10 March 2009
On 3 November 2008, the Government of Vietnam issued Decree No. 114/2008/ND-CP ("Decree 114") providing details on implementation of the Law on Bankruptcy applicable to enterprises conducting business in the insurance, securities and other financial sectors.
Decree 114 deals with a bankruptcy of the following types of enterprises:
- Enterprises conducting insurance business (except for insurance broking companies), securities companies, securities investment fund management companies and securities investment companies established and operating in Vietnam under the Law on Insurance Business and the Law on Securities;
- Companies conducting a lottery business under Decree no. 30/2007/ND-CP of the Government dated 1 March 2007 on lottery business; and
- Enterprises pursuant to a licence or decision of the Minister of Finance after receiving approval from the Prime Minister.
such types of enterprises shall be collectively referred to as "Financial Enterprises".
Decree 114 states that the Ministry of Finance, the State Securities Commission and the enterprise owner may require a Financial Enterprise to apply measures to restore solvency. For example, with respect to insurance enterprises, the Ministry of Finance may require them to assign insurance contracts and take measures to strengthen the organization of their management. The State Securities Commission may require securities enterprises to handover management of funds and force a transfer of investment portfolios to other securities enterprises and to temporarily seal up a part or all of the monetary accounts and securities accounts of their clients.
For enterprises to which measures to restore solvency are not applicable, bankruptcy proceedings are as follows:
- Filing a petition and commencement of bankruptcy proceedings;
- Recovery of business operations;
- Liquidation of assets and debts; and
- Declaration that the enterprise is bankrupt.
For enterprises which are unsuccessful in their attempt to restore solvency, if the Ministry of Finance, the State Securities Commission or the enterprise owner has decided to terminate the application of such measures and a meeting of creditors has not been convened (on the proposal of unsecured creditors representing more than one third of the total number of unsecured debts), then the presiding bankruptcy judge shall issue a decision to immediately liquidate the assets and discharge the debts of the enterprise and declare bankruptcy without further recovery efforts.
Commencement of bankruptcy proceedings shall be initiated by the court when the Ministry of Finance or the State Securities Commission or the enterprise owner provides a notice to the court on either the enterprise's failure to take measures to restore its solvency or for the enterprise to prematurely terminate measures to restore solvency and such enterprise remains unable to pay its debts as they become due.
Decree 114 also provides that once the decision to commence bankruptcy proceedings is issued, all business activities of the enterprise shall be under the supervision of the presiding bankruptcy judge and the liquidator. The enterprise shall be strictly prohibited from certain activities, such as concealing or disposing of assets, paying any secured debt, or abandoning or reducing any right to claim a debt. In addition, some transactions, such as a pledge, mortgage, assignment, sale, donation or lease of any asset or receipt of an asset pursuant to a contract may only be undertaken with prior written consent of the bankruptcy judge.
The payment of undue debts, securing debts or by mortgaged or pledged assets, payment of deposit monies on securities accounts of clients, or settlement and payment of securities transactions by enterprises which are in the process of taking measures to restore solvency during three months prior to the date on which the court accepts jurisdiction over a petition to commence bankruptcy proceedings, shall not be deemed invalid under the Law on Bankruptcy.
Regarding the liquidation of assets, the presiding bankruptcy judge shall issue a decision to commence proceedings for liquidation of assets under general provisions stipulated by the Law on Bankruptcy. Liquidation of assets shall be conducted by way of auction or direct sale, as the case may be.
Decree 114 takes effect as from 29 November 2008.
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