Establishment and dissolution are two common processes for a business. In some cases, dissolution is necessary. The dissolution process must achieve the goal of completely ending the existence of the business and terminating the responsibilities of the business owner or legal representative.
Below is an article providing detailed instructions on the process of dissolving 100% Vietnamese-owned enterprises and foreign-invested enterprises in Vietnam.
1. Understanding business dissolution
1.1. What is business dissolution?
Dissolution of a business can be basically understood as the process of cease to exist of an enterprise under the condition that the enterprise has the ability to pay or guarantee payment of its financial obligations.
Business dissolution is a type of thủ tục hành chính by the authorized person in the enterprise to work with the Business Registration Authority. The person carrying out the procedures is the enterprise.
How is the business dissolution procedure different from the bankruptcy procedure?: Bankruptcy is a type of judicial procedure decided by a competent Court after receiving a valid petition. After the Court accepts and issues a bankruptcy declaration. The implementation of procedures according to the judicial process with the participation of: People's Court, People's Procuracy, Administrator, asset management and liquidation enterprise.
Therefore, the key point to note is: A business can only proceed with dissolution procedures if it has the ability to pay or guarantee the payment of its financial obligations.
1.2. In what cases can a business be dissolved?
There are four possible ways to dissolve a business:
- End of term as stipulated in the company's charter without a decision to extend it;
- According to the resolutions and decisions of the business owner For private enterprises, by the Board of Members for partnerships, by the Board of Members or company owner for limited liability companies, and by the General Meeting of Shareholders for joint-stock companies;
- the Company The minimum number of members is no longer required. according to the provisions of the Enterprise Law (For example, a joint stock company with less than 3 shareholders...) for a period of 06 consecutive months without completing procedures to convert the type of enterprise;
- Business Registration Certificate Revoked, except where otherwise provided by the Law on Tax Administration.
1.3. Who has the right to file an application for the dissolution of a business?
Those entitled to file an application for business dissolution include:
- Business owner in relation to a private enterprise.
- General meeting of shareholders for a joint-stock company.
- Board of members, company owner in the case of a limited liability company.
- All partners in a partnership company.
Based on the will of the business owner, the Board of Members, or the General Meeting of Shareholders, the dissolution of a business is divided into two basic types: voluntary dissolution and compulsory dissolution.
+ Voluntary dissolution:
The termination of business operations at the will of the business owner, proprietor, board of members, or general shareholders' meeting includes:
- Dissolution occurs upon the expiration of the operating period stated in the company's charter without a decision to extend it.
- Dissolution is granted by decision of the business owner, proprietor, board of members, or general shareholders' meeting of the business.
+ Mandatory dissolution:
Termination of business operations is the termination of a business's activities at the will of a competent state authority when there is a violation of business law regulations during the establishment and operation of the business, including:
- A business is dissolved when it no longer has the minimum number of members required by the business law for a continuous period of 06 months without undergoing the procedure to change its business type.
- Dissolution occurs when the business registration certificate is revoked.
2. Procedures for dissolving a business
6 steps The process of dissolving an enterprise (except in cases where the Certificate of Business Registration is revoked) is carried out as follows:
Step 1: Decide to dissolve
Hold an internal meeting and approve minutes (for companies with more than one member) or an intention (for single-member limited liability companies or sole proprietorships) regarding the decision to dissolve the business.
Step 2: Prepare a plan for liquidating rights and obligations.
Conduct a review of assets, liabilities, inventory, etc., up to the time of dissolution and prepare a liquidation plan, such as:
- Paying accounts payable to suppliers and partners (accounts receivable/payable).
- Paying wages, bonuses, social insurance, health insurance, unemployment insurance, and other benefits to employees.
- Pay off short-term, medium-term, and long-term loans.
- Pay all outstanding taxes (value-added tax, corporate income tax, personal income tax, etc.).
- Ensure the completion of any property lease or financial lease agreements (if applicable).
- Sell or transfer assets such as real estate, machinery, equipment, and inventory to recover capital.
- Handling accounts receivable (collecting debts from customers and partners).
Right to use and issue invoices: At this time, the company can still issue invoices because the dissolution decision has not been publicly announced, therefore its tax identification number has not yet changed to the dissolved status.
Therefore, businesses should anticipate the liquidation of assets and goods that require invoicing and proceed with invoicing before publicly announcing their dissolution decision.
Step 3: Publicize the dissolution decision.
- Publicly announce the decision to dissolve the business.
- Submit the dissolution decision to the provincial business registration authority within 07 working days from the date of approval.
- Within 03 working days of receiving the dissolution decision, the provincial business registration authority shall notify the tax authority and the civil enforcement agency. At this time, the tax identification number will change to the following status: The taxpayer has ceased operations but has not yet completed the procedures for terminating the validity of their tax identification number.
Note: Before filing for business dissolution, the enterprise must complete the procedure for terminating the operations of its branches, representative offices, and business locations at the provincial business registration authority where the branches, representative offices, and business locations are situated.
Issue an invoice: At this time, businesses can no longer use invoices. However, if during the liquidation process there are still assets or goods that require invoices, they can apply for the procedure to issue individual invoices for use.
Prohibited activities since the enterprise has a decision to dissolve
From the date of the decision to dissolve the business, the business and its managers are strictly prohibited from carrying out the following activities:
- Concealment and disposal of assets;
- Waive or reduce the right to claim debt;
- Convert unsecured debts into secured debts using the assets of the enterprise;
- Signing new contracts, except for cases of business dissolution;
- Pledge, mortgage, donate, lease assets;
- Terminate the performance of the contract that has come into effect;
- Raising capital through all means.
Depending on the nature and severity of the violation, individuals who violate the above regulations may be subject to administrative penalties or criminal prosecution; if damage is caused, they must provide compensation.
The details of the dissolution registration dossier submitted to the Department of Finance (formerly the Department of Planning and Investment) include:
- Minutes of the meeting regarding the dissolution of the shareholders' council (for joint-stock companies) or the members' council (for limited liability companies with two or more members).
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Decision of the owner or the Board of Members/Board of Directors regarding dissolution.
- Power of attorney to carry out dissolution procedures (if applicable).
Step 4: Submit tax reports up to the time of dissolution and prepare the final financial statements.
- The company proceeds to settle its debts and distribute the remaining assets according to regulations.
- The deadline for filing tax returns in cases of business cessation, contract termination, or business reorganization is no later than... 45rd day from the date the dissolution decision is publicly announced (Date Step 3 is approved).
- The deadline for submitting the financial statements along with the corporate income tax return is therefore no later than... 45rd day from the date the dissolution decision is publicly announced (Date Step 3 is approved).
Step 5: Settling tax and social insurance obligations
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Provide documentation when the tax authorities conduct a tax audit and explain the tax audit to the tax authorities.
- Request a tax refund if you are eligible for one, in case you need a refund for any overpaid VAT.
- Explain and resolve any outstanding issues with Customs (if any). It's important to note that while the tax authority will be responsible for cross-checking with Customs, the business is obligated to provide explanations if necessary; the business will not directly cross-check with Customs.
- Addressing outstanding issues regarding social insurance obligations.
The details of the documents to be submitted to the tax authorities include:
- This document requests the termination of the tax identification number.
- Confirmation of no outstanding customs tax (Currently, this is not required as the tax authorities will handle it; businesses only need to provide explanations if there are any outstanding tax debts).
- Authorization letter for tax procedures (if applicable).
>> Download for free: Form No. 24_DK_TCT Request for termination of tax identification number
Step 6: Return the Enterprise Registration Certificate (ERC), the Investment Registration Certificate (IRC, if applicable), and complete the dissolution process.
If Steps 4 and 5 are successfully completed, the business is eligible to proceed to this final step, which includes:
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Return the seal to the issuing authority (if the seal was issued by the Police).
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Publish a notice confirming the completion of the dissolution.
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Submit the dissolution documents and complete the procedure for returning the Business Registration Certificate.
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Receive "Notification of business dissolution/termination of existence" of the Department of Planning and Investment, now the Department of Finance.
Important note: Bank account The amount of money the business needs to pay to cover remaining costs during the dissolution process should be closed at the beginning of this phase.
Details of the second completed dissolution dossier submitted to the Department of Finance (formerly the Department of Planning and Investment) include:
- Notice of business dissolution;
- Report on the liquidation of company assets;
- List of creditors and the amount of debt paid;
- Confirmation of fulfillment of tax obligations or equivalent documentation;
- Confirmation of fulfillment of social insurance obligations or equivalent document;
- Business registration certificate (original copy, to be submitted upon completion of the procedure)
- Confirmation of returning the seal to the police (if applicable);
- Authorization letter for processing the application (if applicable).
In the case of dissolution documents inaccurate, counterfeitThe following individuals are jointly liable: members of the board of directors of a joint-stock company, members of the board of members of a limited liability company, company owners, owners of private enterprises, directors or general directors, partners, and legal representatives of enterprises. They shall be jointly liable for the payment of outstanding employee benefits, unpaid taxes, and other unpaid debts, and shall be held personally liable before the law for any consequences arising within a specified period. 05 years from the date the business dissolution application is submitted to the Business Registration Authority.
3. Procedures for dissolving a foreign-invested enterprise.
The procedure for dissolving a foreign-invested enterprise is similar to that of a Vietnamese enterprise in the process of terminating the validity of the Enterprise Registration Certificate (ERC) as stated in point 2 above.
In particular, the procedure for dissolving a foreign-invested enterprise may generate two other contents related to the investment project or Investment Registration Certificate (IRC) as follows:
- Procedure terminate investment project, Termination of validity of investment registration certificate (IRC) For foreign-invested enterprises with an Investment Registration Certificate.
- Procedure for transferring money profit if any, investment The remaining balance is paid after fulfilling all obligations to return to the country, through the bank where the investment/capital account is opened.
- CLOSE investment capital account (DICA).