Order of Asset Distribution When a Business Declares Bankruptcy

10:53, 11/07/2024

Bankruptcy is the condition of an enterprise or cooperative being unable to make payments and being declared bankrupt by a People's Court decision. When the court declares bankruptcy, the assets of the enterprise are distributed in the following order:

Bankruptcy costs;
Salary debts, severance allowances, social insurance, health insurance for employees, other benefits according to signed labor contracts and collective labor agreements;
Debts arising after the opening of bankruptcy procedures aimed at restoring the business operations of the enterprise or cooperative;
Financial obligations to the State; unsecured debts to be paid to creditors on the creditor list; secured debts that have not been paid due to the insufficient value of secured assets to cover the debts.

In case the assets of the Enterprise are insufficient to pay the above amounts, each category of debts with the same priority order shall be paid in proportion to the respective debt amounts.

In case the value of the assets of the enterprise or cooperative, after fully paying the above amounts, remains, the remainder shall belong to:

- The owner of a single-member limited liability company;- Members of a limited liability company with two or more members, shareholders of a joint-stock company;- Members of a partnership company.

More details can be found in Bankruptcy Law 2014, effective on January 1, 2015.

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