COMPARITION BETWEEN DISSOLUTION AND BANKRUPTCY OF ENTERPRISE IN ACCORDANCE WITH CURRENT VIETNAM LAW

Article 207 of the Law on Enterprises 2020 stipulates the following cases of enterprise dissolution:

·       The operating period specified in the company's charter expires without an extension decision;

·       b) The enterprise is dissolved under a resolution or decision of the owner (for sole proprietorships), the Board of Partners (for partnerships), the Board of Members and the owner (for limited liability companies) or the GMS (for joint stock companies);

·       The enterprise fails to maintain the adequate number of members prescribed in this Law for 06 consecutive months without converting into another type of business;

·       The Certificate of Enterprise Registration is revoked, unless otherwise prescribed by the Law on Tax administration.

According to the provisions of the Law on Bankruptcy 2014, an enterprise is recognized as bankrupt when simultaneously satisfying two conditions:

• The enterprise is insolvent, fails to fulfill the debt payment obligation within 03 months from the payment due date.

• The enterprise is declared bankrupt by the People's Court

·       Enterprise owner for private enterprise

·       General meeting of shareholders for joint-stock companies.

·       Board of members, company owner for limited companies.

·       All general partners for a partnership company.

• Unsecured creditor, partially secured creditor

• Employees, grassroots trade unions, and superior trade unions (in case there is no grassroots level)

• Legal representative of enterprises or cooperatives

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

• Shareholders or groups of shareholders owning 20% or more of the ordinary shares for at least 6 consecutive months

• A member of a cooperative or the legal representative of a member cooperative of a union of cooperatives

The order of payment upon enterprise dissolution is as follows:

• Debts of salary, severance allowance, social insurance as prescribed by law and other benefits of employees under the collective labor agreement and signed labor contract.

• Tax debt.

• Other debts.

• After all debts and expenses have been paid, the remaining assets will be distributed to private business owners, members, shareholders or company owners in proportion to their ownership of contributed capital and shares.

The order of payment of bankruptcy costs is as follows:

• Bankruptcy costs.

• Debts of salary, severance allowance, social insurance, health insurance for employees, other benefits under the signed labor contract and collective labor agreement.

• Debts incurred after opening bankruptcy proceedings for the purpose of recovering business activities of enterprises or cooperatives.

• Financial obligations to the State; unsecured debts payable to creditors in the list of creditors; secured debt that has not been paid because the value of the security property is not enough to pay the debt.

• After paying all of the above, but still have assets, the rest belongs to: the owner of the private business; owner of a one-member limited liability company; members of limited liability companies with two or more members, shareholders of joint-stock companies; members of a partnership company.

• If the asset value is not enough to pay, each object in the same order of priority will be paid according to the percentage corresponding to the debt amount.

The order and procedures for dissolution of an enterprise, except for cases in which the enterprise registration certificate is revoked, shall be carried out as follows:

Approving the decision to dissolve the enterprise.

• Conduct liquidation of enterprise assets.

• Publicly announce the decision to dissolve the enterprise.

• The enterprise pays debts and distributes the remaining assets according to regulations.

• Submit dissolution documents.

• Update the legal status of the enterprise in the National Database of Enterprise Registration.

The order and procedures for bankruptcy of an enterprise are carried out as follows:

• File a petition with the Court to open bankruptcy proceedings.

• The court considers and accepts the petition to open bankruptcy proceedings.

• Courts open bankruptcy proceedings for cases that have met the conditions for opening bankruptcy proceedings.

• Convene a creditors' conference.

• Enterprise recovery.

• Make the decision to declare the enterprise bankrupt.