Order and procedures for dissolution of the enterprise according to the law

If an enterprise expires at the end of the operating period stated in the company charter and does not renew its operations, if not dissolved, how will it be handled?

1. What are the conditions for an enterprise to be dissolved?

According to the provisions of Clause 2, Article 207 of the Law on Enterprises 2020, the conditions for dissolution of an enterprise are:

An enterprise may only be dissolved when it ensures payment of all debts and other property obligations and is not in the process of resolving disputes at Court or Arbitration. The relevant manager and the enterprise specified in Point d, Clause 1 of this Article are jointly responsible for the debts of the enterprise.

2. In what cases is an enterprise dissolved?

According to Clause 1, Article 207 of the Law on Enterprises 2020, an enterprise is dissolved in the following cases:

“Article 207. Cases and conditions for dissolution of an enterprise

1. An enterprise is dissolved in the following cases here:

a) End of the operating term stated in the company charter without a decision to extend;

b) According to the resolutions and decisions of the business owner for private enterprises, of the Board of Members for partnerships, of the Board of Members and company owner for limited liability companies, and of the General Meeting of Shareholders for joint stock companies part;

c) The company no longer has the minimum number of members as prescribed by this Law for a period of 06 consecutive months without carrying out procedures for converting the type of business;

d) The Certificate of Enterprise Registration is revoked, unless otherwise prescribed by the Law on Tax Administration.”

3. Order and procedures for dissolution of enterprises?

According to Article 208 of the Law on Enterprises 2020, the order and procedures for dissolution of enterprises are prescribed as follows:

“Article 208. Order and procedures for dissolution of enterprises

Dissolution of enterprises in the cases specified in Points a, b and c, Clause 1 of Article 207 of this Law is implemented according to the following provisions:

1. Pass resolutions and decisions to dissolve the enterprise. The resolution and decision to dissolve the enterprise must include the following main contents:

a) Name and address of the enterprise’s head office;

b) Reason for dissolution;

c) Time limit and procedures for liquidating contracts and paying debts of the enterprise;

d) Plan for handling obligations cases arising from labor contracts;

đ) Full name, signature of private enterprise owner, company owner, Chairman of the Board of Members, Chairman of the Board of Directors;

2. The owner of a private enterprise, the Board of Members or the company owner, the Board of Directors directly organizes the liquidation of enterprise assets, except in cases where the company charter stipulates the establishment of a separate liquidation organization;

3. Within 07 working days from the date of approval, the resolution, dissolution decision and meeting minutes must be sent to the business registration authority, tax agency, and employees in the enterprise. Resolutions and decisions on dissolution must be posted on the National Business Registration Portal and publicly posted at the head office, branches, and representative offices of the enterprise.

In case the enterprise has unpaid financial obligations, it must attach the resolution, dissolution decision and debt settlement plan to creditors, people with related rights, obligations and interests. The debt settlement plan must include the name and address of the creditor; debt amount, term, location and method of payment of that debt; Methods and deadlines for resolving creditors’ complaints;

4. The business registration authority must notify the status of the enterprise undergoing dissolution procedures on the National Business Registration Portal immediately after receiving the resolution or decision on dissolution of the enterprise. Along with the notice, the resolution, dissolution decision and debt settlement plan (if any) must be posted;

5. The enterprise’s debts are paid in the following order of priority:

a) Salary debts, severance pay, social insurance, health insurance, unemployment insurance as prescribed by law and other benefits of employees according to the collective labor agreement and signed labor contract;

b) Debts taxes;

c) Other debts;

6. After paying the costs of dissolution of the enterprise and debts, the remaining amount is divided to the private enterprise owner, members, shareholders or company owners according to the ratio of ownership of contributed capital and shares;

7. The legal representative of the enterprise sends the enterprise dissolution documents to the Business Registration Authority within 05 working days from the date of payment of all debts of the enterprise;

8. After 180 days from the date of receipt of the resolution or decision on dissolution as prescribed in Clause 3 of this Article, without receiving comments on the dissolution from the enterprise or written objections from relevant parties or within 05 working days from the date of receipt of the dissolution dossier, the Business Registration Authority updates the legal status of the enterprise on the National Business Registration Database;

9. The Government regulates in detail the order and procedures for dissolution of enterprises.”

3. How are violations of enterprise dissolution handled?

According to Article 58 of Decree 122/2021/ND-CP regulating violations of enterprise dissolution, specifically:

“Article 58. Violations of enterprise dissolution

1. Fine from 20,000,000 VND to 30,000,000 VND for one of the following acts:

a) Failure to carry out dissolution procedures at the end of the operating term stated in the company’s charter without a decision to extend;

b) Failure to carry out dissolution procedures when the company no longer has the minimum number of members as prescribed for a period of 06 consecutive months without carrying out procedures for converting the business type;

c) Failure to carry out procedures for terminating operations of branches, representative offices, or business locations before submitting the enterprise dissolution registration application.

2. Remedial measures:

a) Forced implementation of enterprise dissolution procedures for violations specified in Points a and b, Clause 1 of this Article;

b) Forced implementation of procedures to terminate operations of branches, representative offices, and business locations for violations specified in Point c, Clause 1 of this Article.”

Thus, at the end of the 20-year operating period stated in the charter but without a decision to renew, your enterprise will be dissolved according to Point a, Clause 1, Article 207 of the Law on Enterprises 2020. If not dissolved, you will be fined from 20,000,000 VND to 30,000,000 VND and take remedial measures as prescribed in the above article.