Legal regulations on termination of operations of a joint stock company’s branch

Terminating operations of a joint stock company’s branch is a necessary process when the company decides to cease operations at a specific location. It not only affects the organizational structure of the company but also relates to legal obligations, financial responsibilities, and the rights of employees. Below, NPLaw invites readers to explore the legal issues related to terminating operations of a joint stock company’s branch.

I. The need to terminate operations of a joint stock company’s branch

The need to terminate operations of a joint stock company’s branch arises when the company no longer needs to maintain a presence in a certain area or when there is a change in business strategy. This requires the company to comply with relevant legal regulations to ensure the rights of employees and stakeholders (related parties), while fulfilling financial, tax, and insurance obligations.

Terminating a branch’s operations also helps the joint stock company optimize costs and focus on new business objectives. Therefore, this process must be implemented carefully and in compliance with the law to avoid legal risks and protect the interests of the company and its employees.

II. Legal regulations on terminating operations of a joint stock company’s branch

1. Cases in which a joint stock company’s branch may be terminated

According to Clause 1, Article 213 of the Law on Enterprise 2020, a branch of a joint stock company may be terminated in the following cases:

- When there is a decision on terminating the branch by the joint stock company itself;

- When there is a decision on revoking the branch’s Certificate of Operation Registration by a competent State agency.

Thus, a branch may be terminated by the company’s proactive decision or by the competent authority's revocation decision. Such terminations must be implemented in accordance with the legal procedures to ensure legality and avoid future legal liabilities.

2. Conditions for terminating a joint stock company’s branch

According to Clauses 1 and 2, Article 72 of Decree 01/2021/ND-CP, to terminate the operations of a branch, the following conditions and procedures must be met:

- Before notifying the termination of the branch’s operations, the joint stock company must register with the tax authority to complete all tax obligations related to such a branch;

- Within 10 days from the date of obtaining a decision on terminating the branch, the joint stock company must submit a Notification of terminating operations to the Business Registration Office where the branch is located;

- Together with the notification, the company must submit the resolution or decision of the Board of Directors on the termination, and a copy of the minutes of the Board of Directors’ meeting approving such resolution.

Thus, to terminate the branch’s operations, the joint stock company must fulfill the above conditions under current legal regulations.

3. Procedures and processes for terminating operations of a joint stock company’s branch

According to Article 72 of Decree 01/2021/ND-CP, the procedures and processes for termination are as follows:

Step 1: Preparing a dossier

- For domestic branches, a dossier includes:

+ Notification on the termination of the branch’s operations (Form Appendix II-20 - Circular 01/2021/TT-BKHĐT);

+ Decision of the Board of Directors on termination of the branch;

+ Minutes of the Board of Directors’ meeting approving the termination;

+ Request for supplement and update of registration information (Form Appendix II-15);

+ Power of attorney (if not submitted by the legal representative);

+ Valid copy of the identity document of an authorized person.

- For foreign branches, a dossier includes:

+ Notification of termination of the foreign branch’s operations (Form Appendix II-21);

+ Power of attorney (if not submitted by the legal representative);

+ Valid copy of the identity document of an authorized person.

Step 2: Submitting the dossier

- Domestic branch: Submitting to the Business Registration Office – Department of Planning and Investment where the branch is located.

- Foreign branch: Submitting to the Business Registration Office – Department of Planning and Investment where the parent company is headquartered.

Step 3: Processing and issuing notification

Within 5 working days from the date of receiving the valid dossier, if there is no objection from the tax authority:

- The Business Registration Office will update the termination of the branch in the National Business Registration Database;

- At the same time, issue an official notification on the termination of the branch’s operations.

III. Questions on termination of a joint stock company’s branch

1. What are the responsibilities of the legal representative when terminating the operations of a branch?

According to Clause 2, Article 213 of the Law on Enterprise 2020, the legal representative of the company is jointly responsible with the head of the branch being terminated for the truthfulness and accuracy of the termination dossier, including:

- Internal documents such as decisions, minutes of meetings, notifications;

- Information declared in registration forms;

- Financial obligations (if any), especially those related to taxes.

Thus, the legal representative’s responsibility is not only a legal obligation but also reflects transparency in corporate governance.

2. What should employees do to protect their rights when the branch is terminated?

According to Article 48 of the Labor Code 2019, when terminating a branch leads to termination of labor contracts, employees should:

- Request the company to fully settle entitlements within the statutory period: Within 14 working days from contract termination, or up to 30 days if the branch is terminated. Accordingly, payments include:

+ Remaining wages/ salaries;

+ Severance allowance (if eligible);

+ Insurance payments (social, health, unemployment);

+ Payment for unused annual leave days;

+ Other rights under the labor contract or collective agreements.

Besides, the employer must also:

- Certifying participation in social and unemployment insurance; and returning the social insurance book (if not obtaining);

- Returning original personal documents held by the company;

- Providing copies of work-related documents upon request (at the company’s expense).

Thus, employees should actively request the company to fulfill these obligations to protect their legal rights.

3. Differences between termination of operations of independent and dependent branches

4. Procedures for terminating branch’s operations under current Law

According to Article 72 of Decree 01/2021/ND-CP:

Step 1: Preparing a dossier

- Domestic branches:

+ Notification on the termination of the branch’s operations (Form Appendix II-20 - Circular 01/2021/TT-BKHĐT);

+ Decision of the Board of Directors on termination of the branch;

+ Minutes of the Board of Directors’ meeting approving the termination;

+ Request for supplement and update of registration information (Form Appendix II-15);

+ Power of attorney (if not submitted by the legal representative);

+ Valid copy of the identity document of an authorized person.

- Foreign branches:

+ Notification of termination of the foreign branch’s operations (Form Appendix II-21);

+ Power of attorney (if not submitted by the legal representative);

+ Valid copy of the identity document of an authorized person.

Step 2: Submitting dossier

- Domestic branch: Business Registration Office where the branch is located.

- Foreign branch: Business Registration Office where the parent company is headquartered.

Timeline: Within 5 working days from the date of receiving the valid dossier, without any objection from the tax authority, the Business Registration Office updates the national database and issues the termination notice.

5. Is it necessary to notify the tax authority when terminating a branch?

Under Clause 1, Article 72 of Decree 01/2021/ND-CP, before submitting the termination dossier to the Business Registration Office, the company must register with the tax authority to complete tax obligations. 

Thus, the company does not send a termination notice to the tax authority but must complete tax procedures before registering termination at the Business Registration Office.

6. Does terminating a branch affect the parent company’s business license?

Terminating a branch does not affect the parent company’s business license. Since a branch is a dependent unit without separate legal status:

- The parent company continues normal operations, unaffected in its legal status or business license;

- Only the change in branch status needs to be updated in the company’s business registration records.

IV. Legal consulting services on terminating branch operations of a joint stock company

The above is NPLaw’s analysis of terminating the operations of a joint stock company’s branch. With an experienced team of lawyers and legal specialists, NPLaw is always ready to accompany, advise, and support clients on all legal matters related to branch termination. If you need assistance with other legal issues, please contact NPLaw at: