Full name: TRAN Kim Ny (Ms.)
Phone: (+84) 932-113-569 / (+84) 28.3820-3302
Consultancy fields: Enterprise establishment – Foreign investment
Languages: Vietnamese – English
Full name: TRAN Kim Ny (Ms.)
Table of contents
- Postpone, suspension of operation, and business termination
- Business termination due to the withdrawal of business certificate or in accordance with the court’s decision.
- Prohibited activities since the decision of termination is issued
- Termination of branches’ execution, representative office, sales location
- The differences between procedures of Enterprise DISSOLUTION and BANKRUPTCY
- In case the enterprises perform “voluntary dissolution”:
- In case the enterprises perform “compulsory dissolution”:
Enterprise dissolution is a type of administrative procedure conducted by the authorized people in the enterprise by working with the business registration agency.
Enterprise bankruptcy is a legal procedure carried by the authorized court after receiving the eligible required application.
THE ORDER and PROCEDURES OF ENTERPRISE DISSOLUTION 2020
Due to the negative influence of Covid-19 pandemic, 2020 was truly an unfortunate year for the operation of a number of companies. During this time, many companies have suffered in their trading, manufacturing and other business activities, leading to stagnation and heavy losses. Since the pandemic prolongs, as a result, the businesses which do not have a stable capacity but suffer a great losses will want to withdraw from the market. At that time, companies will have to settle obligations among internal members and the relationship between enterprise with other entities such as partners, suppliers, the employees as well as state authorities, and then proceed the enterprise dissolution procedures.
The difference between Enterprise dissolution and bankruptcy is: Enterprise dissolution means that enterprise still has the ability to pay the obligations, but not the capacity to do business; while enterprise bankruptcy means that enterprise has no ability to conduct any payment.
By throughly understand clients’ circumstance, CFA together with the experienced team of lawyers can conduct the following consultation on dissolution procedures for clients to comply with legal regulations and law in order to minimize risks and violations.
* In case enterprises perform “voluntary dissolution”
Step 1: Approving the decision to dissolve the company
In order to conduct the dissolution of an enterprise, first of all, the enterprise needs to hold a meeting to pass the dissolution decision. Accordingly, the dissolution must be approved by the owner for a one-member limited liability company, by the Members’ Council for a limited liability company with two or more members, by the General Meeting of Shareholders in joint stock companies and by general partners for partnerships.
This decision represents the common consensus among members on all related reasons for dissolution; deadline and procedures for contract liquidation and debt payment; plan to handle obligations arising from labor contracts and the establishment of a liquidation team.
Enterprise dissolution decision should include the following contents:
– Company’s information: Name, head office address, taxation code, legal representative of the business;
– The reasons for dissolution:
– Within 6 months from the date of approval of the dissolution decision, companies must carry out the procedures for liquidating the contract and the companies’ debts.
– Propose the solutions for possible arising obligations in the labor settlement process.
Step 2: Notify the dissolution decision
Once the dissolution decision is passed, the companies must inform people who have rights and benefits related to this dissolution decision.
In case the enterprise has not fully paid off it’s financial obligations, it’s compulsory to send the notice of “dissolution decision” enclosed with a proposal of detailed “settlement plan” to the people having rights and obligations related to the creditor.
The notice content should show detailed information of the creditor (name, address, the amount of debt, payment deadline, location and method). There must be an additional provision condition in this notice in case the enterprise owner does not follow the content of the notice.
Step 3:Liquidation of assets and payment of the company’s debts
Clause 2 and Clause 5 Article 202 of the Law on Enterprises 2014 have defined the person who is in charge of liquidates assets and also the order of debt payment. Unless the company has established a debt liquidation organizing committee, the liquidation of assets of the company will be carried out by the owner of the private company, the members’ council or the board of directors in case of joint stock company.
The order of debt payment is prioritized as following:
(1) Salary debts, severance pay, social insurance in accordance with the law and other benefits of the employee being specified in the collective labor agreement or the signed labor contract;
(2) Tax debt
(3) Other debts
When all debts and dissolution expenses have been paid, the rest belongs to the private enterprise entity, members, shareholders or owners of the company.
According to Point c, Clause 1, Article 202 of the 2014 Law on Enterprises, the term for contract liquidation must not exceed 6 months from the date of approval of the dissolution decision.
Some comments said that this time duration is only suitable for small-sized businesses which don’t have complicated transaction relationships, or highly liquid assets. For businesses with large scale or many assets (such as real estate), which need a long time to liquidate and pay debts, this time duration may not be enough to settle all contracts and pay public debt.
The payment of debts is very complicated because it is necessary to set up an appropriate order to ensure the rights and benefits of those involved.
Step 4: Submit dissolution documents
According to the Clause 4, Article 203 of the Law on Enterprises 2014, the legal representative of the enterprise shall submit the dissolution dossier to the business registration agency within 05 working days from the date of paying all debts of the business. An enterprise dissolution documents is also specified in the Article 204 of this Law.
Step 5: Update legal status of an enterprise in National Business Registration Database
Clause 8, Article 202 of the 2014 Law on Enterprises stipulates that the dissolution of an enterprise is carried out by two methods:
In case of dissolution according to a dossier, Article 59 of Decree No. 78/2015 / ND-CP stipulates that the business registration agency must submit the dissolution dossier of the enterprise to the tax authority. Within 2 working days after receiving information from the business registration agency, the tax authority must feedback its opinion on the dissolution of the enterprise to the business registration agency.
Within 05 working days from the date of receiving the dissolution dossier, the business registration agency must update the enterprise’s legal status in the database system.
– In case of automatic dissolution, after 180 days from the date of notification of the dissolution of the enterprise without receiving any objections from related parties in written document, the business registration agency must update the legal status of their business in the database system
Diagram: Enterprise dissolution process according to the Law on Enterprises 2014
** In case the enterprises perform “compulsory dissolution” :
Step 1: The business registration agency must notify the status of an enterprise that is undergoing dissolution procedures on the National Business Registration Portal
The competent business registration agency must update information of the enterprise’s status that is undergoing dissolution procedures on the national registration information system. Concurrently with the issuance of the decision to revoke the enterprise’s registration certificate or immediately after receiving the effective dissolution decision of the Court. The notice must also be enclosed with the decision to revoke the enterprise registration certificate or the Court decision.
Step 2: Making a dissolution decision and informing this decision to the business registration agent, tax authority, employees in the enterprise and public this decision.
The enterprise must convene a meeting to issue the dissolution decision within 10 days from the date of receiving the effective court’s decision or the decision to revoke the enterprise registration certificate from the competent authority.
The enterprise then must send this dissolution decision and the copy of the decision to revoke the enterprise registration certificate or the legally effective court decision to the business registration agency, tax authority, and employees in the company. Also, the dissolution decision must be publicly posted at the head office and all branches of the enterprise.
If there is a request to publish this dissolution decision in a newspaper, the enterprise must publish it on at least one written newspaper or an electronic newspaper in three consecutive issues.
In case the enterprise has not yet fully paid for its financial obligations, it must send a notice enclosed with a “dissolution decision” and a written proposal of a detailed “settlement plan” to the people who have related benefits and rights, related departments and creditors.
The notice content should show detailed information of the creditor ( name, address, the amount of debt, payment deadline, location and method). There must be an additional provision condition in this notice in case the enterprise owner does not follow the content of the notice.
Step 3: Conducting the liquidation of assets and payment of debts
Step 4: Submit a request for business dissolution
Step 5: The business registration agency updates the legal status of the enterprise on the National Business Registration Database.
The execution order and method in steps 3, 4, 5 are similar to the case of voluntary dissolution.