcy

• Private business owner;
• Chairman of the Board of Directors of a joint stock company;
• Chairman of the Board of Members of a multiple-member limited liability company;
• Owner of a single-member limited liability company
• General partner of a partnership;
• Unsecured creditors, partially secured creditors;
• Employees, grassroots trade unions, and direct superior grassroots unions in places where grassroots unions have not yet been established;
• Legal representative of the enterprise;
• Shareholder or group of shareholders owning 20% or more of common shares for at least 6 consecutive months.

Principles of debt repayment

• Before dissolution, all debts and financial obligations must be paid before proceeding with the procedure.
• With bankruptcy, payment of debts is only done when bankruptcy procedures have been opened and payments are made following the law. It is not required to pay off all debts if the assets of the company are no longer enough to pay.

Legal consequences

• After dissolution, the name will be deleted from the business register and the existence of the enterprise will cease.
• A business declared bankrupt may continue to operate if other entities purchase the entire business.

Business dissolution/ company dissolution in Vietnam services of Viet An Law Firm

• Consulting on procedures, conditions, and documents that need to be prepared to dissolve the company;
• Consulting and guidance on steps to dissolve enterprises;
• Consulting and guiding businesses to carry out procedures with customs authorities;
• Consulting and guiding businesses to carry out procedures with tax authorities to close their company tax code;
• Guidance on the process of paying the company’s obligations before dissolving the company;
• Consulting and reviewing tax declaration documents and tax finalization before carrying out company dissolution procedures;
• Representing clients to carry out procedures with tax authorities, customs authorities, insurance agencies, and business registration agencies to carry out company dissolution procedures for businesses as authorized and according to the provisions of law.

Viet An Law Firm is always ready to exchange and support clients with necessary information during the process of carrying out business dissolution procedures. Please contact Viet An Law Firm for specific advice.