In 2012, many
Vietnamese companies are facing difficulties and have to cease operation. In
other developed countries, the bankruptcy law plays an important role in the
restructuring of a company having financial difficulties. The same cannot be
said for Vietnam. However, to some extent, bankruptcy is still a credible
option in theory for corporate restructuring in Vietnam. Therefore, a good
understanding of Vietnamese bankruptcy law is still necessary.
Basic knowledge
Under
Vietnamese legislation, there is no concept of personal insolvency but only concept of bankruptcy
for enterprises.
In Vietnam, the regulations on bankruptcy of companies and reorganization
and restructuring of companies in bankruptcy process are mainly provided in:
- The Law on Bankruptcy; and
- Resolution 3 of the Supreme Court dated 28 April
2005.
The average timing from
the petition filing until the deletion off the registry book of a bankrupt
company is about 150 days assuming that no recovery plan is adopted and
implemented. If there is an appeal
against the court’s decision to commence the liquidation procedures, a period
of at least 90 days will be added for the court of higher level to consider the
appeal.
Bankrupt status
An enterprise is considered bankrupt if it is
“unable to pay the due debts upon request by the creditors”. Resolution 3
further clarifies that “due debts” are the unsecured debts or partly secured
debts, which is expressly recognized by the relevant parties, supported by
adequate evidencing documents and free of dispute.
Filing and
acceptance of a petition for bankruptcy proceedings
Petition: An unsecured or partly secured
creditor of a company by noticing that the company is in bankrupt status will
have the right to file a petition for bankruptcy proceedings against such company together with evidence of the bankrupt status
Court’s fee: The petitioner
must make an advance of the bankruptcy fees, determined the court
Court: The competent
court in charge of bankruptcy cases is the provincial court of the locality
where the company in bankruptcy registered for its business registration.
Acceptance
of bankruptcy hearing: The Court will issue a decision whether to commence the bankruptcy proceedings within 30 days from the date of acceptance of the petition for
bankruptcy proceedings. Creditors and debtors of the company are also entitled
for being noticed of such decision.
Commencement
of bankruptcy proceedings
Company’s operation: After the issuance of the court’s decision to commence
bankruptcy proceedings, the business activities of the company in bankruptcy
will be subject to the supervision and inspection of the judge in charge of the
case and the Board for Asset Management and Liquidation (Liquidation Board).
Standstill: After the issuance of the court’s decision to commence
bankruptcy proceedings, the disposal of the company’s secured assets for
secured creditors will be temporarily suspended.
List of company’s assets: Within 30 days from the date of receiving the
court’s decision to commence bankruptcy proceedings, the company will have to
list out an inventory of its assets in accordance with the detailed list
submitted to the court and determine the value of such assets.
Preparation
of the list of creditors: Within
60 days from the last day of publication of the court's decision to commence bankruptcy
proceedings, creditors of the company must submit to the court their detailed
request for debt payment. Within 15 days from the expiration of the above 60
days, the Liquidation Board must prepare a list of creditors with details of
the debts thereof.
Convention
of the Creditors Meeting: Within
30 days from the completion of the list of creditors or the list of company’s assets, depending on
which date comes first, the competent court will convene the first meeting of
the company’s creditors to discuss the
company’s situation and approve a resolution to recover the company’s business,
if the creditors consider that the company is recoverable. If the creditors consider that the company is not recoverable then
the court will decide to commence the liquidation procedures.
Recovery
of business activities
The plan
will then be subjected to the approval of the second meeting of the company’s
creditors. The maximum term for the company to implement the business recovery
plan is 3 years from the last day of publication of the Court’s adoption of the
creditor’s resolution approving the company’s recovery plan
Within 30
days from the approval of the resolution
to recover the company’s business,
the company is required to prepare and submit the plan to recover its business
activities to the Court, specifying the necessary measures to recover the
operations as well as the conditions, term and schedule for repayment of debts.
Assets liquidation
Commence the liquidation procedures: The
court will decide to commence the liquidation procedures for the company’s
assets in the following cases: (1) the failure of the first creditor’s meeting,
(2) the company fails to propose a recovery plan, (3) the company implements
improperly the approved recovery plan or (4) the creditors do not approve the
company’s recovery plan.
Settlement
of undue debts: Where the court decides to
commence the liquidation procedures, any undue debts of the company existing at
that time will be treated as due debts, without any interest for the undue
period.
Settlement
of secured debts: Where the
court issues decision on commencing the liquidation procedures, debts secured
by the company’s assets before the courts’ acceptance of bankruptcy hearing
will be given priority in payment by such assets.
Priority
of assets distribution: Where
the court decides to commence the liquidation procedures, the assets of such
liquidated company will be distributed in the priority order of (1) bankruptcy
fees, (2) unpaid salary, severance allowances, social insurance and other
benefits of its employees, and (3) unsecured debts.
Termination of the liquidation procedures: The court will decide to terminate the assets
liquidation procedures when the company has no more assets to carry out the
assets distribution or the assets distribution has been fully completed.
Declaration of
bankruptcy
The court will make the
decision to declare the bankruptcy of the company along with the decision to
terminate the liquidation procedures thereof. Within 10 days from the date of such decision, the court
will forward the decision to the business registration office for deleting the
bankrupt company’s name from the business registry.
Voidable
transactions
Under the Law on Bankruptcy, inter alia,
the following transactions may be held by the court to be invalid if conducted
within three months prior to the date
of acceptance of the bankruptcy application (the suspect period):
the payment of debts which are
not yet due.- settlement of any bilateral
contract under which the obligations of the Counterparty are apparently greater
than those of the other party; and