The dissolution of a Limited Liability Company (LLC) is a legal process to terminate a business's operations. When implementing this process, all relevant parties must comply with legal regulations on debt settlement, asset liquidation, labor and tax issues. The dissolution of a Limited Liability Company is an important decision that may affect many stakeholders; therefore, it should be carefully considered and conducted responsibly. Below are some important notes regarding the dissolution of a Limited Liability Company.
I. Current situation of dissolution of Limited Liability Companies
According to statistics from the National Business Registration Portal, up to now, there are above average of 13,228 enterprises completed the dissolution procedures. This indicates that company dissolution is relatively common as businesses withdraw from the market. This process can occur for various reasons such as: license expiration, failure to meet operating conditions, continuous losses, bankruptcy, mergers, splits, or by decision of the owner.
II. Legal provisions on dissolution of Limited Liability Companies
1. Legal basis for dissolution
Pursuant to Clause 1, Article 207 of the Law on Enterprise 2020, the legal basis for the dissolution of a Limited Liability Company include:
- The expiry of the company’s operational term as stated in its Charter without a decision to extend;
- A resolution or decision by the Members’ Council or the company owner to dissolve;
- The company no longer has the minimum number of members as prescribed by law for six consecutive months and fails to convert its type of business accordingly;
- The enterprise registration certificate is revoked, except where the Law on Tax Administration provides otherwise.
2. Competent authorities for dissolution
The competent authorities responsible for allowing the dissolution of a Limited Liability Company include:
- The Court;
- The Business Registration Authority.
3. Procedure for dissolution of a Limited Liability Company
The procedure for dissolving a Limited Liability Company is as follows:
- Step 1: Approve the resolution or decision on dissolution;
- Step 2: Publicly announce the dissolution decision to parties with related rights and interests;
- Step 3: Liquidate assets and pay the company’s debts;
- Step 4: Submit the dissolution application;
- Step 5: Update the legal status of the business on the National Enterprise Registration Database.
III. Questions about dissolution of Limited Liability Companies
1. Is the dissolution resolution a legal basis for dissolving a Limited Liability Company?
Yes. According to Clause 1, Article 207 of the Law on Enterprises 2020, the dissolution resolution or decision is one of the legal bases for dissolving a Limited Liability Company.
2. Is it necessary to return the company seal during the dissolution of a Limited Liability Company?
Yes. According to Clause 8, Article 70 of Decree No. 01/2021/NĐ-CP, the Limited Liability Company must return its seal and the Seal Registration Certificate to the police authority when implementing the dissolution procedure.
3. Is there an administrative fine for delaying the dissolution process?
Yes. According to Article 58 of Decree No. 122/2021/NĐ-CP, a delay in implementing the dissolution procedure may result in an administrative fine ranging from 20,000,000 VND to 30,000,000 VND.
4. Is personal income tax payable on capital contributions returned after the dissolution of a Limited Liability Company with two or more members?
No. Capital contributions returned after the dissolution of a Limited Liability Company with multiple members are not considered income. Therefore, individuals are not subject to personal income tax on these amounts.
IV. Legal consultancy services related to dissolution of Limited Liability Companies
The above information is provided by NPLAW to help clarify issues related to the dissolution of a limited liability company. If readers have any further questions that need clarification, please feel free to contact NPLAW via the following contact information:
