In business and commerce, the termination of business activities occur frequently for traders not capable of meeting market requirements. In particular, for foreign investment projects, the termination also comes from objective reasons. FDVN Lawfirm presents legal regulations relating to the termination of operation of foreign traders in Vietnam.
I. DETAIL CONTENTS:
1. Shutting down investment projects:
1.1. Conditions and procedures for shutting down an investment project and revoking its Investment Registration Certificate:
- The investor decides to shut down the project;
- The project has to be terminated according to the regulations of the contract or company’s charter;
- The project duration is over;
- The investor fails to overcome the difficulties that lead to project suspension in the cases below:
- The investment authority shall decide to suspend part or all of the project in the following cases:
- For protection of historical remains, relics, antiques, national treasures according to the Law on Cultural heritage;
- For environmental recovery at the request of a environment authority;
- For implementation of occupational safety measures at the request of an labor authority;
- The project is suspended under the decision or judgment of the court or arbitral tribunal;
- The investor fails to adhere to the Certificate of investment registration and recommits administrative violations after incurring penalties.
- The Prime Minister shall decide to suspend part or all of a project if the project execution threatens to affect national security at the request of the Ministry of Planning and Investment.
- The land of the project is withdrawn by the State, or the investor is not permitted to keep using the premises and fails to complete procedures for change of project location within 06 months from the day on which the decision on land/premises withdrawal is issued;
- The registry office cannot contact the investor or the investor’s legal representative after 12 months from the date of suspension of the project;
- The investor fails to execute or is not able to execute the project after 12 months according to the schedule registered with the registry office and is not permitted to extend the project execution schedule;
- The project is terminated under a decision of the Court or arbitral tribunal.
1.2. Procedure of investment project termination:
– The investor decides to shut down the project: The investors submit the decision of investment project termination to Investment Registration Agency within 15 dáy form the date of deciding, enclose the Investment Registration Certificate (if any).
– Termination of operation period, compliance with conditions of termination of operation: The investor shall submit a notification and return the Investment Registration Certificate (if any) to the investment registration authority within 15 days from the date of shutdown of the project together with documents about the shutdown;
– Other cases: The investment registration authority shall issue a decision on project shutdown and revoke the Investment Registration Certificate (if the project has one). The Investment Registration Certificate is annulled from the effective date of the decision on project shutdown.
1.3. Investment project liquidation:
– The investor liquidates the project in accordance with regulations of law on asset liquidation;
– With regard to a project that receives land, leases land from the State, or repurposes land, the right to use land and property on land shall comply with regulations of law on land;
– During the course of liquidation of a project, if the investor is a business organization that is dissolved or goes bankrupt, the project shall be liquidated in accordance with regulations of law on dissolution and bankruptcy of business organizations.
2. Shutdown of representative offices, branches, business location of foreign traders in Vietnam:
2.1. Cases and conditions for shutdown:
– It is requested by its head office;
– The foreign trader ceases to operate according to laws of the country or territory in which such foreign trader is established or registered.
– The License for Establishment of the representative office or branch is expired but its head office does not apply for extension of the license.
– The licensing agency refuses to grant an extension of the expired License for Establishment of the representative office or branch.
– The License for Establishment of the branch or representative office is revoked.
The foreign trader or its representative office or branch no longer satisfies one of the requirements of law.
2.2. Order and procedure:
Dossier consists of: 01 set
- A notification of shutdown of the representative office or branch using the form issued by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader.
- Copies of written refusals of grant of extension of the license or establishment of the representative office or branch or a copy of the decision on revocation of the license for establishment of the representative office or branch released by the licensing agency;
- Lists of creditors and the amount of debts, including outstanding taxes and social insurance premiums;
- Lists of employees and their current benefits;
- The original License for Establishment of the branch or representative office.
Order and procedure:
– Within 03 working days from the date of receipt of the application, the licensing agency shall examine such application and request the applicant to complete the application (if the application is incomplete). The request for supplementation to the application shall be made only once during the processing of the application.
– Within 05 working days from the date of receipt of the valid application, the licensing agency shall publish the decision on shutdown of the representative office or branch on their portal.
3. Dissolution of foreign-invested business organizations:
When an enterprise carries out procedures for business suspension, a notification of suspension of the branch/representative office/business location shall be sent to Business Registration Office where the branch/representative office/business location is registered.
3.1. Cases and conditions of dissolution:
A enterprise shall be dissolved in the following cases:
– The operation period written in the company’s charter expires without a decision on extension;
– The dissolution is decided by the owner of the sole proprietorship, by all general partners of the partnership, by the Board of members or owner of the limited liability company, or insurance the General Meeting of Shareholders of the joint-stock company;
– The company fails to maintain the minimum number of members prescribed by this Law for 06 consecutive months without following procedures for business conversion;
– The Certificate of Business registration is revoked.
Conditions for enterprise dissolution:
– The enterprise shall only be dissolved if all debts and liabilities can be settled and the enterprise is involved in any dispute at a court or arbitral tribunal.
– Relevant managers and enterprises are jointly responsible for the enterprise’s debts.
3.2. Order and procedure of dissolution:
Step1: Ratify the decision on dissolution.
The dissolution must be approved by the owner for a single-member limited liability companies, by the Members’ Council for the multi-member limited liability companies, by the General Meeting of Shareholders for joint stock companies and partners of partnerships.
The decision on dissolution must contain:
- The enterprise’s name and headquarter address;
- Reasons for dissolution;
- Procedures for finalizing contracts and settling debts of the enterprise; the deadline for settling debts and finalizing contracts must not exceed 06 months from the day on which the decision on dissolution is ratified;
- Plans for settlement of obligations derived from employment contracts;
- Full name and signature of the enterprise’s legal representative.
Step 2: Public notify about the decision on dissolution.
– Notify those who have rights and benefits related to dissolution of the enterprise.
– If there are unsettled financial obligations, the decision on dissolution shall be enclosed with the debt settlement plan and sent to the creditors, people with relevant rights, obligations, and interests.
– The plan must contain the creditors’ names and addresses; the amount of debts, deadline, location, and method of payment; method and deadline for settlement of creditors’ complaints.
Step 3: Assets liquidation and payment of debts:
The enterprise’s debts shall be paid in the following order
– Unpaid salaries, severance pay, social insurance as prescribed by law, other benefits of employees according to collective bargaining agreement and signed employment contracts;
– Tax debts;
– Other debts.
After all debts and dissolution costs are paid, the remaining value shall be received by the sole proprietorship’s owner, members, shareholders, or owner of the company according to their holding of stakes or shares in the company.
Time for liquidation: Not exceed to 06 months from the date of approval of decision on dissolution.
Step 4: Applying for dissolution.
The legal representative of the enterprise shall send the petition for dissolution to the business registration authority within 05 working days from the day on which all of the enterprise’s debts are settled.
The application consists of:
- A notification of the enterprise dissolution;
- A report on liquidation of the enterprise’s assets; a list of creditors and paid debts, including tax debts, outstanding social insurance contributions, and debts owed to employees after deciding the dissolution (if any);
- The seal and seal certificate (if any);
- The Certificate of Business registration.
Step 5: Update the legal status of enterprises in the National Enterprise Registration Database.
– In case of dissolution by request of enterprise:
After receiving the dissolution documents, Business Registration Office shall send information about the dissolved enterprise to the tax authority. Within 02 working days from receipt of information from Business Registration Office, the tax authority shall offer its opinions about the dissolution to Business Registration Office. Within 05 working days from the receipt of dissolution documents, Business Registration Office shall change the enterprise’s status on National Enterprise Registration Database to “dissolved” if the tax authority has no objection and issue a notification of the enterprise’s dissolution.
– Enterprise dissolution under a decision:
The business registration authority shall update the enterprise’s legal status of National Enterprise Registration Database if no opinions or objections from relevant parties are received after 180 days from the notification date or within 05 working days from the receipt of the petition for dissolution.
4. Shutdown of foreign investor’s operating office under business cooperation contracts:
Within 07 working days from the day on which the decision to shut down the operating office is issued, the foreign investor shall send a folder to the registry office where the operating office is located.
The folder consists of:
- A decision to shut down the operating office ahead of schedule;
- A list of creditors and settled debts;
- A list or employers and employers’ benefits provided;
- A tax authority’s certification of fulfillment of tax liability;
- A social insurance authority’s certification of fulfillment of social insurance obligations;
- A police authority’s certification of seal destruction;
- The certificate of operating office registration;
- A copy of the Certificate of investment registration;
- A copy of the business cooperation contract.
Agency to receive the dossier: Investment registration agency.
Time for cónideratio: Within 15 working days from the day on which sufficient documents, the registry office shall issue the decision to shut down the operating office.
II. LEGAL BASIS:
- Law on Enterprise 2014.
- Law on Commerce 2005.
- Law on Investment 2014.
- Decree No. 07/2016/NĐ-CP on regulations on establishment of representative offices or branches of foreign traders in Vietnam under Laws on Commerce.
- Decree No. 78/2015/NĐ-CP on enterprise registration;
- Decree No. 108/2018/NĐ-CP on amendment and addition of Decree No. 78/2015/NĐ-CP on enterprise registration;
- Circular No. 20/2015/TT-BKHĐT on guidline of enterprise registration;
- Circular No. 02/2019/TT-BKHĐT on amendment of Circular No. 20/2015/TT-BKHĐT on guidline of enterprise registration;
- Circular No. 11/2016/BCT on forms prescribed in Decree No. 07/2016/ND-CP of the Government on guildelines for the Law on commerce in terms of representative offices and branches of foreign traders in Vietnam.
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