Shutdown and dissolution are legal procedures to terminate the existence of an enterprise 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);
Shutdown and dissolution of an enterprise are more and more complicated than procedures of registration for establishment, management, reorganization, and shall be followed the conditions and procedures:
CASES OF AND CONDITIONS FOR
SHUTTING DOWN AND DISSOLUTION OF ENTERPRISES
An enterprise shall be shut down and dissolved in the following cases:
- The operating period specified in the company’s charter expires without an extension decision;
- The enterprise 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 enterprise fails to maintain the adequate number of members prescribed in this Law for 06 consecutive months without converting into another type of business;
- The Certificate of Enterprise Registration is revoked, unless otherwise prescribed by the Law on Tax Administration.
Conditions for enterprise Shutdown and dissolution :
- An enterprise may only be dissolved after all of its debts and liabilities are fully paid and it is not involved in any dispute at the court or arbitration.
- Relevant executives and the enterprise in cases the Certificate of Enterprise Registration that is revoked are jointly responsible for the enterprise’s debts.
SHUTTING DOWN AND DISSOLUTION PROCEDURES
Enterprise Shutdown and Dissolution shall be carried out as follows:
- A resolution or decision on the dissolution is issued. Such a resolution or decision shall contain the following information: The enterprise’s name and headquarters address; Reasons for dissolution; Time limit and procedures for finalization of contracts and payment of the enterprise’s debts; Plan for settlement of obligations under employment contracts; Full name and signature of the owner of the sole proprietorship, the company’s owner, the President of the Board of Members, the President of the Board of Directors;
- The owner of the sole proprietorship, the Board of Members or the owner, the Board of Directors directly organizes the liquidation of the enterprise’s assets, unless the company’s charter requires establishment of a separate liquidation organization;
- Within 07 working days from the ratification date, the resolution or decision on dissolution and the minutes of the meeting shall be sent to the business registration authority, tax authority and the enterprise’s employees. The resolution or decision shall be posted on the National Enterprise Registration Portal, displayed at the enterprise’s headquarters, branches and representative offices. In case the enterprise still has unpaid debts, the resolution or decision and the debt payment plan shall be sent to the creditors and persons with related rights, obligations and interest. The debt payment plan shall contain the creditors’ names, debts, repayment time, location and method; method and time limit for settling creditors’ complaints;
- The business registration authority shall post a notification that an enterprise is undergoing dissolution, the dissolution resolution or decision and debt payment plan (if any) on the National Enterprise Registration Portal right after the resolution or decision is received (if any);
- An enterprise’s debts shall be paid in the following order of priority: Unpaid salaries, severance pay, social insurance, health insurance, unemployment insurance premiums and other benefits of employees under the collective bargaining agreement and concluded employment contracts; Tax debts; Other debts;
- After the dissolution costs and debts have been fully paid, the remainder shall be divided among the owner, members/partners, shareholders in proportion to their stakes/shares;
- The enterprise’s legal representative shall submit the application for dissolution to the business registration authority within 05 working days from the day on which the enterprise’s debts are fully paid;
- After 180 days from the receipt of the dissolution resolution or decision without further comments from the enterprise or written objections from relevant parties, or within 05 working days from the receipt of the application for dissolution, the business registration authority shall update the enterprise’s status on the national enterprise registration database;
APPLICATION FOR SHUTTING DOWN AND DISSOLUTION
An application for Shutdown and dissolution of an enterprise shall consist of:
- The notification of the enterprise’s dissolution;
- The report on liquidation of the enterprise’s assets; list of creditors and paid debts, including tax debts, social insurance, health insurance, unemployment insurance of employees after the dissolution decision is issued (if any).
- Members of the Board of Directors (for joint stock companies), members of the Board of Members (for limited liability companies), the owner (for sole proprietorships), the Director/General Director, general partners and legal representatives shall be responsible for the accuracy and truthfulness of the application.
- In case the application contains inaccurate or false information, the owners or management persons shall jointly provide the outstanding employees’ benefits, taxes and other debts and bear personal responsibility for the consequences that occur within 05 years from the day on which the application is submitted to the business registration authority.
ACTIONS PROHIBITED FROM THE ISSUANCE
DATE OF THE SHUTTING DOWN AND DISSOLUTION DECISION
From the issuance date of the shutdown and dissolution decision, the enterprise and its executives are prohibited from the following actions:
- Concealing, disguising assets;
- Denying or reducing the creditors’ claims to the debts;
- Convert unsecured debts into debts secured with the enterprise’s assets;
- Concluding new contracts, except for dissolving the enterprise;
- Pledging, donating, leasing out assets;
- Terminating effective contracts;
- Raising capital in any shape or form.
SHUTTING DOWN AND DISSOLUTION BRANCHES, REPRESENTATIVE OFFICES AND BUSINESS LOCATIONS
- Shutdown of branches, representative offices, business locations of an enterprise shall be decided by the enterprise or under a decision to revoke the certificate of branch/representative office registration issued by a competent authority.
- The enterprise’s legal representative and the head of the branch/representative office that is shut down shall be jointly responsible for the accuracy and truthfulness of the application for shutdown of the branch/representative office/business location.
- The enterprise whose branch is shut down shall execute the contracts and pay the debts, including tax debts, of the branch and continue employing or fully provide lawful benefits for the branch’s employees as prescribed by law.
One of the most challenging procedures in shutdown and dissolution of an enterprise in Vietnam is tax inspection, tax settlement and tax completion certificate prior to the final step at the licensing department.
The enterprise keeps accounting records in accordance with accounting laws, tax reports, lawful invoices for investments, revenues, expenses during its operation and is ready to prove for any tax obligation and fully pay tax arrears on tax inspection decisions.
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