Contact

Bankruptcy is the state of a business that is unable to pay its debts and is declared bankrupt by a People's Court. The biggest difference is that bankruptcy involves the intervention of the judicial body (the Court), while dissolution is usually a proactive decision of the owner or due to the expiration of the business's operating period. Furthermore, bankruptcy does not require the payment of all debts; the business will distribute its assets according to the priority order stipulated by law.

The bankruptcy process typically takes longer than dissolution due to its legal complexity. Generally, a bankruptcy case can take 6 to 12 months, or even longer depending on the size of assets, the number of creditors, and the cooperation of the parties involved. This timeframe includes the following stages: filing the application, initiating bankruptcy proceedings, holding a creditors' meeting, and issuing a bankruptcy declaration.

Bankruptcy costs include court filing fees (approximately VND 1,500,000 according to current regulations) and asset management and liquidation costs (paid to the bankruptcy administrator or asset management company). In addition, businesses may incur further costs related to auditing, valuation, and reporting fees as stipulated by the 2014 Bankruptcy Law.

A business can only be dissolved if it ensures that all debts and other financial obligations (such as employee salaries, taxes, and debts to partners) are paid and it is not involved in any ongoing disputes in court or arbitration. If the business no longer has sufficient assets to pay its debts, the procedure will have to change from dissolution to bankruptcy.

The business dissolution process includes the approval of a dissolution decision by the owner or the Board of Members, followed by tax settlement with the tax authorities to close the tax identification number, and finally, submitting the dissolution application to the Business Registration Authority within 5 working days from the date of full payment of all debts. All these steps must be followed in sequence to ensure the business legally ceases to exist within the national management system.

Since the dissolution decision was made, the business is strictly prohibited from engaging in activities aimed at disposing of assets such as: raising capital, signing new contracts (except those related to dissolution), waiving the right to claim debts, or converting unsecured debts into secured ones. The business is only permitted to conduct transactions related to the liquidation of assets and the settlement of outstanding obligations.