Sequence of distribution of assets upon bankruptcy in Vietnam

Sequence of distribution of assets upon bankruptcy in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Rights and obligations to submit request for initiation of bankruptcy process in Vietnam

After the State bank of Vietnam issue a Decision to end the special control or Decision to end the employment or not to employ the measures to regain solvency but the credit institution is still insolvent, the following entities have the right and obligation to submit written requests for initiation of bankruptcy process:

- 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 have to pay salaries and other debts to the employees.

- 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.

- The credit institutions liable to submit the written requests for the initiation of bankruptcy process; if any credit institution does not summit the written request for the initiation of the bankruptcy process, the State bank of Vietnam shall submit a written request for the initiation of bankruptcy process for such credit institution.

(Article 98 of the Law on Bankruptcy 2014)

2. Sequence of distribution of assets upon bankruptcy in Vietnam

According to Article 101 of the Law on Bankruptcy 2014, the sequence of distribution of assets upon bankruptcy in Vietnam is as follows:

(i) The redistribution of the assets of a credit institution shall follow this following sequence:

- Bankruptcy fee;

- Unpaid salaries, severance pay, social insurance, medical insurance of the employees and other benefits under their labor contracts and collective bargaining agreements;

- Deposits, amounts that the deposit insurers must pay to the depositors at the credit institution declared bankrupt under the regulations of the law on deposit insurance and instructions of the State bank of Vietnam;

- Financial obligations to the State; unsecured debts payable to the creditors on the list of creditors; secured debts that are unpaid because the value of the collateral cannot afford the debts.

(ii) The remaining amount after the debts are paid off by the value of the assets of the credit institution as prescribed in Clause 1 this Article shall be given to:

- Cooperatives that are members of the credit institution;

- Single member limited liability company that is the owner of the credit institution;

- Multi-member limited liability companies that contribute capital to the credit institution; joint-stock companies that are the shareholder in the credit institution.

(iii) If the value of the is are not sufficient for the payment in accordance with the regulations in (i), the entities in a order of priority shall be paid at a rate in proportion to the debts

Nguyen Ngoc Que Anh

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