Due to the prolonged situation of the Covid-19 epidemic, which directly affects the economy, the financial problem of maintaining businesses becomes a huge burden for many companies. Many of them cannot continue to perform business, so they have to decide whether to carry out the procedure for suspension or dissolution. Therefore, in this article LSX legal firm will answer the question: “Should businesses suspend or dissolve in Vietnam?”
Legal grounds
- Law on Enterprise 2020
- Decree 78/2015/ND-CP
Business suspension
Business suspension understood as a case where an enterprise suspends production and business activities for a certain period of time. Besides, businesses must notify in writing of the time to start and duration of the suspension.
On the other hand, clause 1, Article 41 of Decree No. 01/2021/ND-CP stipulates business suspension as follows:
“1. “business suspension” means the enterprise’s legal status during its business suspension as prescribed in Clause 1 Article 206 of the Law on enterprises. Starting date of “business suspension” status is the date of business suspension registered by the enterprise. Ending date of “business suspension” status is the ending date of business suspension period as notified by the enterprise or the date of resumption of business ahead of schedule registered by the enterprise.”
One outstanding advantage of suspending business is that when the business resumes operations, the procedure is very simple. In case the suspension period expires, the business will resume operation by itself, and if the business wants to resume earlier than the suspension period, it only needs to make a written notice.
Business dissolution
According to Article 207 of the law on Enterprise 2020:
Article 207. Cases of and conditions for dissolution of enterprises
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.
2. An enterprise may only be dissolved after all of its debts and liabilities are fully paid and it is not involved in any dispute at the court or arbitration. Relevant executives and the enterprise mentioned in Point d Clause 1 of this Article are jointly responsible for the enterprise’s debts.
Should businesses suspend or dissolve?
The Covid-19 outbreak makes commercial activity challenging. Businesses will have to shut down at this time to address financial and human resource issues, as well as to conduct market research. Business owners should select the option of suspension because:
Simple procedures
When a company wants to suspend operations, it merely needs to send a Notice of Suspension to the Business Registration Office where the company’s headquarters located at least 15 days before the suspension. The application will be processed by the competent authorities within three working days after receiving the Notice.
In terms of dissolution procedures, businesses must go through a slew of them at a variety of different government offices, including the Tax Office, the Customs Agency, and the Business Registration Agency. In addition, owners must follow regulations and procedures related to employees and creditors. The method for dissolving a firm takes substantially longer than the procedure for suspending a business. In reality, the dissolution process can take up to 1-2 months to complete.
Cheap expense
Because the method for suspending a business is easy, the cost of doing so is substantially lower than the cost of dissolving the business. It should be noted that during the temporary suspension of business, the company must pay the full amount of tax owed as well as continue to pay the debts and complete the contracts signed with customers and employees (unless the parties have other agreements).
May return to operation after the suspension
If an entity wants to restart operations after a temporary suspension, it just needs to notify the business registration authority of the time for resumption without any other procedures.
In the case of a business’s dissolution, those who intend to continue conducting business must form a new business. Accordingly, the new one can not use information and benefits from the old enterprise for business activities.
May transfer the business after the suspension
After the business suspension period; If the enterprise does not want to continue operating, it can transfer the company to recover part of its capital. Owners do not need to waste time and costs for dissolution; while still being able to take advantage of the company’s advantages to continue doing business.
Business suspension service of LSX Legal Firm
Business suspension-a necessary solution for businesses when they cannot continue doing business for a specified period of time. Suspending business quickly will help businesses avoid unnecessary costs. Meanwhile, the business suspension process contains complicated procedures so if businesses do it themselves, they will face many risks. Using the business suspension service of LSX will make you feel secure in each stage of implementation.
To make your case more convenient, LSX will perform:
- Legal advice related to new regulations in business suspension;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
- Represent to submit documents, receive results, and hand them over to customers.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself, We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
Related articles
Conditions for business suspension of joint-stock company in Vietnam
Procedures for business suspension of a limited company in Vietnam
Meaning and characteristics of shares in a joint stock company in Vietnam
Related questions
After implementing and announcing to suspend of business for the second time. Enterprises need to notify about the continuation of their suspension. This notice means to ensure the business provides information about its current status to the outside. Because the situation of the business will be a concern to investors, customers, suppliers, and many other stakeholders.
The announcement of the suspension is also a condition for enterprises to exempt themselves from making corporate income tax reports and many other annual documents.
Currently, the form of notice of business suspension for enterprises is made according to form II-21 in Circular 01/2021/TT-BKHDT.
Step 1: Prepare dossiers and submit a business suspension application
Enterprises draft dossiers for their business suspension and then submit to the registration agency to conduct business suspension.
Next, the Business Registration Office – Department of Planning and Investment will receive the application submitted by the businesses.
Step 2: The Business Registration Office processes the application
The business Registration Office handles the application. Then, they will verify the form and content of the business suspension application.
Complete dossier processing and update dossier status on the online database. Businesses can then look up the status of their application.
Step 3: Return the result
In case the application is valid, the enterprise will submit the hard copy application to the Business Registration Office.
In case the application invalid and needs amendment or supplementation, the enterprise shall amend and supplement the dossier as required and then resubmit it.
ontact LSX
Finally, hope this article is useful for you to answer the question about “Should businesses suspend or dissolve in Vietnam?”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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