During operation, a company may fall into a state of crisis affecting its solvency. To protect the rights of related persons/organizations, Vietnamese laws allow them to have the right to request the opening of bankruptcy proceedings.
Through this article, Vietnam Lawyers would like to present to you some information on this issue.
I. Who has the right to request the opening of bankruptcy proceedings?
According to the law, the following objects have the right to apply for the opening of bankruptcy proceedings:
- An unsecured creditor or a partially secured creditor has the right to send a written request for the opening of bankruptcy proceedings (the “Written request”) at the end of a period of 03 months from the due date for payment of debts that the company does not pay.
- Any employee, Basic Union (or the direct higher level Union if the Basic Union is not constituted) can send the Written Request after 03 months from the date on which the company must pay wages and other debts to employees.
- The legal representative of the business is required to submit the written request when the business is insolvent.
- The owner of any private company, the chairman of the board of directors of any joint-stock company, the chairman of the board of directors of the members of any multi-partner limited liability company, the owner of any single-member limited liability company or any general partner of any partnership is required to submit the written request when the company is insolvent.
- Any shareholder or group of shareholders holding at least 20% of ordinary shares for at least 06 consecutive months may submit the Written Request when the Société Anonyme is insolvent.
- Any shareholder or group of shareholders holding less than 20% of ordinary shares for at least 06 consecutive months has the right to send the Written Request when the Société Anonyme is insolvent if mentioned in the statutes of the company.
In this case, insolvency is the case when a company does not fulfill its obligation to pay a debt within 3 months due to payment.
II. Procedure for exercising the right to request the opening of bankruptcy proceedings in Vietnam
The process of requesting the opening of bankruptcy proceedings can be summarized through the following steps:
Step 1: Sending the written request
At this stage, only those who can request the opening of bankruptcy proceedings as mentioned in point I above can submit the written request. The person requesting the opening of bankruptcy proceedings must submit the written request and the accompanying documents and evidence to the competent court.
Step 2: The Court receives and considers the written request
Within 03 working days from the date of receipt of the written Application, the competent Court will appoint a Judge to deal with it and will notify the applicant of the bankruptcy costs and the advance payment of the bankruptcy costs (if applicable), whether the Written Request is valid.
Step 3: The Court accepts the written request
The court will accept the written request upon receipt of the bankruptcy fee payment receipts and the bankruptcy fee prepayment receipts. After that, the court decides whether or not to open bankruptcy proceedings.
Step 4: Opening bankruptcy proceedings
At this stage, the claimant may request the competent court to apply temporary urgent measures to preserve the company’s assets and protect its legitimate rights and interests.
Step 5: Meeting of Creditors (“CM”)
From the date of completion of the inventory of assets (in the event that the inventory of assets ends after the establishment of the list of creditors) or from the date of completion of the establishment of the list of creditors (in the event that the completion of the inventory of assets ends before the establishment of the list of creditors), the judge convenes the CM.
The CM has the right to issue the resolution to reach one of the following conclusions:
- Propose to suspend the execution of the request for the opening of collective proceedings;
- Propose to declare the company bankrupt; Where
- Proposal to apply the measures to restore activity to companies.
Step 6: The court issued the decision declaring the company bankrupt
The judge renders a decision declaring the company bankrupt in the following cases:
- In the event that the CM has approved a resolution including the application of procedures to restore business operations, but the company does not implement the plan to restore business operations; or the deadline for implementing the business recovery plan has expired, the business is still insolvent; Where
- The CM approved a resolution declaring the company bankrupt.
Step 7: execution of the declaration of bankruptcy
After the court decision declaring the company bankrupt, the civil judgment enforcement agency will carry out the procedures for the enforcement of this decision with the following steps:
- Liquidation of bankruptcy assets; and
- Divide proceeds from the sale of business assets to objects in the order of division of assets.
In short, the application for the opening of bankruptcy proceedings is one of the measures to protect the legitimate rights and interests of the related objective when becoming aware that the company is in a state of insolvency.