What is corporate dissolution?
Dissolution of a company is a procedure to create a legal basis for the termination of a company. Compared with bankruptcy, the dissolution procedures of the company are conducted much simpler and faster.
When is the company dissolved?
According to the Law on Enterprises, there are 04 cases where an enterprise is dissolved, including:
- The term of operation as stated in the company's charter expires without the decision to extend;
- According to the decision of the owner of the enterprise, for a private enterprise, of all general partners, for a partnership, of the Members' Council, of the company owner, for a limited liability company, or of the General Shareholders' Council, for joint stock companies;
- The company no longer has the minimum number of members as provided for by this Law for a period of 06 consecutive months without going through the procedures for converting the type of enterprise;
- Certificate of business registration revoked.
An enterprise may be dissolved only when it ensures the payment of all debts and other property obligations and the enterprise is not in the process of settling disputes at a court or arbitration body. If the company cannot pay the debt, the company cannot be dissolved but must go through bankruptcy proceedings.
Problems to be addressed to initiate the dissolution process
Termination of the enterprise's branches, representative offices, and business locations
Before carrying out the procedures for registration of dissolution of an enterprise, an enterprise must carry out procedures to terminate the operation of its branches, representative offices and business locations at the Business Registration Office where the branch is located. Representative offices, business locations.
Through the decision to dissolve the enterprise
To be able to conduct the dissolution of an enterprise, first of all, the enterprise needs to hold a meeting to pass the dissolution decision. Accordingly, the dissolution must be approved by the owner for a one-member limited liability company, by the Members' Council for a limited liability company with two or more members, by the General Meeting of Shareholders. shareholders with respect to joint stock companies and by partners for partnerships.
This decision shows the unanimity of members on issues related to the reasons for dissolution; deadline and procedures for contract liquidation and debt payment; plan to handle obligations arising from labor contracts and the establishment of a liquidation team.
The decision to dissolve an enterprise must contain the following main contents:
- Name and address of the head office of the enterprise;
- The reason for dissolution;
- Term and procedures for liquidation of contracts and payment of debts of the enterprise; time limit for debt payment and contract liquidation must not exceed 06 months from the date of approval of the dissolution decision;
- Plan for handling obligations arising from labor contracts;
- Full name and signature of the legal representative of the enterprise
Public announcement of dissolution decision
After the dissolution decision is passed, the enterprise must notify the persons with rights and interests related to the dissolution of the enterprise of the dissolution decision. In case the enterprise has unpaid financial obligations, the debt settlement plan must be sent together with the dissolution decision to the creditors and persons with related interests and obligations. The notice must contain the name and address of the creditor; debt amount, deadline, location and method of payment of such debt; method and deadline to settle creditors' complaints.
Liquidate assets and pay all debts of the company
The Enterprise Law provides for the organizers of asset liquidation and the order of debt payment. Accordingly, the owner of a private enterprise, the Members' Council or company owner, the Board of Directors shall directly organize the liquidation of the enterprise's assets, unless the company's charter provides for the establishment of a liquidation organization. private.
The enterprise's debts are paid in the following order:
- Salary debts, severance pay, social insurance in accordance with law and other benefits of the employee under the collective labor agreement and signed labor contract;
- Tax debt;
- Other liabilities.
- After all debts and dissolution expenses have been paid, the rest belongs to the private enterprise owners, members, shareholders or owners of the company.
According to the Enterprise Law, the term of contract liquidation must not exceed 06 months from the date of approval of the dissolution decision. This period is only suitable for small-sized businesses, without complicated transaction relationships, and highly liquid assets. For businesses with large scale or many assets, which need a long time to liquidate and pay debts, this time may not be enough to settle all contracts and pay debts.
Responsibilities of the business owner and legal representative for the dissolution
Responsibility to fulfill financial obligations to the State is as follows:
- Owner of a private business, company owner or company council; The Board of Directors or the liquidation organization of the enterprise, the relevant manager in case the company's charter provides that the company shall fulfill the financial obligations to the State to pay tax of the enterprise before submitting the request for settlement. can be for the business registration office;
Responsibility to fulfill tax obligations in case the taxpayer terminates operations do not carry out dissolution proceduresbankruptcy in accordance with the law
- If the enterprise terminates its operation without following the dissolution or bankruptcy procedures and has not fulfilled the tax obligation, the owner of the private enterprise; company member council or company owner; administrative Council; governance of the cooperative; or the relevant manager if the company charter states that it is responsible for paying tax debt;
Responsibility for the truthfulness of information in the dissolution dossier is submitted to the governing body
- Member of the Board of Directors of a joint stock company, member of the Members' Council of a limited liability company, company owner, owner of a private enterprise, director or general director, general partner, representative Under the law of the enterprise is responsible for the truthfulness and accuracy of the dissolution dossier of the enterprise.
- In case the dissolution dossier is inaccurate or forged, the persons specified in Clause 2 of this Article must be jointly responsible for the payment of the unpaid debts, unpaid tax amounts and the interests of the employee not yet resolved. decide and take personal responsibility before law for consequences arising within 05 years from the date of submission of the application for dissolution of the enterprise to the business registration agency.