The ultimate guide to dissolving a Foreign-Invested company in Vietnam

 2. What is Company Dissolution?

Dissolving a company in Vietnam is a legal process that involves winding up a business. It requires the company's owners to liquidate all assets, settling employee salaries, contract compensation, debts, and other property obligations. This process terminates the company's legal status and existence and also terminates all its rights and obligations before the law. To complete the dissolution procedure, the company must fulfill all its obligations stemming from its business operations.

3. Cases of Company Dissolution in Vietnam

According to the 2020 Enterprise Law in Vietnam, there are two primary cases of company dissolution:

Voluntary Dissolution

Voluntary dissolution occurs when the company owners decide to terminate the company's operations. This can happen when the operating period stated in the company's charter expires, and there is no intention to extend it. Alternatively, it may occur if the company's operation is no longer efficient, and the owners decide to cease business activities.

Compulsory Dissolution

Compulsory dissolution happens when competent state agencies require a company to cease all its business activities. This occurs when the company violates the law's provisions or doesn't meet the minimum number of company members or shareholders required by law. If the company doesn't add additional members to meet the requirement, it must be dissolved according to the law.

4. Conditions for Company Dissolution in Vietnam

Clause 2, Article 207 of the 2020 Enterprise Law sets out the conditions for company dissolution:

• The company is only approved for dissolution when it has paid all its debts and related property obligations and is not involved in any ongoing legal proceedings in court or arbitration.

• The dissolution of the company is conducted with the consent of the company owners or the decision of the Business Registration Office under the Department of Planning and Investment.

• In compulsory dissolution, the company managers and related companies are jointly responsible for the company's debts.

• If a company is insolvent, it cannot proceed with the dissolution and must carry out bankruptcy procedures under the Bankruptcy Law.

5. The Difference Between Bankruptcy and Dissolution

While both bankruptcy and dissolution result in the termination of a company's existence and legal status, there are significant differences between the two:

• Bankruptcy involves the closure of an insolvent company through judicial proceedings handled by a competent court. A company cannot go bankrupt without a court's decision.

• Dissolution is the closure of a company that actively wants to stop doing business and can still pay its debts and other property obligations. If the competent state agency revokes the enterprise registration certificate, the company is forced to be dissolved by the law.

6. The Procedure for Company Dissolution in Vietnam

Passing a Decision to Dissolve a Company

The first step in dissolving a company is to issue a decision on the company's dissolution. This decision must include:

• The company's name and head office address.
• The reason for the company's dissolution.
• The time limit for contract liquidation and payment of company debts (not exceeding 6 months from the decision's date).
• A settlement plan for obligations arising from labor contracts.
• The full name and signature of the company's representative under Vietnamese law.

Notice of the Company Dissolution

After passing the decision on the company's dissolution, the company must provide official notice to those with related rights and benefits. This notice should include the names and addresses of creditors, clear deadlines, locations, and methods of debt payment. If the company still has financial obligations, the debt settlement plan must be enclosed.

Fulfillment of Debt Payment Obligations

Debts should be paid in the following order:

• Salary debts, severance allowance, social insurance, and other agreements in employees' labor contracts should be prioritized.
• Next, pay the taxes incurred during business activities.
• Finally, pay all debts to organizations or individuals.

After settling all debts and related expenses, the remaining assets belong to the company's owners, members, or shareholders.

Submit Dissolution Documents at the Business Registration Office

The legal representative must submit the company dissolution documents to the Business Registration Office. In the case of voluntary dissolution, if there are no written objections from relevant parties within 180 days from the date of notification, the Business Registration Office will update the company's legal status on the National Business Registration Portal.

7. Conclusion

Dissolving a foreign-invested company in Vietnam is a structured process that involves several steps and legal requirements. It's essential to understand the distinctions between dissolution and bankruptcy, as well as the conditions and cases in which dissolution is necessary. By following the outlined procedures, foreign investors can navigate the dissolution process effectively.

FAQs

1. What is the difference between bankruptcy and company dissolution in Vietnam? Bankruptcy involves closing an insolvent company through court proceedings, while dissolution is the closure of a company that actively wants to cease business activities and can pay its debts.

2. When is a company in Vietnam required to undergo compulsory dissolution? Compulsory dissolution occurs when competent state agencies require a company to cease all its business activities. This can happen if the company violates the law or fails to meet the minimum required number of members or shareholders.

3. What are the conditions for company dissolution in Vietnam? Conditions for company dissolution include paying all debts and related property obligations, not being involved in ongoing legal proceedings, and obtaining consent from the company owners or the Business Registration Office.

4. What happens to a company's assets after dissolution in Vietnam? After settling all debts and related expenses, the remaining assets belong to the company's owners, members, or shareholders.