Difficulties when dissolving a business improperly

Dissolving a business is the process of terminating the operations and legal status of a company. Dissolution procedures are carried out when the enterprise’s business activities no longer meet its original purpose. However, many businesses today still encounter many difficulties when dissolving their businesses. The following article by Long Phan will analyze in detail the necessary steps in the process of dissolving a business.

What is enterprise dissolution?

Dissolving a business is the process of terminating the existence and operation of a business entity. This is a legal procedure to end all rights and obligations of the business. According to the Law on Enterprises 2020, dissolution can be done voluntarily or mandatory.

When dissolved, the enterprise must pay all debts and property obligations. At the same time, it is necessary to terminate valid labor contracts and economic contracts. After completing the procedure, the business will have its name removed from the National Business Registration Database.

Cases of enterprise dissolution

According to Article 207 of the Law on Enterprises 2020 and Article 70 and Article 71 of Decree 01/2021/ND-CP, enterprises are dissolved in the following cases:

Voluntary dissolution:

• According to the owner’s decision for private enterprises.
• According to the decision of all partners for the partnership company.
• According to the decision of the Board of Members, the company owner for a limited liability company.
• According to the decision of the General Meeting of Shareholders for joint stock companies.

Compulsory dissolution:

• End of the operating term stated in the Charter without a decision to extend.
• Business registration certificate revoked.
• Failure to maintain the minimum number of members as prescribed for 6 consecutive months.

Before dissolving, the enterprise must ensure that all debts and other property obligations have been paid. At the same time, the dispute must not be in the process of being resolved in Court or Arbitration.

Determining the correct case of dissolution will help businesses choose the appropriate process and avoid unnecessary legal risks.

Difficulties encountered when dissolving a business

Legal procedures are complicated and time-consuming

Dissolution procedures require businesses to comply with a series of complex legal procedures such as tax finalization, cancellation of business registration, liquidation of assets and completion of obligations to state agencies. This not only takes a lot of time but also requires businesses to prepare accurate documents, otherwise it will easily lead to errors that prolong the process.

Handling debts and financial obligations

The dissolution of an enterprise at the Business Registration Office requires the enterprise to fulfill its tax obligations at the tax department/tax department. Businesses need to pay off all debts before they can complete the dissolution process. This can cause great financial pressure, especially when the business is facing cash flow difficulties.

In some cases, businesses cannot carry out tax finalization procedures due to insufficient documents such as: financial statements, invoices, documents, etc. This causes the dissolution file to be stopped or even stopped even a few years.

Loss of property and resources

Dissolution means the business must sell or liquidate assets, often at a price lower than book value. This can cause great loss of assets and resources, and cause businesses to lose the values ​​that have been built over time.

Difficulties in resolving workers’ rights

Dissolving a business directly affects employees, especially the settlement of benefits such as salaries, bonuses, social insurance and other regimes. This requires businesses to be transparent and clear in payment to avoid disputes and complaints from employees.

Affects reputation and relationships with partners

The decision to dissolve can reduce the business’s reputation in the market and affect relationships with partners and customers. This not only affects the brand but also makes it difficult for business owners who want to start a business or invest in new projects in the future.

Risk of legal disputes

During the dissolution process, businesses may encounter legal disputes with creditors, partners or even shareholders. These disputes not only prolong the dissolution time but also cause high costs and affect the reputation of the business.

The solution for businesses in this case is to find units that support business dissolution services such as Long Phan to represent and carry out the procedures on their behalf.

Processes, procedures, and documents for dissolving a business in accordance with the law

Compulsory dissolution

Compulsory dissolution usually involves a decision by a competent state agency. The mandatory dissolution process has a number of differences compared to voluntary dissolution.

For cases where the Business Registration Certificate is revoked:

1. Step 1: Notice of dissolution: The business registration agency posts a notice that the enterprise is undergoing dissolution procedures on the National Business Registration Portal.
2. Step 2: Make a decision to dissolve: Within 10 days from the date of receiving the decision to revoke, the enterprise must hold a meeting to approve the decision to dissolve.
3. Step 3: Information disclosure: Publicly post the dissolution decision at the head office and affiliated units of the enterprise.
4. Step 4: Debt settlement: Make a plan to pay outstanding debts and financial obligations.
5. Step 5: Liquidate assets: Proceed to liquidate the assets and debts of the business.
6. Step 6: Submit dissolution documents: Within 5 working days from the date of full debt payment, the enterprise submits dissolution documents to the Department of Planning and Investment.
7. Step 7: Update status: The Department of Planning and Investment updates the legal status of the business as “dissolved” on the National Business Registration Information System.

In cases where the minimum number of members is not guaranteed, the dissolution process is similar to voluntary dissolution.

Legal basis: Article 209, Law on Enterprises 2020.

Voluntary dissolution

Complying with the correct dissolution process will help businesses avoid legal risks and ensure the rights of related parties. The steps to perform dissolution are as follows:

1. Step 1: Enterprises submit documents for enterprise dissolution on the national information portal similar to business registration procedures.
2. Step 2: The business registration office processes the documents and transfers them to tax to handle tax procedures.
3. Step 3: If it is determined that the file does not owe tax or violates taxes, the tax code will be closed
4. Step 4: The business registration office closes the business code of the business.

Legal basis: Article 70, Decree 01/2021/ND-CP.

Consulting services on dissolving a business

Dissolving a business sometimes causes difficulties for entrepreneurs when planning to implement new projects. To ensure compliance with legal regulations and optimize processes, businesses should choose to use Long Phan’s professional business consulting services. We provide consulting services on dissolving a business that usually include:

• Evaluate the financial and legal situation of the business.
• Consulting on choosing a suitable dissolution plan.
• Support in preparing dissolution documents.
• Business representatives work with tax authorities and business registration agencies.
• Instructions for implementing post-dissolution procedures.

Dissolving a business is a complicated process, requiring strict compliance with legal regulations. To ensure proper implementation of the process and avoid risks, customers can contact Long Phan via Hotline: 0906735386 for detailed advice on business dissolution procedures. We are committed to supporting customers in completing the dissolution process quickly, effectively and legally.