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July 5, 2018

New Guidance for Bankruptcy Proceedings in Vietnam

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On June 12, 2018, the Ministry of Justice, the Supreme People’s Procuracy, and the Supreme People’s Court of Vietnam issued Joint Circular No. 07/2018/TTLT-BTP-VKSNDTC-TANDTC, on coordination in the enforcement of court decisions on bankruptcy. Joint Circular 07 comes into force on August 1, 2018.

The joint circular provides detailed guidelines on a number of issues pertaining to the order and procedures for enforcement of court decisions on bankruptcy. Of note, it sets a deadline of five business days, from the receipt of a court’s notice of acceptance of a petition to open bankruptcy proceedings, for the civil judgment enforcement agency to issue a decision to temporarily suspend the enforcement of a judgment against the assets of an insolvent company, except for judgments requiring the company to pay compensation for loss of life, health, or honor or to pay salary to its employees. If the court then refuses to initiate bankruptcy proceedings, or makes a decision to suspend the bankruptcy proceedings after they have begun, the civil judgment enforcement agency must, within five business days, revoke the decision on temporary suspension and continue to enforce the judgment in accordance with the provisions of the Law on Enforcement of Civil Judgments.

When bankrupt companies are the beneficiaries of other legally effective judgments or decisions, the civil judgment enforcement agency will continue to enforce such judgments or decisions accordingly. The bailiff in charge will simultaneously notify the civil judgment enforcement result to the asset management officers and asset management enterprises and the judge in charge of the bankruptcy process in order to redistribute the receivable assets.

In addition, for the disposal of liquidated assets which were held for sale before the issuance of the decision on declaration of bankruptcy, if the judge decides on selling the assets of the insolvent company after initiating the bankruptcy process to ensure adequate funds to cover the bankruptcy but fails to sell such assets, and thereafter decides on a declaration of bankruptcy for the company and transfers the case to the civil judgment enforcement department for enforcement, the bailiff will request the asset management officer to carry out the valuation of the assets and the sale will be conducted by auction.

It is anticipated that under the provisions of the joint circular, the coordination between the court and other agencies during the process of bankruptcy settlement will be improved, resulting in effective mechanisms to smoothly handle bankruptcies and the restructuring process for insolvency cases.

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