When business operations encounter difficulties and/or when they no longer want to continue operating, many businesses are faced with the final decision, wondering whether to dissolve or go bankrupt?
These are two concepts that are easily confused but have completely different natures and consequences. Understanding the difference will help you make the right choice and protect your rights.
1. Common points between dissolution and bankruptcy
Whether it is dissolution or bankruptcy, the final result is the same. cease to existThe enterprise will have its seal and business registration certificate revoked and must fully perform all remaining financial obligations.
- Both lead to the termination of the existence of the business.
- All have their seals and business registration certificates revoked.
- All property obligations must be fulfilled.
2. The difference between dissolution and bankruptcy
Key Differences
This is the most important point to distinguish between these two procedures:
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Dissolution: When the business still able to pay debts and financial obligations, but for some reason (for example: no longer wanting to do business, closing to open a new business, expiration of operation period...) then will choose to dissolve. This is a procedure of a Voluntary, decided by the business itself.
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Bankrupt: When the business has inability to pay debts due, unable to continue operations, will have to face bankruptcy proceedings. This is a situation obligatory and decided by the Court after reviewing the records.
About the type of legal procedure
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Dissolution: Is one administrative procedures simple. The enterprise will conduct the work with the Business Registration Office itself, ensure the liquidation of assets, pay off debts and submit documents.
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Bankrupt: Is one judicial proceedings complicated. The entire process will be supervised and implemented by the People's Court, the People's Procuracy, the Administrator and relevant agencies. This is no longer a story of the enterprise alone but has the intervention of the law.
On legal consequences
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Dissolution: After dissolution, the business rights of the owners and managers unrestrictedThey are free to establish new businesses or engage in other business activities.
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Bankrupt: The court may Restricted Business Rights against owners or managers if they intentionally violate the Bankruptcy Law. This could affect their ability to conduct business in the future.
In short, if your business still has the financial capacity to pay off its debt, choose dissolve to end it gently and proactively. Conversely, if you have lost the ability to pay, bankrupt is the only legal route. Understanding these points will help you be best prepared when faced with this important decision.