Update on important points to note when suspending a company's business activities
2024/02/24
- US CPA
- Masaya Sakai
Introduction
Many Vietnamese companies facing difficulties due to the impact of COVID-19 have temporarily suspended their business activities to wait for the economy to recover or to prepare for company liquidation procedures. Previously, we created a QA¹ regarding important points to note when suspending business activities in Vietnam, but in this article, we will explain the points to note with a focus on the procedure for notifying business activities suspension to investment registration institutions and business registration institutions.
1. Overview of procedures required when a company suspends business activities
When a company suspends its business activities, it needs to carry out the following two procedures.
① Notification of suspension of investment project activities to investment registration organizations based on guidance documents such as investment laws and government ordinances
② Notification of suspension of business activities to the company registration agency based on guidance documents such as corporate laws and government ordinances
Each of these procedures is regulated in different legal instruments, and the law does not specify the order in which the above two procedures should be carried out. However, since companies are essentially established to carry out investment projects, companies with only one investment project need to match the period of suspension of the project with the period of suspension of business activities. In other words, when a company temporarily suspends operations, it is necessary to carry out the above two procedures at the same time.
There are also different regulations regarding stoppage time as shown below.
-According to the Investment Law, the total period of suspension of activity of an investment project shall not exceed 12 months². The Investment Law and relevant government regulations do not clearly stipulate whether this period is a single suspension period or the sum of multiple suspension periods. In fact, it is common for companies to suspend a project for one year at a time, but if you wish to suspend a project multiple times (with a total period not exceeding one year), please check with the competent Planning and Investment Department before implementation.
– According to the Enterprise Law, there is no limit to the number of times a business can be suspended, but the maximum period of suspension that can be granted with a single notification is one year. ³
As mentioned above, there is no legal limit on the total period of suspension of business activities. We understand that this provision only applies if a company has multiple investment projects. If an FDI company has only one investment project, the maximum period of suspension of business activities can be interpreted to correspond to the project suspension period of one year. In practice, companies should check with the competent authorities, as this view may vary depending on the region and the personal views of the authority officials. In this case, once the suspension period of a company’s business activities expires, the following possibilities are considered.
*If you wish to end your business in Vietnam: End your current investment project, liquidate your company and return to your home country at the same time.
*If continuing business in Vietnam:
– Restart current investment projects and continue operations.
– Terminate the current investment project, register a new investment project at the same time, and continue operation.
2. Specific procedure information
Please see the table below for details of the procedure.
| Content | Investment project activity suspension notice | Business activity suspension notice | |
| 1 | Where to submit | Investment Registration Authority: Department of Planning and Investment, Overseas Economics Department |
Company Registrar: Business Registration Department of Planning and Investment Department |
| 2 | Notice period | Within 5 business days from the decision date (Article 56, Paragraph 3 of Decree 31/2021/ND-CP) |
At least 3 business days before the date of actual suspension of activities (Article 66, Paragraph 1 of Decree 31/2021/ND-CP) |
| 3 | Application documents | Article 47, Paragraph 1 of the Investment Law 2020; Article 56 of Decree 31/2021/ND-CP; Investment under Circular 03/2021/TTBKHDT |
Article 206, Article 66 of the Enterprise Law 2020, Cabinet Order Based on Article 66 of 01/2021ND-CP, Circular 01/2021TTBKHDT |
| 4 | How to submit | Notify the Registrar directly in writing | Notify us online through the following website: https://dangkyquamang.dkkd.gov.vn/auth/Pu blic/LogOn.aspx?ReturnUrl=%2fonline%2fd efault.aspx |
| 5 | Processing period | There are no regulations (in the case of Hanoi Planning and Investment Department:10-15 business days from date of receipt of complete documentation) |
3 business days from the date of receipt of complete documentation |
3. Other points to note
Additionally, the following points should be noted during the implementation process.
➀ Penalties for administrative violations
– Regarding the procedure for notifying the suspension of investment project activities, companies are required to send a notification to the investment registration agency within 5 business days from the date of the decision to suspend activities. In case of violation, enterprises will be fined between 30,000,000 and 50,000,000 VND and must retroactively notify the investment registration authority⁴.
In addition, if the investment project is suspended for a total of more than 12 months, the enterprise will be fined 50,000,000 to 70,000,000 VND and must continue the investment project. ⁵
– Regarding the procedure for notification of suspension of business activities, if an enterprise fails to properly notify the Registrar of Businesses of the date and period of suspension of business activities, or if the notification is delayed, the enterprise shall be fined VND 10,000,000 to VND 15,000,000 and the notification shall be retroactively implemented to the Registrar of Businesses⁶.
② Regarding submission of periodic investment report
Since there is no provision that requires periodic investment reports to be submitted during the period of temporary suspension of investment project activities, it is often interpreted that there is no need to submit periodic investment reports. Our practical experience has shown that in some regions, investment management institutions may require periodic investment reports to be submitted during the course of business operations.
③ Regarding notification upon expiration of the period of temporary suspension of investment projects
There is no provision that requires notification to the investment registration agency when the suspension period expires, so it is often interpreted as not requiring notification. However, our practical experience has shown that in some jurisdictions, investment management institutions may require notification to be filed when the suspension period for an investment project expires.
④ Regarding implementation of license modification procedures
During the period of temporary suspension of the investment project, it is basically impossible to carry out amendment procedures related to the Investment Registration Certificate (IRC). Meanwhile, in practice, amendment procedures related to the Enterprise Registration Certificate (ERC) can be carried out. This may vary by region and time, so businesses are advised to check with their competent authorities before implementing.
In conclusion
Suspending business activities is considered to be an effective option when restructuring a business in difficult business conditions. However, in order to ensure that violations of laws and regulations are avoided, companies must appropriately notify investment project suspensions and activity suspensions, and, as introduced in a previous article, notify workers and third parties. It is also necessary to pay attention to obligations such as tax filing and payment obligations.
That’s all
¹[Vietnam investment environment] Important points to note when suspending business activities of a company (September 2023)
²Article 56, Paragraph 1 of Decree No. 31/2021/ND-CP dated March 26, 2021 on detailed provisions and enforcement guidance of the Investment Law
³Article 66, Paragraph 1 of Decree 01/2021/ND-CP dated January 4, 2021 on business registration
⁴Article 15, paragraphs 1 and 2 of Decree No. 122/2021/ND-CP dated December 28, 2021 stipulating penalties for administrative violations in the planning and investment field
⁵Article 19, Paragraph 1 of Decree No. 122/2021/ND-CP dated December 28, 2021 stipulating penalties for administrative violations in the planning and investment field
⁶Article 50, paragraphs 1 and 2 of Decree No. 122/2021/ND-CP dated December 28, 2021 stipulating penalties for administrative violations in the planning and investment field
*This article was translated by Yarakuzen.
