Understanding voluntary liquidation of enterprises

Voluntary liquidation of an enterprise is a strategic decision, typically made when a company is no longer able or willing to continue its operations. From a legal perspective, the following article clarifies the core issues relating to the voluntary liquidation of enterprises, including conditions, procedures, and arising obligations, thereby assisting enterprises in implementing the process effectively and in compliance with the law.

Voluntary liquidation of an enterprise is a strategic decision, typically made when a company is no longer able or willing to continue its operations. From a legal perspective, the following article clarifies the core issues relating to the voluntary liquidation of enterprises, including conditions, procedures, and arising obligations, thereby assisting enterprises in implementing the process effectively and in compliance with the law.

I. Overview of voluntary liquidation of enterprises in the current context

In the current context, voluntary liquidation of enterprises has become relatively common and may arise from various reasons, most notably business difficulties, prolonged losses, etc.

It is a legal process that requires enterprises to implement asset liquidation, settle outstanding debts, and fulfill all obligations to competent state authorities before officially ceasing operations. So how does the law regulate such matters? Let us explore the following content together with NPLaw.

1. Concept of voluntary liquidation of enterprises

Pursuant to Article 207 of the Law on Enterprise 2020, which provides for cases and conditions of enterprise liquidation, voluntary liquidation may be understood as the termination of the legal existence of an enterprise based on the enterprise’s own will, rather than by a decision of a competent authority.

2. Cases of voluntary liquidation of enterprises

According to Article 207 of the Law on Enterprise 2020, as amended and supplemented in 2025, cases of voluntary enterprise liquidation include:

Expiration of the operating term stated in the company’s Charter without a resolution or decision on extension;
liquidation according to a resolution or decision of the private enterprise owner in respect of a private enterprise; of the Members’ Council in respect of a partnership; of the Members’ Council or the company owner in respect of a limited liability company; or of the General Meeting of Shareholders in respect of a joint-stock company;
The company no longer has the minimum number of members or shareholders as required by law for a consecutive period of six months without implementing procedures for conversion into another type of enterprise.

3. Example of voluntary liquidation of enterprises

A typical example of voluntary liquidation is Joint Stock Company A, operating in the sector of manufacturing and trading electrical equipment. After a period of operation, the company encountered financial difficulties due to intense market competition and was unable to pay its due debts. The company convened a General Meeting of Shareholders and adopted a resolution on voluntary liquidation as it no longer had the ability to restore its business operations.

III. Legal provisions relating to voluntary liquidation of enterprises

1. Legal provisions enterprises should note when voluntarily dissolving

When voluntarily dissolving an enterprise, several important legal provisions must be observed to ensure that the process proceeds smoothly and in compliance with the law, including:

An enterprise may only be dissolved if it ensures full payment of all debts and other property-related obligations and is not involved in any dispute being resolved by a court or arbitration.
From the date of issuance of the liquidation decision, the enterprise and its managers are strictly prohibited from engaging in the following activities according to Article 211 of the Law on Enterprise 2020:
Concealing or dispersing assets;
Waiving or reducing the right to claim debts;
Converting unsecured debts into secured debts with the enterprise’s assets;
Entering into new contracts, except for those serving the purpose of enterprise liquidation;
Pledging, mortgaging, donating, or leasing assets;
Terminating the execution of contracts that are still in effect;
Raising capital in any form.
The enterprise must implement procedures for termination of operations of its branches, representative offices, and business locations (if any) with the Business Registration Authority, tax authorities, and other relevant authorities in accordance with Article 213 of the Law on Enterprise 2020.
The enterprise must submit a liquidation dossier and relevant documents to the Business Registration Authority to complete the liquidation procedures in accordance with Articles 208 and 210 of the Law on Enterprise 2020.

2. Conditions for voluntary liquidation of enterprises

Pursuant to Article 207 of the Law on Enterprise 2020, an enterprise may only be dissolved when all of the following conditions are satisfied:

Expiration of the operating term: The enterprise has completed the operating duration specified in its Charter without a decision on extension.
Adoption of a resolution/decision by the owner/Members’ Council/General Meeting of Shareholders: Depending on the type of enterprise, the owner, the Members’ Council (for limited liability companies), or the General Meeting of Shareholders (for joint-stock companies) has the authority to decide on liquidation.
Full settlement of debts and other property-related obligations: The enterprise must ensure full payment of all debts, including tax debts and other financial obligations, prior to liquidation.
Absence of dispute resolution proceedings: The enterprise must not be involved in any dispute being resolved by a court or arbitration.

3. Procedures for voluntary liquidation of enterprises

The procedures for voluntary enterprise liquidation are provided for in Articles 208 and 210 of the Law on Enterprise 2020, as follows:

Adoption of a resolution or decision on enterprise liquidation. Such resolution or decision must include the following principal contents:
Name and address of the enterprise’s headquarters;
Reason for liquidation;
Duration and procedures for liquidation of contracts and payment of the enterprise’s debts;
Plan for settlement of obligations arising from labor contracts;
Full name and signature of the private enterprise owner, company owner, Chairperson of the Members’ Council, or Chairperson of the Board of Directors.
Organization of asset liquidation: The private enterprise owner, Members’ Council or company owner, or the Board of Directors shall directly organize the liquidation of enterprise assets, unless the company’s Charter provides for the establishment of a separate liquidation organization.
Submission of the liquidation resolution/decision and meeting minutes to the Business Registration Authority, tax authorities, and employees within seven working days from the date of adoption; and submission of the liquidation resolution/decision and debt settlement plan to creditors and relevant parties in cases where the enterprise still has outstanding financial obligations.
Publication of the liquidation resolution/decision on the National Enterprise Registration Portal and public posting thereof at the headquarters, branches, and representative offices of the enterprise.
Notification of the enterprise’s liquidation status on the National Enterprise Registration Portal immediately after receipt of the liquidation resolution/decision, together with the publication of such resolution/decision and the debt settlement plan (if any).
The legal representative of the enterprise shall submit the enterprise liquidation dossier to the Business Registration Authority within five working days from the date of full settlement of all debts and shall receive the liquidation result.

The enterprise liquidation dossier includes the following documents:

Notice of enterprise liquidation;
Report on liquidation of enterprise assets; and a list of creditors and debts that have been settled, including full payment of tax debts and outstanding contributions to social insurance, health insurance, and unemployment insurance for employees after the liquidation decision (if any).

IV. Questions regarding voluntary liquidation of enterprises

1. How are employees’ rights protected in the case of voluntary liquidation of enterprises?

Pursuant to Clause 5 Article 208 of the Law on Enterprise 2020 and Article 48 of the Labor Code 2019, employees’ rights are protected as follows:

The enterprise must give priority to settling the following obligations:
+ Outstanding salary payments for unpaid working day
+ Severance allowance;
+ Payment of compulsory insurances, including social insurance, health insurance, and unemployment insurance, as well as other employee benefits stipulated in collective labor agreements and signed labor contracts.

2. What rights does a shareholder have if they disagree with the decision on voluntary liquidation of enterprises?

Pursuant to Clause 2 Article 119 and Article 132 of the Law on Enterprise 2020, shareholders are not permitted to withdraw contributed capital in the form of ordinary shares from the company in any manner, except where such shares are redeemed by the company or purchased by another party.

Accordingly, if a shareholder disagrees with a decision on voluntary enterprise liquidation, they have the right to request the company to redeem their shares in accordance with the law. If the company does not redeem the shares, the shareholder may transfer the shares to another party or initiate legal proceedings to protect their lawful rights and interests if they believe that the liquidation decision is unlawful or infringes upon their interests.

3. How do disputes among shareholders affect the voluntary liquidation process?

Pursuant to Article 207 of the Law on Enterprise 2020, an enterprise may only be dissolved if it ensures full payment of all debts and other property-related obligations and is not involved in any dispute being resolved by a court or arbitration.

Accordingly, if disputes among shareholders are related to the enterprise and are being resolved by a court, the enterprise is not permitted to implement liquidation procedures. If shareholder disputes are unrelated to the enterprise, the enterprise may still be dissolved provided that the remaining statutory conditions are satisfied.

4. How are debts and financial obligations handled upon voluntary liquidation of enterprises?

Pursuant to Clause 5 Article 208 of the Law on Enterprise 2020, debts and financial obligations are handled in the following order of priority:

Outstanding salaries, severance allowances, compulsory social insurance, health insurance, unemployment insurance, and other employee benefits in accordance with law and as agreed in collective labor agreements and labor contracts;
Tax debts;
Other debts.

After payment of liquidation expenses and settlement of all debts, the remaining assets shall be distributed to the private enterprise owner, members, shareholders, or company owner in proportion to their capital contribution or shareholding.

5. What risks may arise if voluntary liquidation is not implemented properly?

Improper voluntary liquidation may result in various legal risks, including administrative fines, legal disputes, and difficulties in establishing new enterprises in the future. In particular, failure to fully fulfill financial and legal obligations may result in forced liquidation or litigation.

Administrative fines: Enterprises that fail to implement liquidation procedures may be subject to fines depending on the nature and severity of violations in accordance with Decree No. 24/2025/ND-CP.
Legal disputes: Failure to settle debts, lack of transparency in asset liquidation, or failure to resolve disputes may lead to lawsuits with creditors, employees, or other related parties.
Difficulties in establishing new enterprises: Enterprises dissolved due to legal violations may face significant obstacles, or even prohibition, in establishing new enterprises in the future.
Joint liability: The legal representative may take joint liability for the enterprise’s debts and property-related obligations if liquidation procedures are not properly followed.
Bankruptcy: If the enterprise is unable to pay its debts, it may be declared bankrupt by the court, leading to a more complex liquidation process under judicial supervision.
Delay in removal of enterprise registration: Failure to comply with proper procedures may delay the removal of the enterprise’s name from the business registration system, adversely affecting future enterprise establishment or the personal reputation of managers.
Tax-related risks: Final tax settlement and tax code closure procedures upon liquidation may encounter difficulties, including risks of tax arrears collection and late payment fines.
Asset-related risks: Improper or non-transparent asset liquidation may result in asset disputes or be deemed asset dispersal.

V. Should enterprises seek legal counsel for effective support in voluntary liquidation?

Enterprises should seek legal counsel to receive effective support throughout the voluntary liquidation process. Engaging legal counsel helps ensure that the liquidation proceeds smoothly, complies with applicable laws, mitigates risks, and saves time and costs.

The above information is provided by NPLaw to address questions regarding voluntary enterprise liquidation. Should you have any further inquiries regarding such matters or other legal issues, please contact NPLaw for direct consultation and guidance.