Regulations Governing the Dissolution of a Company

Dissolution of company regulations refers to the set of rules, laws, and procedures that govern the process of closing, liquidating, or winding up a company. These regulations outline the legal requirements and steps that a company must follow when it decides to cease its operations and formally dissolve. The specific regulations can vary from one jurisdiction to another and may include requirements related to notifying authorities, settling outstanding debts and obligations, distributing remaining assets, and adhering to tax and reporting obligations. In essence, these regulations provide a framework for the orderly and legal dissolution of a company. Companies need to follow these regulations to ensure compliance with the law and to avoid potential legal consequences.

II. Article 207 to Article 210 of The Law on Company

The regulations governing the dissolution of a company in Vietnam are stipulated in Article 207 to Article 210 of The Law on Company. To give you a comprehensive understanding of this process, we will break it down into several key aspects.

Legal Documents

Before embarking on the journey of dissolving a company in Vietnam, foreign investors must be well-versed in the legal documents that underpin this procedure. The primary legal documents governing this process are:

• The Law on Company 2020
• Decree 01/2021/NĐ-Cp, January 01, 2021
• Circular 01/2021/TT-BKHĐT, March 16, 2021

These documents provide the legal framework and guidelines that foreign investors need to follow when dissolving their companies in Vietnam.

Conditions for Dissolution

Several conditions must be met for a company to be eligible for dissolution. These conditions include:

• The operating period specified in the company's charter expires without an extension decision.
• The company is dissolved under a resolution or decision of 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).
• The company fails to maintain the adequate number of members prescribed by law for six consecutive months without converting into another type of business.
• The Certificate of Company Registration is revoked unless otherwise prescribed by the Law on Tax administration.

Additionally, the company can only be dissolved after all of its debts and liabilities are fully paid, and it is not involved in any disputes in court or arbitration. Both relevant executives and the company itself, if the Certificate of Company Registration is revoked, are jointly responsible for the company's debts.

Sequence and Procedure for Company Dissolution with Foreign Capital

Now, let's outline the sequence and procedure for dissolving a company in Vietnam with foreign capital. This process involves several critical steps:

Step 1: Company Approval of Dissolution Decision

The first step in dissolving a company is to obtain approval for the dissolution decision. This decision should include essential information such as the company's name, reason for dissolution, a timeline for finalizing contracts and paying the company's debts, and a plan for settling obligations under employment contracts. It should also bear the full name and signature of the company's authorized personnel.

Step 2: Submission of Dissolution Documents

Within seven working days from the ratification date, the resolution or decision on dissolution and the minutes of the meeting must be sent to the relevant authorities, including the business registration authority, tax authority, and the company's employees. This information should also be made public on the National Company Registration Portal and displayed at the company's offices.

If the company still has unpaid debts, the resolution or decision and the debt payment plan must be sent to the creditors and persons with related rights, obligations, and interests. This plan should contain details of the creditors, debts, repayment schedules, and methods for settling creditors' complaints.

Step 3: Asset Liquidation

The company will then proceed with liquidating its assets. The process may be directly organized by the private company, the Board of Members, the owner (for limited liability companies), or the Board of Directors (for joint-stock companies). However, the Company's Charter may stipulate the establishment of a separate liquidation organization.

Step 4: Closure of the Tax Code

Depending on the company's accounting documents, closing the tax code can take six months or more, excluding procedures for penalties, violations, and late submissions. During this process, the company will also reduce labor and settle relevant regimes for employees, following the Labor Code.

Step 5: Return the Company Seal

In the event that the company's seal was issued by the police department, proper procedures must be followed to return the seal to the old police department.

Step 6: Submission to Update Business Registration Certificate

The company's legal representative is responsible for applying for dissolution to the Business registration authority within five working days from the day when the company's debts are fully paid.

III. Expected Time for Dissolution

After 180 days from the date of sending the dissolution decision to the Department of Planning and Investment, if there are no further comments from the company or written objections from relevant parties, or within five working days, the business registration authority will update the company's status on the national company registration database.

IV. Termination of Investment Project

For companies with foreign capital holding an Investment Registration Certificate or equivalent document, in addition to the procedures for company dissolution, investors must also announce and re-submit the Investment Registration Certificate to the Investment Registration Authority within 15 days from the termination of the investment project.

Frequently Asked Questions

1. How long does the company have to operate before being dissolved?

The laws do not specifically stipulate how many years a company has to operate before being dissolved. A company can be dissolved based on the cases outlined in the Law On Companies.

2. Is a company with long-term losses required to be dissolved?

A company is only dissolved in specific cases, such as when the operating period specified in the company's charter expires without an extension decision or when it fails to maintain the required number of members as prescribed by law.

3. What is the sequence of priorities for paying business debts?

The company's debts will be paid in a specific sequence of priorities, starting with unpaid salaries, severance pay, and social insurance, followed by tax debts and other debts. Once all dissolution costs and debts are paid, any remaining funds are divided among the company's stakeholders.

4. What documents need to be submitted for company dissolution?

The company dissolution documents include the notification of the company's dissolution, the report on the liquidation of the company's assets, a list of creditors and their debts, confirmation of tax authorities regarding the closure of the tax code, and the resolution or decision and the minutes of the meeting of the company's authorized personnel on company dissolution.