Company Dissolution

Dissolving a company is a significant step for any investor or business owner, often necessitated by various circumstances. While most investors hope to maintain their operations indefinitely, circumstances might arise that lead to the decision to cease business activities. The process of dissolution can be complex, and it’s important for executives to be fully aware of their responsibilities.

Reasons for Company Dissolution

A company may be dissolved under any of the following conditions:

1. Expiration of Operation Period: If the period stated in the company charter expires and is not extended.
2. Decision by the Enterprise Owner: In the case of a private enterprise, the owner may decide to dissolve the company.
3. Decision by Unlimited Liability Partners: In a partnership, all unlimited liability partners must agree to dissolve the company.
4. Decision by the Members’ Council or Company Owner: In a limited liability company, the Members’ Council or company owner must make the decision to dissolve.
5. Decision at the General Meeting of Shareholders: In a joint-stock company, the General Meeting of Shareholders must decide to dissolve.
6. Failure to Maintain Minimum Members: If the company does not have the minimum number of members required by law for six consecutive months without converting to another type of business.
7. Revocation of Business Registration Certificate: If the company’s business registration certificate is revoked.

Timeframe

The dissolution process typically takes around four to six months or longer, depending on the tax finalization process.

Responsibilities and Steps for Company Closure

To successfully close a company, investors must:

1. Tax and Financial Obligations:

   • Finalize and pay all tax and financial obligations to the government and close the company’s tax code (if applicable).

2. Employee Obligations:

   • Finalize and pay all personal income tax, social insurance, and health insurance for all employees.
   • Obtain a confirmation letter from the relevant authority verifying the completion of these obligations.

3. Contractual Obligations:

   • Liquidate all employment contracts and other agreements, such as office leasing contracts and contracts with suppliers.

4. Debt Settlement:

   • Settle all outstanding debts.

5. Resolution and Notification:

   • Within seven working days of passing the resolution on dissolution, notify licensing authorities, creditors, individuals with related rights or obligations, and employees.
   • Publicly post the dissolution notice at the company’s head office and branches.

Steps for Company Dissolution

1. Announce to Employees:

   • Inform employees about the decision to dissolve the company.

2. Submit Announcement of Company Dissolution:

   • File the necessary announcements with relevant authorities.

3. Arrange Audit and Follow-Up:

   • Conduct an audit and follow up on any required actions.

4. Liquidate Assets and Transactions:

   • Manage and liquidate current transactions and assets.

5. Cancel Red Invoices:

   • Cancel any red invoices in accordance with tax regulations.

6. Complete Tax Finalization:

   • Finalize all tax matters and ensure compliance.

7. Complete Labor and Insurance Matters:

   • Address any remaining labor and insurance issues.

8. Address Tax Inspections:

   • Handle any tax inspections that may arise during the process.

9. Close Tax Code:

   • Officially close the company’s tax code.

10. Official Announcement of Dissolution and Seal Return:

    • Make an official announcement of the company’s dissolution and return any company seals (if applicable).

11. Support in Bank Account Closure:

    • Assist in closing the company’s bank accounts.

By following these steps and ensuring that all obligations are met, investors can effectively manage the dissolution of a company and fulfill their responsibilities throughout the process.