WHAT DO ENTERPRISES NEED TO DO WHEN THEY WOULD LIKE TO TEMPORARILY SUSPEND BUSINESS OPERATIONS? SOME NOTABLE POINTS

In the course of business operations, it is inevitable that the enterprise will encounter difficulties in finance, human resources, pandemic, etc., which gives rise to the need to suspend business activities instead of proceeding with dissolution.

However, in order to avoid mistakes of statutory procedures and legal consequences, enterprises are required to comply with the provisions of law when suspending business. Here is some of our advice on procedures as well as legal notes when enterprises would like to temporarily suspend their business operations.

1. When an enterprise can suspend its business operations?

Enterprises can conduct their business suspension when needed. However, in some cases in Clause 2, Article 206 of the Enterprise Law 2020, the business registration agency or competent state agency shall have the right to request the enterprise to suspend its business operations. Specifically:

Suspending conditional business lines and business lines with conditional market access for foreign investors when detecting that the enterprise does not fully meet the corresponding conditions as prescribed by law;

Suspending business at the request of relevant agencies in accordance with the provisions of the law on tax administration, environment and other relevant laws.

2. Procedures for temporary suspension of business operation

Pursuant to Article 66 of Decree No. 01/2021/ND-CP of the Government, an enterprise must notify in writing the business registration office where its head office is located at least 03 working days before the date of business suspension.

Application dossier includes:

Notice of suspension of business operation;

Decision of the owner (for one-member limited liability companies), of the Members' Council (for limited liability companies with two or more members), of the Board of Management for joint-stock companies;

Minutes of meeting of the Members' Council or General Meeting of Shareholders on business suspension (applicable to limited liability companies with 2 or more members and joint stock companies);

Authorization letter to carry out procedures at the Business Registration Office (if authorizing someone else).

Processing time: 03 working days from the date of receipt of valid application.

The Business Registration Office updates the legal status of the enterprise and the status of all branches, representative offices, and business locations of the enterprise in the National Database on Business Registration to the status of suspended business.

3. Time to suspend business operation

According to the provisions of Clause 1, Article 66 of Decree No. 01/2021/ND-CP of the Government, the duration of business suspension of each notice must not exceed 01 year. After the notice period of suspension expires, if the enterprise, branch, representative office or business location continues to suspend business, it must further notify the Business Registration Office.

Previously, according to the provisions of the Enterprise Law 2014, the total period of business suspension in a row must not exceed 02 years. However, the Enterprise Law 2020 does not limit the period of consecutive business suspension. It is understandable that an enterprise can suspend business for many years in a row.

4. Is it possible to resume business operation before the notice period of suspension?

The answer is absolutely possible. Enterprises only need to send a notice to the Business Registration Office where the enterprise is headquartered at least 03 working days before the date of resumption of business before the notified deadline.

5. Administrative fines for not complying with the notice of business suspension to the business Registration Agency

According to Article 10 of Decree 125/2020/ND-CP of the Government, enterprises will be fined from 1,000,000 to 2,000,000 VND for failing to notify the suspension of business operations.

6. Other legal notes

During the business suspension, the enterprise must fully pay the outstanding tax, social insurance, health insurance and unemployment insurance amounts; continue to pay debts, complete the performance of contracts signed with customers and employees, unless otherwise agreed upon by enterprises, creditors, customers and employees.
Taxpayers are not required to submit tax declaration dossiers, except where taxpayers suspend their operations or business for less than a full month, quarter, calendar year or fiscal year, they still have to submit monthly and quarterly tax declaration dossiers; annual tax finalization dossiers (Decree 126/2020/ND-CP of the Government).

ADK & Co Vietnam Lawyers Law Firm