Cases of invalid transactions of insolvent enterprises in Vietnam

 Cases of invalid transactions in Vietnam (Internet image)

1. Invalid transactions under the Law on Bankruptcy in Vietnam

Pursuant to Clause 1, Article 59 of the Law Bankruptcy 2014, the invalid transactions are stipulated as follows:

A transaction of the insolvent entity which is made within 06 months prior to the day on which the People’s Court gives the Decision on the initiation of bankruptcy process shall be considered invalid in the following cases:

(1) The asset transfer does not apply market prices;

(2) Unsecured debts are converted into debts secured wholly or partly against assets of the debtor;

(3) The payment or offsetting is beneficial for a creditor whose debt is undue, or the amount offset against is larger than the due debt;

(4) Assets are given to other entities;

(5) The transaction does not serve the business operation of the entity;

(6) The transaction is meant for dispersing the entity’s assets.

Calculation time for the transaction is considered invalid

- A transaction of the insolvent entity, which is prescribed in Section 1, made with relevant entities within 18 months prior to the day on which the People’s Court gives the Decision on the initiation of bankruptcy process shall be considered invalid.

The relevant entities include:

- The parent company, the manager of the parent company and the persons having authority to appoint the manager of the subsidiary ;

- Subsidiaries of the parent company; enterprises established by the cooperative;

- People or groups of people that dominate decisions on the business operation of the enterprise or cooperative issued by their management board;

- The manager of the entity;

- Spouse, father, adoptive father, mother, adoptive mother, children, adopted children, brothers, sisters of the manager of the entity or the members and/or shareholders having capital holdings or controlling shares;

+ The individuals appointed as the representatives of those prescribed in Points a, b, c, d and dd of Clause 3, Article 59 of the Law Bankruptcy 2014;

+ Enterprises in which the entities prescribed in Points a, b, c, d, dd, e and h of Clause 3, Article 59 of the Law Bankruptcy 2014 have so much holding that they may dominate the decisions of the management boards of the enterprises;

+ A group of people cooperating with each other in acquiring capital holdings, shares or other benefits of the company in order to dominate the decisions of the company.

- The asset management officers and/or asset management enterprises are responsible for considering the transactions of the insolvent entity and report on any detected transaction prescribed in Clause 1 and Clause 2, Article 59 of the Law Bankruptcy 2014 to the People’s Court in order for the People’s Court to consider declaring the transaction invalid.

2. Declaring transactions invalid in Vietnam

Pursuant to Article 60 of the Law Bankruptcy 2014, the declaration of transactions invalid in Vietnam is as follows:

Stage 1: Within 10 working days from the day on which the asset management officers and/or asset management enterprises and/or the involving entities request for declaring a transaction invalid or the People’s Court detects a transaction prescribed in Clause 1 and Clause 2 Article 59 of Law Bankruptcy 2014, the People’s Court shall make one of the following decisions:

- Reject the request of the asset management officers and/or asset management enterprises and/or the involving entities.

- Declare the transaction invalid, cancel the preservation measures and handle the results of the invalid transaction according to the regulation of the Law.

- The Decision on declaring the transaction invalid shall take effect from the day on which it is made.

Stage 2: Within 05 working days from the receipt of the Decision on declaring the transaction invalid, the insolvent entity and its contracting party may send a written request to the executive judge of the People’s Court in order to reconsider such Decision.

Stage 3: Within 07 working days from the receipt of the request for reconsidering the Decision on declaring the transaction invalid, the executive judge of the People’s Court given the Decision shall make one of the following decisions:

- Reject the request for reconsidering the Decision on declaring the transaction invalid;

- Cancel the Decision on declaring the transaction invalid. Any dispute shall be settled according to Chapter X of the Law Bankruptcy 2014.

In addition, within 07 working days from the receipt of the Decision prescribed in Point b Clause 1 òArticle 60 of the Law Bankruptcy 2014, the civil execution authorities are responsible for implementing the Decision according to the regulation of the Law on civil execution.

Ngoc Nhi

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