Procedures for closing the Company – Enterprise

Procedures for closing the Company – Enterprise

In their business activities, for a number of reasons such as market economy, epidemics, management and administration of business owners,… The business had to close as a result. So in the terminology of the legal profession, the closure of a company is carried out in a procedural manner, the process of dissolution of an enterprise according to the Enterprise Law. So what is the latest company and business closure procedure in 2024? Find out in the article below.

When does the business need to close/dissolve?

According to Article 207 of the Enterprise Law 2020, an enterprise will be closed or dissolved in the following cases:

• End the operation term as prescribed in the company’s charter without a decision on extension;
• According to resolutions and decisions of business owners for private enterprises, of the Members’ Council for partnerships, of the Members’ Council or owners for limited liability companies, of the General Meeting of Shareholders for joint-stock companies;
• The company fails to maintain the minimum number of members as prescribed by this Law for 06 consecutive months without carrying out procedures for changing the type of enterprise;
• The enterprise registration certificate shall be revoked, unless otherwise provided for in the Law on Tax Administration.

The enterprise may only be dissolved when it has fully paid its debts and other property obligations and there is no dispute being resolved at the Court or Arbitration. The manager and related enterprise as prescribed at Point d, Clause 1 of this Article are jointly responsible for the debts of the enterprise.

Process and procedures for closing a company or business

Procedures for closing the Company – Enterprise

The Enterprise Law 2020 in Article 208 stipulates that the process of closing and dissolving an enterprise is:

Step 1: Prepare documents for closure / dissolution of the enterprise or company

• Decision on dissolution of the enterprise
• Notification of the process of dissolution of the enterprise;
• A report on the process of liquidating the assets of the enterprise, accompanied by a list of creditors and the amount of paid debts. This list includes the full payment of tax debts and obligations for social insurance, health insurance, and unemployment insurance for employees after the enterprise decides to dissolve (if any).
• Minutes and decisions on asset liquidation
• List of employees
• Confirmation of bank account closure/ commitment not to open an account
• Confirmation of non-tax debt by the General Department of Customs
• Notice of tax code closure

NOTE:

• Members of the Board of Directors in joint-stock companies, members of the Members’ Council in limited liability companies, owners of companies, owners of private enterprises, directors or general directors, members of partnerships, and legal representatives are all responsible for the truthfulness and accuracy of dissolution dossiers of the business.
• In case the dissolution dossier is inaccurate or falsified, the above-mentioned members shall be jointly liable for the payment of unsettled benefits to employees, unpaid taxes and other unpaid debts, and shall be personally liable before law for consequences arising within a period of 05 years from the date submit a dossier for dissolution of the enterprise to the business registration authority.

Step 2: File the Notice of Business Dissolution

Duration: After issuing a decision to close or dissolve the enterprise, within 07 days, the enterprise must submit:

• Resolutions and decisions on dissolution and minutes of meetings on dissolution
• If the enterprise still has unpaid financial obligations, it must enclose the resolution, dissolution decision and debt settlement plan to creditors, persons with relevant rights, obligations and interests. The debt settlement plan must contain the name and address of the creditor; amount of debt, duration, place and method of payment of such debt; how and within the time limit for settling creditors’ complaints;

Place of submission:

• Business registration agency, or specifically the Business Registration Office under the Department of Planning and Investment (hereinafter collectively referred to as the Business Registration Office).
• Tax authorities;
• Employees in the enterprise

Step 3: Pay the outstanding debt

The payment obligations of the enterprise are processed in the order of priority below:

1. a) Payment of obligations related to salary, severance allowance, social insurance, health insurance, and unemployment insurance as prescribed by law, as well as other interests of employees as agreed upon in the signed labor contract and collective labor agreement;
2. b) Payment of tax obligations;
3. c/ Payment of other debt obligations.

Step 4: Submit the application to return the company seal to the competent authority

• Minutes of dissolution
• Decision to dissolve
• Stamp dispatch
• Notice of tax code closure
• Copy of the Certificate of Business Registration
• Notice of the Department of Planning and Investment on the return of the seal

Step 5: Submit documents for dissolution and closure of the business

Duration: 05 days from the date of settlement of all outstanding debts

Location: Business registration office (Business registration office of the Department of Planning and Investment where the office is located)

Note when closing or dissolving the company or enterprise

Circumstances in which the company is allowed or required to dissolve

These are all diverse, which can stem from violations of the law or voluntary decisions by business owners.

Business owners who experience losses are unable to pay their financial obligations when they are due or do not have sufficient demand to continue their business.

Other reasons include violating the law, imposing sanctions and suspending business operations, or doing business illegally. In this case, the enterprise may be subject to sanctions, suspension of business operations, and forced dissolution.

When dissolved, the enterprise needs to complete its tax obligations at the district tax office, and carry out procedures to lock the tax code before submitting the dissolution dossier at the business registration office at the head office.

Paying off debts is an important step in the dissolution process. Priority payment obligations include salary, severance pay, social insurance, and other employee benefits, followed by tax liabilities, and finally other liabilities.

The dissolution decision shall be made by the Court or business registration authority after confirming the validity of the dissolution dossier. Enterprises need to comply with regulations and prohibit all activities such as hiding assets, relinquishing debt collection rights, converting debts, entering into new contracts, pledging, mortgaging, gifting, leasing assets, terminating contracts, and raising capital in any form

Tax liability

Enterprises must fulfill all tax obligations at the District Tax Department and carry out procedures for paying the tax code before submitting the application for carrying out business dissolution procedures at the Business Registration Office at the head office of the company.

Payment of debts

Debt payment

To dissolve an enterprise, it is important to pay off debts and other property obligations in full. Therefore, in order to facilitate the process of dissolving the company quickly, enterprises need to make full payment of debts.

The debts of the enterprise are paid in order of priority as follows:

Obligations related to salary, severance allowance, social insurance, and other benefits of employees, as prescribed by law and in signed labor contracts;

Tax liabilities;

Other debt obligations.

Decision to dissolve

For the Business Registry, their jurisdiction does not include objection or consent to the dissolution decision of the business. Instead, they only considered the validity of the dissolution file;

If there is no complaint against the dissolution, a decision will be made to update the status of the dissolved enterprise through the National portal during the business registration process.

Note: When the dissolution decision is made, the enterprise is prohibited from some activities such as hiding assets, giving up or reducing the right to collect debts, converting unsecured debts into debts secured by assets of the enterprise, entering into new contracts unless related to dissolution, pledge, mortgage, donate, lease property, terminate effective contracts, and raise capital in any form.

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