Legal guidance: Enterprise dissolution in Vietnam

 

In the context of the constantly fluctuating investment environment and the business strategy of the enterprise is constantly adjusted to adapt to reality, terminating business activities - although not a desirable option - can still become a necessary decision for investors. In fact, the process of dissolving an enterprise not only requires thorough legal preparation but also requires business leaders to be fully aware of legal responsibilities, financial obligations and related administrative procedures.

Understanding the challenges that businesses may face in this process, HM&P Law Firm (“HM&P”) has compiled and published the publication Legal guidance on enterprise dissolution in Vietnam - an in-depth, up-to-date and practical document. The publication was developed with the goal of supporting businesses in systematically and comprehensively approaching current legal regulations, from dissolution conditions, order of procedures, dossier requirements to important notes to ensure that the dissolution process is carried out in accordance with regulations,  efficiency and limit legal risks.

This publication draws from HM&P’s practical experience in advising and providing legal support to many domestic and foreign businesses, from start-ups to large corporations operating in Vietnam. We believe that this will be a useful and practical reference for businesses/investors who are considering or preparing to carry out business dissolution procedures in Vietnam.

If you have any questions about the contents of this document, please contact HM&P at the information below:

Our Managing Partner:

Lawyer Nguyen Van Phuc

Phone: 0932 768 630

Email: phuc.nguyen@hmplaw.vn

HM&P Law Firm

Address: 7th Floor, ITAXA Building, 126 Nguyen Thi Minh Khai, Xuan Hoa Ward, HCMC

Phone: +84 28 73080839

Email: counsel@hmplaw.vn

Website: hmplaw.vn

The Law on Enterprise and its guiding documents do not give a specific definition for the concept of “enterprise dissolution”. According to the Civil Code, dissolution is listed as one of the cases that leads to the termination of the existence of legal entities,[1] including businesses and other economic organizations.[2]

Thus, it can be understood that enterprise dissolution is the process of terminating the activities and existence of an enterprise. After completing the dissolution process as prescribed, the enterprise will be updated by the Business Registration Authority with the legal status of the enterprise on the National Enterprise Registration Database as “Dissolved, bankrupt, terminated from existence”.[3]

An enterprise may be dissolved/dissolved in the following cases:[4]

1. Upon the expiration of the operation term stated in the company’s charter without an extension decision;
2. According to the resolution, the decision on voluntary dissolution of the following subjects:[5]
   • Business owners (for private enterprises);
   • Members’ Council (for partnerships);
   • The Board of members or the owner of the company (for limited liability companies);
   • General Meeting of Shareholders (for joint-stock companies);
3. When the company fails to maintain a sufficient number of members or a minimum number of shareholders as prescribed by law for a continuous period of six months;
4. When the enterprise registration certificate is revoked under the decision of the competent authority.

Within the scope of this publication, HM&P will focus on analyzing and providing guidance on legal matters relating to the dissolution of enterprises in two specific scenarios: dissolution upon the expiration of the operational term as stipulated in the company’s Charter (item i), and dissolution under a voluntary dissolution resolution adopted by the enterprise’s management and governing bodies (item ii) as mentioned above.

 

 

In principle, enterprises need to ensure that the following conditions are met at least to be dissolved:

1. Before submitting a dossier for registration of dissolution, the enterprise must carry out procedures for terminating the operation of its branches, representative offices, and business locations (collectively referred to as “dependent units”).[6]
2. Enterprises must ensure the payment of all debts and other property obligations, including the fulfillment of tax obligations and the invalidation of tax identification numbers.[7]
3. The enterprise is not in the process of resolving the dispute at the Court or Arbitration.[8]
4. In case the enterprise must be dissolved due to the revocation of the enterprise registration certificate under a decision of a competent authority, the relevant manager and the enterprise shall be jointly responsible for the debts of the enterprise.[9]

For the process of enterprise dissolution to be carried out in accordance with the law and minimize the associated risks, enterprises must comply with a series of administrative procedures and legal obligations related to various subjects. Each step in the process requires close coordination between businesses and authorities, from issuing internal decisions to fulfilling tax obligations, social insurance (“social insurance”) and asset liquidation.

Below is a summary of the main tasks to be carried out in the process of enterprise dissolution, accompanied by the receiving authorities and agencies of each step, in order to help enterprises have an overview and be proactive in implementing dissolution procedures effectively and complying with current legal regulations.

Note: The list of tasks below is for general orientation only. Enterprises are not necessarily required to take all steps or follow this order if they do not incur obligations or are not subject to application in accordance with the law. The review of the legal status and actual operation of the enterprise is necessary to determine the scope and order of work to be implemented.

STT	Work item	Receiving authorities and agencies
	Termination of investment projects implemented by enterprises	Investment Registration Agency
	Termination of operation of dependent units, including (i) registration for invalidation of tax identification numbers for dependent units of enterprises; and (ii) notice of termination of operation for each branch, representative office and business location of the enterprise	Tax Authorities and Business Registration Authorities
	Promulgating the decision on the dissolution of the enterprise	Inside the business
	Notify the dissolution of the enterprise to the Business Registration Authority	Business Registration Authority
	Submission of dossier of application dossier for invalidation of the tax identification number	Tax authorities
	Liquidation of assets and fulfillment of financial obligations	Self-implemented enterprises
	Reporting labor reduction and completing procedures for closing social insurance books	Social Insurance Agency
	Submission of tax finalization dossiers upon dissolution	Tax authorities
	Close a bank account	Bank where the account is opened
	Cancellation of digital signatures, cancellation of seals	The unit providing the digital signature andthe police agency (if it is an engraving)
	Submission of dossiers for registration of enterprise dissolution	Business Registration Authority

In addition to the above-mentioned tasks, businesses need to pay attention to comply with the provisions of the law on data management when dissolved, reorganized or bankrupt. Concrete:

1. In case of a need to transfer data, enterprises must develop a clear plan for data processing and transfer, and notify relevant agencies, organizations and individuals to ensure the legitimate rights and interests of the affected parties.
2. For core data and important data, enterprises are responsible for fully applying security measures to ensure information safety during the process of processing and transferring.
3. Enterprises must report the data processing plan, including specific information about the data recipient, to the competent state agency in accordance with law to avoid arising legal liabilities after dissolution.

• Question:

After dissolution, the enterprise will no longer be able to continue implementing investment projects. Therefore, in the process of preparing for dissolution, in order to ensure that there are no more obligations arising related to investment activities before proceeding with the next steps, enterprises implementing investment projects need to review and come up with corresponding plans to handle the investment projects they are implementing. Consists of two directions:

1. Transfer the entire investment project to another investor if it meets the conditions prescribed by law;[10] or
2. Termination of investment projects.[11]

Within the scope of this publication, HM&P will present issues related to the procedure for notifying the termination of an investment project in case the enterprise is subject to this procedure in accordance with the Law on Investment. The application of specific procedures will depend on the legal characteristics of the investment project, including projects that have been granted investment registration certificates, projects that have been approved for investment guidelines or projects that have been granted investment registration documents before the Law on Investment takes effect.

 

 

1.1. Order and procedures for termination of the operation of investment projects

When deciding to terminate an investment project by itself, the investor shall terminate the operation of the investment project according to the following procedures:

Step 1: Within 15 days from the date of the decision to terminate the operation of the investment project according to Point a Clause 1 Article 48 of the Law on Investment, the investor shall submit a dossier of notice of termination of the operation of the investment project to the investment registration authority.[12]

Step 2: In practice, after about two weeks from the date of receipt of a valid dossier, the Investment Registration Authority will issue a Notice of termination of the investment project and send it to the investor and notify the relevant authorities and agencies.

 

 

Note:  For investment projects subject to investment policy approval, the investment registration agency shall terminate the operation of the investment project after obtaining the opinion of the investment policy approval authority.[13]

Step 3: After the investment project is terminated, the liquidation of the investment project shall be carried out as follows:[14]

1. Investors self-liquidate investment projects in accordance with the law on asset liquidation.
2. For investment projects that are allocated land, leased land or permitted by the State to change the land use purpose, the handling of land use rights and land-attached assets shall comply with the provisions of the land law and relevant laws.
3. In the process of liquidation of an investment project, if the investor being an economic organization is dissolved or falls into bankruptcy, the liquidation of the investment project shall comply with the provisions of law on dissolution and bankruptcy of economic organizations.

Please read more and download the publication (PDF File) here