During business operations, an enterprise may fall into a status of a crisis affecting its solvency. To protect the rights of related individuals/organizations, Vietnamese laws allow them to have the right to request the opening of bankruptcy proceedings.
Through this article, BLawyers Vietnam would like to present to you information on this issue.
I. Who has the right to request the opening of bankruptcy proceedings?
By law, the following objects have the right to request the opening of bankruptcy proceedings:
- An unsecured creditor or a partly-secured creditor has the right to send a written request for initiation of bankruptcy proceedings (the “Written Request”) upon the expiration of 03 months from the payment due date for the debts which the enterprise does not pay.
- Any employee, grassroots Trade Union (or the direct-higher level Trade Union if the grassroots Trade Union is not established) can send the Written Request after 03 months from the date on which the enterprise must pay salaries and other debts to employees.
- The legal representative of the enterprise is obliged to submit the Written Request when the enterprise is insolvent.
- The owner of any Private Enterprise, the Chairman of the Board of Directors of any Joint Stock Company, Chairman of the Board of members of any Multi-member Limited Liability Company, the owner of any Single-member Limited Liability Company, or any general partner of any Partnership is obligated to submit the Written Request when the enterprise is insolvent.
- Any shareholder or any group of shareholders owning at least 20% of ordinary shares for at least 06 consecutive months can send the Written Request 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 send the Written Request when the Joint Stock Company is insolvent if it is mentioned in the company’s Charter.
In which, insolvency is the case where an enterprise fails to fulfill its obligation to pay a debt within 3 months due to payment.
II. Process for exercising the right to request the opening of bankruptcy proceedings in Vietnam
The process of requesting the opening of bankruptcy proceedings is summarized through the following steps:
Step 1: Sending the Written Request
At this stage, only those who can request the opening of bankruptcy proceedings as mentioned in Item I above can submit the Written Request. The person who requests to open bankruptcy proceedings must submit the Written Request and the attached documents and evidence to the competent Court.
Step 2: The Court receives and considers the Written Request
Within 03 working days from the date of receipt of the Written Request, the competent Court will appoint a Judge to handle it and notify the requester of the bankruptcy fees and advance payment of bankruptcy fees (if any), if the Written Request is valid.
Step 3: The Court accepts the Written Request
The Court shall accept the Written Request upon receipt of receipts for payment of bankruptcy fees and receipts of advance payment of bankruptcy fees. After that, the Court decides whether to open or not to open bankruptcy proceedings.
Step 4: Opening bankruptcy proceedings
At this stage, the requester can request the competent Court to apply temporary urgent measures to preserve the enterprise’s assets and protect his/her legitimate rights and interests.
Step 5: Creditors’ Meeting (“CM”)
From the date of completion of the assets inventory (in case the assets inventory ends after the making of the list of creditors) or from the date of the completion of the preparation of the list of creditors (in case the completion of the assets inventory ends before the making of the list of creditors), the Judge shall convene the CM.
The CM has the right to issue the resolution to reach one of the following conclusions:
- Proposing to suspend the settlement of the request for opening bankruptcy proceedings;
- Proposing to declare the enterprise bankrupt; or
- Proposal to apply the measures to restore business operations to enterprises.
Step 6: The Court issued the decision declaring the enterprise bankrupt
The Judge shall issue a decision declaring the enterprise bankrupt in the following cases:
- In case the CM approved a resolution including the application of procedures to restore business operations, but the enterprise fails to implement the plan to restore business operations; or the time limit for implementation of the plan to restore business operations expires, business activity is still insolvent; or
- The CM approved a resolution declaring the enterprise bankrupt.
Step 7: Execution of bankruptcy declaration
After the Court’s decision declaring the enterprise bankrupt, the civil judgment enforcement agency will carry out the procedures for implementing this decision with the following steps:
- Liquidation of bankruptcy assets; and
- Dividing the proceeds from the sale of the enterprise’s assets to the objects in the order of asset division.
In short, the request to open bankruptcy proceedings is one of the measures to protect the related objective’s legitimate rights and interests when realizing that the enterprise is in a state of insolvency.
For further information, please contact
Minh Ngo Nhat, Partner, BLawyers
minh.ngo@blawyersvn.com
