10/29/2023

Outline

Bankruptcy Law • The concept of Bankruptcy and situation

Assoc. Prof. Dr. Tran Thang Long
of Bankruptcy
• Law on Bankruptcy
• Procedures for Bankruptcy cases

1 2

Legislation

• The Law on Bankruptcy 2014

(effective as from 01/01/2015)
The concept of
Bankruptcy
a custom of breaking a
moneychanger's bench or
counter to signify his
insolvency, or which may be
only a figure of speech

3 4

What is Bankruptcy?
Unsuccessfu

The concept of
Enterp Busines l
rises s

Bankruptcy Court
Creditors
Declaration
Due
debts
Debtors
Insolvency Incapability

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What is Bankruptcy? Bankruptcy - definition

Phenomena of a
market economy
A number of terms:
bankruptcy, winding-
up, liquidation,
insolvency…
• Insolvency: incapable to
repay due debt 🡪
bankruptcy
Unsuccessful
business 🡪 cannot A situation where an enterprise
pay due debts 🡪
competitiveness or or a cooperative
other reasons
• having failed to meet the debt liability for
03 months falls 🡪 into the state of
Bankruptcy: insolvency
bancus (table or
chair in Latin) and
• Being declared bankrupt by the court
ruptus (broken in (under procedures stipulated by the law)
Latin) 🡪 banco
roto or banca rotta

7 8

Bankruptcy - definition Bankruptcy (Art. 4(2))

Elements of bankruptcy The enterprise owns

The enterprise is
debts (secured, The debts are due
incapable to
The state of insolvency Declaration unsecured, partially to repay repay
secured debts)
• Don’t repay due debts (NOT incapable) of the court
• Applicable only to enterprises
• Non-applicable to other subjects of civil
relations (individuals, households with 03 months from the
business registration) The people’s court
deadline for repayment
• The enterprise is declare that
considered as insolvent entity
insolvent entity bankrupt

9 10

Bankruptcy vs Insolvency? Bankruptcy vs Dissolution Procedures

Bankruptcy Dissolution
Insolvency Bankruptcy
• Insolvent entity: An enterprise • One reason: incapable to repay • Many reasons: internal/external
• Bankruptcy is a legal status of
or a cooperative due debt • Administrative procedure
an insolvent entity that is
• An insolvent entity having failed • Judicial procedure • The business must ensure
to meet the debt liability
declared bankrupt by the
• Release a business from unpaid discharging all debts and
People’s Court.
• for 03 months from the debts or partially paid debts property obligations before
deadline for repayment • Some punishments given for dissolution
managing persons (prohibition • No punishments for persons in
of doing managers for a certain charge of management of the
years) business

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The state of Insolvency

• It can be declared
An enterprise 🡪
bankrupt by the court, Bankruptcy Law
in the state of
bankruptcy
does not mean • its capability to repay
such business due debts can also be
ceases to exit recovered as the
result of a restoration
process

13 14

Purposes Roles of Bankruptcy Law

To regulate relations
arising from the
settlement of
bankruptcy situation of
businesses, individuals
To protect legitimate
rights and interests of
involving parties
(laborer, creditors,
state…)

To perfect legal system To bring about an

necessary for a market healthy environment
economy for business activities

15 16

Application of the Bankruptcy Law

Protect legitimate Guarantee the Applicable for every

rights and interests of payment of enterprise and
cooperative based
business in bankruptcy in
creditors an order
in the territory of
Vietnam.

Protect interests of A managing tool In case an international

employees in the
businesses falling in the
state of bankruptcy
agreement to which
of the state for Vietnam is a signatory
contravenes regulations of
regulating business this Law, such
activities international agreement
shall prevail.

17 18

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Bankruptcy Law – fundamental 1. Subjects conducting and participating in the

bankruptcy procedures
provisions 2. Procedures for a bankruptcy case

19 20

Competence of the People’s Courts (cont.)

Art. 8 of BL 2014
The People’s The People’s Court
Courts of central-affiliated
cities and
provinces
(generally referred
to as provincial
Subjects People’s Court)

carrying out Asset

bankruptcy management
Judges
procedures Individuals
/enterprises The district
People’s Court

21 22

Competence of the People’s Courts

The people’s court of locality at the same level as the state
authorization that made business registration

Provincial-level: District-level:
Tasks and
• Cases involving overseas assets or entities
• for enterprises and
entitlements of
• The insolvent entity has branches and/or
representative offices located in district
cooperatives of which the
headquarters are located in
Judges
and/or cities of various provinces the district
• The insolvent entity has real estate in district • for cases not falling into
and/or cities of various provinces the competence of
• The bankruptcy cases taken from the district Provincial People’s Courts
People’s Court of the province due to their (Art. 8(1))
complicacy

23 24

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Tasks and entitlements of Judges Tasks and entitlements of Judges (cont.)

Collect and verify documents and evidences
To decide to conduct an audit of the insolvent
related to the request for initiation of
entity if necessary.
bankruptcy process if necessary.

To decide to initiate or to refuse to initiate To decide on the liquidation of the assets of

bankruptcy process. the insolvency entity

To appoint or replace the asset management To take temporary emergency measures

officer/enterprise according to the regulations of the law.

To supervise the asset management To impose the prohibition against leaving the
place on the representative of the insolvent
officer/enterprise entity and request the competent authorities to
escort him/her

25 26

Tasks and entitlements of Judges (cont.) Tasks and entitlements of Judges (cont.)

To impose administrative penalties and/or

To convene the creditors' meeting. request competent authorities to impose
criminal penalties

To decide on approving the creditors’ To refer to the bankruptcy settlements for the
meeting’s resolution on the restoration plan prior similar cases with the guidance of the
Supreme People’s Court.

To decide on suspending bankruptcy

To dismiss settling bankruptcy in one of the
process. cases prescribed in Article 10(1)

To decide on the declaration of bankruptcy

To perform other tasks and powers according
of the insolvent entity. to the regulations of the Law.

27 28

Who can submit requests for

initiation of bankruptcy
process?

29 30

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Creditors
An individual, an agency or an organization that is entitled
request the debtor to pay the debt
Creditors

Secured Partly-secured Unsecured

creditor: is creditor: is entitled creditor:
Subjects entitled to request the to request the insolvent entitled to request
participating debtor to pay the debt entity to pay the debt the debtor to pay
Business in partly secured against the debts that are
in bankruptcy Others
secured against
assets of the debtor or a not secured against
the state of assets of the debtor
procedures insolvency or a third party. third party whose value is assets of the debtor
not sufficient to cover the or a third party.
debt

31 32

Other subjects

unsecured and
Insolvent entities:
partly-secured Art. 28
creditors
Shareholders/groups
Employees or of shareholders of
representatives SCs, members of
cooperative or
of Trade Unions: cooperative members
Art. 27 of cooperative
unions: Art. 29

Creditors: a written request

for initiation of bankruptcy Requests for
process after 03 months for initiation
of bankruptcy
from the payment due date process
for the debts

33 34

Other subjects participating Other subjects participating

in bankruptcy procedures (Art.5) (cont.)
The following ones are liable to submit
a written request for initiation of
bankruptcy process
• The owner of any PE,
• The President of the BM of any SCs,
• President of the Member Council of any
multi-member LLC,
• The owner of any single LLC
• Any general partner of any partnership:
in bankruptcy procedures (cont.)
The following ones are entitled to file a
written request for initiation of bankruptcy
process
• Any shareholder or any group of shareholders
owning:
• at least 20% of ordinary shares for at least 06
consecutive months.
• less than 20% of ordinary shares if it is
mentioned in the company’s charter.
• Any member of any cooperative or any legal
representative of any cooperative which is a
member of the cooperative union

35 36

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Other subjects participating Contents of the request for initiation of bankruptcy

in bankruptcy procedures (Art.5) process of the creditors
Any employee, internal
The legal Name of the People’s
Trade Union (or the
representative of each Court in charge of Name and address of
superior Trade Union if Date
enterprise or bankruptcy the requester;
the internal Trade Union
cooperative: settlement;
is not established):

is entitled to send a is liable to send a Name and address of

written request for
initiation of bankruptcy
process
written request for Proof of due debts
enterprise/cooperativ
initiation of bankruptcy The due debts must be enclosed
e is forced to file for
process herewith
bankruptcy

after 03 months from

the day on which the
entity have to pay
salaries and other
debts to the
employees.
The selection of asset
when the entity is management officers and/or
insolvent. enterprises: must contain
the name and address.

37 38

Procedures

Submission and

Procedures for a reception of

applications for
opening of bankruptcy
Open the
bankruptcy
procedures
bankruptcy case procedures

Business
Declaring
operation
bankruptcy of
restoration
the business
procedures

39 40

Contents of the request for initiation of bankruptcy

process

Debtor: Art. 26
Method of
Directly
sending
Employees or representatives of Trade Unions: Art. 27
requests for the
initiation of
Insolvent entities: Art. 28 bankruptcy
process: Art. 30
Shareholders/groups of shareholders of SCs, members of
By post
cooperative/cooperative members of cooperative unions: Art.28

41 42

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Reception of applications for opening of bankruptcy Reception of applications for opening of bankruptcy
procedures procedures

Within 03 working days from the day of

• Within 03 working days from the receipt of the appointment, the appointed judge can make the following
request, the executive judge of the People’s Court shall: decisions (Art. 32):

– Appoint a judge, or • If the request is satisfactory 🡪 notify the requester of

the bankruptcy fee and bankruptcy advance (except
– a group of 03 judges for the bankruptcy settlement. when being exempted)
(Art. 31 LB 2014) • If the request does not include any necessary content
provided in Arts. 26-29, 🡪 request to amend
• The request shall be transferred to another People’s
Court if it is within the jurisdiction of such Court;
• Dismissal the request.

43 44

Dismissal of the request (Art. 35)

The requester is not
eligible for
The requester does submitting such
not pay the request The requester does
bankruptcy fee and not make
bankruptcy advance amendment after
being requested by
the judge in charge;
Open the bankruptcy
procedures
The request is Another People’s
withdrawn by Court has made a
the requester Decision on the
initiation of bankruptcy
process

45 46

Requests for reconsidering and appeal (Art. 44) Requests for reconsidering and appeal (Art. 44)

Within 07 working days from the receipt of a Decision on

On receiving the request or the appeal, the Court
the initiation of bankruptcy process:
giving the Decision 🡪 send the dossier on the case
to the superior People’s Court for settlement.
• the involving entities may request reconsideration
of the Decision,
• the People’s Procuracy at the same level may
appeal against the Decision.
Procedures: Art.44(3-9)

47 48

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Appointment of asset management officers and asset

management enterprises (Art. 45)

Within 03 working days from the day of

issuance of the Decision on the initiation • Criteria for appointment of asset
of bankruptcy process, the appointed management officers/enterprises?
judge🡪 appoint asset management
officers/ enterprises.

49 50

Appointment of asset management officers and asset

management enterprises (Art. 45)
Criteria for appointment:
• The individuals must possess practice
Open the bankruptcy
certificates of asset management
• The requester gives advice on selecting the
procedures
asset management officers and/or asset
management enterprises.
• The asset management officers and Actions concerning business activities of
enterprises do not have benefits related to the business after the opening of
the case;
bankruptcy procedures
• The characteristics of the case are suitable;
• Asset management officers and/or
enterprises must not the relatives of the
involving entities.

51 52

Business operation of insolvent entities Art. 47)

The insolvent entity:

• shall keep running the business
operation
• but under the supervision of the
• What are prohibited activities of
judge and asset management officers
and/or enterprises.
insolvent entity after opening
the judge shall decide to replace
bankruptcy procedure?
the legal representative of the
insolvent entity upon:
• the request of creditors’ meeting or
• the asset management officers and/or
enterprises.

53 54

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Prohibited activities of insolvent entities (Art. 48) Supervision insolvent entities (Art.49)

Dispersing and hiding assets;

The insolvent entity must notice the asset
management officers and/enterprises before:
Paying the unsecured debts, except the unsecured debts incurred
after the initiation of bankruptcy process and the employees’ • Doing the activities related to loan, pledge,
salaries
mortgage, sale, transfer or lease of assets; sale
or exchange of shares; transfer of asset
Renouncing the right over debt claim; ownership;
• Terminating a valid contract;
• Paying the debts incurred after the initiation of
Making an unsecured debt into a secured or partly-secured debt with bankruptcy process; paying employees’ salaries.
collateral which are assets of the entity.

55 56

Financial Obligations (Arts.51-58) Measures for Preserving Assets (Arts.59-74

• Invalid transactions (Art. 59)

• Valuation of financial obligation (Art. 51)
• Determination of interest on debts (Art. 52)
• Handling secured debts (Art. 53)
• Sequence of redistribution of assets (Art. 54)
• Financial obligations in cases of joint responsibility or guarantees
(Art. 55)
• Returning rented or borrowed assets on the declaration of
bankruptcy of an insolvent entity (Art. 56)
• Returning collaterals (Art. 57)
• Retrieving sold assets (Art. 58)
• Declaring transactions invalid (Art. 60)
• Suspension of valid contracts (Art. 61)
• Compensation for damage when contracts are suspended (Art. 62)
• Offsetting liabilities (Art. 63)
• Assets of insolvent enterprises and cooperatives (Art. 64)
• Inventory of assets of insolvent entities (Art. 65)
• Sending debt claims (Art. 66)
• Compilation of lists of creditors (Art. 67)
• Compilation of lists of debtors (Art. 68)

57 58

Measures for Preserving Assets (Arts.59-74)

• Application for secured transactions by insolvent entities

(Art. 69)
• What can temporary emergency • Employment of temporary emergency measures (Art. 70)
measures be taken? • Handling of suspension of civil execution (Art. 71)
• Handling of suspension of civil execution and handling of
cases (Art. 72)
• Obligations of banks at which entities have accounts (Art.
73)
• Obligations of employees (Art. 74)

59 60

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Temporary Emergency Measures (Art. 70) Temporary Emergency Measures (Art. 70)

• Allowing selling fragile goods, goods close to expiration date, • Blocking bank account of the entity;
goods that can hardly be bought if they are not sold at the right
• Sealing stores, fund, keeping the accounting books and
time;
relevant documents of the entity;
• Allowing harvesting and selling farm products or other goods
• Prohibiting transferring the rights to the assets of the insolvent
and products;
entity;
• Distraint and sealing assets of the entity;
• Remaining the current conditions of the assets of the insolvent
entity;

61 62

Temporary Emergency Measures (Art. 70) The creditors’ meeting

(Chapter VI, LB 2014)

• Prohibiting or forcing other relevant entities to perform some

acts;
• Compelling the employer to advance the salaries, wages,
compensation, occupational accident and occupational
disease pensions to the employees;
• Other temporary emergency measures under the regulations of
the law.

63 64

Convening the Creditors’ Meeting

• How is Creditors’ Meeting convened? • When? within 20 days

• Who is entitled to attend the Creditors’ Meeting?
• Who is obliged to attend the Creditors’ Meeting?
• How will a creditors’ meeting be valid?
• How will the Resolution of the creditors’ meeting be
passed?
– from the end of the inventory of assets if such inventory of
assets is finished after the list of creditors is made, or
– from the day on which the list of creditors is made if such
inventory of assets is finished before the list of creditors is
made,
– unless the Creditors’ meeting is not convened as prescribed
in Article 105
(Art. 75(2) LB 2014)

65 66

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Convening the Creditors’ Meeting Participants of the Creditors’ meeting

• The notification of convening the creditors' meeting and other

relevant documents must be sent to:
• Persons entitled to attend the creditors’ meetings
– The persons having the right to attend the creditors' meeting
– The persons obliged to attend the creditors' meeting • Persons having obligation to attend creditors’ meetings
– Within 15 days before the opening of such meeting.
– must specify the time and place to hold the creditors’ meeting,
programme and contents of the meeting.
(Art. 75(2) LB 2014)

67 68

Person entitled to attend (Art. 77)
The creditors whose names are on the list of creditors.
• Can authorize others to attend the creditors' meetings
• The rights and obligations of the authorized persons are the same as the
creditors’.
• Authorization must be recorded in writing;
The representatives of the employees, the Trade Union:
• That are authorized by the employees.
• The rights and obligations of the authorized persons are the same as the
creditors’.
The guarantors having paid the debts of the insolvent entities 🡪 the
unsecured creditors.
Persons under Obligation to attend (Art. 78)
The persons submitting the written request for the initiation of the
bankruptcy process
Owners or legal representatives of the insolvent entities
• Can authorize others to attend the creditors’ meetings
• Rights and obligations of the authorized persons are the same as the
authorizing persons’.
• Such authorization must be recorded in writing.
If the representatives of the insolvent entities are intentionally
absent without legitimate excuses,
• the asset management officers/enterprises shall send written requests
to the People’s Court for imposition of penalties

69 70

Valid requirements for creditors’ meetings Creditors’ meeting (cont.)

The creditors attending represent at least 51 % of the total

unsecured debts. • Deferment of creditors’ meetings: Art. 80,
The creditors not attending must sent the written opinions to the
LB 2014
Judge before the opening of the creditor's meetings. • Contents of the Creditors’ Meeting: Art.
• Contents prescribed in Art. 83(1) 81, LB 2004
• Such creditors shall be considered to attend the creditors’
meetings.
The asset management officers/enterprises assigned to deal with
the requests for the initiation of bankruptcy process must attend
the creditors’ meetings.

71 72

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Creditors’ meeting (cont.)

The Resolution of the creditors’ meeting

shall be passed:
• When more than
creditors attend, and
half of the unsecured Business operation restoration
• Representatives of at least 65% of the procedures
unsecured debts approve.

The Resolution of the creditors’

meeting shall apply to every
creditors.

73 74

Making restoration plan to resume business operations

The insolvent entity must send the restoration plan to:

• the Judge, creditors, asset management officer/enterprise for consideration

• within 30 days from the day on which any creditors’ meeting passes the Resolution that
mentions the procedures for resuming their business operation. • What should contents be included in the
The creditors, asset management officer/enterprise shall give their within 10
working days from the receipt of such plan.
restoration plan?
The asset management officer/enterprise must send a report to the Judge on
their receipt of the restoration plan

The Judge shall consider before sending the plan to the creditors’ meeting for
consideration within 15 days from the receipt of such plan.

75 76

Deadline for implementation of plans to resume business

Contents of the restoration plan operations
The plan must specify the solutions to resume the business
operation; requirements, deadline and plan to pay the debts.
Is prescribed in the
Resolution of the creditors’
The solutions include: meeting agreeing the
restoration plan.
• Capital mobilization;
• Debt relief, debt moratorium;
• Changing products and goods;
• Technological innovation;
• Reorganization of governing board, merging or separating If the creditors’ meeting cannot
the production division; specify the deadline 🡪 shall be
implemented within 03 years from
• Selling share to the creditors and others; the day on which the creditors’
• Selling or lending the assets; meeting agrees such plan.
• Other solutions under the regulations of the law.

77 78

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Valid requirements for creditors’ meetings agreeing plans to

resume business operations of entities

The creditors attending represent at least 51 % of the total

unsecured debts.
• How will the creditors’ meetings
agree plans to resume business The creditors not attending must sent the written opinions to the
Judge before the creditor's meetings is opened

operations be accepted? • Such creditors shall be considered to attend the creditors’

meetings.

The asset management officers/enterprises assigned to deal with

the written requests for the initiation of bankruptcy process must
attend the creditors’ meetings.

79 80

Suspension of plans to resume business operations Other issues

• Contents and procedures for approving plans to resume

the entity has completely executed restoration business operations: Art. 91
plan
• Recognition of Resolutions of creditors’ meetings through
plans to resume business operations: Art. 92
• Supervising execution of plans to resume business
the entity cannot execute restoration plan operations: Art. 93
• Adjustment to plans to resume business operations: Art. 94

the entity is still insolvent after the deadline

for the execution of restoration plan

81 82

Declaration of bankruptcy • How will the declaration of

bankruptcy procedure be made?

83 84

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Declaration of bankruptcy
Summary procedure
Regular procedure
85
Declaration of bankruptcy by regular procedure
When creditors’ meetings fail (Art. 106), the Court:
• shall issue a Decision to declare the entity bankrupt
• within 15 days from the receipt of the report on the result
of a creditors’ meeting
After issuance of Resolutions of creditors’ meetings
(Art.107), the Court:
• shall consider the Decision to declare entity bankrupt
• within 15 days from the receipt of the Resolution of a
creditors’ meeting requesting the declaration of
bankruptcy
87
Declaration of bankruptcy by regular procedure
• Decisions to declare entities bankrupt: Art. 108
• Sending and announcing Decisions to declare entities bankrupt:
Art. 109
• Financial obligations after Decisions to declare entities bankrupt
are issued: Art. 110
• Requests for reconsideration of and appeals against Decisions
on declaration of bankruptcy: Art. 111
• Handling of requests and appeals against Decisions on
declaration of bankruptcy: Art. 112
• Consideration of requests and appeals according to special
procedures: Art. 113
89
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Declaration of bankruptcy by summary procedure
The Court shall declare the bankruptcy by the simplified procedures if
the Insolvent entity:
• Cannot afford the bankruptcy fee and bankruptcy advance after
submitting the request for the initiation of the bankruptcy process
• Cannot afford the bankruptcy cost after the request is accepted.
The Court shall notify the involve entities about the application of
summary procedure.
The Court shall within 30 days from the day giving notification:
• Consider and declare the entity bankrupt, or
• Continue to apply the regular procedures
• Notify that to the involved entities.
86
Declaration of bankruptcy by regular procedure
In case the creditors’ meeting passes the
Resolution adopting recovery plan, the Court shall
issue a Decision to declare the entity bankrupt if:
• The entity cannot formulate the restoration
plan before the deadline;
• The creditors’ meeting does not agree the
restoration plan of the entity;
• The entity cannot execute the restoration plan .
88
Repayment of debts
• Sequence of redistribution of assets:
Art. 54(1)
• The remaining amount of the asset
value after every payment: Art. 54(2)
90
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Sequence of redistribution of assets

The unpaid salaries, severance

pay, social insurance and
medical insurance to
Cost of bankruptcy employees, other benefits
• How is the Sequence of redistribution according to the labor
contracts and collective
bargaining agreements;
of assets for an entity being declared
bankrupt?
Unsecured debts
Financial obligations to payable to the
the Government; creditors on the list of
creditors;
Debts incurred after the
initiation of bankruptcy
which are used for
resuming the business
operation.
Secured debts which are
not paid because the value
of collateral is not enough
to cover such debts

91 92

Remaining amount of the asset value Consequences of the declaration of bankruptcy

Members of the
cooperative ;
• Cease the existence of • Cease all relations
Owners of the
Members of the private the business falling into concerning debts and
partnerships; enterprises; repayment of debts (except
the state of bankruptcy
for the following cases:
• Property obligations of unlimited
Owners of the liability partners
shareholders of
single member
the shareholding • Property obligations of the
limited
companies; owner of a PE
companies;
Members of
multi-member
limited liability
companies,

93 94

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