In today’s market, where intense competition is a normal occurrence, business conditions have changed dramatically. As a result of the impact of the COVID-19 outbreak, many enterprises are unable to continue their operations, resulting in bankruptcy. The bankruptcy process of an enterprise is lengthy and involves numerous legal steps. In this post we provide you with the neccesary information regarding business insolvency procedures in accordance with the current regulations.
1. What is bankruptcy?
Bankruptcy is a legal status of an insolvent entity that is declared bankrupt by the People’s Court.
To be recognized as bankrupt, an enterprise must meet both of these requirements:
Obviously, the procedures for the registration of business establishments are carried out at the Department of Planning and Investment. However, the bankruptcy process of an enterprise shall be carried out at the competent People’s Court.
An insolvent enterprise is an enterprise having failed to meet a debt liability for 3-months from the deadline for repayment or due date.
An enterprise having failed to meet the debt liability can happen in 2 cases:
2. Process for declaring bankruptcy of the enterprise
The process for declaring an enterprise bankrupt is specifically regulated by the 2014 Bankruptcy Law, including the following steps:
Detailed steps are presented below:
Step 1: Submission of written request to initiate the bankruptcy process
Eligibility and liability to prepare a written request for the initiation of the bankruptcy process, including relative documentation of the enterprise’s outstanding debts – submitted directly or indirectly (by post) to the competent People’s Court.
Step 2: People’s Court receipt and consideration of the petition
The People’s Court considers the satisfaction of the application. If the written request for initiation of the bankruptcy process is satisfactory, the judge will notify the requester of the fee and bankruptcy advance (if any) and send a written notification of such receipt of written requests for initiation of it.
Step 3: Initiation of the bankruptcy process
Within 30-days from the receipt of a written request for initiation of the bankruptcy process, the Judge shall make a Decision on the initiation or refusal to initiate the bankruptcy process (except when an enterprise has declared bankruptcy by the simplified procedures)
Step 4: Meeting of Creditors
Meeting of Creditors: is considered valid if the creditors attending represent at least 51% of the total unsecured debts.
A meeting of creditors can propose a Resolution including one of the following conclusions:
Step 5: Resume business operations
The insolvent entity must submit a plan to resume business operations to the Judge, creditors, the asset management officer, and the asset management enterprise for consideration within 30-days from the day in which any meeting of creditors passes the Resolution that mentions the procedures for resuming their business operation.
Step 6: Declaratio and implementation of the Decisions on the declaration of bankruptcy
When an entity is unable execute the plan to resume business operations or that entity is still insolvent after the deadline for execution of the plan to resume business operations, the judge gives the Decision on the declaration of bankruptcy.
The remaining assets of the enterprise will be liquidated and redistributed among the objects in the sequence of the redistribution of assets
For the convenience of potential clients, we have provided the aforementioned guidance regarding the bankruptcy process for enterprises. Any related issues or concerns may be directed to our team of dedicated legal professionals via hotline +84-916-545-618 or email hung.le@cnccounsel.com and thanh.tran@cnccounsel.com.
