Currently, in the era of economic integration, the market becomes fierce competition and the business conditions also gradually change for appropriation. Therefore, there are businesses with firm positions in the market, but a business going bankrupt is a common issue. To declare a business as bankruptcy, such a business shall implement the necessary legal procedure. In this legal essay, NPLaw shall help our clients clearly understand procedures for the business bankruptcy resolution.
Pursuant to the Bankruptcy Law 2014, Business bankruptcy means a business is insolvent and has been declared bankruptcy by the People’s Court.
The bankruptcy procedures mean a legal procedure resolving insolvency, and if the settlement result cannot help the business escape insolvency, the competent state agency shall make a decision to declare business bankruptcy.
Bankruptcy resolution has particular meaning for Businesses. In many cases, bankruptcy procedures can give debtors the opportunity to recover business and production activities, in contrast they can also terminate the legal existence of the debtors being bankrupt. Bankruptcy procedures are recorded by the State to protect the rights of many different subjects in the economy. This method is the most effective protection for the creditors’ legitimate rights and interests; it protects the debtors’ rights, and gives the debtors the opportunity of withdrawing market orderly; besides, this method also contributes to the protection of the employees’ rights.
Legal basis for adjusting business bankruptcy orders and procedures:
Pursuant to the Bankruptcy Law 2014, Bankruptcy means a business or cooperative that is insolvent and has been declared bankruptcy by the People’s Court.
Therefore, with the conditions for implementing bankruptcy procedures, businesses shall demand the following two conditions:
Insolvent business means a business doesn’t perform its payment obligation to the debt within 3 months from the date of payment due date.
Not to perform payment obligations shall include the following two cases:
Step 1: File a petition for initiating bankruptcy procedures
Only persons with related rights and obligations have the right to file the petition for initiating bankruptcy procedures.
There are two methods to file the petition for initiating bankruptcy procedures:
Step 2: The Court receives the petition
After receiving the petition for initiating bankruptcy procedures, the Court considers the petition; if the petition is valid, the Court shall notice payment and the advance fee on the bankruptcy.
In case, if the petition is invalid, the Court shall require modification and supplement.
If the petitioner doesn’t have the right to file the petition or refuses to modify the petition, the Court shall return the petition.
Step 3: The Court accepts the petition
The People’s Court shall accept the petition for initiating bankruptcy procedures when receiving the receipt for submitting bankruptcy fees and the advance fee on the bankruptcy.
Then, the Court shall make a decision whether bankruptcy procedures are initiated or not (except for enterprises and cooperatives that go bankrupt according to abridged procedures).
Step 4: Initiation of bankruptcy procedures
For the decision on whether bankruptcy procedures are initiated or not, the Court has to send a notice to the related persons.
During resolution of the requirement of initiating bankruptcy procedures, it can require the competent People’s Court to implement remedies for asset preservation such as the declaration of an invalid transaction, temporary suspension for implementing a contract, etc.
Specifically, asset inventory, list of creditors, and list of debtors.
Step 5: The creditor conference
Convention of creditor conferences:
+ First creditor conference
The creditor conference is considered a valid implementation if the number of participating creditors represents the least at 51% of the total amount of deadweight debt (unsecured debt). When such conditions are not required, the creditor conference shall be delayed and the second (02) creditor conference shall be held.
+ Second creditor conference
The creditor conference has the right to provide one of the following conclusions:
Step 6: Making a declaring decision that the business goes bankrupt
In case, the businesses don’t implement the restoration plan for business activities, or it is expired on implementing the restoration plan for business activities but the businesses are still insolvent, then the Court shall make a declaring decision that the businesses go bankrupt.
Step 7: Executing the declaration for bankrupt business
Liquidation of bankrupt assets
Division on the money gained from selling the business's assets for the subjects according to the division order of assets.
Pursuant to Article 8 of the Bankruptcy Law 2014, the authorities have the competence to resolve the bankruptcy procedures of businesses, as follows:
- District/ Town People’s Court, Commune People’s Court, and People’s Court under Province (hereinafter known as District People’s Court) have the competence to resolve the bankruptcy of businesses with headquarters in towns, districts, communes, and cities under such provinces.
- The Provincial People’s Court and the People’s Court under the Central (hereinafter known as the Provincial People’s Court) have the competence to resolve the bankruptcy of businesses with business registration in such province or belonging to one of the following cases:
Simultaneously, Clause 1, Article 2 and Clause 1, Article 3 of the Resolution No.03/ 2016/NQ-HDTP specified stipulate that assets in foreign countries and complicated bankrupt issues shall belong to the competence of the Provincial People’s Court, as follows:
- Assets in the foreign countries mean assets considered according to the provisions of the Civil Code beyond the territory of the Socialist Republic of Vietnam, and it depends on the time when the Court accepts the application for initiating bankruptcy procedures.
- Complicated bankrupt issues mean issues without belonging to one of the cases that are prescribed by Points a, b, and c, Clause 1, Article 8 of the Bankruptcy Law 2014; the business or cooperative that is required to initiate bankruptcy procedures belongs to one of the following cases:
Therefore, on the above legal basis, both the Provincial People’s Court and the District People’s Court have the competence to resolve the bankruptcy according to each specific case.
When the client needs to implement issues relating to procedures for business bankruptcy resolution, please contact NPLaw to receive useful information because it will help the procedure be implemented quickly and easily. NPLaw always supports and conscientiously answers questions when the client needs to understand the bankruptcy procedures.
NPLaw
Hotline: 0913449968
Email: legal@nplaw.vn
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