Bankruptcy is a legal status of an insolvent entity that is declared bankrupt by the People’s Court. Here is a 6-step guideline to conducting a business bankruptcy process in Vietnam.
Article table of contents
According to the Law on Bankruptcy 2014 of Vietnam, the bankruptcy process is conducted as following:
Step 1: Request for initiation of bankruptcy process
According to the Law on Bankruptcy 2014 of Vietnam, the entities wishing to request the initiation of bankruptcy process must send the application and documents to the People’s Court either directly or by post:
- Any creditor of unsecured debts or partly-secured debts is entitled to send a written request for initiation of bankruptcy process after 03 months from the payment due date for the debts which the enterprise or cooperative does not pay.
- Any employee, internal Trade Union (or the superior Trade Union if the internal Trade Union is not established) is entitled to send a written request for initiation of bankruptcy process after 03 months from the day on which the entity has to pay salaries and other debts to the employees.
- The legal representative of each enterprise or cooperative is liable to send a written request for initiation of bankruptcy process when the entity is insolvent.
- The owner of any private enterprise, the President of the Board of Directors of any joint-stock company, President of the Member assembly of any multi-member limited liability company, the owner of any single limited liability company or any general partner of any partnership is liability to submit a written request for initiation of bankruptcy process when the entity is insolvent.
- Any shareholder or any group of shareholders owning at least 20% of ordinary shares for at least 06 consecutive months is entitled to file a written request for initiation of bankruptcy process when the joint-stock company is insolvent. Any shareholder or any group of shareholders owning less than 20% of ordinary shares for at least 06 consecutive months is entitled to file a written request for initiation of bankruptcy process when the joint-stock company is insolvent if it is mentioned in the company’s charter.
- Any member of any cooperative or any legal representative of any cooperative which is a member of the cooperative union is entitled to file a written request for initiation of bankruptcy process when the entity is insolvent.
Step 2: The Court receives the application for initiation of bankruptcy process
- In case of satisfactory application, the Court shall inform the requester in order for him/her to make the payment of bankruptcy fee and bankruptcy advance.
- In case of unsatisfactory application, the Judge shall inform the requester for revision.
- The People’s Court shall dismiss the written request for initiation of bankruptcy process in the following cases:
+ The requester is not prescribed in Article 5 of the Law on Bankruptcy 2014 of Vietnam;
+ The requester does not make amendment to the written request for initiation of bankruptcy process;
+ Another People’s Court has made a Decision on the initiation of bankruptcy process for the insolvent entity;
+ The requester withdraws the written request for initiation of bankruptcy process in case the parties reach an agreement on withdrawal of the written request for initiation of bankruptcy process;
+ The requester does not pay the bankruptcy fee and bankruptcy advance except the cases in which the bankruptcy fee and bankruptcy advance are exempt.
Step 3: The Court receives the written request for initiation of bankruptcy process and makes a Decision on the initiation of bankruptcy process
The People’s Court shall receive the written request for initiation of bankruptcy process on receiving the receipts of the bankruptcy fee and the bankruptcy advance and make a Decision on the initiation of bankruptcy process or refusal to initiate bankruptcy process, (except for bankruptcy by simplified procedures).
Step 4: Convening creditors’ meetings
The Judge shall convene a Creditors’ meeting within 20 days from the end of the inventory of assets if such inventory of assets is finished after the list of creditors is made or from the day on which the list of creditors is made if such inventory of assets is finished before the list of creditors is made, unless the Creditors’ meeting is not convened in simplified procedures.
- First creditor’s meeting: It must meet the valid requirement that the creditors attending represent at least 51 % of the total unsecured debts. Any creditors' meeting failing to satisfy the requirements shall be deferred and the second one will be held.
- Second creditor’s meeting: A creditors’ meeting can propose a Resolution including one of these conclusion:
+ Proposal to suspend the handling of the request for initiation of bankruptcy process;
+ Proposal to allow the entity to resume its business operation;
+ Proposal to declare the entity bankrupt.
Step 5: Decision on declaration of bankruptcy
Regarding any case that the entity cannot execute the plan to resume the business operation or the entity is still insolvent after the deadline for the execution of the plan to resume the business operation, the Judge shall issue a Decision on declaration of bankruptcy to the entity.
Step 6: Implementation of Decisions on declaration of bankruptcy
The civil execution authority shall issue the Decision on implementation and assign the bailiff to implement the Decision on declaration of bankruptcy within 05 working days from the issuance of a Decision on declaration of bankruptcy. After assigned by the Head of the civil execution authority, the bailiff shall:
- open an bank account held by the civil execution authority in charge of implementing the Decision on declaration of bankruptcy to send confiscated money of the insolvent entity;
- supervise the asset liquidation conducted by the asset management officer and asset management enterprise;
- enforce the asset confiscation and transfer the assets to the buyers under the regulations of the law on civil execution;
- redistribute the assets according to the Decision of declaration of bankruptcy after receiving the report of the asset management officer and asset management enterprise on the asset liquidation.
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