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PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Legal basis:

  • The Enterprise Law 2020 takes effect from January 1, 2021;
  • The Investment Law 2020 takes effect from January 1, 2021;
  • Decree 31/2021/ND-CP issued on March 26, 2021 guiding The Investment Law;

When terminating the operation of enterprise of foreign traders, Clients should note the following provisions:

1. Cases of termination of operation of enterprise

  • 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. PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

2. Conditions of termination of operation of enterprise

  • 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. 
  • In case the The Certificate of Enterprise Registration is revoked, relevant executives and the enterprise are jointly responsible for the enterprise’s debts.

3. Orders and procedures of termination of operation of enterprise

Firstly, when terminate the operation of a foreign-invested enterprise, it is necessary to terminate the operation of an investment project, specifically: PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Step 1: Termination of investment project and return of investment registration certificate

After completing the procedures for terminating the investment project and returning of investment registration certificate, the investor shall implement procedures to terminate the operation of the enterprise in accordance with the provisions of law corresponding to each type of enterprise. PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

3.1. Enterprise termination shall be carried out according to the specific order and procedures:

Step 2: A decision on the dissolution is issued PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Such a decision shall contain the following information:

a) The enterprise’s name and headquarters address;

b) Reasons for dissolution;

c) Time limit and procedures for finalization of contracts and payment of the enterprise’s debts;

d) Plan for settlement of obligations under employment contracts;

đ) Full name and signature of the owner of the sole proprietorship, the company’s owner, the Chairman of the Board of Members, the Chairman of the Board of Directors;

Bước 3: Organizing the liquidation of the enterprise’s assets

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; PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Step 4: Send the decision to terminate the operation and the meeting minutes

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 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;

Step 5: Update business status undergoing dissolution termination procedures on the National Enterprise Registration Portal 

Step 6: Submit application for enterprise termination PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Dossier for enterprise termination, including:

  • 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).
  • The resolution or decision and the copy of the minutes of meeting of the Board of Members of the multi-member limited liability company or partnership, or of the General Meeting of Shareholders of the joint-stock company, or the resolution or decision of the owner of the single-member limited liability company on enterprise dissolution;
  • The debt payment plan (if any).

Step 7: Change inactive status PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

After 180 days from the receipt of the notification of dissolution, enclosed with the resolution or decision on dissolution, if the Business Registration Office does not receive the application for dissolution from the enterprise and receives no written objections from relevant parties, it shall change the enterprise’s legal status on the National Enterprise Registration Database into “dissolved”, send information about the enterprise’s dissolution to the tax authority, and issue a notification of enterprise’s dissolution within 03 working days from the abovementioned deadline.

3.2. Dissolution of enterprise upon revocation of its enterprise registration certificate or under a Court’s decision PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Step 2: Announcement of business status

Business Registration Office shall post the decision and notify the enterprise’s “undergoing dissolution” status on the National Business Registration Portal, change the enterprise’s legal status on the National Enterprise Registration Database into “undergoing dissolution”, and send information about enterprise dissolution to the tax authority, except the enterprise whose enterprise registration certificate is revoked to serve the implementation of coercive measures at the request of tax authorities.

Step 3: Decision to terminate operation

Within 10 days from the receipt of the effective decision, the enterprise shall convene a meeting to dissolve the enterprise. The dissolution resolution or decision and copies of the effective decision shall be sent to the business registration authority, tax authority and the enterprise’s employees and displayed at the enterprise’s headquarters, branches and representative offices.

Step 4: Settle debts

The payment of debts is similar to the termination of business specified at Points a, b and c, Clause 1, Article 207 of the Law on Enterprises 2020 (Section a).

At the same time, enclose the resolution, decision to terminate the operation of the enterprise, and the debt settlement plan to the creditors, people with related interests and obligations.

Step 5: Requests the termination of activities

Within 05 working days from the day on which the enterprise’s debts are fully paid, the enterprise’s legal representative shall submit an application for dissolution to the Business Registration Office of the province where it is headquartered.

A dossier terminated business is similar to termination of business stipulated in points a, b and c, Clause 1 of Article 207 of the Enterprise Act 2020 (Section a) PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES

Step 6: Update business status

After 180 days from the day on which the enterprise’s “undergoing dissolution” status is posted on the National Business Registration Portal, if the Business Registration Office does not receive the application for dissolution from the enterprise and receives no written objections from relevant parties, it shall change the enterprise’s legal status on the National Enterprise Registration Database into “dissolved”, send information about the enterprise’s dissolution to the tax authority, and issue a notification of enterprise’s dissolution within 03 working days from the abovementioned deadline.

         An enterprise’s Certificate of Enterprise Registration shall be revoked in the following cases:

  • The enterprise registration application contains fraudulent information;
  • The enterprise is established by persons banned from establishing enterprises;
  • The enterprise is suspended for 01 year without notifying the business registration authority and the tax authority;
  • The enterprise fails to send reports to the business registration authority within 06 months from the deadline or from the receipt of a written request; PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES
  • Other cases under decision of the court or request of competent authorities as prescribed by law.

4. Actions prohibited from the issuance date of the dissolution decision

  • 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; PROVISIONS ON TERMINATION ON BUSINESS ACTIVITIES
  • Raising capital in any shape or form.

5. Obligations related to the termination of operation of enterprise

  • Before submitting the application for dissolution, the enterprise must complete procedures for shutdown of its branches/representative offices/business locations with the Business Registration Office of provinces where the branch/representative office/business location is situated.
  • If an enterprise uses a seal issued by a police authority, the seal and the certificate of seal registration shall be returned to the police authority when following dissolution procedures.
  • 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 persons specified in Clause 2 of this Article 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.