What is a company dissolution? Cases and conditions for company dissolution

The ultimate goal of any foreign investor when doing business in Vietnam is to earn their expected profit. However, investors often also have a strategy to get out of their business through the sale of the company or the company dissolution.

A foreign-invested company can voluntarily be dissolved at any time for any reason as long as it ensures the payment of all debts and other property obligations and is not involved in dispute resolution in court or arbitration.

How complicated and lengthy the procedure for dissolving a company will depend on its activities’ history. A company that has been in business for many years will inevitably face more problems than a company that has just been established. The procedure for company dissolution is mandatory if the business owners want to terminate the company legally. Foreign investors can learn more about the process for company dissolution in this article on LTS LAW.

Documents and procedures to know when dissolving a company
Documents and procedures to know when dissolving a company

What does the company dissolution mean?

The dissolution of an enterprise or a company is a process of legally winding up a company. The owners of a dissolved company must liquidate all company assets to pay employee salaries, contract compensation, debts, and other property obligations before legally terminating the company’s legal status and existence. At the same time, the company dissolution is also a procedure to terminate all rights and obligations of the company before the law. However, to complete the company dissolution procedure, the company must fulfill all the obligations arising in the business operations.

Dissolving a company is a termination of its existence in the market.
Dissolving a company is a termination of its existence in the market.

Cases of company dissolution in Vietnam

According to the provisions of Clause 1, Article 207 of the 2020 Enterprise Law, there are 2 cases of the dissolution of a company as follows:

Voluntary dissolution

Voluntary dissolution is the termination of a company’s operations according to the company owners’ decision. Dissolution occurs when the operating period stated in the company’s charter expires, and the company owners have no intention of extending it further. Or in the case of the company’s inefficient operation, the company owners do not want to continue doing the business.

Compulsory dissolution

Compulsory dissolution occurs when competent state agencies require a company to cease all business activities. This case of dissolution may appear when a company violates the provisions of the law.

Compulsory dissolution may also occur when the minimum number of company members or shareholders does not meet the minimum number prescribed by the law. If the company does not add additional members to meet the requirement, it must be dissolved in accordance with the law.

Cases of company dissolution in Vietnam
Cases of company dissolution in Vietnam

Conditions for company dissolution in Vietnam

According to Clause 2, Article 207 of the 2020 Enterprise Law, conditions for company dissolution are as follows:

  • The company is only approved for dissolution when it has paid all debts and related property obligations and does not participate 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. It must carry out bankruptcy procedures under the provisions of the Bankruptcy Law.
Necessary conditions for company dissolution
Necessary conditions for company dissolution

The difference between bankruptcy and dissolution

The ultimate consequences of company dissolution and bankruptcy are the termination of a company’s existence and legal status. But in terms of causes, objectives, responsibilities, and implementation procedures, there will be many differences.

Bankruptcy is the closing of an insolvent company through judicial proceedings handled by a competent court. The company cannot go bankrupt on its own without a court’s decision.

Meanwhile, dissolution is the closing of a company that actively wants to stop doing business and still be able to 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.

Difference between bankruptcy and dissolution
Difference between bankruptcy and dissolution

The procedure for company dissolution in Vietnam

Passing a decision to dissolve a company

The first step for dissolving a company is to issue a decision on the company dissolution by the company owners, members’ council, or shareholders’ general meeting.

The decision on the company must contain the following primary details:

  • Company name and head office address.
  • The reason for the company dissolution.
  • The time limit for contract liquidation and payment of company debts. Please note that the time limit for debt payment and contract liquidation must not exceed 06 months from the date of the decision on the company dissolution.
  • It is necessary to have a settlement plan for obligations arising from labor contracts.
  • Full name and signature of the representative of the company under Vietnamese law.

Notice of the company dissolution

When the decision on company dissolution is passed by the company owners, members’ council, or shareholders’ general meeting, the company must give official notice to persons with related rights and benefits. The debt settlement plan must be enclosed if the company still has financial obligations.

The notice must contain the name and address of the creditors, clear deadlines, location, and method of payment of such debts.

Steps to notify of the company dissolution
Steps to notify of the company dissolution

Fulfillment of debt payment obligations

The company’s debts should be paid as follows:

  • Salary debts, severance allowance, social insurance, and other agreements in the employees’ labor contracts should be prioritized for payment.
  • The next step is the payment of taxes incurred during business activities.
  • Finally, the company pays all debts to the organizations or individuals.
  • After paying all the debts and related expenses, the rest belongs to the company’s owner, company members, or shareholders.

Submit dissolution documents at the Business Registration Office

After completing the above procedures, the legal representative must submit the company dissolution documents to the Business Registration Office.

In case of the company dissolution, after receiving the dissolution dossier, the Business Registration Office will send data about the company’s dissolution registration to the tax agency. Within two working days of the data’s receipt, the tax agency will respond to the Business Registration Office.

In case of voluntary dissolution, after 180 days from the date of notification of the company dissolution without receiving written objections from relevant parties, the Business Registration Office shall update the company’s legal status on the National Business Registration Portal. This requires the tax agency to carry out urgently the tax finalization procedures for the company dissolution.

Submit all the dissolution documents to the Business Registration Office
Submit all the dissolution documents to the Business Registration Office

Documents to be prepared for the company dissolution

To proceed with the company dissolution, the legal representative of the company must prepare the relevant documents as follows:

  • A written notice of dissolution of the
  • Meeting minutes and decisions of shareholders’ general meeting, members’ council, or company owners on the dissolution of the company.
  • The list of paid debts, including creditors, amounts, both tax debts, and social insurance debts.
  • The list of employees at the company and their benefits have been resolved.
  • A letter from the bank confirming that the company has opened a business account and that the account has been settled. If the company has not opened an account at the bank, it needs a written commitment that it has not opened an account and has not owed the bank.
  • Documents proving that the company has posted notice of dissolution in accordance with the law.
  • Notification and certification of the tax agency on the closing of tax codes, if tax registration is not conducted, a written certificate from the tax agency is also required.
  • Certificate of the police agency on the destruction of the enterprise’s seal according to regulations. A written certification from the police is required if there is no enterprise seal.
  • The original Enterprise Registration Certificate.
  • The report on the dissolution procedures, including the commitment to have paid all the company’s debts.
  • If a company has a branch or a representative office, it must be enclosed with the proof of dissolution of those units.

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LTS LAW advises on company dissolution procedures in Vietnam

LTS LAW’s company dissolution service includes consulting services on procedures for businesses that want to terminate business activities in accordance with the law. This service of LTS LAW is chosen by many clients because:

  • Our team of lawyers with many years of experience in dealing with company dissolution will help clients quickly resolve related procedures.
  • A team of enthusiastic consultants and lawyers is ready to support clients 24/7.
  • There are many service categories for our clients to choose from.
  • Apply the processes and forms thoroughly to ensure uniformity during our company dissolution service.
  • LTS LAW provides quality service at an affordable cost.
  • LTS LAW provides practical solutions in Vietnam with a high profession.
LTS LAW advises on reputable enterprise dissolution procedures
LTS LAW advises on reputable enterprise dissolution procedures

The company dissolution in Vietnam involves many complicated stages and documents. Therefore, many companies will choose the company dissolution service of a professional law firm to optimize the time and ensure the proper process.

The information related to the company dissolution has been updated in this article; you can refer to it for your business. If you want to consult about the company dissolution service, please get in touch with LTS LAW through the hotline for support.

Contact LTS LAW immediately for the most detailed advice:

LTS LAW FIRM

Address: Room 602, 6th Floor, 520 Cach Mang Thang 8, Ward 11, District 3, Ho Chi Minh City, Vietnam.

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