Authors: Truong Trong Minh – Senior Associate, Vo Thi Anh Nhi – Paralegal.
Many foreign investors whose business in Vietnam is not performing well choose to cease operations, return to their home country, and let the company shut down in practice without carrying out the necessary legal procedures.
This is a choice that carries many potential risks. An enterprise may have closed down, with no more employees or transactions, but that does not mean the enterprise has ceased to exist as a legal matter, and the legal representative may still face issues arising from that unresolved status. In this article, the team of experts at CDLAF will analyze the issue under four main headings: the legal basis requiring an enterprise to carry out the dissolution procedure, the risk of exit suspension, the liability of the legal representative, and the practical handling of FDI enterprises that have been abandoned for a long period of time.
1. An enterprise does not automatically cease to exist when it stops operating
Ceasing business in practice does not mean that the enterprise has ceased to exist as a legal matter.
If an FDI enterprise simply closes down and abandons the legal entity, its tax obligations, compliance reporting obligations, obligations to employees, debts, or other obligations still need to be reviewed and resolved in the future.
In particular, if the enterprise has not yet completed its tax obligations, ceasing operations does not cause that obligation to automatically disappear. Administrative penalties or related outstanding tax obligations remain, together with late payment interest accruing each day, causing the cost of dissolving the enterprise to increase over time.
2. The company’s tax debt creates a risk of exit suspension for the foreign Director
The company’s outstanding tax obligations do not automatically become the Director’s personal debt. However, where the enterprise is subject to tax enforcement measures, the legal representative may be temporarily suspended from leaving the country until the tax obligation is completed.
This is why an enterprise that has long ceased operations can still create a direct problem for its representative — particularly for a foreign Director planning to leave Vietnam. The tax authority may issue a notice applying the exit suspension measure to the legal representative until the enterprise has completed its obligations to the tax authority.
3. Is the Director jointly liable for all of the company’s debts?
An enterprise is an independent legal entity. The fact that the company has a debt does not mean the Director or capital-contributing members must automatically use their personal assets to pay it. However, the legal representative and managers still have their own obligations in the course of management, and depending on the specific case, personal liability may be considered where there has been a violation, a failure to properly perform management duties, or where damage has been caused.
Therefore, leaving Vietnam does not automatically end the enterprise’s legal issues or the related personal obligations. Whenever the legal representative returns to Vietnam, they will have to face those legal issues.
4. The longer an abandoned enterprise is left unresolved, the harder and more costly it becomes to handle
The longer an enterprise is abandoned, the more complicated handling it tends to become: accounting books are no longer complete, former personnel have left, records are lost, and the registered address is no longer in use, while the obligations still need to be determined before termination can be completed.
For cases abandoned for many years, the issue is no longer simply a matter of carrying out the dissolution procedure, but becomes a process of restoring operations, searching for records and books again, determining outstanding obligations, and working with many relevant authorities. An enterprise that is reviewed early usually goes through the dissolution procedure more smoothly.
5. A solution for terminating operations in the proper sequence
If the investor no longer wishes to continue operating in Vietnam, the earlier a check and resolution is carried out, the better the investor can control the cost, time, and legal risks that may arise.
Depending on the specific situation, this handling may include reviewing tax obligations, completing missing records, settling debts, resolving obligations to employees and partners, terminating the investment project, and carrying out the appropriate legal entity dissolution procedure.
For a foreign Director, an early review also helps in proactively assessing risks related to tax obligations, avoiding an exit ban when leaving Vietnam, and facilitating other future investment plans in Vietnam.
CDLAF’s Advisory Services for the Dissolution of FDI Enterprises
CDLAF Law Firm is committed to accompanying and supporting enterprises in carrying out the dissolution procedure safely, lawfully, effectively, and with well-controlled risk, including:
- Reviewing and assessing the legal status, accounting records, social insurance, and labor situation before dissolution; proposing appropriate options and a roadmap.
- Carrying out the enterprise dissolution procedure, drafting the dossier, and representing the enterprise in working with the business registration authority, the tax authority, and the social insurance authority throughout the dissolution process.
- Advising on legal matters arising throughout the enterprise’s dissolution process.
📩 BOOK A CONSULTATION WITH CDLAF’S LEGAL TEAM
Do not let procedural errors disrupt your business plans. Contact CDLAF today to receive a preliminary risk assessment from our team of Lawyers:
Hotline/Zalo: [+84 909 668 216]
Email: info@cdlaf.vn
Why choose CDLAF’s service?
- We provide effective and comprehensive legal solutions that help you save money and maintain compliance in your business;
- We continue to monitor your legal matters even after the service is completed and update you when there are any changes in the Vietnamese legal system;
- Our system of forms and processes related to labor and personnel is continuously built and updated and will be provided as soon as the customer requests it;
- As a Vietnamese law firm, we have a thorough understanding of Vietnam’s legal regulations, and grasp the psychology of employees, employers, and working methods at competent authorities;
- CDLAF’s team of lawyers has many years of experience in the field of labor and enterprises, as well as human resources and financial advisory.
- Strict information security procedures throughout the service performance and even after the service is completed.
You can refer for more information:
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- Tax Finalization upon Dissolution of an FDI Enterprise: 4 Cost-Disallowance Risks and Solutions for a Safe Tax Code Closure
- Termination of Operations of an FDI Enterprise in Vietnam — Dissolution Procedure and Tax Code Closure
- Costs of Corporate Dissolution: Economical Yet Effective
- 5 Steps to Dissolve a Business Quickly and in Full Compliance in 2026
- Dissolution; Suspension of Operations; “Neglection” of the Company: Which Option Is More Appropriate?
