In the course of operation business, risks to the business is natural. When an enterprise is no longer able to operate, they must conduct bankruptcy proceedings. It is what we will talk today on this article.
Bankruptcy is a legal status of an insolvent entity that is declared bankrupt by the People’s Court. An insolvent enterprise or insolvent cooperative (hereinafter referred to as insolvent entity) is an enterprise or a cooperative having failed to meet the debt liability for 03 months from the deadline for repayment (Article 4, Law on Bankruptcy 2014).
According to Article 2 of Law on Bankruptcy, bankruptcy shall be applied to enterprises and cooperatives or cooperative unions (hereinafter referred to as cooperatives) which are established and run in accordance with the regulations of the law.
Bankruptcy Procedures (brief) for businesses in accordance with the Bankruptcy Law 2014 are summarized as follows:
- The petitioner for bankruptcy filing must file an application requesting the People's Court to open the bankruptcy procedure.
- Subsequently, if the Court accepts the application, the court shall resolve the bankruptcy according to the following procedures: opening of bankruptcy proceedings; Appointing an administrator, an enterprise managing or liquidating assets; Determining the property obligations and taking measures to preserve the property; convening creditors' conferences; Application of business rehabilitation procedures (if any); The court decides to declare bankruptcy; executing the decision of declaring bankruptcy.
Article 54. Sequence of redistribution of assets
1. When the judge gives the Decision on the declaration of bankruptcy, the assets of the insolvent entity shall be redistributed in the following sequence:
a) Cost of bankruptcy
b) The unpaid salaries, severance pay, social insurance and medical insurance to employees, other benefits according to the labor contracts and collective bargaining agreements;
c) Debts incurred after the initiation of bankruptcy which are used for resuming the business operation.
d) Financial obligations to the Government; unsecured debts payable to the creditors on the list of creditors; secured debts which are not paid because the value of collateral is not enough to cover such debts.
2. The remaining amount of the asset value after every payment prescribed in Clause 1 this Article has been made shall belong to:
a) Members of the cooperative ;
b) Owners of the private enterprises;
c) Owners of the single member limited companies;
d) Members of multi-member limited liability companies , shareholders of the joint-stock companies;
dd) members of the partnerships;
3. If the value of the assets of the insolvent entity is not enough to make the payment as prescribed in Clause 1 this Article, the entities given the same priority shall be paid in proportion to the debt."
"Article 110. Financial obligations after Decisions to declare entities bankrupt are issued
1. The Decisions on declaration of bankruptcy prescribed in Articles 105, 106 and 107 of this Law do not exempt any owner of private enterprises, general partner of any partnership from fulfilling the financial obligations to the creditors having not received payments unless the involved entities have other agreement or the law has other regulations.
2. Any financial obligation incurred after any entity is declared bankrupt shall be handled under the regulations of the law on civil execution and other relevant law provisions."
Law on bankruptcy 2014, here