Writer: Thao Bui
When deciding to cease a business in Vietnam, foreign investors must note and take step by step pursuant to the law of Vietnam. There are lots of matters that the investors should note. By this article, our corporate lawyers would present some notes for the case of a foreign investor ceases an investment project attaching with a company establishment to manage the project.
The cessation goes through two steps, which are two separate procedures. Here are specific regulations of each step:
1. Terminating the investment project
According to Law on Investment 2020, there are 03 cases that an investor could stop their investment project as follows:
- The investor decides to terminate the investment project;
- Pursuant to termination conditions as prescribed in the contract or the company’s charter;
- The investment project duration expires.
Besides, the competent agency also requests termination of the investment project under 7 following cases:
- The investor fails to overcome the difficulties that lead project suspension in cases prescribed by law;
- The investor is no longer permitted to keep using the investment location and fails to complete the procedures for change of investment according to regulations;
- The investment registration authority cannot contact the investor or legal representative within the statutory term;
- Land reserved for the investment project is retrieved;
- The investor fails to pay the deposit or obtain a bank guarantee as prescribed by law;
- The investor conducted the investment activities on the basis of a feigned civil transaction;
- Pursuant to a judgment or decision of Court, or an arbitral award.
Of note, for a project subjects to investment policy approval, the competent agency shall terminate it after consulting the authority approving for such project.
Then, the investor shall himself liquidate the investment project in accordance with the law on asset liquidation. For the handling land use rights and assets on land, its process must comply with land law and relevant regulations.
2. Terminating the company operation
After Step 1 above, the investor shall conduct the enterprise dissolution procedure as follows:
Firstly, there would have a resolution or decision of owners, Board of Members, or General Meeting of Shareholders.
Secondly, the company must have no outstanding debt and financial obligations and no dispute at any authority of Vietnam.
Thirdly, the dissolution procedure goes through 05 below steps:
- Issuing a resolution or decision on dissolving company as mentioned above.
- Sending the resolution or decision to the competent business registration agency, tax agency and the company’s employees within a timeline the law requested.
- Directly organizing the liquidation of company’s properties. The company must set up a separate liquidation organization if the charter of company requires.
- Paying all debts in the order of legal priority. After completing financial obligations, the rest amount shall be divided among owners, members, or shareholders depending on their capital contribution.
- Then, submitting the dissolution dossier to business registration agency for settlement.
In conclusion, foreign investors who decide to cease business must comply with 2 above steps for ceasing an investment project in Vietnam. It is not easy and may take time and cost for working with stakeholders and authorities.
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