It is a fact that establishing a company can be carried out very quickly and conveniently. However, the “termination” process often takes much longer, requiring considerable time and effort. This is because, in order to completely cease operations, an enterprise must fulfill all of its obligations and liabilities to be eligible for dissolution. This article outlines notable provisions regarding enterprise dissolution as follows:
Cases and Conditions for Enterprise Dissolution
- An enterprise shall be dissolved in the following cases:
a) Upon the expiration of its operation term stated in the company’s Charter without a resolution to extend;
b) Pursuant to the resolution or decision of the owner in the case of a private enterprise; of the Members’ Council in the case of a partnership; of the Members’ Council or the owner in the case of a limited liability company; or of the General Meeting of Shareholders in the case of a joint-stock company;
c) Where the company no longer maintains the minimum number of members as prescribed by law for six consecutive months without completing procedures for conversion of the enterprise type;
d) Where the Certificate of Enterprise Registration is revoked, except as otherwise provided under the Law on Tax Administration. - An enterprise may only be dissolved if it has settled all debts and other property obligations and is not involved in any dispute settlement at Court or Arbitration. Relevant managers and the enterprise referred to in Point d, Clause 1 of this Article shall be jointly liable for the company’s debts.
Order and Procedures for Enterprise Dissolution
The dissolution of enterprises in the cases specified at Points a, b, and c, Clause 1 above shall be carried out as follows:
- Adoption of a resolution or decision on dissolution. Such resolution or decision must contain the following principal details:
a) Name and address of the enterprise’s head office;
b) Reason for dissolution;
c) Time limit and procedures for liquidation of contracts and settlement of debts;
d) Plan for handling obligations arising from employment contracts;
dd) Full name and signature of the private enterprise owner, company owner, Chairperson of the Members’ Council, or Chairperson of the Board of Directors. - The private enterprise owner, Members’ Council, company owner, or Board of Directors shall directly organize the liquidation of the enterprise’s assets, unless otherwise provided by the company Charter through establishment of a liquidation committee.
- Within 07 working days from the date of adoption, the resolution or decision on dissolution and the minutes of the meeting must be sent to the Business Registration Authority, tax authority, and employees of the enterprise. The resolution or decision must also be published on the National Business Registration Portal and publicly posted at the enterprise’s head office, branches, and representative offices.
Where the enterprise still has outstanding financial obligations, the resolution or decision on dissolution must be accompanied by a debt settlement plan sent to creditors and other parties with related rights, obligations, and interests. The debt settlement plan must specify the names and addresses of creditors; amounts owed, due dates, places, and methods of payment; and procedures and deadlines for lodging complaints by creditors.
- The Business Registration Authority shall publish the status of the enterprise undergoing dissolution procedures on the National Business Registration Portal immediately upon receipt of the dissolution resolution or decision. The notice must be accompanied by the dissolution resolution or decision and the debt settlement plan (if any).
- The debts of the enterprise shall be paid in the following order of priority:
a) Salary debts, severance allowances, social insurance, health insurance, unemployment insurance as prescribed by law, and other benefits of employees under collective labor agreements and employment contracts;
b) Tax liabilities;
c) Other debts. - After payment of dissolution expenses and debts, the remaining assets shall be distributed to the private enterprise owner, members, shareholders, or company owner in proportion to their ownership interests.
- The enterprise’s legal representative shall submit the dissolution dossier to the Business Registration Authority within 05 working days from the date of full settlement of debts.
- Upon expiry of 180 days from the date the dissolution resolution or decision was received pursuant to Clause 3 above, without receiving any objection in writing from the enterprise or relevant parties, or within 05 working days from receipt of the dissolution dossier, the Business Registration Authority shall update the legal status of the enterprise in the National Enterprise Registration Database.
Dossier for Enterprise Dissolution
- The dossier for enterprise dissolution shall include the following documents:
a) A notice of enterprise dissolution;
b) A report on the liquidation of the enterprise’s assets; a list of creditors and debts already settled, including full payment of tax liabilities and obligations related to social insurance, health insurance, and unemployment insurance for employees after the adoption of the dissolution decision (if any). - Members of the Board of Directors of a joint-stock company, members of the Members’ Council of a limited liability company, the company owner, the sole proprietorship owner, the Director or General Director, general partners, and the legal representative of the enterprise shall be responsible for the truthfulness and accuracy of the enterprise dissolution dossier.
- In case the dissolution dossier is inaccurate or falsified, the persons specified in Clause 2 of this Article shall be jointly liable for the payment of unresolved employee entitlements, unpaid taxes, and other outstanding debts, and shall bear personal liability before the law for any consequences arising within 05 years from the date the dissolution dossier is submitted to the Business Registration Authority.
Legal basis:
- Articles 207, 208, and 210 of the Law on Enterprises 2020.
