BUSINESS LICENSE REVOKED: WHO IS RESPONSIBLE FOR DEBT REPAYMENT?

1. Case Information

• Judgment No.: 50/2025/KDTM-PT (September 13, 2025).

• Plaintiff: Company D (Joint Stock Company).

• Defendant: Company A (Limited Liability Company) and related individuals.

• Subject Matter: Dispute over a concrete sales contract with an outstanding principal debt of 131,020,000 VND.

2. Key Legal Facts

Company A had its BRC revoked by authorities in February 2023. The Court of First Instance previously ruled that the Director (Mr. L1) and the Capital Contributor (Ms. H) must be jointly liable for the company's debt, reasoning that the legal entity had ceased to exist.

3. Observations of the Appellate Court

a. Legal Standing: An undissolved business remains the Defendant

• By law, a business is only dissolved once all debts and asset obligations are fully settled and it is not involved in any ongoing court disputes. Although its BRC was revoked, Company A had not completed dissolution procedures; thus, its legal person status remained intact, and it remained the proper Defendant in the case.

• As the legal entity had not terminated, Mr. L1 (in his role as Director) remained the legal representative to participate in the proceedings on behalf of the Defendant.

• Mr. L1 and Ms. H, as capital contributors, are only liable within the scope of their committed capital. The Appellate Court identified them as Persons with Related Rights and Obligations, rejecting the "successor of procedural rights and obligations" status incorrectly assigned by the lower court.

b. Payment Obligations and Scope of the Lawsuit

• The obligation to pay the principal of 131,020,000 VND is grounded: The 2019 concrete sales contract is legally valid. Based on invoices and the lack of dispute over the debt amount by the parties, Company A is responsible for paying the outstanding balance.

• Rejection of personal joint liability: The Plaintiff only filed a lawsuit requesting Company A to pay the debt. The lower court's decision to arbitrarily force Mr. L1 and Ms. H to use personal assets to jointly pay the debt exceeded the scope of the Plaintiff's claim and violated the principle of limited liability.

4. Final Decision of the Appellate Court

The Da Nang City People's Court amended the first-instance judgment as follows:

a) Accept the lawsuit petition of Company D against Company A.

b) Compel Company A to pay Company D the sum of 131,020,000 VND.

5. Conclusion

The ruling reinforces that a license revocation is merely the beginning of the dissolution process, not the end of a legal entity. Creditors must ensure they sue the correct subject (the legal entity) rather than its owners, unless specific legal violations regarding the liquidation process are proven.

6. FAQ

a. Is a business automatically dissolved when its license is revoked?

• Answer: No. The revocation of the BRC is only a ground for dissolution. A business is only officially dissolved after it has settled all debts and its name has been removed from the National Business Registration Database.

b. Can I sue the Director directly if the company's license has been revoked?

• Answer: According to Judgment 50/2025/KDTM-PT, if the company is not yet fully dissolved, you must still sue the Legal Entity (the Company). Suing the Director or Shareholders individually is incorrect unless you can prove they violated liquidation obligations, causing damage.

c. How is the "Limited Liability Shield" interpreted in this case?

• Answer: This principle states that owners are only responsible for debts within the scope of their contributed capital. The Appellate Court rejected forcing individuals to pay corporate debts because the assets of individuals and the assets of an LLC are entirely independent.

d. Why did the Appellate Court revoke the joint liability of the individuals?

• Answer: There are two main reasons: (1) The business still retained its legal person status to be held liable; (2) The Plaintiff did not request individual repayment in their petition, so the lower court's ruling exceeded the scope of the lawsuit.