Enterprise dissolution is a complex process that requires strict compliance with legal obligations. This article provides a detailed guide on the key obligations that businesses must fulfil during dissolution.

1. Overview of Enterprise Dissolution

Enterprise dissolution is the process of terminating the operations and existence of a business following legal regulations. This process requires full compliance with legal obligations to ensure the rights of all related parties.

Enterprise dissolution involves ceasing operations and legal existence as per regulations, requiring strict adherence to legal obligations to protect stakeholders’ rights. In an unstable economic environment, the number of businesses exiting the market has been increasing. Specifically, according to VOV.VN, in 2023, Vietnam recorded 172,600 businesses withdrawing from the market, a 20.5% increase compared to the previous year, averaging nearly 14,400 businesses ceasing operations per month.

Dissolution not only affects business owners but also impacts employees, business partners, and the overall economy. Therefore, strict legal compliance in the dissolution process is essential to protect stakeholders’ rights and maintain market stability.

2. Tax Obligations in Dissolution

2.1. Tax Finalization

• Debt and asset settlement (Clause 5, Article 208 of the Enterprise Law 2020): Businesses must recover receivables, settle payables, including tax debts, and liquidate fixed assets, as well as close bank accounts registered under the business name.
• Corporate income tax (CIT) finalization (Clause 4, Article 44 of the Tax Administration Law 2019): Businesses must submit a CIT finalization declaration using Form No. 03/TNDN, along with financial statements up to the dissolution date and relevant annexes. The tax return must be filed within 45 days from the cessation date.
• Personal income tax (PIT) finalization: If the business has paid income to employees, it must submit a PIT finalization declaration, including detailed annexes on income and tax deductions for each individual.

2.2. Procedures with Tax Authorities

• Completion of tax obligations (Article 54 of the Tax Administration Law 2019): Businesses must ensure full payment of outstanding taxes, including corporate income tax, value-added tax, personal income tax, and other taxes.
• Submission of tax code deactivation application (Clause 1, Article 39 of the Tax Administration Law 2019): Businesses must submit an application for tax code deactivation to the relevant tax authority. The required documents (Article 14 of Circular 105/2020/TT-BTC) include:
  • A written request for tax code deactivation (Form No. 24/ĐK-TCT).
  • Dissolution resolution or decision on business registration certificate revocation.
  • Original tax registration certificate or tax identification number notification.
• Invoice usage report (Clause 2, Article 29 of Decree 123/2020/NĐ-CP): Businesses must submit a report on invoice usage up to the dissolution date and destroy unused invoices per regulations.
• Tax finalization submission: Businesses must submit final tax reports up to the dissolution date, including:
  • Corporate income tax finalization declaration.
  • Personal income tax finalization declaration (if applicable).
  • Financial statements up to the dissolution date.
  • The deadline for submission, as per Clause 4, Article 44 of the Tax Administration Law 2019, is within 45 days from the cessation date.
• Obtaining tax clearance confirmation: After verification by the tax authority, a tax clearance certificate will be issued, which is a critical document in the dissolution process.

3. Responsibilities of the Legal Representative

The legal representative of a business holds significant responsibilities during the dissolution process:

• Approval and announcement of the dissolution decision (Clauses 1 and 3, Article 208 of the Enterprise Law 2020):
  • The legal representative must approve and organize the dissolution resolution or decision.
  • Within seven working days from approval, this decision must be sent to the Business Registration Office, tax authorities, employees, and creditors. It must also be publicly posted at the company’s headquarters and branches.
• Asset liquidation and debt settlement (Clauses 2 and 5, Article 208 of the Enterprise Law 2020):
  • The legal representative is responsible for directly organizing the asset liquidation unless the company charter mandates a separate liquidation entity.
  • Debt settlement must follow the legally stipulated priority order, ensuring all financial obligations are met before dissolution.
• Filing the dissolution dossier (Article 210 of the Enterprise Law 2020):
  • After settling all debts, the legal representative must submit the dissolution registration dossier to the Business Registration Office within five working days.
  • The dossier must include a dissolution notification, an asset liquidation report, and a list of creditors with details of settled debts.
• Ensuring employee rights (Clause 5, Article 208 of the Enterprise Law 2020): The legal representative must ensure full payment of salaries, severance allowances, social insurance, health insurance, unemployment insurance, and other employee benefits before finalizing the dissolution.
• Accountability for the accuracy of the dissolution dossier (Clause 8, Article 208 of the Enterprise Law 2020):
  • The legal representative is responsible for the truthfulness and accuracy of the dissolution dossier.
  • If the dossier contains inaccurate or falsified information, the legal representative and other management members will be jointly liable for unresolved debts and legally accountable for any consequences arising within five years from the submission date.

4. Debt Settlement Obligations

4.1. Order of Payment Priority

According to legal regulations, the order of debt payment is as follows: (Clause 1, Article 54 of the Bankruptcy Law; Clause 5, Article 208 of the Enterprise Law)

• Bankruptcy expenses;
• Wages, severance pay, social insurance, health insurance for employees, and other benefits under signed labor contracts and collective labor agreements;
• Debts arising after the initiation of bankruptcy procedures for the purpose of restoring the business operations of the enterprise or cooperative;
• Financial obligations to the State; unsecured debts payable to creditors listed in the creditor list; secured debts that remain unpaid due to insufficient asset value to cover the debt.

4.2. Debt Settlement Process

• Preparing a list of creditors and debts (Clause 1, Article 210 of the Enterprise Law 2020): The enterprise must compile a detailed list of creditors and the debts to be paid. The Enterprise Law 2020 requires the dissolution dossier to include a “list of creditors and the debts that have been settled.”
• Notifying creditors of the payment plan (Clause 3, Article 208 of the Enterprise Law 2020): If the enterprise still has outstanding financial obligations, it must send the dissolution resolution or decision along with the debt settlement plan to creditors and relevant parties. This plan must include the creditor’s name and address, the amount of debt, the deadline, the location and method of payment, as well as the procedures and timeline for handling creditor complaints.
• Executing payments in order of priority (Clause 5, Article 208 of the Enterprise Law 2020): The enterprise must settle debts in the following order:
  • Salaries, severance pay, social insurance, health insurance, unemployment insurance, and other employee benefits under signed labor contracts and collective labor agreements.
  • Taxes.
  • Other debts.
• Handling creditor complaints (if any): The enterprise must address creditor complaints based on the announced plan. This ensures the rights of all parties involved and compliance with legal regulations on business dissolution.

5. Protecting Employee Rights

The bankruptcy of a company leads to the termination of its operations. Consequently, labor contracts with employees will be terminated by law, even if the contract term has not expired. In other words, when a company goes bankrupt, it terminates employment contracts with its employees. (Clause 7, Article 34 of the Labor Code 2019).

The enterprise must ensure full compliance with obligations toward employees:

Payment of Outstanding Wages (Clause 2, Article 48 of the Labor Code 2019)

The enterprise must pay employees in full for the days they have worked but have not yet been compensated. In the event of bankruptcy, employees’ wages, social insurance, health insurance, unemployment insurance, severance pay, and other benefits are given payment priority.

Severance Pay (Article 46 of the Labor Code 2019)

Employees who have worked continuously for at least 12 months are entitled to severance pay when their labor contract is terminated due to company bankruptcy. The severance pay is calculated at half a month’s salary for each year of service.

Settlement of Insurance Obligations (Clause 2, Article 48 of the Labor Code 2019)

The enterprise must fully pay social insurance, health insurance, and unemployment insurance contributions for employees. These payments are prioritized in the event of bankruptcy.

Completion of Social Insurance Book Confirmation and Return (Point a, Clause 3, Article 48 of the Labor Code 2019)

The enterprise must confirm the period of social insurance and unemployment insurance contributions and return the social insurance book along with other relevant documents to employees.

Providing Copies of Relevant Documents (Point b, Clause 3, Article 48 of the Labor Code 2019)

Upon employee request, the enterprise must provide copies of documents related to their employment. The costs of copying and sending these documents are borne by the company.

To learn more about the bankruptcy process, please refer to the article: Detailed Guide to Bankruptcy Procedures for Businesses in 2025 

6. Practical Advice

To ensure a smooth dissolution process, businesses should:

• Develop a detailed dissolution plan – A well-prepared plan helps businesses identify the necessary steps, estimated completion time, and potential risks. This ensures an orderly process, preventing unnecessary delays or errors.
• Consult legal experts – Business dissolution involves multiple legal regulations, tax obligations, and administrative procedures. Seeking legal consultation ensures compliance, minimizes legal disputes, and avoids violations.
• Maintain comprehensive records and documents – Proper documentation helps businesses address any arising issues, especially in debt settlement, tax finalization, and audits. This also aids in resolving disputes that may occur after dissolution.
• Keep stakeholders informed – Businesses should update stakeholders, including tax authorities, partners, customers, and employees, about the dissolution process to ensure their rights are protected. Transparent communication helps reduce conflicts and maintains the business’s reputation even after dissolution.

Conclusion

Fulfilling legal obligations during business dissolution is not only a legal requirement but also a means to protect the rights of all parties involved. Enterprises should carefully prepare and strictly follow the prescribed procedures to ensure a smooth dissolution process.

Need legal advice on business dissolution procedures? Contact us at Harley Miller Law Firm for detailed guidance and legal support.

For detailed consultation on this matter, please contact us through the following channels:

• Hotline: + 84 9372 15585 
• Email: [email protected]
• Website: luatminhnguyen.com or hmlf.vn