"Many enterprises who were not able to hold up due to the lasting for two years of the pandemic, have had to find a way out that they can withdraw from the market and legal responsibilities by an enterprise dissolution procedure. However, there are not all cases of dissolution put an end to the liability.
Facing burden of the costs of premises, salary, bank loan interest and other costs during the enormous pandemic, the continual interruption of production and business activities as well as business opportunities, which have been reduced or no longer, many enterprises have decided to dissolve their businesses to terminate their operations and be released from legal responsibilities.
Number of the enterprises registering for dissolution has increased
Statistics from business management agencies show that the returns of the pandemic in 2021 have forced more and more small and medium-sized enterprises in commerce and services to withdraw from the market. Compared to the same period in 2020, the number of dissolved enterprises increased by 33.8%, and the number of enterprises temporarily suspended operation and waiting for dissolution procedures increased by 25.7% (1). However, there are not all cases of dissolution can remove all legal responsibilities for the enterprises and the enterprise managers.
A legal case is recorded: company A sued company B to request for the payment of debt arising from a sale and purchase contract between these companies. The court, after accepting the petition, summoned company B to take testimony and work on the debt under the company A’s petition, but company B was absent. The court decided to collect evidence and sent an official dispatch to Business Registration Office of Department of Planning and Investment which is the company B’s management agency to verify the operation status of company B. According to the response letter and an extract of the dissolution dossier, issued by the Business Registration Office, stating that company B was “dissolved”, which means, had completed the dissolution procedure and did not operate any longer. By comparing records, it could be seen that company B had dissolved before company A brought a lawsuit of debt collection. In this case, the court suggested company A should withdraw the petition because company B has dissolved and the defendant no longer exists. If the plaintiff wants to sue for the debt collection, he or she has to sue individuals of the Members’ Council. The plaintiff, after that, withdraws the petition and adjusts the petition, in the Name of Defendant, which is individually managers of company B to require the performance of the payment obligation.
Debts must be paid off at first
In legal aspect, the enterprise dissolution is a statutory procedure for an enterprise when it realized that it is no longer able to operate and wishes to legally release from the legal obligations. According to Law on Enterprises, when the enterprise wants to terminate its operation, the enterprise’s owner, in the case of a private enterprise; or the members’ Council, in the case of a partnership; or the members’ council and the company owner, in the case of a limited liability company; or general meeting of shareholders, in the case of a joint-stock company, will issue a resolution, a decision of the enterprise dissolution. However, under the requirement of the Law, the enterprises can only be dissolved when they ensure to pay off all debts and other obligations of property and are not in any dispute resolution process in the court or arbitration.
The debts that the enterprises must pay include the collection of: (i) Salary debts, severance pay, social insurance, health insurance, unemployment insurance in accordance with the Law and other employees’ benefits under a collective labour agreement and signed labour contract; (ii) tax debt; (iii) other debts, (iv) dissolution costs of the enterprise.
The enterprise dissolution dossier must submit the following documents: (i) Notice of enterprise dissolution, (ii) report on liquidation of enterprise assets; (iii) a list of creditors and the amount of debt paid, including payment of tax debts and payment of social insurance, health insurance and unemployment insurance premiums for employees after deciding to dissolve the enterprise (if any). Even in case the enterprise still remains its financial obligations, it has to notice debt settlement resolution to its creditors, the people who have relevant rights and obligations. The debt settlement resolution must have the name and address of the creditors; debt amount, due date, location and method of the debt payment; methods and time limit for settling creditors' complaints. In general, to be dissolved, the enterprises, at first, must deal with the debt settlement.
Especially, the Law on Enterprise also expects for the case that if a certain debt remains but the enterprise is dissolved for reasons of its dishonesty or falsified the dissolution dossier to be dissolved, who will take responsibility. In this case, individuals who are members of the Board of management of the joint-stock company; members of the Members’ Council of the limited liability company; owners of the company or the private enterprise; directors or president, or partners or legal representatives of the enterprises take responsibility for the trustworthy and accuracy of the enterprise dissolution dossier. In case the dissolution dossier is inaccurate or forged, these persons shall be jointly responsible for paying the unresolved employee benefits, unpaid tax, other unpaid debts and take individual responsibility before the Law, for the consequences arising within 05 years from the date of submitting the enterprise dissolution dossier to the business registration agency. In this case, it can be seen that the legal responsibility has transformed from the limited liability of the company (limited liability or shareholding) to unlimited liability until the debt is paid off by the manager’s own assets.
In conclusion, the dissolution only helps to release from all responsibilities when the enterprises have completed the payment obligation of debts before or during the dissolution procedures. In case the debt cannot be paid off, the enterprise should find other legal resolutions, possibly requiring the opening of bankruptcy proceedings, to terminate its operation in accordance with the Law instead of, by all means, trying to become “dissolved”, but the legal responsibility of enterprise’s managers still remains.