Temporarily Suspend Joint-Stock Company in Vietnam

Overview of Temporarily Suspending a Joint-Stock Company

In Vietnam, companies, including joint-stock companies, may choose to temporarily suspend their business operations for various reasons. This suspension can provide relief in periods of economic uncertainty or business restructuring without leading to the dissolution of the company. However, there are specific legal procedures that companies must follow to suspend their activities in compliance with Vietnamese law.

Legal Framework for Suspension

The primary legal basis for temporarily suspending a joint-stock company in Vietnam is outlined in the Law on Enterprises and several decrees that govern corporate activities. For instance, according to Decree 47/2021/ND-CP and other guiding regulations, companies must notify relevant authorities of their intent to suspend operations at least 15 days before the intended date of suspension. The suspension can be extended but cannot exceed two consecutive years. These laws protect both the company and its stakeholders by ensuring transparent and lawful suspension processes.

Reasons for Temporary Suspension

• Economic downturn or financial difficulty
• Restructuring or mergers
• Changes in business strategy
• Regulatory challenges

Requirements for Temporarily Suspending a Joint-Stock Company

Before initiating a suspension, the company must fulfill several conditions to avoid penalties or legal complications. The company must ensure all tax obligations are settled, including VAT, corporate income tax, and any other financial liabilities.

Key Requirements

• Notification to Authorities: The company must notify the Department of Planning and Investment or the relevant Business Registration Office 15 days before the intended suspension date.
• Tax Settlements: Ensure all tax filings are updated and cleared, as tax debts could prevent the suspension from being approved.
• Duration of Suspension: A joint-stock company can suspend its operations for up to one year, renewable once. The total period should not exceed two years.
• Employee Welfare: Inform employees and ensure that labor contracts are handled in compliance with labor laws during the suspension period.

Steps to Temporarily Suspend a Joint-Stock Company

The process for temporarily suspending a joint-stock company in Vietnam follows several straightforward steps, outlined below:

Step 1: Resolution by the Board of Directors

The first step is for the company’s Board of Directors to pass a resolution approving the temporary suspension of the company’s activities. This resolution must include the reason for suspension, the start date, and the duration of the suspension.

Step 2: Filing a Suspension Application

Once the resolution is passed, the company must file an application for suspension with the Business Registration Office or the Department of Planning and Investment. The application should include:

• The company’s decision or resolution on suspension
• Notification of the tax office regarding the suspension
• Proof of settlement of all financial obligations

Step 3: Approval and Public Disclosure

If the suspension application meets all legal requirements, the Business Registration Office will approve the suspension and update the company’s status in the National Business Registration Database. The suspension must also be publicly disclosed on the National Portal for Business Registration.

Effects of Temporary Suspension

During the suspension period, a joint-stock company must not conduct any business activities, including the sale of goods or services. However, the company remains responsible for fulfilling ongoing contractual obligations unless otherwise specified by the parties involved. Additionally, the company must continue to file tax reports even if no business is conducted during the suspension period.

Employee and Stakeholder Considerations

The company must inform its employees, partners, and customers about the temporary suspension. It should ensure that all employee rights, such as severance or compensation, are respected in accordance with labor laws. This is a critical step to avoid future disputes or labor claims against the company.

Renewing the Suspension Period

If the company needs more than one year to resolve its issues, it can apply for an extension of the suspension period. This extension must be requested before the end of the initial suspension period and can only be granted once, for a maximum of one additional year. Failing to comply with the procedures or extend the suspension period on time can lead to administrative penalties or the forced resumption of business operations.

Consequences of Failing to Notify Suspension

If a joint-stock company fails to notify authorities of its temporary suspension or resumes business operations without permission, it may face fines, penalties, or even compulsory dissolution by the authorities. Therefore, it is crucial for the company’s management to adhere to the regulations and timelines strictly.

Reactivating Business Operations

Once the suspension period ends, the company can resume its operations by notifying the Business Registration Office of its decision to reactivate the business. This notification should be filed at least 15 days before the resumption date. Reactivating business operations must comply with all previously agreed contracts and obligations to avoid disputes or legal action.

Conclusion

Temporarily suspending a joint-stock company in Vietnam is a viable option for businesses facing challenges, provided that the legal procedures are followed correctly. By ensuring compliance with all legal requirements, companies can safeguard their interests while navigating through difficult times. For more information, visit our Learn About Unilaw or explore Our Related Services to ensure a smooth suspension process.

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