The easiest-to-understand guide to bankruptcy procedures for businesses?

When is a business considered bankrupt?

According to Article 214 of the Law on Enterprises 2020, regulations on corporate bankruptcy are as follows:

Business bankruptcy
Enterprise bankruptcy is carried out in accordance with the provisions of bankruptcy law.
According to Clause 2, Article 4 of the Bankruptcy Law 2014, bankruptcy is explained as follows:

Explanation of words

In this Law, the following terms are understood as follows:
1. An insolvent enterprise or cooperative is an enterprise or cooperative that fails to fulfill its debt payment obligation within 03 months from the payment due date.
2. Bankruptcy is a situation in which an enterprise or cooperative loses its ability to pay and is declared bankrupt by a decision by the People’s Court.
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Accordingly, a business will be considered bankrupt when the following two factors are met:

[1] Insolvency: failure to fulfill debt payment obligations within 03 months from the payment due date.

[2] Declared bankrupt by the Court
Who has the right to request the opening of bankruptcy proceedings for a business?
According to Article 5 of the Bankruptcy Law 2014, people have the rights and obligations to file a request to open bankruptcy procedures as follows:

Persons with rights and obligations submit a request to open bankruptcy proceedings
1. Unsecured creditors and partially secured creditors have the right to file a request to open bankruptcy proceedings at the end of 3 months from the due date of the debt and the enterprise or cooperative fails to fulfill its payment obligations.
2. Employees, grassroots trade unions, and direct superior grassroots unions in places where grassroots unions have not yet been established have the right to file a request to open bankruptcy proceedings at the end of 3 months from the date of payment of salaries and other debts due to employees that the enterprise or cooperative fails to pay.
3. The legal representative of an enterprise or cooperative is obliged to file a request to open bankruptcy proceedings when the enterprise or cooperative becomes insolvent.
4. The owner of a private enterprise, the Chairman of the Board of Directors of a joint stock company, the Chairman of the Board of Members of a limited liability company with two or more members, the owner of a one-member limited liability company, and general partners of a partnership are obliged to file a request to open bankruptcy procedures when the enterprise becomes insolvent.
5. A shareholder or group of shareholders owning 20% ​​or more of common shares for at least 6 consecutive months has the right to file a request to open bankruptcy proceedings when the joint stock company becomes insolvent. A shareholder or group of shareholders owning less than 20% of common shares for at least 6 consecutive months has the right to file a request to open bankruptcy proceedings when the joint stock company becomes insolvent in cases where the company’s Charter stipulates.
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Accordingly, the following people will have the right to request the opening of bankruptcy proceedings, including:

– Creditor

– Employees in cases where the enterprise cannot pay salaries and other debts to employees

– legal representative of the enterprise- Owner of a private enterprise, Chairman of the Board of Directors of a joint stock company, Chairman of the Board of Members of a limited liability company with two or more members, owner of a one-member limited liability company, general partner of a partnership

– Shareholder or group of shareholders owning 20% or more of common shares for at least 6 consecutive months.

A shareholder or group of shareholders owning less than 20% of common shares for at least 6 consecutive months has the right to file a request to open bankruptcy proceedings when the joint stock company becomes insolvent in cases where the company’s Charter stipulates.

Which agency has the authority to resolve bankruptcy for businesses?

According to Article 8 of the Bankruptcy Law 2014, the People’s Court’s jurisdiction to resolve bankruptcy is as follows:

The People’s Court’s authority to resolve bankruptcy
1. The People’s Court of a province or centrally run city (hereinafter referred to as the Provincial People’s Court) has the authority to resolve bankruptcy for enterprises registered for business or enterprise registration, cooperatives registered for business or cooperative registration in that province and falling into one of the following cases:
a) Bankruptcy cases with assets abroad or persons participating in bankruptcy proceedings abroad outside;
b) Insolvent enterprises and cooperatives have branches and representative offices in many districts, towns, and cities in different provinces;
c) Insolvent enterprises and cooperatives have real estate in many different districts, towns, and cities in different provinces;
d) Bankruptcy cases fall under the jurisdiction of the State. People’s Courts of districts, towns, and provincial cities (hereinafter collectively referred to as district-level People’s Courts) that the Provincial People’s Court takes up to resolve due to the complex nature of the case.
2. The district-level People’s Court has the authority to resolve bankruptcy for enterprises and cooperatives with headquarters in the district, town, or city of that province and not falling into the cases specified in Clause 1 of this Article.
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Accordingly, the People’s Court is the competent authority to resolve bankruptcy for businesses registered in the area, specifically as follows:

[1] The Provincial People’s Court resolves bankruptcy for enterprises in the area that fall into one of the following cases:

– Bankruptcy cases involving assets abroad or participants in bankruptcy procedures abroad;

– Insolvent enterprises with branches and representative offices in many districts, towns and cities belonging to different provinces;

– Insolvent enterprises have real estate in many districts, towns, and cities in different provinces;

– Bankruptcy cases fall under the jurisdiction of the District People’s Court and are taken up by the Provincial People’s Court to resolve due to the complex nature of the case.

[2] The District People’s Court resolves bankruptcy for businesses in the area, except for cases falling under the jurisdiction of the Provincial People’s Court

The easiest-to-understand guide to bankruptcy procedures for businesses?

Enterprise bankruptcy procedures will be carried out based on the provisions of the 2014 Bankruptcy Law, specifically the following basic steps:

Step 1: The person who is qualified to request the opening of bankruptcy procedures sends a request to the competent People’s Court.

Step 2: Within 03 working days from the date of receiving the request to open bankruptcy procedures, the Chief Judge of the People’s Court assigns a Judge or a Judge Team consisting of 03 Judges to resolve the request to open bankruptcy procedures.

Step 3: Within 03 working days from the date of assignment, the Judge must review and process the request to open bankruptcy proceedings.

Step 4: Within 03 working days from the date of receiving a valid request to open bankruptcy procedures, the People’s Court estimates the amount of advance for bankruptcy costs and notifies the requester to open bankruptcy procedures to pay bankruptcy fees and advance bankruptcy costs.

Step 5: Within 15 days from the date of receiving notice of payment of bankruptcy fees and advance of bankruptcy costs, the applicant requesting to open bankruptcy procedures must pay the bankruptcy fee and advance of bankruptcy costs.

Step 6: The People’s Court accepts the request to open bankruptcy proceedings upon receiving the receipt for payment of bankruptcy fees and receipt for advance payment of bankruptcy costs.

In case there is no need to pay bankruptcy fees or advance bankruptcy costs, the time of acceptance is calculated from the date the People’s Court receives a valid application to open bankruptcy procedures.

Step 7: Within 03 working days from the date of accepting the application, the People’s Court must notify in writing the applicant requesting to open bankruptcy procedures and the enterprise.

Step 8: Within 30 days from the date of accepting the request to open bankruptcy proceedings, the Judge must make a decision to open or not to open bankruptcy proceedings.

In case of necessity, before making a decision to open bankruptcy procedures, the Judge may convene a meeting with the participation of the applicant requesting the opening of bankruptcy procedures, the business owner or legal representative of the enterprise requested to open bankruptcy procedures, and relevant individuals and organizations to consider and check the grounds to prove that the enterprise or cooperative is insolvent.