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Tuesday, June 28, 2022

How to suspend or dissolve a company in Vietnam

Updated: 16:00’ - 18/03/2022
Bizspective Vietnam

Many foreign business owners in Vietnam do not know how to suspend or close a company in Vietnam. In this article, our business support team from Bizspective Vietnam[1] will walk you through the requirements, procedures, time frames, and fees to suspend a company in Vietnam or to close a company in Vietnam.
 

Introduction

Unfortunately, business does not always go as planned. Even with the greatest ideas in the World, and with the best of intentions, it just does not always work out. In fact, there are numbers suggesting that 90% of all startups ultimately fail in their first 10 years.[2]

Sometimes the original business plan is simply not as good as originally thought, other times there are external factors. Indeed, you do not have to think far for a recent (hugely disruptive) external factor that put an end to many good businesses.[3]

It is tough, but also an inherent part of doing business. And if you ever find yourself at that point, then it is good to know what are your options to suspend (i.e. to put your business temporarily on hold) or close a company in Vietnam.

Suspend a company in Vietnam

Under Vietnamese Law[4], there is a step between a company being operational or “active”, and a company being closed or “dissolved” for good. This is called “suspension”, and you can consider it as putting your business “on hold”, or “pausing” your operations for a while. It does not go as far as permanently closing your company in Vietnam, but it will officially put your company’s operations on hold for a while. Common situations where company owners decide to suspend a company in Vietnam include:
  • They are moving overseas for a while and do not need to use their company,
  • They are focusing on a different project and do not have time to operate their company, and
  • They are not sure that their business is going to gain traction but they also do not want to take the irreversible step of permanently closing their company.
For all of these cases and more, the temporary suspension could be a good option to consider. A major advantage to suspend a company in Vietnam is that it relieves the company from most of its regular tax, reporting, and other compliance obligations.

But how does the procedure work to suspend a company in Vietnam? In fact, it is pretty straightforward: the legal representative of the company must send a written notification to the registration office at the local Department of Planning and Investment[5], at least 3 business days before the proposed suspension date.

As with many administrative procedures in Vietnam, there is a template form available for you to use. Among other things, the legal representative must fill out the reason for suspension, and in most cases, a brief explanation will be accepted without any issues.

Practically speaking, a suspension is often approved for a 1-year maximum, after which you can extend it for a maximum of 1 year. After that, you must either re - activate the company, or permanently close it.


 Close a company in Vietnam

Compared to suspending, closing a company in Vietnam has more far - reaching consequences. It is officially called “dissolution”, which means the permanent closure of a company. There are a few legal grounds[6] to close a company in Vietnam:
  • The operating period as mentioned in the company’s charter and/or license(s) expires without an extension decision,
  • The owner(s) of the company decide in writing to close the company,
  • The company adds or removes members but fails to update the company type for 6 consecutive months, or
  • The company’s license(s) get revoked.
Important to note is that you can only close a company in Vietnam after all its debts and liabilities have been fully paid, and it is not involved in any legal dispute. Apart from the legal grounds, here are a few common practical reasons to close a company in Vietnam:
  • The owners have finished the project,
  • The project does not gain traction and the owners want to limit the financial consequences, or
  • The foreign owners want to move back overseas.
A major advantage to close a company in Vietnam is that after completing the procedures, the company is completely relieved from all tax, reporting, and compliance obligations. And what does the procedure look like? Well, that partially depends on which legal ground is used to close the company. In most cases, it starts with an official decision from the owner(s) of the company.[7]

An important part of this decision is that it should detail a procedure, and a plan for finalizing the company’s contracts (including labor contracts), and for paying the company’s outstanding debts. The owner’s decision shall be sent to the Business Registration Office at the local Department of Planning and Investment, and it shall be posted on the National Database[8], as well as at the company’s headquarters.

Generally speaking, the owner(s) of the company is/are responsible for the liquidation of the company’s assets, the results of which shall be divided among the owner(s) proportionately to their ownership percentage.[9] But only after all debts (including tax liabilities) have been paid.

When all those debts have been fully paid, the legal representative of the company then submits an application file for dissolution to the Authorities. Only after that can the official status of the company be updated to “dissolved”, which means “permanently closed”. In summary, there are two steps to close a company in Vietnam: (i) the owner’s decision, and (ii) the application file.
 

Time frame and fees

To suspend a company in Vietnam is relatively uncomplicated, fast, and economical. It normally takes only a couple of days. The official State fees are minimal, but most foreign company owners choose to let a lawyer, a business service provider, or their accountant take care of the procedures. A common service fee is VND 2 - 5 million.

In order to close a company in Vietnam, by comparison, takes a little longer. As explained above in more detail, there must be a decision first, contracts must be finalized, debts must be paid, and only then can the official application for closing be submitted.

Depending on the complexity of the specific company, the process could take between 1 month and 1 year. Same as for suspension, foreign owners who want to close a company in Vietnam often let a professional service provider take care of these procedures.

The official State fees are minimal, and depending on the complexity, a common service fee for a small-scale foreign-owned company is between VND 10 - 20 million. If it involves a medium- or large-scale company, then the fees can be a plural of those numbers.

 

More information

We hope that you found this article useful and that it has given you some insights into how to suspend or close a company in Vietnam. It is perhaps not the most positive thing to consider, but it may at least be useful to know your options, and how they would work in practice. Our mission at Bizspective Vietnam is to provide a platform where all foreign investors and entrepreneurs can find good quality and free of charge information regarding business in Vietnam. Our platform also helps to connect you with great local experts around Vietnam[10]. If you are interested, have a look at our Bizspective Vietnam business platform and/or contact us via support@bizspective.com


[1] https://www.bizspective.com/
[2] https://www.investopedia.com/articles/personal-finance/040915/how-many-startups-fail-and-why.asp
[3] https://www.oecd.org/global-forum-productivity/webinars/Gourinchas-Kalemli-Ozcan-covid-19-and-business-failures.pdf
[4] The Vietnamese Law on Enterprises, number 56/2020/QH14, dated 17/06/2020.
[5] http://www.hapi.gov.vn/en-US
[6] Article 207(1) of the Vietnamese Law on Enterprises, number 56/2020/QH14, dated 17/06/2020.
[7] Article 208(1) of the Vietnamese Law on Enterprises, number 56/2020/QH14, dated 17/06/2020.
[8] https://dichvuthongtin.dkkd.gov.vn/
[9] Article 208(6) of the Vietnamese Law on Enterprises, number 56/2020/QH14, dated 17/06/2020.
[10] https://bizspective.com/business-experts/

 

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