Legal regulations on resolutions on company dissolution

A resolution on company dissolution is a crucial legal instrument reflecting the decision to terminate a company’s operations. In practice, the issuance and implementation of such a resolution must strictly comply with applicable laws to safeguard shareholders’ interests, settle outstanding debts, mitigate legal risks, and ensure procedural transparency.

A resolution on company dissolution is a crucial legal instrument reflecting the decision to terminate a company’s operations. In practice, the issuance and implementation of such a resolution must strictly comply with applicable laws to safeguard shareholders’ interests, settle outstanding debts, mitigate legal risks, and ensure procedural transparency.

I. Introduction to resolutions on company dissolution in the current context

At present, a resolution on company dissolution plays a pivotal role in lawfully and transparently terminating a company’s operations. Such a document is issued by the competent authority, shareholders, or the company owner, reflecting the decision to dissolve the enterprise along with plans for handling debts, assets, and other legal obligations.

The preparation and implementation of such a resolution must comply with the Law on Enterprise 2020 and relevant guiding instruments to ensure shareholders’ rights, proper prioritization of debt settlement, and avoidance of disputes and legal risks.

II. Concept of a resolution on company dissolution

A resolution on company dissolution is understood as an official document issued by the competent authority, shareholders, or the enterprise owner, expressing the decision to terminate the company’s operations. Such a resolution must comply with legal requirements, including the full settlement of debts and other asset-related obligations, and the condition that the enterprise is not currently involved in dispute resolution proceedings before a court or arbitral tribunal. The issuance and execution of the dissolution resolution must follow proper legal procedures to ensure the rights of relevant parties and to mitigate legal risks.

III. Legal regulations governing resolutions on company dissolution

1. Main legal provisions to be noted

Enterprises should pay particular attention to the following regulations:

Authority to issue the dissolution resolution: Depending on the type of enterprise, the dissolution resolution must be adopted by the competent authority:
+ Sole proprietorship: The enterprise owner;
+ Single-member limited liability company: The company owner;
+ Multi-member limited liability company and partnerships: The Members’ Council;
+ Joint-stock company: The General Meeting of Shareholders.
Time for notification: Within 07 working days from the date of adoption of the dissolution resolution, the enterprise must send a notification to the provincial-level business registration authority where its headquarter is located.
Contents of the notification: The notice of dissolution must be accompanied by the following documents:
+ The dissolution resolution or decision issued by the competent authority;
+ Minutes of the meeting of the competent authority;
+ A debt settlement plan (if any).
Public disclosure: Upon receipt of the notification, the provincial business registration authority must publish information on the enterprise’s dissolution on the National Business Registration Portal within 01 working day.
Public announcement in newspapers: Where required by law, the dissolution resolution must be published in at least one print or electronic newspaper for three consecutive issues.

Compliance with the above provisions will facilitate a lawful and smooth dissolution process.

2. Measures for handling violations related to dissolution resolutions

Pursuant to Article 58 of Decree No. 122/2021/ND-CP, enterprises may be subject to administrative sanctions ranging from 20,000,000 VND to 30,000,000 VND in the following cases:

Failure to implement dissolution procedures upon the expiry of the operational term specified in the company charter without a decision on extension;
Failure to initiate dissolution procedures when the company does not maintain the minimum required number of members for six consecutive months without converting its business form;
Failure to complete procedures for termination of operations of branches, representative offices, or business locations prior to submitting the dissolution application.

Remedial measures include compulsory implementation of dissolution procedures for violations specified at Points a and b, Clause 1 of this Article, and compulsory termination procedures for branches, representative offices, and business locations for violations specified at Point c, Clause 1.

Accordingly, strict compliance with dissolution procedures is essential to avoid administrative sanctions and ensure legal compliance.

IV. Questions on resolutions on company dissolution

1. Who has the authority to propose a dissolution resolution at a shareholders’ meeting?

Pursuant to Article 208 of the Law on Enterprise 2020, in a joint-stock company, the General Meeting of Shareholders has the authority to propose and adopt a dissolution resolution. The dissolution must be approved through a duly convened and conducted meeting in accordance with the law and the company charter. The resolution must meet a prescribed voting threshold, typically ranging from 65% to 75% of the total voting shares, depending on the company’s charter. Therefore, only the General Meeting of Shareholders has the authority to propose and adopt a dissolution resolution.

2. How are disagreements regarding a dissolution resolution resolved?

Under Article 208 of the Law on Enterprise 2020, a dissolution resolution/decision must be approved by:

The owner (for single-member limited liability companies);
The Members’ Council (for multi-member limited liability companies and partnerships);
The General Meeting of Shareholders (for joint-stock companies).

If a concerned party submits a written objection within 180 days from the date of sending the dissolution notice by the enterprise, the Business Registration Office will suspend the update of the “dissolved” status and publicly disclose the information. In cases of disagreement or objection, disputes should be resolved through internal dialogue or settled by a court or arbitral tribunal before completion of the dissolution process, typically through the following steps:

Internal negotiation and discussion;
Seeking advice from legal experts;
Initiating court proceedings if the dispute cannot be resolved amicably.

Dispute resolution must comply with applicable laws and may affect the timeline of the dissolution process.

3. What risks arise if a dissolution resolution fails to comply with legal requirements?

Legal consequences for the enterprise: Loss of legal status and inability to conduct civil, commercial, or administrative transactions; existing contracts must be terminated or transferred, potentially leading to disputes.
Liability of managers: Legal representatives may take personal liability for unresolved debts and financial obligations, particularly in single-member limited liability companies or sole proprietorships.
Administrative sanctions: Fines ranging from 20,000,000 VND to 30,000,000 VND for failure to comply with dissolution procedures in prescribed circumstances.
Difficulties in re-establishment: A dissolved company cannot be re-established under its former legal identity, and all legal rights and obligations cease to exist.

Strict compliance with legal procedures is therefore essential to mitigate risks and protect legitimate interests.

4. What are the legal consequences of a dissolution resolution on shareholders’ rights?

A dissolution resolution directly affects shareholders’ interests. After all debts and dissolution expenses are settled, shareholders are entitled to receive the remaining assets in proportion to their shareholding ratio (Point b, Clause 2, Article 117 of the Law on Enterprise 2020).

At the same time, their rights to participate in management and operation of the company terminate. Failure to comply with proper procedures may result in disputes, delayed payments, or legal risks affecting shareholders’ rights.

5. In what circumstances may a dissolution resolution be deemed invalid?

Pursuant to Article 207 of the Law on Enterprise 2020, a dissolution resolution may be invalid in the following cases:

Failure to ensure full payment of debts and other asset-related obligations;
The enterprise is involved in unresolved disputes before a court or arbitral tribunal;
Failure to complete procedures for termination of operations of branches, representative offices, or business locations;
Failure to fulfill tax obligations;
Revocation of the Enterprise Registration Certificate.

Non-compliance with these conditions may render the dissolution resolution invalid and expose the enterprise to legal risks.

V. Should enterprises seek legal counsel for assistance with dissolution resolutions?

Enterprises are strongly advised to engage legal counsel to ensure that dissolution resolutions comply with applicable laws, thereby avoiding disputes, procedural violations, and financial liabilities. NPLaw provides professional legal services, including drafting, reviewing, and guiding the implementation of dissolution resolutions, ensuring effective protection of shareholders’ and enterprises’ interests.