Navigating the Labyrinthine Path: Demystifying Business Bankruptcy Procedures in Vietnam 2023

The specter of financial distress looms large for businesses, potentially culminating in the complex and consequential journey of bankruptcy. In Vietnam, this path is governed by a labyrinthine framework of legal intricacies, leaving many in a state of bewilderment. Fear not, for this comprehensive guide from NT International Law Firm sheds light on the latest conditions and procedures for business bankruptcy in 2023, empowering you to navigate this challenging terrain with informed confidence.

Navigating the Labyrinthine Path: Demystifying Business Bankruptcy Procedures in Vietnam 2023

Unveiling the Bane: Recognizing Insolvency

The bedrock of bankruptcy proceedings lies in recognizing the enterprise’s financial plight. As per Article 214 of the Enterprise Law, two crucial conditions must be met simultaneously:

1. Inability to Pay: The enterprise fails to fulfill its debt payment obligations within a stipulated three-month window after the due date. This inability can manifest in two ways:
   • Depleted Assets: The enterprise simply lacks the financial resources to settle its debts.
   • Willful Neglect: Despite possessing assets, the enterprise chooses not to utilize them for debt repayment.
2. Judicial Decree: The People’s Court, acting as the arbiter of financial justice, officially declares the enterprise bankrupt.

Charting the Course: Unveiling the Procedural Map

Charting the Course: Unveiling the Procedural Map of Business Bankruptcy

The 2014 Bankruptcy Law lays the intricate procedural map for business bankruptcy, a journey with seven distinct stages:

1. Initiating the Voyage: The odyssey begins with a petition filed with the People’s Court, seeking the commencement of bankruptcy proceedings. Only individuals with authorized rights and responsibilities, such as creditors or the enterprise’s legal representative, can embark on this voyage.

2. Navigating the Initial Passage: The Court meticulously examines the petition. If deemed valid, a notification requesting payment of fees and bankruptcy advance is issued. Conversely, invalid petitions necessitate amendment or supplementation, while refusal by the applicant or lack of requisite rights leads to the petition’s return.

3. Reaching the Crossroads: Upon receiving the requisite fees and advance, the Court embarks on a critical decision-making process. In most cases, a thorough evaluation determines whether to initiate bankruptcy proceedings. However, for enterprises exhibiting swift deterioration, accelerated procedures may be employed.

4. Braving the Tempestuous Seas: Should the Court approve the proceedings, the storm officially breaks. A public announcement declares the decision, safeguarding transparency and stakeholder awareness. Asset preservation measures, such as temporary contract suspension or invalidating dubious transactions, may be implemented to prevent further financial turbulence. Additionally, a detailed inventory of assets and comprehensive lists of creditors and debtors are meticulously compiled.

5. Convening the Creditors’ Council: The winds of negotiation take center stage at the creditors’ conference, a two-pronged affair:

• First Meeting: Quorum requirements demand at least 51% of total unsecured debt representation for the conference’s validity. Failure to meet this threshold necessitates postponement and a subsequent reconvening.
• Second Meeting: Armed with the collective wisdom of the creditors, this final session holds the power to chart the enterprise’s fate. Three options lie on the table: suspending bankruptcy proceedings, proposing business operation restoration measures, or declaring bankruptcy.

6. Facing the Final Judgment: If the enterprise fails to implement a viable recovery plan or remains insolvent after the allotted time, the Court Judge unleashes the final decree: a solemn declaration of bankruptcy.

7. Calming the Waters: Liquidation and Distribution

With the enterprise declared bankrupt, the storm begins to subside. The final stage sees the meticulous liquidation of bankruptcy assets. Proceeds from this process are channeled towards settling outstanding debts, adhering to a strict order of priority that safeguards vulnerable stakeholders like employees and creditors.

Unraveling the Legal Maze: Practicalities and Clarifications

Unraveling the Legal Maze: Practicalities and Clarifications

Beyond the procedural map lie additional intricacies demanding attention:

• Jurisdictional Compass: The district-level People’s Court typically handles bankruptcy proceedings for enterprises within its jurisdiction. However, complex cases or enterprises with widespread assets may navigate towards the Provincial People’s Court.
• Financial Compass: Resolution 326/2016/UBTVQH14 sets the current filing fee for bankruptcy proceedings at 1.5 million VND. Exemptions exist for workers’ unions, insolvent enterprises lacking funds, and specific court-determined situations.
• Rightful Initiators: Understanding who can initiate proceedings is crucial. Creditors, employees, the enterprise’s legal representative, and even major shareholders under certain circumstances hold this right.
• Priority of Claims: When the storm settles, a strict order guides the distribution of liquidated assets: 1) bankruptcy costs, 2) employee dues, 3) recovery-related debts, 4) state obligations, 5) unsecured debts, and finally, 6) the private business owner or shareholders.

Beyond the Technicalities: A Human Compass in the Storm

Navigating the intricate procedures of bankruptcy isn’t merely a bureaucratic dance; it’s a human drama with profound consequences. While legal knowledge serves as a vital map, the journey demands a guiding compass—one forged with empathy and awareness of the human cost associated with financial upheaval.

The Ripple Effect: Recognizing the Human Toll

The storm of bankruptcy doesn’t just engulf the enterprise; its waves crash mercilessly onto the shores of those who depend on it. Employees face the agonizing uncertainty of job losses, delayed salaries, and shattered career plans. Communities grapple with economic downturn and the loss of essential services. Families bear the emotional brunt of financial hardship and social stigma.

Navigating with Empathy: Prioritizing People

Navigating with Empathy: Prioritizing People

In this tempestuous sea, responsible navigation demands prioritizing the human cost. Open communication with employees, clear severance packages, and proactive job search assistance can lessen the financial and emotional blow. Engaging with the community, explaining the situation, and seeking alternative solutions for essential services can mitigate the wider impact. Above all, treating every individual with dignity and respect throughout the process is paramount.

Building Bridges, Not Walls: Collaboration and Transparency

Bankruptcy isn’t a solitary voyage; it demands collaboration and transparency. Working with creditors, seeking their input and addressing their concerns fosters trust and can lead to more beneficial outcomes. Engaging with government agencies and utilizing available support programs can provide crucial assistance during this challenging time. Maintaining open communication with stakeholders, including customers, suppliers, and the affected community, fosters understanding and minimizes negative ramifications.

Emerging from the Storm: Lessons Learned and New Beginnings

While business bankruptcy marks a painful ending, it can also be a catalyst for new beginnings. Analyzing the factors that led to financial distress offers valuable lessons for the future. Exploring restructuring options, seeking investment opportunities, and embracing innovation can pave the way for a future marked by resilience and renewed success.

Conclusion: A Journey with Courage and Purpose

The odyssey of bankruptcy is indeed complex, riddled with legal intricacies and demanding human considerations. Yet, by equipping yourself with knowledge, navigating with empathy, and fostering collaboration, you can transform this perilous journey into a crucible of learning and growth. With courage, resilience, and a commitment to ethical practices, you can emerge from the storm, your human compass guiding you towards a brighter horizon.

NT International Law Firm is Here to Help You

NT International Law Firm is Here to Help You

NT International Law Firm has addressed the question of what business bankruptcy is and how you can recover from it. If you have any further questions or concerns regarding corporate law, please contact our law firm immediately for expert legal advice.

If you require any legal assistance, please feel free to reach out to us via phone at 090 252 4567 or through email: info@ntpartnerlawfirm.com. At NT INTERNATIONAL LAW FIRM, our team is committed to offering you prompt and personalized advice.

You also might be interested in:

• The 2015 Civil Code in English
• The 2015 Civil Procedure Code in English
• The 2020 Law on Enterprise in English
• The 2014 Law on Bankruptcy in English