The 2020 Company Law amended by a decree and a circular in 2021 are the main documents providing for company liquidation in Vietnam. According to them, both local and foreign business owners can terminate the activities of their businesses by completing several steps.
Below, our company registration agents in Vietnam explain how to close a company in this country. We will also list some of the services we can provide in case of winding up a business.
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Company liquidation reasons in Vietnam
In order to close a company in Vietnam, there must be a solid reason to do so. The motives are prescribed by the law and often include:
- the operation period of the company has reached its end, as provided by the constitutive documents;
- the shareholder decides or, in the case of companies with more owners, the shareholders agree on the termination of the business;
- the company does not meet the minimum number of shareholders for 6 consecutive months, as required by law;
- the company’s business license or registration certificate is revoked by the Trade Register;
- the company declares bankruptcy or one or more creditors direct a request in this sense with a Vietnamese court.
Should you need assistance in closing your company, our Vietnamese company formation representatives can assist with the creation of various specific documents.
| Quick Facts | |
|---|---|
| Reasons for company liquidation in Vietnam |
poor operating conditions, insolvency, tax relief, departure of company’s founder, special purposes |
|
The effects of company liquidation in Vietnam |
The company is dissolved and its corporate existence ends permanently. |
|
Types of voluntary company liquidation in Vietnam |
members voluntary liquidation, creditors voluntary liquidation |
| Compulsory winding up | Ruled by the Vietnamese Court of Law. |
| Reasons for compulsory company winding up in Vietnam |
When the company commits an illegal operation/act or fails to submit to mandatory regulations. |
| Voluntary winding up steps |
official public announcement on dissolution of the Vietnamese company, finalizing tax procedures, finalizing insurance procedures, closing the company’s bank account, applying for registration on the company’s dissolution to the Business Registration Division, terminating the investment project at the Investment Registration Office |
| Compulsory winding up steps |
court hearing, decision of the company’s termination made by the court, convening a meeting to adopt the dissolution decision |
| Business activities during voluntary dissolution |
Only the activities related to the termination of the company. |
| Void activities during company liquidation |
hiding illegally liquidating assets, |
| The liquidator’s role |
reducing the right to claim debts, converting unsecured debts into debts secured on the enterprise’s assets, write and sign new contracts with the exception of dissolution purposes, terminating effective contracts, raising capital |
| Director’s powers |
The director’s power comes to an end when it is transferred to a liquidator. |
| Director’s duties |
Supervision and assistance of the liquidator. |
| Creditor’s duties |
Present the liquidator the debts needed to be recovered from the liquidated company. |
| Alternatives to winding up the company |
restructuration of the company, renegotiate credit and debt terms, suspend the company’s activities (in certain conditions) |
| Liquidation process duration | around 6 months |
The decision-making process in case of closing a business in Vietnam
The law enables investors to open various types of companies in Vietnam. This is why it is important to note that the liquidation decision must be made in accordance with the legal structure of the business. As such:
- in the case of a partnership, the decision must be made by all the partners with unlimited liability;
- in the case of a multi-member private limited liability company, the decision will made by the Member’s Council;
- in the case of a public limited liability company, the decision will be made by the shareholders during a General Meeting.
The decision-making process is available only for voluntary company liquidation in Vietnam.
When can a Vietnam company start the liquidation process?
The success of a Vietnam company depends very much on its profits. After paying all the taxes due to the state, a company must verify the amount left for continuing its activities. When this amount is lower than its projections, the company is considered to be in financial difficulties. Once this is established, the company shareholders have two choices: to undergo financial restructuring or to declare bankruptcy. If the financial restructuring process fails, the Vietnam company can start the liquidation procedure.
Liquidating a company in Vietnam is not that simple, as it can be declared bankrupt only after three months of being unable to pay its debts. These requirements have been introduced in the recently amended Bankruptcy Law in Vietnam.
The Vietnam company liquidation procedure is also governed by other laws, among which:
- the Investment Law;
- the Decree on Company Registration.
Our Vietnam company formation experts can explain the legislation related to company dissolution in this country.
Here is our infographic on company liquidation:
Company winding up steps in Vietnam
Here are the steps to close a company in Vietnam:
- the adoption of the company liquidation decision;
- the appointment of the liquidator;
- the notification of the Trade Register and Tax Department;
- debt clearance;
- terminating all contracts, including employment ones;
- drafting the last balance sheet and financial statements, a step our accountants in Vietnam can help with;
- filing for dissolution with the Companies Register.
The same procedure applies to both voluntary and compulsory company liquidation in Vietnam. However, in the latter situation, the court issues the termination decision and appoints the liquidator.
Please note that in the case of trading companies, de-registration with the General Department of Customs (GDT) is also mandatory.
The procedure of liquidating a company in Vietnam
The company dissolution process in Vietnam must start with a meeting of the shareholders and management board where a resolution for the termination of the business is agreed upon. Then, the liquidation decision will be ratified. Within 7 days of the decision, the company representative must file a liquidation petition with the Business Registry Office.
There is also an involuntary company liquidation process, where the petition for the dissolution of a Vietnam company is filed by creditors who have not received their payments. The petition in this case is filed with a Vietnamese court of law.
Following the termination of the court dissolution proceedings, the assets of the Vietnam company must be liquidated. Here is also our video on this subject:
How long does it take to close a business in Vietnam?
Here is a timeline for the company liquidation procedure in Vietnam:
- all authorities, creditors, and employees must be notified about the liquidation within 7 days from the date of the decision;
- all contracts and loans must be cleared within 6 months from the date of initiation of the liquidation;
- the entire procedure takes between 4 and 6 months in the case of the voluntary procedure and longer in the judicial one.
Our company registration consultants in Vietnam can also assist with the liquidation procedures of local and foreign companies operating in this country. For full information on the company liquidation process and the legislation related to it, please contact us.