LEGAL PROCEDURES FOR COMPANY DISSOLUTION AFTER SETTING UP A BUSINESS IN VIETNAM

Setting up a business in Vietnam presents significant opportunities for investors, but there may come a time when a company needs to dissolve for various reasons. Whether due to an expiration of the company’s operating period, a voluntary decision, or other regulatory issues, dissolving a business in Vietnam requires following a structured and lawful process. The procedures for company dissolution are clearly outlined in Vietnam’s Law on Enterprises 2020 to ensure a smooth and legal closure of business operations.

How to dissolve a company in Vietnam after setting up a business in Vietnam

Dissolving a company in Vietnam is a formal process regulated by the Law on Enterprises 2020. There are specific conditions under which a company can voluntarily dissolve, and following the legal procedures ensures a lawful conclusion to business activities in the country.

When to voluntarily dissolve a company in Vietnam

The voluntary dissolution of a company after setting up a business in Vietnam is governed by Article 207 of the Law on Enterprises 2020. To legally initiate the process, certain conditions must be met. These conditions help ensure that the dissolution is conducted in an orderly manner and without legal complications. Some of the main conditions include:

Expiration of operating period

When a company’s operating period, as stated in its charter, expires, and there is no decision to extend it, the business must be dissolved. For instance, if you've engaged in setting up a small business in Vietnam and the designated operating period ends without an extension, you will need to dissolve the company.

Businesses must notify authorities and settle all debts

Resolution or decision by ownership authorities

Depending on the type of business entity, the dissolution process can be initiated by a resolution or decision of the relevant ownership authorities. This varies by business structure:

Sole proprietorships: By the owner.
Partnerships: By the Board of Partners.
Limited liability companies: By the Board of Members and the owner.
Joint-stock companies: By the General Meeting of Shareholders (GMS).

Failure to maintain an adequate number of members

A company after setting up a business in Vietnam that fails to maintain the minimum number of members, as required by law, for six consecutive months, must dissolve unless it changes its business structure.

Revocation of Enterprise registration certificate

A company may be forced to dissolve if its Certificate of Enterprise Registration is revoked due to violations of tax-related regulations, as outlined in the Law on Tax Administration.

Other conditions

Before dissolving, a company must settle all debts and liabilities, and there should be no ongoing disputes in court or arbitration. In cases where the Certificate of Enterprise Registration is revoked, company executives share joint responsibility for resolving outstanding debts.

Step-by-step process for voluntary company dissolution

As setting up a business in Vietnam, the dissolution process in Vietnam follows a series of legal steps, ensuring that the company’s closure is handled responsibly and according to the law.

Step 1: Company approval of dissolution decision

The first step is for the company to approve a dissolution resolution or decision. This document must contain the following details:

Company’s name and headquarters address.
Reason for dissolution.
Time limit and procedures for settling contracts and paying debts (this period should not exceed six months).
A plan for addressing employment contract obligations.
The full name and signature of the private company owner, the Chairman of the Board of Members, or the Chairman of the Board of Directors.

Step 2: Submission of dissolution documents to competent state agencies

Within seven working days of approving the dissolution decision, the company must submit the resolution and meeting minutes to:

Business registration authority.
Tax authority.
Company’s employees.

Additionally, the resolution or decision must be posted on the National Company Registration Portal and displayed at the company’s headquarters, branches, and representative offices. If there are unpaid debts, the company must notify creditors and provide a debt payment plan.

Legal procedures for company dissolution in Vietnam require several steps

Step 3: Implementation of asset liquidation

The company’s assets must be liquidated according to its charter or by an established liquidation team. For companies involved in setting up a manufacturing business in Vietnam, asset liquidation may include equipment, machinery, and real estate holdings.

Step 4: Procedure to close the company tax code

The company must close its tax code, which typically takes six months or longer, depending on its accounting practices. During this time, the company must reduce its workforce and ensure all employee rights and benefits are settled according to the Labor Code.

Step 5: Return of the company seal (Round sign)

The company must return its seal, which was issued by the police department. The procedures for returning the seal involve contacting the relevant police department to complete the return process.

Step 6: Submission of Business Registration Certificate and Termination of projects

Within five working days of paying all outstanding debts, the company’s legal representative must apply for dissolution with the business registration authority. This step includes terminating any investment projects if the company holds an investment registration certificate.

Key considerations for liquidating a company

Dissolving a company in Vietnam requires careful attention to detail, and certain aspects of the liquidation process must be handled with precision to avoid legal issues.

Required documentation for company liquidation

According to Article 210 of the Law on Enterprises 2020, the application for the dissolution of a company must include several key documents. These documents serve as proof of the company’s intent to cease operations and must be submitted accurately and in full.

The required documentation includes:

Formal notification of enterprise dissolution: This is the official notification stating the company’s decision to dissolve.
Comprehensive report on asset liquidation: A detailed report of the company’s asset liquidation, including how assets were distributed or settled.
List of creditors and settled debts: A list of all creditors and proof that debts, including taxes, social insurance, and health insurance, have been settled.

The responsibility for the accuracy of the dissolution documents lies with the company’s leadership, such as:

For joint-stock companies: The Board of Directors.
For limited liability companies: The Board of Members.
For sole proprietorships: The owner.
For all business types: The Director, General Director, or legal representatives.

Expected timeline for completing company liquidation

Once the dissolution decision is submitted to the Department of Planning and Investment, there is a 180-day period for comments or objections from relevant parties. If no objections are raised, the business registration authority will update the company’s status on the national registration database within five working days of the comment period’s conclusion.

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Proper documentation is essential for a smooth process

Prohibited actions after the dissolution decision is issued in Vietnam

From the date the dissolution decision is issued, company executives and the company itself are prohibited from engaging in certain actions. Violating these prohibitions can result in administrative penalties, criminal prosecution, and financial liability for damages. These include:

Concealing or disguising assets.
Denying or reducing creditor claims.
Securing unsecured debts with company assets.
Entering new contracts (except for dissolution-related purposes).
Donating, leasing, or pledging assets.
Terminating effective contracts.
Raising capital or attempting to secure additional capital.

The dissolution of a company in Vietnam involves a series of legal steps and requires strict adherence to the Law on Enterprises 2020. Whether you’re managing the dissolution of a small business set up in Vietnam or a large foreign-owned company, following the correct procedures ensures a smooth process.

It's important for businesses, including those setting up a foreign business in Vietnam or setting up a manufacturing business in Vietnam, to understand the dissolution process fully and seek legal assistance when needed. Proper documentation, timely notifications, and transparency in the liquidation of assets are key to avoiding complications during company dissolution.

For those considering how to set up a business in Vietnam, understanding both the establishment and dissolution processes is essential for a comprehensive business plan. With G2B, you're not just choosing a consultancy to help setting up a business in Vietnam, you're choosing a partner who will stand by your side throughout your entrepreneurial journey. Contact G2B today to learn more about how we can help you with your business goal in Vietnam.