Dissolution of single-member limited liability companies: Condition and Procedure

1. Dissolution of single-member limited liability companies: Condition and Procedure

Dissolution is the way many owners choose to close down an unproductive business. So how to dissolve a private enterprise with limited liability?

According to Section 207 of the Companies Act 2022, a Sole Proprietorship is dissolved in the following cases:

- The operation term stated in the company's charter expires but there is no decision to extend such operation term;

- According to the resolution, decision of the owner;

- A private enterprise has its business registration certificate revoked, unless otherwise provided for by the law on tax administration.
Accordingly, according to Section 212 of the Companies Act 2020, a private enterprise will have its business registration certificate revoked in the following cases:

The information declared in the enterprise registration dossier is falsified;

The company was created by people prohibited from setting up a business;

The company ceases business operations for 1 year without notifying the company registration agency and tax office of such cessation;

The enterprise fails to send a report to the business registration agency within 06 months from the deadline for submitting the report or after receiving a written request;

Other cases decided by the Court or requested by a competent authority.

2. Conditions for dissolution of a one-member limited liability company

According to the Companies Act 2020, the conditions for dissolution of a single-owner limited liability company are as follows:

The company can only be dissolved when the company agrees to pay all debts and fulfill other property obligations and does not participate in the dispute settlement process at court or arbitration. The relevant manager and the company specified at Point d, Clause 1 of this Article must be jointly responsible for the debts of the company.
Accordingly, a one-member limited liability company must meet the following two conditions in order to dissolve:

- Commitment to fully repay debts and fulfill other obligations related to real estate

Note: The condition is to agree to pay, not pay off all debts and perform other property obligations. - One-member limited liability companies are not currently involved in the dispute resolution process in court or arbitration.

3. Procedures for dissolution of a one-member limited liability company

According to the provisions of Articles 208 and 209 of the Enterprise Law 2020 and Articles 70 and 71 of Decree No. 01/2021/ND-CP, the dissolution of a one-member limited liability company is carried out according to different procedures. . Special :

* Dissolution upon the expiration of the term of operation stated in the company's charter without a decision to extend this term of operation

Step 1: Approving the decision to dissolve the one-member limited liability company.
A decision on dissolution of a one-member limited liability company must contain all of the following principal details:

- Name and address of registered office

- Reason for dissolution

- Time limit, procedures for contract liquidation and payment of debts. - The plan to settle the obligations arising from the labor contract

- Name and signature of the owner

Step 2: Post the decision to dissolve the single-member limited liability company.
Within 07 working days from the date of adoption of the resolution or decision on dissolution, the enterprise shall send a notice of the dissolution of the enterprise to the Business Registration Office where the enterprise is headquartered.
The summons must be accompanied by the following documents:

 - Decision on dissolution of the company owner;

- Debt settlement plan (if any).
Step 3: Organize asset liquidation and debt settlement

Debts of a Private Enterprise will be settled in the following order of priority:

- Unpaid salary, severance allowance, payment of social insurance, health insurance and unemployment insurance contributions

- Unpaid tax amount

- Other debts;

Step 4: Submit the enterprise dissolution dossier to the Business Registration Office where the enterprise is headquartered.
Deadline for application submission: Within 05 working days after the company pays all debts

Dissolution dossier must include

- Announcement of company dissolution

- Minutes of liquidation of the company's assets; the list of creditors and the amount of debt paid.
Past 180 days from the date of notifying the enterprise’s status of currently carrying out dissolution procedures, if receiving no written rejection from related parties, or within 5 working days after receiving the dissolution dossier, the business registration agency shall update information about the legal status of the single-member LLCs in the national business registration database.

* In the case of revocation of enterprise registration certificates of single-member LLCs

Step 1: Business registration agencies shall revoke the enterprise registration certificate of single-member LLCs.

Step 2: Single-member LLCs take the meeting for decision of resolution.
Time of implementation: Within 10 days after receiving the decision on revocation of the enterprise registration certificate or the court’s legally effective decision

Step 3: Disclosure of information of the single-member limited liability companies:

After receiving the decision on revocation of the enterprise registration certificate, the enterprise dissolution decision and a copy of the decision on revocation of the enterprise registration certificate or the court’s legally effective decision shall be sent to the business registration agency, tax office and employees of the enterprise.
The decision is publicly displayed at the head office, branches and representative offices of single-member LLCs. If it is required by law, the enterprise dissolution resolution or decision shall be posted on at least 1 printed newspaper or electronic newspaper in 3 consecutive issues.
At the same time, a debt settlement plan shall be sent together with the enterprise dissolution decision to the creditors and persons with related interests and obligations. Step 4: Liquidation of assets and liabilities of the business

Step 5: Submit application for dissolution of the enterprise

Application deadline: Within 05 working days after the company pays all debts

Place of application: Business registration office where the company's head office is located.
A file should include:

- Announcement of the decision to dissolve the one-member limited liability company.
- Minutes of liquidation of the company's assets; list of creditors and the amount of debt paid.
180 days from the date of receipt of the resolution or decision on dissolution specified in Clause 3 of this Article, in case there is no written notice of dissolution by the company or the related parties refuse or within 05 working days from the date of receipt of the enterprise dissolution dossier, the business registration authority shall update information on the legal status of the enterprise in the national enterprise registration database.