Bankruptcy knowledge

What does it mean to be insolvent?

According to the Bankruptcy and Recovery Law of 2025, enterprises and cooperatives are considered...
insolvency
when a debt is not paid by the due date.
6 months from the payment due date.

Accurately determining the extent of insolvency is the basis for considering the application of rehabilitation or bankruptcy procedures as prescribed by law.

Business recovery

Recovery is a mechanism designed to help businesses overcome insolvency and continue operating.

Businesses can develop recovery plans with measures such as reorganizing operations, mobilizing resources, restructuring obligations, and planning for debt repayment.

Business bankruptcy

Bankruptcy is the state in which a business or cooperative is unable to pay its debts and has
court's decision to declare bankruptcy.

Therefore, a business experiencing financial difficulties or failing to pay a debt does not necessarily mean that the business has gone bankrupt.

What is the difference between recovery and bankruptcy?

• Recover:
  The goal is to overcome insolvency and continue operations.
• Bankrupt:
  Established when the court issues a decision declaring the enterprise or cooperative bankrupt.
• Recovery plan:
  Focus on generating cash flow, managing obligations, and maintaining operations.
• Bankruptcy proceedings:
  Focus on resolving the case, handling assets and the rights of creditors in accordance with regulations.

Financial difficulties do not necessarily mean that businesses must immediately choose bankruptcy. Assessing recovery potential, asset structure, liabilities, and cash flow is crucial in determining the appropriate course of action.

Parties involved and procedures in bankruptcy proceedings.

Rehabilitation and bankruptcy proceedings involve multiple parties with varying rights and obligations. Depending on the specific circumstances, a business may be considered for business resumption or continue to be processed through bankruptcy proceedings.

Asset management and disposal

The company's assets are inventoried, verified, and processed according to regulations to generate funds to fulfill its obligations in bankruptcy proceedings.

Inventory and valuation of assets:
Review and fully identify all assets belonging to the enterprise and the value of each type of asset.

Asset recovery and disposal:
Perform the necessary tasks to preserve, recover, and dispose of assets in accordance with regulations.

Liquidation and distribution:
Assets are liquidated and distributed to fulfill obligations in the order and according to the principles prescribed by law.

Simplified bankruptcy procedure

The simplified bankruptcy procedure is applied when a business falls under one of the cases stipulated by law and meets the corresponding conditions.

Number of creditors and total debt:
The business has no more than 20 unsecured creditors and the total principal debt is within the legally prescribed limit.

Small or micro-enterprises:
This falls under the cases where the law permits the application of simplified bankruptcy procedures.

Other cases:
Simplified procedures may be applied in other special cases under the Bankruptcy and Recovery Law 2025.

The application of simplified bankruptcy procedures should be determined based on the actual situation of the business and the legal conditions at the time of implementation.