THE LAW ON TRUSTEES AND ASSET MANAGEMENT IN VIETNAM 2024

STATE MANAGEMENT OF TRUSTEES AND ASSETS MANAGEMENTS IN VIETNAM 2024

THE LAWS ON TRUSTEES, PROFESSIONAL PRACTICES, ASSET MANAGEMENT AND LIQUIDATION; SOLUTIONS TO IMPROVE THE QUALITY OF PROFESSIONAL PRACTICES MANAGEMENT, LIQUIDATION OF ASSETS AND RECOMMENDATIONS FOR IMPROVING LEGAL PROVISIONS

Ho Chi Minh City Department of Justice

I. Current status of state management of trustees and the practice of asset management and liquidation

1. Implementation of bankruptcy laws

Immediately after the Bankruptcy Law of 2014 was enacted by the National Assembly, the Government issued Decree No. 22/2015/ND-CP on February 16, 2015, detailing the implementation of certain provisions of the Bankruptcy Law concerning trustees and the practice of asset management and liquidation. Following this, the Ho Chi Minh City Department of Justice advised the City People’s Committee to sign Decision No. 3960/QD-UBND on August 12, 2015, issuing a plan to implement Decree No. 22/2015/ND-CP in Ho Chi Minh City. Additionally, on September 21, 2015, the Department of Justice proactively issued Plan No. 5005/KH-STP-BTTP for implementation at the Department of Justice.

To implement these two plans, the Department of Justice undertook the following tasks:

– The department announced administrative procedures in the field of trustees and asset management and liquidation enterprises under the state management scope of the Department of Justice (Decision No. 2103/QD-UBND on April 28, 2016, of the City People’s Committee on announcing standardized administrative procedures within the management scope of the Department of Justice in Ho Chi Minh City). This included the registration, change, dissolution, and termination of activities for trustees and asset management and liquidation enterprises.

– The Department of Justice implemented Circular No. 224/2016/TT-BTC on November 10, 2016, issued by the Ministry of Finance, stipulating the fees, regime of collection, payment, management, and use of the assessment fees for professional practice standards and conditions, asset management and liquidation activities, and the licensing fees for trustee practice certificates.

– The Department of Justice coordinated with the City People’s Court, the City People’s Procuracy, and the City Civil Judgment Enforcement Department to issue Coordination Regulation No. 1085/QCPH-STP-TA-VKS-THA on March 22, 2022, to strengthen state management and supervision of asset management and liquidation practices in Ho Chi Minh City. On August 3, 2022, the Department of Justice issued Plan No. 3622/KH-STP-BTTP to implement the coordination regulation to enhance state management and supervision of asset management and liquidation practices at the Department of Justice in Ho Chi Minh City.

2. On the work of promoting bankruptcy laws​​​

A dedicated webpage titled “Trustees and Asset Management and Liquidation Enterprises in Ho Chi Minh City” has been created on the Department of Justice’s electronic information portal. This page publishes the list of trustees and asset management and liquidation enterprises, updates legal regulations, and provides practice guidelines from the Ministry of Justice. It serves as a resource for individuals, organizations, and enterprises to access relevant information.

Additionally, 10,000 leaflets have been designed and distributed to the city business association, business associations in 24 districts, the city’s People’s Court, and district courts. These leaflets provide information about trustees, the forms of practice, the rights and obligations of trustees, the costs of asset management and liquidation, and the published list of trustees and asset management and liquidation enterprises.

An electronic leaflet titled “Introduction to Trustees and Asset Management and Liquidation Enterprises” has also been created and posted on the Department of Justice’s electronic information portal.

3. State management of Trustees

To support the development of asset management and liquidation practices locally, regular review of regulations is essential. The Department of Justice promptly advises the City People’s Committee to publish and republish the list of administrative procedures in asset management and liquidation, facilitating organizations and individuals in monitoring and performing administrative procedures.

For instance, Decision No. 2103/QD-UBND issued on April 28, 2016, announced administrative procedures under the management scope of the Department of Justice in Ho Chi Minh City, including five procedures related to trustees and asset management and liquidation practices.

Decision No. 2700/QD-UBND, issued on June 29, 2018, announced new, amended, supplemented, replaced, and abolished administrative procedures under the management scope of the Department of Justice, with five amended procedures in the trustee field.

The list of administrative procedures, including those related to trustees, was published under Decision No. 3651/QD-UBND issued by the City People’s Committee on October 5, 2020.

Additionally, the Department of Justice studies and proposes methods to standardize processes and create convenience for applicants, shortening the processing time. This includes establishing the “Combined Process for Administrative Procedures with Judicial Record Forms under the Authority of the Department of Justice” (issued under Decision No. 613/QD-STP on November 30, 2017), applied to asset management and liquidation registration procedures and issuance of Judicial Record Forms No. 1 and No. 2 for individuals.

To enhance the effectiveness of state management in asset management and liquidation practices, the Department of Justice has implemented the following measures:

– The application of quality management systems according to TCVN ISO 9001:2008 and 9001:2015 standards has been adopted to ensure transparency in the handling of ongoing files.

– The Department advises the City People’s Committee President to develop internal processes for resolving administrative procedures under the jurisdiction of the Department of Justice, including asset management and liquidation (Decision No. 1464/QD-UBND dated May 4, 2020, of the City People’s Committee President).

– The development and application of software for managing judicial support organizations, including asset management and liquidation, aim to ensure scientific, accurate, and time-saving monitoring and management. This ensures that the registration, change, and dissolution of activities are handled according to the prescribed procedures and results are delivered on time.

The Department of Justice has organized a specialized conference on asset management and liquidation practices. Through this, the Department promptly grasps the situation of organizational activities, provides professional training, resolves difficulties, and enhances the effectiveness of state management over trustees and asset management and liquidation enterprises in Ho Chi Minh City.

The Department of Justice regularly reviews and publishes the list of individuals and enterprises registered for asset management and liquidation on its electronic information portal. Additionally, the Department of Justice informs the Department of Judicial Support and the Ministry of Justice about including these trustees in the list when processing registration documents.

On March 20, 2019, the Ministry of Justice issued Circular No. 03/2019/TT-BTP, which specifies certain contents of judicial statistical activities and has been effective since May 15, 2010. To implement Circular No. 03/2019/TT-BTP, the Department of Justice issued Official Letter No. 2454/STP-BTTP on May 6, 2019, and Official Letter No. 7361/STP-BTTP on December 16, 2019. These documents guide and request that individual trustees and asset management and liquidation enterprises submit reports as required.

The regular and timely reporting and statistical work regarding the organization and activities of asset management and liquidation practices in the city ensure that the Department of Justice keeps abreast of the situation. These reports highlight difficulties and obstacles and provide recommendations for the Ministry of Justice and the City People’s Committee to address and resolve these issues.

II. Organizational Structure for Asset Management and Liquidation Activities

1. Organization

Since the issuance of Decree No. 22/2015/ND-CP, the number of individual trustees and enterprises registered for asset management and liquidation practices in Ho Chi Minh City has been increasing annually. As of September 30, 2024, there are 136 individual trustees and 48 enterprises engaged in asset management and liquidation in the city.

The process of handling registration files indicates that asset management and liquidation practices in the city are relatively stable. Some trustees also concurrently practice as lawyers and auctioneers.

2. About activities

Regarding the number of asset management and liquidation cases, according to reports from individual trustees and asset management and liquidation enterprises in Ho Chi Minh City, from 2015 to December 31, 2023, 431 cases were received. The total remuneration collected was 7,554,097,596 VND, and the taxes and financial obligations paid amounted to 442,228,634 VND. 

Specifically:

Overall, the activities of trustees and asset management and liquidation enterprises in the city have been stable and compliant with legal regulations.

III. Review and Evaluation

1. Advantages

The implementation of the organization and activities of asset management and liquidation in the city ensures compliance with state policies and legal regulations on judicial reform. It effectively mobilizes social resources for the socialization of certain judicial support fields.

2. Difficulties, obstacles and suggestions and recommendations

State management of the organization and activities of asset management and liquidation is emphasized and enhanced through regular dissemination of information and addressing difficulties and obstacles to continually improve the professional quality of services provided to the public and the effectiveness of management activities. Some difficulties and obstacles are as follows:

– Regarding the business registration authority and the professional registration authority for asset management and liquidation enterprises: According to Clause 1, Article 13 of the Bankruptcy Law, two types of enterprises are permitted to practice asset management and liquidation during bankruptcy proceedings: partnerships and private enterprises.

According to Article 12 of Decree No. 22/2015/ND-CP: “An enterprise that meets the conditions specified in Clause 2, Article 13 of the Bankruptcy Law shall register for asset management and liquidation practice with the provincial/municipal Department of Justice after being granted a business registration certificate.” Compared to other judicial support fields, to practice asset management and liquidation, an enterprise must first register its business with the Department of Planning and Investment. After receiving the business registration certificate, the enterprise must register its practice with the Department of Justice.

However, the process of handling registration files has revealed several issues:

Firstly, after being granted a business registration certificate by the Department of Planning and Investment, there is no regulation on the timeframe for registering the practice with the Department of Justice.

Secondly, the types of enterprises permitted are limited to two forms: private enterprises and partnerships. In some cases, individuals establish or participate in establishing asset management enterprises while concurrently practicing as lawyers, either as partners or owners in law firms registered by the Department of Justice. This situation can lead to violations of the Enterprise Law’s provisions on operating conditions for private enterprises or partnerships.

– Regarding the naming of asset management and liquidation enterprises, the current Bankruptcy Law and Decree 22/2015/ND-CP do not have specific regulations distinguishing the names of enterprises in the asset management and liquidation sector. Therefore, it is proposed to supplement the regulations on the naming of enterprises according to their business functions in the trustee sector (similar to other support fields such as notary, lawyer, and bailiff).

– The Bankruptcy Law and Decree No. 22/2015/ND-CP, which guide the registration of asset management and liquidation practices, only require the determination of the permanent residence of individual trustees but do not apply this to trustees registered in enterprises. Consequently, there is no restriction on where trustees can register their practice within enterprises across the country. Additionally, there is currently no common database to review whether a trustee has registered to practice individually or has practiced at an asset management and liquidation enterprise nationwide. This has led to cases where a trustee is registered to practice both individually at their residence and within an asset management and liquidation enterprise.

– Certain provisions of the Bankruptcy Law regarding the timeframe for responses to enterprises or cooperatives unable to pay debts (Clause 3, Article 49 of the Bankruptcy Law), the deadline for creditors to send debt claims to trustees (Clause 1, Article 66 of the Bankruptcy Law), the timeframe for compiling the list of creditors (Clause 1, Article 67 of the Bankruptcy Law), and the timeframe for compiling the list of debtors and publicly posting it at the People’s Court (Clause 2, Article 68 of the Bankruptcy Law) are too short for complex cases.

– The concepts of bankruptcy and insolvency (Article 4 of the Bankruptcy Law) currently have different interpretations, leading to inconsistent application in resolving bankruptcy cases. This discrepancy can easily result in creditors abusing the insolvency of enterprises to file for bankruptcy proceedings with the court, instead of initiating civil lawsuits.

– Regarding bankruptcy costs, advance payment of bankruptcy costs, and the costs for trustees and asset management and liquidation enterprises (Articles 23 and 24 of the Bankruptcy Law), there are no specific guidelines. This lack of clarity makes it difficult to apply the law, does not provide judges with the initiative needed when handling bankruptcy cases, and leads to inconsistency in the application of advance bankruptcy costs and trustee fees, as well as the costs for asset management and liquidation enterprises.

– Articles 45 and 46 of the Bankruptcy Law regulate the appointment and replacement of trustees and asset management and liquidation enterprises. However, they do not address the scenario where there is no consensus between the judge and the trustee or the asset management and liquidation enterprise. This omission can cause confusion for judges.

– Clauses 1 and 2 of Article 109 of the Bankruptcy Law stipulate a 10-working-day period for sending and announcing the bankruptcy declaration decision. This includes publication on the national business registration portal, the electronic portal of the People’s Court, and in two consecutive issues of local newspapers, starting from the date the People’s Court issues the decision. However, Clause 2 of Article 111 of the Bankruptcy Law allows a 15-day period from the date of receiving the bankruptcy declaration decision for notified parties to request reconsideration or for the People’s Procuracy at the same level to file an objection.

– Both the Bankruptcy Law and the Civil Judgment Enforcement Law assign the authority to enforce the bankruptcy declaration decision to the civil judgment enforcement agency. Clause 2 of Article 36 of the Civil Judgment Enforcement Law sets a 3-working-day timeframe from the date of receiving the decision for issuing the enforcement decision. However, Clause 1 of Article 120 of the Bankruptcy Law states: “Within 5 working days from the date of issuing the bankruptcy declaration decision, the civil judgment enforcement agency must proactively issue the enforcement decision.” Thus, the timeframes for the civil judgment enforcement agency to issue the enforcement decision on the bankruptcy declaration are inconsistent between the Civil Judgment Enforcement Law and the Bankruptcy Law.

– Article 21 of Decree No. 22/2015/ND-CP and Joint Circular No. 01/2018/TTLT-BTP-VKSNDTC-TANDTC stipulate that the costs for trustees and asset management and liquidation enterprises are paid from the value of the insolvent enterprise’s or cooperative’s assets. These costs include the remuneration for trustees and asset management and liquidation enterprises and other related expenses.

However, the Decree only specifies the costs involved when trustees and asset management and liquidation enterprises handle the process. In cases where enforcement officers execute asset recovery, transfer assets to buyers (Point c, Clause 2, Article 120 of the Bankruptcy Law), and carry out asset liquidation (Clause 4, Article 121 of the Bankruptcy Law), it does not clearly state who should bear these costs.

Currently, there is no specific regulation on whether trustees and asset management and liquidation enterprises should be paid for their expenses during the two-year asset liquidation period or under which item of Article 21 of Decree No. 22/2015/ND-CP these costs fall.

– Decree 22/2015/ND-CP does not clearly specify how to determine the remuneration for trustees. If the remuneration is calculated based on working hours, it lacks specific guidelines on what constitutes billable working hours and the hourly rate. If the remuneration is calculated as a lump sum, it is not clear who determines this lump sum, how the agreement is made, when the agreement takes place, and the form of the agreement. Moreover, the method of calculating trustee remuneration is not clearly defined for each stage of the bankruptcy declaration procedure.

– Decree 22/2015/ND-CP does not specify whether trustees can act as representatives of enterprises or cooperatives without legal representatives during the asset liquidation phase, as stated in Clause 2 of Article 16 of the Bankruptcy Law, and in Clause 4 of Article 121 of the Bankruptcy Law (the phase after the bankruptcy declaration decision).

– Currently, there are no regulations requiring trustees and asset management and liquidation enterprises to report to civil enforcement officers on the handling of assets of insolvent enterprises or cooperatives before the court issues a bankruptcy declaration decision.

– For the task of trustees and asset management and liquidation enterprises transferring money after liquidating assets, the Bankruptcy Law and Decree 22/2015/ND-CP do not clearly specify the timeframe for the transfer. This lack of clarity results in trustees and asset management and liquidation enterprises not being proactive. Specific guidance was only provided when Joint Circular No. 07/2018/TTLT-BTP-VKSNDTC-TANDTC was issued, effective from August 1, 2018. However, after receiving documents from the Civil Judgment Enforcement Agency regarding delays in transferring money post-liquidation, trustees have still not prioritized or expedited this task.

Additionally, there are no clear and specific regulations on whether the money collected by trustees from asset liquidation should be deposited into term or non-term savings accounts, nor on how to handle interest earned on these deposits. There is also no mechanism to address delays by trustees in transferring liquidation proceeds to the Civil Judgment Enforcement Agency.

– The obligations and responsibilities of trustees are not clearly defined in cases where they fail or delay transferring the liquidation proceeds of bankrupt enterprises or cooperatives to the civil enforcement agency to protect creditors’ rights. Additionally, the obligations and responsibilities of trustees when transferring bankruptcy files to the civil enforcement agency, as stipulated in Article 121 of the Bankruptcy Law, are not specified to ensure compliance with the legal regulations on civil judgment enforcement.

IV. Solutions for Improving the Quality of Asset Management and Liquidation Practices and Proposals for Legal Amendments

Based on the advisory and management activities of asset management and liquidation in Ho Chi Minh City, the Department of Justice proposes the following solutions to the Ministry of Justice:

– It is recommended that the Ministry of Justice study and propose the Government to consider amending and supplementing Decree 22/2015/ND-CP to resolve difficulties and obstacles in asset management and liquidation activities. In the long term, it is suggested that the National Assembly consider amending the Bankruptcy Law (including content on asset management and liquidation) to suit the current practical situation.

– The Ministry of Justice is urged to develop a coordination mechanism between the courts, the procuracy, the civil enforcement agency, banks, tax authorities, and social insurance agencies to enhance the effectiveness of asset management and liquidation activities. Additionally, it is proposed to develop a handbook for judges, procurators, enforcement officers, and trustees to quickly grasp the procedures, roles, functions, and tasks in handling bankruptcy cases.

– The Ministry of Justice is also advised to organize training for asset management and liquidation before issuing trustee practice certificates and to conduct annual training sessions to update legal knowledge on asset management and liquidation for trustees and asset management and liquidation enterprises.

– It is recommended that the Ministry of Justice research and consider additional regulations for law practice organizations that wish to register for asset management and liquidation practice. These organizations should be allowed to add this practice to their existing registration without having to register a new asset management and liquidation enterprise as currently required.

– The Supreme People’s Court is recommended to guide local courts on the advance payment levels for bankruptcy costs, providing the basis for appropriate cost estimates. Additionally, guidance is needed on the timeframe for posting the list of creditors and debtors as stipulated in Articles 67 and 68 of the Bankruptcy Law.

– The Ministry of Justice is urged to research and develop a national database (management software) for organizations and individuals practicing asset management and liquidation.

– It is proposed that inspection agencies enhance the oversight and inspection of this field to promptly correct and address errors and violations.

The above discussion on “State Management of Trustees and Asset Management and Liquidation Practices; Solutions to Improve Practice Quality and Proposals for Legal Amendments” is presented by the Ho Chi Minh City Department of Justice at the conference. We wish all leaders and delegates good health, happiness, and success in their work. We also wish the conference a great success.

If you need more consulting, please Contact Us at TNHH NT International Law Firm (ntpartnerlawfirm.com)

You can also download the .docx version here.

“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

LEGAL CONSULTING SERVICES

090.252.4567

HÃY CLICK ĐỂ LẠI SĐT CHÚNG TÔI SẼ GỌI NGAY CHO BẠN MIỄN PHÍ

NT INTERNATIONAL LAW FIRM

• Email: info@ntpartnerlawfirm.com – luatsu.toannguyen@gmail.com
• Phone: 090 252 4567
• Address: B23 Nam Long Residential Area, Phu Thuan Ward, District 7, Ho Chi Minh City, Vietnam