Procedure for Dissolution and Bankruptcy of Enterprises in Vietnam

Dissolution and Bankruptcy of Enterprises is not something any business desires. However, when business operations are no longer effective and the enterprise faces financial difficulties, dissolution and bankruptcy become inevitable. The procedures for dissolution and bankruptcy are complex. The following article from LHB Law Firm provides an overview of the procedures for dissolution and bankruptcy of enterprises in Vietnam. For clients in need of corporate lawyer services, please contact LHB Law Firm at Hotline: +84.969.088.118 (Zalo).

What is Business Dissolution and Bankruptcy?

Business dissolution is the process of ending a business’s operations and legal status by the decision of the business owner or by the decision of a competent state authority.

Bankruptcy is a legal status in which a business or company is declared unable to pay its outstanding debts and cannot continue its business operations. This process often leads to the liquidation of the company’s assets to repay creditors in a certain order of priority.

Conditions for Business Dissolution and Bankruptcy

When Can a Business Be Dissolved?

• A business can be voluntarily dissolved when the term of operation specified in the Charter ends and there is no decision to extend the operating period.
• A business can be dissolved by the decision of the sole proprietor, the members’ council (for a multi-member LLC), the owner (for a single-member LLC), or the shareholders’ meeting (for a joint-stock company).
• A business may be dissolved if it no longer has the minimum number of members as required and fails to change its business type within six consecutive months.
• A business may be dissolved if its Business Registration Certificate is revoked or if the court declares its dissolution due to legal violations.

Conditions for a Business to Be Declared Bankrupt

• The conditions for a business to be declared bankrupt in Vietnam are regulated by the Bankruptcy Law of 2014.
• A business is considered insolvent when it fails to meet its debt obligations within three months from the due date of payment.

Lawyer for Business Dissolution and Bankruptcy: Hotline +84.969.088.118 (Zalo).

Cases of Business Dissolution and Bankruptcy

Cases of Business Dissolution

Voluntary Dissolution:

• Voluntary Decision: This occurs when the business owner decides to dissolve the business for various reasons, such as prolonged losses, low profits, internal conflicts, or other factors. The decision to dissolve can be made by the owner of a sole proprietorship, a general partner in a partnership, the members’ council or owner in a limited liability company, or the shareholders’ meeting in a joint-stock company.
• Expiration of Operation Term: If the company’s charter specifies an operational term and it expires without the members wishing to extend it, the company must proceed with dissolution. The operational term may be stipulated by agreement among founders or authorized by the relevant state authority as per legal regulations.

Mandatory Dissolution:

• Insufficient Members: If the company fails to maintain the minimum number of members required for its existence and does not recruit additional members within six continuous months, or if it does not convert to a suitable business type, it must undergo dissolution procedures.
• Revocation of Business Registration Certificate: If the company’s Business Registration Certificate is revoked, it must convene a meeting to decide on dissolution within 10 days from receiving the revocation decision or the effective court ruling.

Cases of Business Bankruptcy

Insolvency:

• Inability to Pay Debts: The company is declared bankrupt if it cannot pay its debts when required by creditors.

Request for Bankruptcy Proceedings:

• Filing for Bankruptcy: The company or its creditors (including employees) can file a request with the court to initiate bankruptcy proceedings.

Procedure for Bankruptcy of Enterprises in Vietnam

Business Dissolution Procedure:

• Decision to Dissolve: The members’ council or company owner must convene a meeting and pass a resolution to dissolve the company.
•  Notification: Within 7 working days from the date of the dissolution decision, the business must notify the business registration authority and the tax authority. The dissolution decision must be publicly announced on the national business registration portal
• Asset Liquidation and Debt Settlement: The company must liquidate its assets and settle its debts in accordance with legal priorities. This includes paying wages, social insurance contributions, and other debts.
• Tax Closure: After completing asset liquidation and debt settlement, the business must file for tax code closure with the tax authority.
• Dissolution Filing: After completing all the above steps, the company must submit the dissolution application to the business registration authority.

Procedure for Business Bankruptcy:

• Filing a Petition for Bankruptcy Proceedings: The petition can be filed by the business owner, a creditor, or an employee. The petition must be submitted to the competent People’s Court.
• Court Review and Decision: Upon receiving the petition, the court will review it and issue a decision to open bankruptcy proceedings if the conditions are met. The court will notify the business, creditors, and relevant state management agencies of this decision.
• Announcement of Bankruptcy Proceedings: The decision to open bankruptcy proceedings must be publicly announced through mass media and on the court’s electronic portal.
• Appointment of a Bankruptcy Administrator: The court appoints a bankruptcy administrator or an organization to manage and liquidate the company’s assets. The administrator will conduct an inventory and valuation of the company’s assets.
• Asset Distribution Plan: The bankruptcy administrator prepares a plan for the distribution of assets after inventory and valuation. This plan must be approved by the court.
• Settlement of Debts: The company’s assets will be used to pay off debts in order of priority. After settling the debts, any remaining assets (if any) will be distributed to the shareholders.

Completion of Bankruptcy Proceedings: After completing the above steps, the court will issue a decision to conclude the bankruptcy proceedings, and the business will be officially removed from the business registration list

Lawyer Support for Business Liquidation and Bankruptcy Procedures in Vietnam

Liquidation and bankruptcy are two important legal processes for businesses, requiring extensive knowledge of the laws and administrative procedures in Vietnam. Below are the services that LHB Law Firm provides for business liquidation and bankruptcy in Vietnam:

Lawyer Services for Business Liquidation

• Legal Consultation: Advise on legal regulations related to business liquidation.
• Assessment: Evaluate the legal and financial status of the business to determine the appropriate form of liquidation.
• Document Preparation: Guide and prepare the necessary documents for business liquidation, including the owner’s decision to liquidate, minutes of the shareholders’ or members’ meeting, and other related documents.
• Submission: Represent and submit the liquidation application at the business registration authority.
• Public Notice: Announce the liquidation on public media and tax authorities.
• Debt Settlement: Handle procedures related to settling debts, liquidating assets, and addressing employee rights.
• Finalization: Complete procedures to return the company seal and business registration certificate to the registration authority.
• Closure Decision: Obtain the decision on the cessation of business activities from the competent authority.

Lawyer Services for Business Bankruptcy

• Legal Consultation: Advise on legal regulations related to business bankruptcy.
• Financial Assessment: Assess the financial condition and payment capability of the business.
• Preparation of Bankruptcy Filing: Guide and prepare the application for opening bankruptcy proceedings.
• Document Drafting: Draft the bankruptcy petition, financial reports, creditor lists, and other related documents.
• Submission: File the bankruptcy petition with the competent court.
• Court Representation: Represent in court hearings related to the bankruptcy process.
• Debt Verification and Asset Liquidation: Perform procedures related to verifying debts, liquidating assets, and distributing assets to creditors.
• Court Orders: Implement court decisions regarding business bankruptcy.
• Finalization: Complete the necessary procedures for the business to be declared bankrupt and cease operations.

Contact a corporate lawyer: Hotline +84.969.088.118 (Zalo).

Benefits of Using Legal Services

• Lawyers possess deep expertise and practical experience in handling matters related to the dissolution and bankruptcy of businesses.
• Lawyers help alleviate the time and effort burdens on the business during the complex process of completing these procedures.
• Lawyers ensure that all procedures are carried out in accordance with legal regulations, minimizing legal risks for the business.

Legal Fees for Business Lawyers in Vietnam

The fees for business lawyers depend on several factors. Here is a breakdown of the specific types of fees:

• Type of Legal Service: Different services, such as business formation consultation, dispute resolution, or contract drafting, will have varying fees.
• Scope of Work: The volume and complexity of the work significantly impact the fee. Complex cases that require extensive effort and time will incur higher fees.
• Timeframe: Work that needs to be completed in a shorter timeframe typically has a higher fee.
• Legal Nature of the Issue: The severity and legal implications of the issue also influence the fee. Matters with higher legal risks or involving multiple parties generally require higher fees.
• Contract Duration: Long-term legal service contracts may allow for negotiated preferential rates compared to short-term contracts.
• Special Requirements: If the business needs legal advice in a foreign language or requires the involvement of top experts, the fees may increase.

Contact LHB Law Firm to get advice on the fees for corporate lawyer services: Hotline +84.969.088.118 (Zalo).

Best regards!