Bankruptcy Law 2014 This is the foundational legal document governing the resolution of insolvency situations for businesses and cooperatives in Vietnam. This article provides a detailed summary of the procedures, processes, and significant changes in the implementation of bankruptcy law, helping administrators and creditors to closely understand their rights.
Bankruptcy Law 2014 and its practical application
The Bankruptcy Law of 2014 serves as a mechanism. humanistic retreat This is for businesses facing financial difficulties. Instead of letting businesses sink into insurmountable debt, the 2014 Bankruptcy Law creates a legal framework for restructuring or liquidating assets fairly, in accordance with the rule of law.
Based on current legal regulations, The concepts and applicable subjects are clarified as follows:
- According to Clause 1, Article 4 of the 2014 Bankruptcy Law, a business is defined as one that fails to fulfill its debt payment obligations within three months of the due date.
- The applicable entities include enterprises, cooperatives, and cooperative unions legally established and operating within the territory of Vietnam.
- The purpose of bankruptcy proceedings is to protect the legitimate rights of all parties involved, from creditors and employees to the debtor company itself, in order to restructure the economy and minimize cascading damage.
The enactment of the 2014 Bankruptcy Law has helped standardize the debt resolution process, preventing illegal debt collection or asset dissipation that causes harm to society.
Rights and obligations to file for bankruptcy proceedings.
One of the advancements of the 2014 Bankruptcy Law is the expansion of access to justice for many parties. Filing for bankruptcy proceedings is not only a right but, in many cases, a mandatory legal obligation to avoid sanctions related to the personal liability of managers.
The entities involved in this initial phase, as stipulated by the 2014 Bankruptcy Law, include:
- The group of entities entitled to file a claim includes unsecured or partially secured creditors when, after a period of 3 months, the business fails to fulfill its debt repayment obligations.
- The legal representative or owner of a business has the obligation to file for bankruptcy when they realize the business is insolvent, in accordance with the spirit of the 2014 Bankruptcy Law; failure to do so may result in liability for the resulting damages.
- The right of workers and union representatives to request bankruptcy proceedings when a company fails to pay wages and other debts to workers for three consecutive months.
Current procedures for resolving corporate bankruptcy
The process of resolving a bankruptcy case is often lengthy and requires accurate documentation. These steps are closely monitored by the People's Court based on the chapters of the 2014 Bankruptcy Law to ensure transparency.
Application submission and processing
The first stage determines the validity of the entire subsequent debt restructuring process:
- The filing location for the application at the competent People's Court is based on the location where the business is registered as its head office, as stipulated in Article 8 of the 2014 Bankruptcy Law.
- The deadline for amending or supplementing the application is usually 10 working days from the date of receipt of the request from the Court; businesses also need to be aware of the payment of fees and advance payment of bankruptcy costs for the application to be officially accepted.
- The basis for the court to decide to accept a bankruptcy petition is after verifying the validity of the documents and confirming that the applicant has fulfilled their obligation to pay the advance fees.
Decision to initiate bankruptcy proceedings and seize assets.
After receiving the case, the court will review it to decide whether to initiate bankruptcy proceedings. This is a crucial milestone that changes the entire operational status of the economic entity.
- Prohibited or restricted activities for businesses after a decision to initiate bankruptcy proceedings include: asset disposal, payment of unsecured debts (except with the judge's permission), or gifting assets in violation of the 2014 Bankruptcy Law.
- The process of inventorying assets and compiling lists of creditors and debtors must be carried out expeditiously to determine the actual financial situation under the supervision of the Court.
- The role of the Receiver or asset management company is to directly oversee day-to-day business operations, ensuring there is no loss of assets before the Creditors' Meeting takes place.
Creditors' meeting and resolution options
The creditors' meeting is considered the highest authority of creditors in the settlement process under the 2014 Bankruptcy Law:
- Participants include listed creditors, business representatives, and receivers; the condition for a valid meeting is that at least 65% of the total unsecured debt participate.
- Possible scenarios at the Conference include: suspending proceedings if the business is no longer insolvent, or adopting a business recovery plan under the 2014 Bankruptcy Law to give the business a chance to recover.
Business recovery procedures under the Bankruptcy Law 2014
Bankruptcy does not necessarily mean the end of existence. The 2014 Bankruptcy Law prioritizes business recovery if the enterprise still has economic potential and creditors agree to facilitate it.
Below are the key aspects of the recovery phase as stipulated by the Bankruptcy Law 2014:
- The conditions for application are that the creditors' meeting adopts a resolution on the recovery plan; the timeframe for implementing this plan is usually no more than 3 years as stipulated in the 2014 Bankruptcy Law, except in special cases.
- Recovery measures are diverse, including: raising new capital, changing production and business lines, selling shares to new investors, or restructuring the entire management system.
- The consequence of successfully implementing the recovery plan under Article 92 of the 2014 Bankruptcy Law is that the enterprise will escape bankruptcy and return to normal operation.
Declaration of bankruptcy and order of asset distribution
If the recovery plan is not feasible or is not approved, the court will issue a decision declaring bankruptcy and proceed with the liquidation of the remaining assets of the business. To ensure fairness, the Bankruptcy Law of 2014 clearly stipulates the priority order for payment.
Below is a summary table of the priority order of payments when a business is declared bankrupt, for your easy reference:
| Order of priority | Payment details | Legal basis |
|---|---|---|
| Priority 1 | Bankruptcy costs (fees, administrator fees, asset inventory) | Article 54 of the Bankruptcy Law 2014 |
| Priority 2 | Wages, severance pay, and social insurance contributions owed to workers. | Article 54 of the Bankruptcy Law 2014 |
| Priority 3 | Financial obligations to the State (Unpaid taxes) | Article 54 of the Bankruptcy Law 2014 |
| Priority 4 | Unsecured debts are paid to other creditors. | Article 54 of the Bankruptcy Law 2014 |
After the asset distribution according to the table above, if there is still a surplus of assets, that amount will belong to the business owner or contributing members. However, if the assets are insufficient to cover the debts, debts of the same priority will be paid proportionally based on the actual amount owed.
Note regarding asset liquidation: If the company's assets are found to be concealed or if additional assets are discovered after the bankruptcy declaration has been made, the Court will proceed with recovery and additional distribution in accordance with Article 127 of the 2014 Bankruptcy Law.
Functions of Insolvency Administrators and Asset Management Companies
The bankruptcy administrator is a central figure throughout the bankruptcy resolution process, playing an independent role in protecting the assets of the debtor company for creditors in accordance with the spirit of the 2014 Bankruptcy Law.
The regulations regarding this position include:
- The standard requirements for obtaining a bankruptcy administrator's license are that the individual must have a bachelor's degree in law or economics, practical work experience, and be licensed to practice by the Ministry of Justice in accordance with the 2014 Bankruptcy Law.
- The authority to recover assets and request the People's Court to declare invalid illegal transactions carried out within 6 to 18 months prior to the commencement of bankruptcy proceedings.
- The responsibility to maintain the confidentiality of business information and to compensate for damages if there is any profiteering or loss of assets due to subjective errors in the implementation of the 2014 Bankruptcy Law.
Notes on legal risks and property liability
Participating in the bankruptcy process requires a thorough understanding of the 2014 Bankruptcy Law to avoid unnecessary legal risks, particularly the personal liability of business executives.
Businesses should pay particular attention to the following points when applying the Bankruptcy Law of 2014:
- Clearly distinguish between voluntary and compulsory bankruptcy to develop a response strategy that aligns with your best interests.
- Under the 2014 Bankruptcy Law, the liability of private business owners and partners is unlimited for any outstanding debts.
- Prohibited acts include: falsifying documents, prioritizing debt payments to relatives, or absconding to evade financial obligations; these acts may be subject to criminal prosecution in addition to the penalties of the 2014 Bankruptcy Law.
Conclude
The 2014 Bankruptcy Law is not just the end of the road, but also an opportunity for businesses to restructure transparently and in accordance with the law. However, implementing these regulations requires absolute accuracy in accounting, asset inventory, and financial appraisal. To ensure this process is safe and minimizes risks for management, consultation with experts deeply knowledgeable in corporate finance is essential. In-depth debt management solutions and restructuring consulting from reputable expert networks like MAN – Master Accountant Network will help businesses be more proactive in all scenarios. A proper understanding of the 2014 Bankruptcy Law, along with technical support from specialized units, will ensure the legal rights of all parties and help businesses take the necessary steps. cease operations or revive in a sustainable way.
Contact information for Man – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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- E-mail: man@man.net.vn
Content is moderated by: Mr. Le Hoang Tuyen – Founder & CEO of Man, CPA Vietnam Auditors With over 30 years of experience in accounting, auditing, and financial consulting...
