The Vietnam Debt Trading Company does not have enough resources to make the difference between the cost of purchasing debt and the book value of the debt, can it restructure the business?

Vietnam Debt Trading Company does not have enough resources for the difference between the cost of purchasing debt and the book value of the debt, can it restructure its business?

Can enterprises that are restructured according to the provisions of Clause 1 of Article 20 Decree 129/2020/ND-CP includes:

– Enterprises equitized according to the provisions of law on equitization after financial settlement and determination of enterprise value according to regulations, but the actual value of the enterprise is lower than the enterprise’s liabilities;

– Other businesses are debtors of the Vietnam Debt Trading Company associated with the debt recovery handling plan.

To carry out restructuring, the enterprise being the subject of restructuring must satisfy the following conditions:

– The enterprise is assessed to have the ability to recover and develop after the Vietnam Debt Trading Company participates in debt handling and restructuring;

– Vietnam Debt Trading Company has enough resources for the difference between the cost of purchasing debt and the book value of the debt to handle financial problems and implement solutions to recover the restructured business;

– The restructuring plan is feasible, economically effective and has the consent of the agency representing the owner of the restructured enterprise.

Based on the above regulations, the Vietnam Debt Trading Company must have enough sources for the difference between the cost of debt purchase and the book value of the debt to handle financial problems and implement solutions to recover the restructured enterprise in order to be able to restructure the enterprise. enterprises.

How do restructured enterprises handle finances?

Pursuant to Article 21 of Decree 129/2020/ND-CP, financial handling activities for restructured enterprises are regulated as follows:

(1) Principles of financial handling:

a) Financial handling of restructured enterprises must be linked to the restructuring plan approved by the owner’s representative agency. The reduction of debt repayment obligations must be associated with the Vietnam Debt Trading Company converting debt and assets into contributed capital at the enterprise and does not change the responsibility of the organization or individual that caused the previous financial loss;

b) Ensure publicity, transparency and compliance with legal regulations.

(2) Content of financial handling:

a) For enterprises specified in point a clause 1 Article 20 of Decree 129/2020/ND-CP:

– Vietnam Debt Trading Company considers and partially reduces debt repayment obligations associated with the restructuring plan approved by the owner’s representative agency. The maximum deduction for debt repayment obligations is equal to the negative amount of equity based on the decision of the owner’s representative agency on determining the value of the enterprise minus the deduction for debt repayment obligations of other creditors (if any) and does not exceed the difference between the book value of the purchased debt and the cost of purchasing the debt as of the time of the decision to reduce the debt repayment obligation;

– Other creditors decide to reduce debt repayment obligations for the restructured enterprise according to the agreement between the parties;

– From the time of determining the value of the enterprise to the time of official transformation into a joint stock company, if the restructured enterprise incurs losses, the owner’s representative agency shall direct the restructured enterprise to clarify the causes and responsibilities of relevant collectives and individuals to take corrective measures and compensation according to regulations. The remaining losses will be considered by the Vietnam Debt Trading Company and the creditors participating in the restructuring, and a partial reduction of debt repayment obligations will be carried out if there is any source of difference. between the cost of purchasing debt and the book value of the debt.

b) For enterprises specified in Point b, Clause 1, Article 20 of Decree 129/2020/ND-CP:

Vietnam Debt Trading Company partially reduces debt repayment obligations for debt businesses on the basis of ensuring full implementation of commitments agreed between the parties. The maximum deduction must not exceed the accumulated loss on the enterprise’s most recent financial statement that has been audited by an independent auditing organization and must not exceed the difference between the book value of the debt purchased and the cost of debt purchased as of the time of the decision to deduct debt repayment obligations.

What measures does the enterprise take to recover after restructuring?

Enterprises take measures to recover after restructuring as prescribed in Article 22 of Decree 129/2020/ND-CP as follows:

Restructured enterprises in which the Vietnam Debt Trading Company holds more than 50% of charter capital and have a feasible and effective production and business plan and capital use plan (including debt repayment sources) will be considered and supported by the Vietnam Debt Trading Company with the following measures:

(1) Providing finance from the business capital of Vietnam Debt Trading Company according to the following principles:

a) Vietnam Debt Trading Company decides and is responsible for providing finance to restructured enterprises, based on effective and feasible capital recovery plans;

b) Do not provide finance for restructured enterprises where the Vietnam Debt Trading Company has plans to transfer all capital contributions of the Vietnam Debt Trading Company in the fiscal year. For restructured enterprises that have been provided with finance by the Vietnam Debt Trading Company, in case the Vietnam Debt Trading Company plans to transfer the entire capital contribution of the Vietnam Debt Trading Company at the enterprise, there must be a feasible plan to recover the financial provision before transferring the capital contribution;

c) The restructured enterprise must use the financial provision of the Vietnam Debt Trading Company for the correct purpose, and must not use the financial provision of the Vietnam Debt Trading Company to repay the debt of the Vietnam Debt Trading Company itself;

d) The Vietnam Debt Trading Company, through its Representative, supervises the restructured enterprise in using the financial provision of the Vietnam Debt Trading Company in accordance with the capital use plan.

(2) Loan guarantees at credit institutions:

Vietnam Debt Trading Company provides guarantees according to the principles specified in Clause 4, Article 23 of the Law on Management and Use of State Capital Invested in Production and Business at Enterprises 2014. Loan guarantees to implement investment projects must be based on an appraisal of the investment project’s effectiveness and there must be a commitment to repay the guaranteed loan on time.

Thus, the Vietnam Debt Trading Company does not have enough resources for the difference between the cost of purchasing debt and the book value of the debt and cannot restructure the business. Financial handling and recovery measures after restructuring are carried out specifically in accordance with the law.