Incorporation and dissolution are two common processes for a business. in some cases dissolution is necessary. The dissolution process achieves the goal of completely ending the existence of the enterprise and terminating the liability of the business owner and legal representative.
The most complete guide article for the dissolution of Vietnamese enterprises and dissolution of foreign-invested enterprises.
1. Regulations on enterprise dissolution #
Enterprise dissolution can be understood basically as the process of terminating the existence of an enterprise in the condition that such enterprise has the ability to pay or secure payment of its property obligations.
Dissolution of an enterprise is a type of administrative procedure conducted by an authorized person in an enterprise to work with the Business Registration Authority. The person performing the procedures is an enterprise.
Different from bankruptcy proceedings: Bankruptcy is a type of judicial procedure decided by a competent Court after receiving a valid petition. After the Court accepts and declares bankruptcy. The implementation of procedures according to the judicial process with the participation of: People's Court, People's Procuracy, Asset Management Officer, and asset management and liquidation enterprises.
There are 4 cases of enterprise dissolution as follows:
- The term of operation as stated in the company's charter expires without the decision to extend;
- According to resolutions and decisions of the business owner, for private enterprises, of the Members' Council, for partnerships, of the Members' Council, of the company owner, for limited liability companies, of General Meeting of Shareholders for joint-stock companies;
- The company no longer has the minimum number of members as provided for by this Law for a period of 06 consecutive months without going through the procedures for converting the type of enterprise;
- The Certificate of Business Registration is revoked, unless otherwise provided by the Law on Tax Administration.
Persons entitled to file a petition for dissolution of an enterprise include:
- Business owner for sole proprietorship.
- General Meeting of Shareholders for joint stock companies.
- Members' Council, company owner for limited companies.
- All general partners for a partnership company.
Based on the will of the business owner, the owner, the Members' Council, and the General Meeting of Shareholders, the dissolution of an enterprise is divided into two basic types: voluntary dissolution and compulsory dissolution.
+ Voluntary dissolution:
The termination of operation of the enterprise at the will of the business owner, the owner, the Members' Council, the General Meeting of Shareholders includes:
- Dissolution at the end of the operation term stated in the company's charter without a decision on extension;
- Dissolution under the decision of the business owner, the owner, the Members' Council, the General Meeting of Shareholders of the enterprise.
Compulsory dissolution:
Termination of operation of an enterprise according to the will of a competent state agency when there is a violation of the law on enterprises during the establishment and operation of the enterprise, including:
- Dissolution when the enterprise no longer meets the minimum number of members as prescribed by the law on enterprises within 06 consecutive months without carrying out procedures to change the type of enterprise;
- Dissolution when the enterprise registration certificate is revoked.
2. Order and procedures for enterprise dissolution #
The order and procedures for enterprise dissolution (except for cases where the enterprise registration certificate is revoked) is carried out as follows:
- Approving the decision to dissolve the enterprise.
- Conduct liquidation of corporate assets.
- Public announcement of the decision to dissolve the enterprise.
- The enterprise pays debts and distributes the remaining assets according to regulations.
- Submit dissolution application.
- Update the legal status of the business in the National Database of Business Registration.
Since the decision to dissolve the enterprise is issued, the enterprise and its manager are strictly prohibited from performing the following activities:
+ Concealing or dispersing assets;
+ Waive or reduce the right to collect debt;
+ Converting unsecured debts into secured debts with assets of the enterprise;
+ Sign a new contract, except for the case of enterprise dissolution;
+ Pledge, mortgage, donate or lease properties;
+ Termination of performance of an already effective contract;
+ Mobilizing capital in any form.
Depending on the nature and seriousness of the violation, individuals who commit acts of violating the above provisions may be administratively sanctioned or examined for penal liability; If damage is caused, compensation must be made.
Procedures for dissolution of foreign-invested enterprises are the same as those of Vietnamese enterprises in the process of invalidation of business registration certificates.
Particularly, the procedures for dissolution of foreign-invested enterprises may arise two other contents as follows:
- Procedures for terminating an Investment Registration Certificate for a foreign-invested enterprise with an Investment Registration Certificate (ERC)
- Procedures for transferring the remaining investment capital back home through the bank where the investment account is opened / Capital Account.
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3. Guidance on handling financial obligations upon enterprise dissolution #
Handling financial obligations is the most important thing when dissolving a business. This is the most detailed guide to liquidating all financial obligations to the state budget when dissolving a business.
The objective of tax liability processing is to have the tax authority confirmed that it does not owe tax. To be confirmed not to owe tax, the enterprise applies the instructions below.
Which cases do not need tax finalization upon dissolution
1. To pay enterprise income tax according to the percentage of turnover
Enterprises and organizations that are liable to pay enterprise income tax at the rate of% on sales of goods and services in accordance with the law on corporate income tax shall dissolve or terminate their operations.
2. The business does not generate revenue, has not used invoices
An enterprise dissolves or terminates its operation, but from the time it is granted the business registration certificate or the enterprise registration certificate to the time of dissolution or shutdown, the enterprise has not generated any revenue. use invoice.
3. Revenue has been generated, invoices have been used but the following conditions are satisfied:
An enterprise that is liable to pay corporate income tax according to declaration shall dissolve or terminate its operation if the following conditions are satisfied:
- Have an average annual turnover (from the year that has not been finalized or tax inspection or examination to the time the enterprise dissolves or terminates its operation) not exceeding VND 1 billion / year.
- From the year the enterprise has not received the tax finalization, tax inspection or examination to the time of dissolution or shutdown, the enterprise shall not be sanctioned for tax evasion law violations.
- The amount of corporate income tax paid from the year that has not been finalized, tax inspection or examination to the time of dissolution or shutdown is higher than the corporate income tax amount, if calculated as a percentage of the sale turnover. goods and services.
Provisions on the percentage of sales
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For the cases specified at Points 1, 2, 3 above, within 05 (five) working days from the date of receipt of the dossier submitted by the taxpayer (including the decision to dissolve or terminate its operation; documents proving that the taxpayer falls into the above cases and has fully paid payable tax amounts, if any), the tax office shall confirm that the enterprise has fulfilled its tax liability.
Cases subject to tax finalization upon dissolution
In case the enterprise dissolves or terminates its operation which does not fall into the above-mentioned cases, based on actual needs, the tax agency directly managing the taxpayer will conduct tax finalization according to the plan set by the agency. tariff issued.
In order for an enterprise to plan its dissolution tax finalization plan, an enterprise needs to complete and submit the following procedures:
- A written certification of fulfillment of tax obligations with import-export activities by the General Department of Customs if your business has import-export activities. Or a written commitment to have no tax debts and other payables to the state budget related to import-export activities to the date of signing the confirmation of tax debt of the General Department of Customs and take responsibility for this commitment.
- Property liquidation record (if any).
- Notify the result of invoice cancellation and report on the use of the invoice as of the time of submitting the dissolution dossier.
- Finalization of Corporate Income Tax (CIT) and Personal Income Tax (PIT) up to the time of submission of the dissolution dossier.
- Submit Value Added Tax (VAT) declaration by the time of submission of application for dissolution of the enterprise.
- Financial statements are prepared up to the time of settlement. For FDI enterprises, the corresponding audit report must be submitted.
Time limit for processing dissolution dossiers at tax agencies
After all types of documents listed above have been fully submitted, the deadline for tax finalization for dissolution of the company is the forty-five (45) day from the date of submission of the complete application. During this time, enterprises need to carefully prepare, complete accounting books and appoint accountability personnel to work with tax authorities' representatives.
The objective of the settlement of social insurance obligations is to be certified by the social insurance agency that they do not owe social insurance. To be certified not to owe social insurance, the enterprise shall follow the instructions below.
In addition to fulfilling obligations to people and employees, enterprises are also responsible for certifying the completion of financial obligations to the social insurance management agency as follows:
1. Closing the employee's insurance book as follows:
According to the provisions of Article 47 of the Labor Code as follows: “Article 47. Responsibilities of the employer when terminating the labor contract: Within 07 working days from the date of contract termination labor, the two parties are responsible for paying in full all amounts related to the interests of each party; In special cases, it can be extended but not more than 30 days.
The employer is responsible for completing the procedure for confirming and returning the social insurance book and other documents that the employer has withheld from the employee. ”
2. Please confirm that you do not owe compulsory insurance:
- Comparation of compulsory social insurance to the time of dissolution.
- Please confirm no debt of social insurance.
The goal of handling import and export tax obligations is to be certified by the customs office that they do not owe import and export tax obligations. To be certified not to owe import-export tax obligations, enterprises shall follow the instructions below.
1. Principles of confirmation of obligations
Import and export goods subject to tax must pay tax before customs clearance or goods release. Except for cases where taxpayers are entitled to the priority regime prescribed by the Customs Law.
Therefore, most import and export taxes have been paid in full, except for cases where there are problems that need to be checked: Export processing; Tax adjustment due to detection before the time of dissolution.
2. Confirmation procedures
A dossier to certify no customs tax debt for dissolution comprises:
- Letter of confirmation that you do not owe customs duties.
- Minutes of meeting, decision on dissolution of the company.
- Copy of business registration, establishment decision of the unit (authenticated)
Within 5 working days, the General Department of Customs will have a written reply on whether the unit owes or does not owe customs tax.
Upon receipt of the General Department of Customs' written confirmation of no tax debt, the enterprise shall submit this document to the tax administration agency before terminating the tax identification number.
The Enterprise Law provides for the organizers of asset liquidation and the order of debt payment. Accordingly, the owner of a private enterprise, the Members' Council or company owner, the Board of Directors shall directly organize the liquidation of the enterprise's assets, unless the company's charter provides for the establishment of a liquidation organization. private.
The enterprise's debts are paid in the following order:
- Debts of salary, severance allowance, social insurance in accordance with the law and other benefits of employees according to the collective labor agreement and signed labor contract.
- Tax debt.
- Other liabilities.
- After all debts and expenses have been paid, the remaining assets will be divided among private business owners, members, shareholders or company owners in proportion to their ownership of contributed capital or shares. .
According to the Enterprise Law, the time limit for contract liquidation must not exceed 06 months from the date of approval of the dissolution decision. This time is only suitable for businesses with small scale, no complicated transaction relationships, high liquidity assets. For businesses with a large scale or many assets, which need a long time to liquidate and repay, this time may not be enough to settle all contracts and pay debts. Therefore, enterprises need to review and plan appropriate liquidation.
4. Should the enterprise be dissolved or bankrupt? #
To answer this question and make the right choice, it is important to understand some of the following differences:
Similarities Between Dissolution and Bankruptcy
- 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.
The decisive difference between dissolution and bankruptcy
Dissolution enterprise is an administrative procedure in that enterprise be able to pay or guarantee payment of property obligations of the enterprise.
While Bankrupt is the state of the business inability to pay and was declared bankrupt by the People's Court.
Regarding the type of legal proceedings:
Enterprise dissolution is a type administrative procedures conducted by an authorized person in the enterprise to work with the business registration agency. The person performing the procedures is an enterprise.
Bankruptcy is a type judicial proceedings decided by a competent court after receiving a valid petition. After the Court accepts and declares bankruptcy. The implementation of procedures according to the judicial process with the participation of: People's Court, People's Procuracy, Asset Management Officer, and asset management and liquidation enterprises.
Regarding legal consequences:
- The right to decide on dissolution belongs to the enterprise. After the dissolution, the freedom of business of the owner and the person being managed by the management is not restricted.
- The court can restriction of freedom of business against the owner or executive manager if he intentionally violates the provisions of the Bankruptcy Law.
