While essential goods production enterprises were able to maintain operations, recover financially, and continue business after the Covid pandemic, things became difficult for enterprises in other industries. At that time, many enterprises chose to close branches to stabilize their situation. So, how is the issue of branch termination regulated? Let's find out together with NPLaw in the article below.

I. The reality of branch termination in enterprise

The peak of the Covid epidemic has passed, but its consequences for the economy remain to this day. The pandemic has financially exhausted many enterprises, forcing them to close branches to continue operating and stabilize production and business. This is not only due to decreased enterprise revenue but also due to increased production costs.

Besides, labor shortages are a significant concern as the rate of workers returning home increases. A large portion of laborers have gone home for Tet holiday and found other jobs. Therefore, many enterprises are forced to continue closing branches, even shutting down the entire enterprise because they lack sufficient revenue and the minimum number of employees to operate the factory/enterprise.

II. Regulations on terminating branch operations

Enterprise, in order to continue their production and business activities when facing financial and human resource difficulties, are forced to terminate their branch operations. Enterprise law has specific regulations on this issue in the Enterprise Law 2020 and Decree No. 01/2021/ND-CP on enterprise registration.

Specifically, Article 213 of the Enterprise Law 2020 (guided by Article 72 of Decree No. 01/2021/ND-CP) stipulates that the operation of branches, representative offices, and business locations can be terminated by the decision of the enterprise itself or by the decision to revoke the Certificate of Branch Operation Registration, Representative Office by a competent state agency.

              

In addition, the legal representative of the enterprise and the head of the terminated branch or representative office are jointly responsible for the accuracy and truthfulness of the dossier on the termination of the branch, representative office, and business location.

Furthermore, an enterprise with a terminated branch is responsible for fulfilling contracts, paying debts, including branch tax debts, and continuing to employ or settle sufficient legal benefits for employees who have worked at the branch in accordance with the law.

Moreover, the revocation of the Certificate of branch operation registration, representative office is guided by Article 77 of Decree 01/2021/ND-CP on enterprise registration.

III. Cases of terminating branch operations

The law does not specifically stipulate the cases of terminating branch operations, however, in reality, the termination of branch operations often occurs when enterprises encounter difficulties in the production and business process, so they have to close some branches.

The termination of branch operations can be by the decision of the company itself or by the decision of a competent state agency through the decision to revoke the Certificate of Branch Operation Registration in the following cases:

- The declared content in the branch operation registration dossier is fake;

- The branch has stopped operating for 01 year but has not notified the Business Registration Office and the Tax Authority;

- According to the decision of the Court, the request of a competent agency according to the provisions of law.

IV. Procedures for terminating branch operations

1. Dossier for terminating branch operations

According to the regulations in Clause 2, Article 72 of Decree No. 01/2021/ND-CP on enterprise registration, the dossier for terminating branch operations must include the following documents:

- Notification of the termination of branch operations according to the form in Appendix II-20 attached to Circular 01/2021/TT-BKHDT dated March 16, 2021, on enterprise registration guidelines;

- Original copy of the resolution, decision, and a copy of the minutes of the Members' Council meeting for a limited liability company with two or more members, a partnership company, or the Board of Directors for a joint-stock company; Resolution, decision of the company owner for a one-member limited liability company on the termination of branch operations;

- Power of attorney for the representative to carry out the procedures for terminating branch operations (Not required to be notarized or authenticated) (Original copy);

- Legal documents of the authorized party to carry out the procedures for terminating branch operations (Copy).

Thus, an enterprise wishing to terminate branch operations needs to prepare all the above types of documents and materials.

2. Order and procedures for terminating branch operations

When an enterprise is forced to terminate its branch, this creates many other complex relationships, such as the relationship between members of the enterprise, the debt relationship between creditors and the enterprise, and the relationship between the dissolved enterprise and employees. Therefore, the termination of branch operations must also follow a strict process according to the provisions of law. Specifically, Article 72 of Decree 01/2021/ND-CP stipulates the procedures for terminating branch operations as follows:

Step 1: Before notifying the termination of branch operations, the enterprise, branch must register with the Tax Authority to complete tax payment obligations in accordance with the provisions of tax law.

Step 2: Within 10 days from the date of the decision to terminate branch operations, the enterprise sends a Notification of the termination of branch operations to the Business Registration Office where the branch is located. 

In case of termination of branch operations, the notification must be accompanied by a resolution, decision, and a copy of the minutes of the Members' Council meeting for a limited liability company with two or more members, a partnership company, or the Board of Directors for a joint-stock company; Resolution, decision of the company owner for a one-member limited liability company on the termination of branch operations.

Step 3: After receiving the dossier for terminating branch operations, the Business Registration Office sends information about the branch's termination of operations to the Tax Authority.

Within 02 working days from the date of receiving information from the Business Registration Office, the Tax Authority sends its opinion on the completion of the branch's tax payment obligations to the Business Registration Office.

Within 05 working days from the date of receiving the dossier for terminating branch operations, the Business Registration Office terminates the branch's operations in the National Business Registration Database if it does not receive a refusal opinion from the Tax Authority, and issues a notice of the termination of branch operations.

In addition, the termination of branch operations of a foreign enterprise is carried out in accordance with the law of that country. 

Within 30 days from the date of officially terminating branch operations, the enterprise sends a written notice of the termination of branch operations of the foreign enterprise to the Business Registration Office where the enterprise's head office is located.

The Business Registration Office updates the enterprise's information in the National Business Registration Database within 03 working days from the date of receiving the notice.

Thus, when a business wishes to terminate branch operations, it needs to prepare a complete dossier and follow the procedures prescribed by law.

V. Answering questions about branch termination procedures

1. When does a microfinance institution announce information about the termination of operations and dissolution of a branch, transaction office, representative office, or non-business unit?

Based on Clause 1, Article 28 of Circular 19/2019/TT-NHNN, within 07 working days from the date of termination of operations or dissolution of a branch, transaction office, representative office, or non-business unit, the microfinance institution... announces information about the termination of operations or dissolution on the State Bank's electronic portal and the microfinance institution's website (if any), a daily print newspaper of the central or local government in 03 consecutive issues, or a Vietnamese electronic newspaper.

Therefore, a microfinance institution announces information within 07 working days from the date of termination of operations or dissolution of a branch, transaction office, representative office, or non-business unit.

2. Does an enterprise have to pay license fees when terminating branch operations in the middle of the year?

Whether an enterprise has to pay license fees when terminating branch operations in the middle of the year is based on Clause 3, Article 4 of Decree 139/2016/ND-CP (amended by point b, Clause 2, Article 1 of Decree 22/2020/ND-CP) on license fee collection. Specifically:

Small and medium-sized enterprises converted from household businesses (including branches, representative offices, and business locations) when the license fee exemption period ends (the fourth year from the year of enterprise establishment): if the termination occurs in the first 6 months of the year, the full annual license fee is paid; if the termination occurs in the last 6 months of the year, 50% of the full annual license fee is paid. Therefore, if the enterprise has not completely terminated, it must pay the full annual license fee.

3. When a branch of a joint-stock company terminates operations, is it necessary to carry out asset liquidation procedures?

The liquidation of assets of a branch of a joint-stock company when terminating operations is based on Article 44 of the Enterprise Law 2020 on branches, representative offices, and business locations of enterprises, as follows: A branch is a dependent unit of an enterprise, tasked with performing all or part of the functions of the enterprise, including the function of authorized representation. The business lines of the branch must be consistent with the business lines of the enterprise.

Therefore, a branch is only a dependent unit of the enterprise, does not have legal status, and does not have separate assets. Therefore, before terminating the branch, the enterprise can transfer assets or liquidate assets according to its decision.

VI. Branch termination procedure consulting services

Currently, there are many law firms/law offices on the market that provide branch termination procedure consulting services. Among them, NPLaw is a company with high professional experience and a team of dedicated, meticulous, and professional employees. The company is always ready to advise and provide solutions for customers to choose the most time-saving and cost-effective way.

The services at NPLaw when carrying out branch termination procedures for enterprises are as follows:

- Advising clients on information related to company branch closure procedures.

- Receiving information from clients about company branch closure procedures.

- Drafting dossiers on company branch closure procedures.

- Submitting company branch closure dossiers at the Business Registration Office and working with the tax authority.

- Representing clients in carrying out company branch closure procedures.

- Receiving and handing over results to clients after completing company branch closure procedures.

The above is information to answer questions about branch termination procedures that NPLaw sends to readers. If readers have any related questions that need further clarification, please contact NPLaw at the following contact information.