Cases of dissolution of cooperatives and cooperative unions under current regulations in Vietnam

Cases of dissolution of cooperatives and cooperative unions under current regulations in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Cases of dissolution of cooperatives and cooperative unions under current regulations in Vietnam

According to Article 97 of the Law on Cooperatives 2023, a cooperative or cooperative union shall follow dissolution procedures in one of the following cases:

- The cooperative or cooperative union is voluntarily dissolved under the resolution of its GMM;

- The cooperative or cooperative union is compulsorily dissolved under a court decision or in case its cooperative registration certificate is revoked, unless otherwise prescribed by laws.

A cooperative or cooperative union may only be dissolved after all of its debts and liabilities are fully paid and it is not involved in any disputes at a Court or arbitral tribunal.

The legal representative, chairperson and members of the Board of Directors Director (General Director) and relevant title holders of the cooperative or cooperative union shall be jointly responsible for debts of that cooperative or cooperative union;

Individually responsible for any damage caused by their failure to comply or strictly comply with regulations on dissolution laid down in the Law on Cooperatives 2023.

2. Settlement of assets upon dissolution of cooperatives and cooperative unions in Vietnam

Pursuant to Article 101 of the Law on Cooperatives 2023, settlement of assets upon dissolution of cooperatives and cooperative unions as follows:

(i) Upon its dissolution, a cooperative or cooperative union shall get back and settle its undistributed fund and undistributed assets; get back other assets; transfer or liquidate assets.

(ii) Upon its dissolution, a cooperative or cooperative union’s undistributed fund shall be settled according to the following rules:

- Undistributed fund derived from the proceeds earned from transfer or liquidation of undistributed assets which are entirely or partially acquired using the State financial assistance shall be paid to state budget;

- The undistributed fund specified in Clause 4 Article 84 of the Law on Cooperatives 2023 shall be settled under specific agreement between the donor and the cooperative or cooperative union. If such agreement is not available, the provisions of (iv) and (v) shall prevail;

- The undistributed fund specified in Clauses 1 and 2 Article 84 of the Law on Cooperatives 2023 shall be settled according to the provisions of (iv) and (v).

(iii) Upon its dissolution, a cooperative or cooperative union’s undistributed assets shall be settled according to the following rules:

- The undistributed assets specified in Points a, c and dd Clause 2 Article 88 of the Law on Cooperatives 2023 shall be transferred to competent authorities that shall settle such assets by their sources as prescribed by laws;

- The undistributed assets specified in Point d Clause 2 Article 88 of the Law on Cooperatives 2023 shall be settled under specific agreement between the donor and the cooperative or cooperative union. If such agreement is not available, the provisions of (iv) and (v) shall prevail;

- The undistributed assets specified in Points b and e Clause 2 Article 88 of the Law on Cooperatives 2023 shall be settled according to the provisions of (iv) and (v).

(iv) Remaining assets of the cooperative or cooperative union upon its dissolution shall be distributed in the following order of priority:

- Pay dissolution costs, including costs incurred from recovery, valuation and liquidation of assets;

- Pay unpaid salaries, severance pay, social insurance premiums as prescribed by laws, and other benefits of employees under the collective bargaining agreement and signed employment contracts;

- Pay tax debts;

- Pay other debts.

(v) The assets that remain after they are distributed according to (iv) shall be distributed to official members and contributing members of the cooperative or cooperative union in proportion to their holdings.

The Law on Cooperatives 2023 takes effect as of July 1, 2024.

Nguyen Ngoc Que Anh

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