Dissolution of Foreign-Invested Company: Conditions & Procedures

Dissolution of Foreign-Invested Company: 

Conditions & Procedures

 

In the course of operations, some foreign-invested companies, after a prolonged period, may decide to cease their business activities. In such cases, they are required to carry out dissolution procedures, or they may face administrative penalties. So, what are the essential points to know about dissolving a foreign-invested company? Find out in the article below.

 

What is the dissolution of a foreign-invested company?

The dissolution of a foreign-invested company is the process by which the company, either voluntarily or through a decision by a competent authority, terminates its operations and existence. This process also results in the termination of its legal status, along with all related rights and obligations.

Dissolution of Foreign-Invested Company

 

Conditions for the dissolution of a foreign-invested company & When is it required?
The circumstances and conditions for the dissolution of a company are stipulated in Article 207 of the Law on Enterprises 2020:

• When the operational period stated in the company’s charter has expired, and there is no decision to extend the period.
• As outlined in the dissolution content of a resolution or decision made by:
• The business owner (for private enterprises),
• The Members’ Council (for partnerships),
• The Members’ Council or company owner (for limited liability companies),
• The General Meeting of Shareholders (for joint-stock companies).
• When the company no longer meets the minimum required number of members for six consecutive months without completing the procedure to convert to another form of enterprise.
• Upon revocation of the Enterprise Registration Certificate, except as otherwise provided by the Law on Tax Administration.

Procedures for dissolving a foreign-invested company
Step 1: Passing a resolution or decision on the dissolution

The company initiating dissolution must adopt a resolution or decision to dissolve the enterprise, which must include the following details:

• The name and address of the company’s headquarters,
• The reason for the dissolution,
• The plan for settling obligations arising from labor contracts,
• The timeline and procedures for liquidating contracts and settling the company’s debts,
• The full name and signature of the owner of the private enterprise, the company owner, the Chairman of the Members’ Council, or the Chairman of the Board of Directors.

Step 2: Submitting the dissolution dossier

Required documents for submission:

• The dissolution resolution or decision,
• Meeting minutes,
• If there are any outstanding financial obligations, the dissolution resolution or decision, along with the debt settlement plan, must be submitted to creditors and parties with relevant rights and obligations. The debt settlement plan must include: the name and address of the creditor, the debt amount, the timeline, the location and method of payment, and the process and timeline for resolving creditor complaints.
• Estimated implementation time: Within 7 days from the date of passing the dissolution resolution or decision.
• Submission address: The business registration authority, tax authority, and the employees of the company.
• Additionally, the dissolution must be published on the National Business Registration Portal and publicly posted at the company’s headquarters, branches, and representative offices.

Step 3: Liquidating the company’s assets

The private enterprise, Members’ Council, or the company owner, or the Board of Directors shall directly organize the liquidation of the company’s assets, unless the company’s charter provides for the establishment of a separate liquidation organization.

Step 4: Closing the company’s tax code

• Required documents: The dissolution decision; meeting minutes; and a confirmation of the completion of tax obligations from the General Department of Customs (if engaged in import-export business), along with other relevant documents as stipulated in Circular 105/2020/TT-BTC.
• Submission address: The tax authority managing the area where the company operates.
• Processing time: A maximum of 6 months.
• During the tax settlement process, the company needs to carry out procedures for reducing its workforce and resolving related benefits for employees within the timeframe specified by the Labor Code.

Step 5: Returning the company seal

If the company obtained its seal from the police authority, it must complete the procedure for returning the seal to that authority.

Step 6: Submit the Business Registration Certificate and terminate the project

Thus, the total estimated time to complete the dissolution procedure for a foreign-invested company is approximately 180 days from the date the dissolution decision or resolution is submitted to the Department of Planning and Investment, provided there are no objections from any parties involved. Within 5 days after confirming that the company has completed all dissolution procedures, the business registration authority will update the legal status of the company in the National Business Registration Database.

If you have any questions related to the dissolution of foreign-invested companies, please contact Siglaw.  Siglaw are always ready to answer in detail!

Siglaw Law Firm

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