How much is fine for failure to initiate dissolution procedures when the operating period specified in the company's charter expires in Vietnam?

How much is fine for failure to initiate dissolution procedures when the operating period specified in the company's charter expires in Vietnam?

In Clause 1, Article 58 of Decree 122/2021/ND-CP, violations against regulations on enterprise dissolution are as follows:

1. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for any of the following violations:

a) Failure to initiate dissolution procedures when the operating period specified in the company's charter expires without an extension decision;

b) Failure to initiate dissolution procedures when the company fails to maintain the prescribed adequate number of members for 06 consecutive months without converting into another type of business;

c) Failure to initiate procedures for shutting down a branch, representative office or business location before submitting the application for enterprise dissolution.

Thus, if your business has expired the operation period stated in the Charter and you do not have extension decision, but you do not carry out the business dissolution procedures in Vietnam, you will be fined from VND 20,000,000 to VND 30,000,000 dong.

What are cases of dissolution of enterprises in Vietnam?

In Clause 1, Article 207 of the Law on Enterprises 2020, cases of and conditions for dissolution of enterprises are as follows:

1. An enterprise shall be dissolved in the following cases:

a) The operating period specified in the company's charter expires without an extension decision;

b) The enterprise is dissolved under a resolution or decision of the owner (for sole proprietorships), the Board of Partners (for partnerships), the Board of Members and the owner (for limited liability companies) or the GMS (for joint stock companies);

c) The enterprise fails to maintain the adequate number of members prescribed in this Law for 06 consecutive months without converting into another type of business;

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

According to this Article, in case an enterprise falls into the above cases, the enterprise must be dissolved according to the provisions of law in Vietnam.

What are dissolution procedures in Vietnam?

Article 208 of the Enterprise Law 2020 stipulates dissolution procedures as follows:

Enterprise dissolution in the cases specified in Points a, b and c Clause 1 Article 207 of this Law shall be carried out as follows:

1. A resolution or decision on the dissolution is issued. Such a resolution or decision shall contain the following information:

a) The enterprise’s name and headquarters address;

b) Reasons for dissolution;

c) Time limit and procedures for finalization of contracts and payment of the enterprise’s debts;

d) Plan for settlement of obligations under employment contracts;

dd) Full name and signature of the owner of the sole proprietorship, the company’s owner, the President of the Board of Members, the President of the Board of Directors;

2. The owner of the sole proprietorship, the Board of Members or the owner, the Board of Directors directly organizes the liquidation of the enterprise’s assets, unless the company's charter requires establishment of a separate liquidation organization;

3. Within 07 working days from the ratification date, the resolution or decision on dissolution and the minutes of the meeting shall be sent to the business registration authority, tax authority and the enterprise’s employees. The resolution or decision shall be posted on the National Enterprise Registration Portal, displayed at the enterprise’s headquarters, branches and representative offices.

In case the enterprise still has unpaid debts, the resolution or decision and the debt payment  plan shall be sent to the creditors and persons with related rights, obligations and interest. The debt payment  plan shall contain the creditors’ names, debts, repayment time, location and method; method and time limit for settling creditors’ complaints;

4. The business registration authority shall post a notification that an enterprise is undergoing dissolution, the dissolution resolution or decision and debt payment  plan (if any) on the National Enterprise Registration Portal right after the resolution or decision is received (if any);

5. An enterprise’s debts shall be paid in the following order of priority:

a) Unpaid salaries, severance pay, social insurance, health insurance, unemployment insurance premiums and other benefits of employees under the collective bargaining agreement and concluded employment contracts;

b) Tax debts;

c) Other debts;

6. After the dissolution costs and debts have been fully paid, the remainder shall be divided among the owner, members/partners, shareholders in proportion to their stakes/shares;

7. The enterprise’s legal representative shall submit the application for dissolution to the business registration authority within 05 working days from the day on which the enterprise’s debts are fully paid;

8. After 180 days from the receipt of the dissolution resolution or decision mentioned in Clause 3 of this Article without further comments from the enterprise or written objections from relevant parties, or within 05 working days from the receipt of the application for dissolution, the business registration authority shall update the enterprise’s status on the national enterprise registration database;

9. The Government shall elaborate the procedures for enterprise dissolution.

The above are the legal provisions on the dissolution procedures in Vietnam.

Best Regards!