In today’s volatile economic climate, it’s no longer unusual for businesses to exit the market. However, when a legal entity ceases to exist, a pressing question arises: who is responsible for the unpaid debts left behind?

1. Business closure doesn’t mean debt disappears

According to the General Statistics Office, in 2024, nearly 76,200 businesses suspended operations while awaiting dissolution procedures—a 16.3% increase from the previous year. Over 21,600 businesses completed dissolution procedures, up 20%. On average, nearly 16,500 businesses withdrew from the market each month. One major driver behind this wave of exits is financial pressure, particularly debt obligations.

However, dissolving a business is not as simple as “shutting the doors and walking away.” The 2020 Law on Enterprises clearly states that a business may only be dissolved after fulfilling all financial obligations and resolving any legal disputes. This provision is designed to protect the interests of stakeholders, especially creditors.

In reality, the situation is more complex. Some businesses are forced to dissolve due to the expiration of their operating term or revocation of their business license. In such cases, creditors are often caught off guard when they discover their debtor has “vanished” without settling outstanding debts.

2. Legal liability – Not everyone pays with personal assets

Current laws clearly distinguish the financial liability of different business types. Only sole proprietors and general partners in partnerships are required to use their personal assets to settle business debts. In contrast, shareholders of joint-stock companies, members of limited liability companies (LLCs), and capital-contributing partners are only liable within the scope of their committed or actual capital contributions.

This means that once they have fully contributed their registered capital, they are not obligated to use personal assets to cover company debts—unless they also serve as business managers.

3. Business managers – personally liable if debts remain

The 2020 Law on Enterprises defines “business managers” as individuals holding executive roles such as director, general director, chairman of the board, members of the board of members, and similar positions. According to Article 207, if a business is dissolved without fulfilling its financial obligations, the responsible managers may be held jointly liable for the remaining debts.

This opens the door for creditors to sue individuals—not just the company—to recover unpaid amounts. However, the line between “manager” and “investor” is not always clearly defined.

4. When shareholders are also managers – Legal gray areas arise

A common scenario is when shareholders also hold managerial positions within the company. In such cases, under which capacity are they held accountable? As investors—liable only within their capital contribution? Or as managers—jointly responsible for the company’s debts?

Currently, the law does not provide clear guidance on how to handle overlapping roles. In practice, there have been court rulings where shareholders who also served as directors or board members were ordered to jointly repay debts in proportion to their capital contributions, based on their managerial responsibilities.