Dissolution of enterprise during the Covid-19 pandemic: 7 remarkable matters

Date: 3 August 2021

Writer: Thu Tran

The prolonged Covid-19 epidemic has dealt a blow to enterprises in Vietnam. As a result, many enterprises must stop working. Some of them have decided to dissolve. However, to implement the enterprise’s dissolution during the Covid-19 epidemic is also a difficult problem.

Through this article, BLawyers Vietnam would like to present to enterprises about 7 remarkable matters when dissolving during the pandemic. 

1. Dissolution of enterprise procedures are under delay because State agencies have restricted from meeting people

Currently, to strictly comply with the Prime Minister’s directive on the prevention of the Covid-19 epidemic, almost all competent business registration agencies shall notify on receiving application via online or by post, not to directly receive from citizens as usual.

Under the prevailing regulation, there is no more than 1/3 of the number of cadres, civil servants, public employees, and employees working at the offices, except for the armed forces and the health sector are 100% of quantities. This is a result that the enterprise’s dissolution application shall be prolonged than before. Thus, enterprises should note this matter to implement the dissolution procedures as planned.

Good read: 6 things employers cannot do towards employees during the Covid-19 pandemic

2. Sending and receiving the application by post

Currently, the postal and telecommunications service is also facing lots of obstacles. In addition to losing documents and dossiers as before, many post offices have had to postpone the delivery time from 5 to 7 days. Even there is someone infected with the Covid-19 pandemic, such post offices must stop working until the epidemic situation is under control.

Within 07 business days from the date that resolution or decision on dissolution takes effect, enterprise must apply to competent agencies. In fact, the agencies will base on the date of sending written on the parcel to calculate the time limit of application but there is no clear regulation on the application time by post. Therefore, there is a risk of violating the deadline if the application is under delay by post.

3. Notarizing and authenticating documents and papers

By laws, an enterprise’s application on dissolution includes the original or a valid copy of some documents. Therefore, the enterprise must do notarizing and authenticating the documents and papers. However, according to the Official Letter No. 2468/UBND-VX dated 24 July 2021 and Official Letter No. 4481/BCT-TTTN dated 27 July 2021, notarization and authentication services are not considered as the essential services and not allowed to operate at this time.

Unless the enterprise prepares such required dossiers in advance, it is difficult to notarize and authentic documents right now until new regulations are available.

4. Settlement of salaries and compulsory insurances for employees

One of the conditions for the dissolution of enterprise is paying off the salary debts, severance allowance, compulsory insurances, and other benefits of employees as prescribed. However, it is hard to make such payments during the epidemic since most enterprises allowed employees to work from home, stop working even of the quarantined employees. Therefore, it is difficult for enterprise to agree on termination and liquidation of labor contracts as well as paying for employees.

Enterprises also need to note the current social insurance policies. According to Decision No. 23/2021/QD-TTg dated 07 July 2021, the contribution rate of 0% is applied for the occupational accidents and occupational diseases fund from 01 July 2021 to 30 June 2022 and postponed for paying the retirement and death premium in a certain period, then must be compensated at the end of such period. So far, there has been no further guidance on paying social insurance to dissolve during the pandemic. Can enterprise apply the above provisions or must be compensated when dissolving? So, the enterprise should actively contact the social insurance agency for specific guidance.

5. Asset liquidation

Enterprises must liquidate assets by setting up an asset liquidity council, inspecting and evaluating assets’ quality, selling assets, and reports on liquidation of enterprise’s assets for submission together with a set of dissolution applications.

Due to travel restrictions under the directives of the Prime Minister, it is difficult for enterprise’s owners and managers to liquidate assets as procedures and still ensure the content of the report as reality. Moreover, the inspection and evaluation of property quality is not only based on papers and documents. Instead, the inspectors must directly check the status of enterprise’s assets such as machineries, equipment, workshops, and other fixed assets. Valuating and selling such assets are also important for the dissolved enterprise to pay the costs and debts as prescribed. So, this procedure must be performed thoroughly.

6. Terminating branches, representative offices, and business locations of enterprise before dissolution

Closing branches, representative offices, and business locations of enterprises is a must before the dissolution of enterprise. This matter is always a concerning matter even if not during the epidemic period. In fact, many enterprises do not understand this regulation. Thus, competent authority returns the submitted application on dissolution to complete the termination of its dependent units in advance.

The procedures for termination of the above units must comply with the Law on Enterprises 2020 and relevant guiding documents.

Good read: 03 notable points of Law on Enterprises 2020 

7. Enterprise that stops working may be considerable for bankruptcy

During the stop working period, creditors may send the Court a petition to request opening the bankruptcy procedure for enterprises that are struggling due to the pandemic with grounds show that the enterprise is unable to pay debts within 3 months from the deadline. Thus, the enterprise must stop the dissolution, then follow bankruptcy procedures under the Court’s decision. The enterprise shall force to bear some restrictions from bankruptcy for its activities and assets on a case-by-case basis. Currently, the pandemic period is a sensitive time of the financial situation, so enterprise must pay attention to this matter.

Good read: How can an employee request a bankruptcy case over his company?

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Maybe you want to read:

6 things employers cannot do towards employees during the Covid-19 pandemic

Representative office of foreign trader in Vietnam: List of 26 frequently asked questions and answers

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