Cases of and conditions for dissolution of enterprises in Vietnam

2. Understanding the Cases of Dissolution

Expiry of Operating Period

One of the primary reasons for the dissolution of an enterprise in Vietnam is when the operating period specified in the company's charter expires without an extension decision. It's essential for businesses to keep a close eye on their charter and make timely decisions regarding extensions.

Dissolution by Resolution or Decision

An enterprise can be dissolved under a resolution or decision made by the owner (for sole proprietorships), the Board of Partners (for partnerships), the Board of Members, and the owner (for limited liability companies), or the GMS (for joint stock companies). These resolutions or decisions must be taken seriously, as they can lead to the termination of the business.

Inadequate Number of Members

If an enterprise fails to maintain the required number of members for six consecutive months without converting into another type of business, it is grounds for dissolution. Maintaining the correct membership is vital to the continuity of the enterprise.

Revocation of Enterprise Registration

The Certificate of Enterprise Registration can be revoked, leading to dissolution, unless otherwise prescribed by the Law on Tax Administration. Businesses need to ensure they comply with tax regulations to avoid this situation.

Debt Settlement and Liabilities

It's essential to note that an enterprise may only be dissolved after all of its debts and liabilities are fully paid, and it is not involved in any court disputes or arbitration. The relevant executives and the enterprise mentioned in Point d Clause 1 of Article 207 of the Law on Enterprises 2020 are jointly responsible for the enterprise’s debts.

3. Dissolution Procedures for Enterprises in Vietnam

Once the decision to dissolve an enterprise has been made, there are specific procedures that must be followed, as outlined in Article 208 of the Law on Enterprises 2020.

Issuing the Resolution or Decision

A resolution or decision on dissolution should be issued, and it must contain the following information:

• The enterprise’s name and headquarters address
• Reasons for dissolution
• Time limit and procedures for finalization of contracts and payment of the enterprise’s debts
• A plan for the settlement of obligations under employment contracts
• Full name and signature of the decision-maker

Liquidation of Assets

The owner of the sole proprietorship, the Board of Members or the owner, the Board of Directors directly organizes the liquidation of the enterprise’s assets unless the company's charter requires the establishment of a separate liquidation organization.

Notifications

Within 7 working days from the ratification date of the resolution or decision on dissolution, the relevant documents should be sent to various authorities and the enterprise’s employees. This includes the business registration authority, tax authority, and the enterprise’s employees. The resolution or decision must be posted on the National Enterprise Registration Portal and displayed at the enterprise’s headquarters, branches, and representative offices.

If the enterprise still has unpaid debts, the resolution or decision and the debt payment plan must be sent to the creditors and individuals with related rights, obligations, and interests. The debt payment plan should include the creditors’ names, debts, repayment time, location, and method, as well as the method and time limit for settling creditors’ complaints.

Prioritizing Debt Payment

Debts should be paid in a specific order of priority, which includes:

• Unpaid salaries, severance pay, social insurance, health insurance, unemployment insurance premiums, and other benefits of employees under the collective bargaining agreement and concluded employment contracts.
• Tax debts.
• Other debts.

Division of Remaining Assets

After the dissolution costs and debts have been fully paid, the remaining assets are divided among the owner, members/partners, and shareholders in proportion to their stakes/shares.

Application for Dissolution

The enterprise’s legal representative must submit the application for dissolution to the business registration authority within 5 working days from the day on which the enterprise’s debts are fully paid.

Updating Enterprise Status

After 180 days from the receipt of the dissolution resolution or decision without further comments or objections, or within 5 working days from the receipt of the application for dissolution, the business registration authority shall update the enterprise’s status on the national enterprise registration database.

4. Conclusion

Understanding the cases and conditions for the dissolution of enterprises in Vietnam is essential for business owners and entrepreneurs operating in this dynamic market. Compliance with the legal procedures outlined in the Law on Enterprises 2020 is critical to ensure a smooth and legal dissolution process.

If you're considering dissolving your enterprise in Vietnam, make sure you follow these procedures diligently to avoid any legal complications. Dissolution can be a complex process, but with the right knowledge and adherence to the law, it can be managed effectively.

FAQs

1. Can an enterprise be dissolved if it has unpaid debts?

An enterprise can be dissolved if it has unpaid debts, but these debts must be settled as a priority during the dissolution process.

2. What is the role of the owner in the dissolution process?

The owner plays a crucial role in making the decision to dissolve the enterprise and in organizing the liquidation of assets.

3. How long does it take to complete the dissolution of an enterprise in Vietnam?

The timeline for dissolving an enterprise can vary, but it generally takes several months, especially if there are unpaid debts to settle.

4. What happens if an enterprise doesn't comply with the dissolution procedures?

Failure to comply with the dissolution procedures outlined in the Law on Enterprises 2020 can lead to legal complications and disputes.