Strong enough policies are needed to encourage business recovery.

Changing the way we think about corporate bankruptcy

One of the new highlights of the draft Bankruptcy Law (amended) is the regulation on business recovery before bankruptcy. According to Deputy Chief Justice of the Supreme People's Court Nguyen Van Tien, the draft Law supplements the Chapter on recovery procedures, regulations on opening recovery procedures, developing business recovery plans, and creditors' meetings.

This Chapter also stipulates the order of payment priority in the business recovery plan; business and cooperative operations after opening recovery procedures; measures to encourage recovery: deferring tax debts, suspending contributions to pension and death funds, etc.

Chairman of the Economic and Financial Committee Phan Van Mai speaks

The newly added content also includes the duties and powers of the creditors' meeting, conditions for passing resolutions of the creditors' meeting; suspension of implementation of the recovery plan, suspension of recovery procedures and legal consequences...

Chairman of the Economic and Financial Committee Phan Van Mai speaks

Highly appreciating this new content in the draft Law, Phan Duc Hieu, a member of the National Assembly who works full-time at the Economic and Financial Committee, said that many countries in the world consider bankruptcy a normal activity of the business process, even understanding bankruptcy in the main sense of recovery, ending one thing to move on to another. However, in Vietnamese culture, bankruptcy is still considered bad, a failure. Therefore, it is very necessary to add regulations on business recovery when amending the Bankruptcy Law.

However, the question is whether bankruptcy and recovery should be considered as two separate stages or recovery is essentially one stage in the bankruptcy process of an enterprise or cooperative? Delegate Phan Duc Hieu expressed his inclination towards considering recovery as a stage of bankruptcy; at the same time, he suggested that the draft Law should be designed in the direction that if recovery is not successful, the bankruptcy process must be "activated". "In reality, there are many "zombie" enterprises, which have essentially gone bankrupt for a long time but continue to operate in order to enjoy mechanisms, policies, premises, etc., causing harm to national interests," Delegate Phan Duc Hieu emphasized.

Permanent Deputy Chairman of the Economic and Financial Committee Le Quang Manh speaks

Sharing the same view, Permanent Deputy Chairman of the Economic and Financial Committee Le Quang Manh commented that currently the demand for resolving bankruptcy procedures is very high, but the number of cases resolved is not much, and the procedure time is prolonged. Many businesses have been insolvent for a long time but have not been able to resolve bankruptcy, which is like "being dead but not buried".

These types of businesses cause three consequences. First, the business has stopped operating but because it has not been declared bankrupt, it still occupies land and labor, and the business owner even flees, causing social resources to be blocked and wasted. Second, the debt is not resolved, causing bad debt in the banking system, negatively affecting the financial market. Third, the law is not enforced, weakening the confidence of the people and investors.

Deputy Chief Justice of the Supreme People's Court Nguyen Van Tien speaks

Therefore, the Standing Deputy Chairman of the Economic and Financial Committee also supported the viewpoint of changing the mindset on corporate bankruptcy, prioritizing the implementation of recovery procedures before bankruptcy. However, the delegate suggested that this content should be "processed" further in the direction of clearer regulations to increase the initiative and flexibility of this procedure at an earlier stage, when the enterprise is only at risk of insolvency. "If the enterprise has not yet fallen into insolvency, recovery will be meaningful."

Prioritize business autonomy

Regarding bankruptcy procedures, the draft Law has amended and supplemented many contents, including adding subjects with rights and obligations to submit applications for opening bankruptcy proceedings consistent with the provisions of the Labor Code, Enterprise Law, Insurance Business Law, Law on Credit Institutions and overcoming practical difficulties. So what are the regulations on when the bankruptcy process will be declared to begin?

Delegate Phan Duc Hieu suggested that the draft law should clarify when bankruptcy will begin. If the criteria are not precise, it will cause damage to businesses, because sometimes businesses only have short-term cash flow difficulties and are not completely insolvent.

National Assembly delegate working full-time at the Economic and Financial Committee Phan Duc Hieu speaks

Clause 1, Article 41 of the draft Law stipulates that “unsecured creditors and partially secured creditors have the right to file a petition to open bankruptcy proceedings when the 6-month period from the due date of the debt expires and the enterprise or cooperative fails to fulfill its payment obligation”. Delegate Phan Duc Hieu said that this provision is unreasonable, because the fact that enterprises have not paid the debt during this period is sometimes their strategy, to postpone debt repayment, accept fines in exchange for another investment opportunity.

Considering that "it is incorrect for the Court to declare the date of bankruptcy based on the time of debt payment", delegate Phan Duc Hieu suggested that the regulation on the time of bankruptcy must have economic criteria and be viewed from the perspective of cash flow rather than a rigid regulation based on the time of debt payment, debt-to-equity ratio...

From the reality of enterprises, National Assembly Deputy Nguyen Thanh Nam (Phu Tho) said that it is necessary to prioritize the right of enterprises to decide in the recovery phase before bankruptcy. The plan to restore production and business must belong to the enterprise (managers and shareholders), and cannot be developed and decided by creditors at the creditors' meeting as currently stipulated in the draft Law. "This is an authority of enterprises as stipulated in the Enterprise Law. Reality also shows that if money is needed, shareholders will be the first to pour money into "saving" the enterprise, not creditors," said Deputy Nguyen Thanh Nam.

National Assembly Delegate Nguyen Thanh Nam (Phu Tho) speaks

To ensure the effectiveness of recovery implementation, delegates also proposed to continue reviewing and learning from experiences from drafting the current Enterprise Law to regulate the individualization of enterprise responsibilities, not to generalize the "responsible enterprise" regulations as in the draft Law.

Regarding this new content of the draft Bankruptcy Law (amended), Chairman of the Economic and Financial Committee Phan Van Mai emphasized that in the world, there are many large brands, global brands that have been reborn from the brink of bankruptcy. Meanwhile, Vietnam does not have a legal framework and strong enough policies to encourage recovery from bankruptcy. "We must have a sufficient legal framework for large companies and investment funds to participate in restructuring businesses on the brink of bankruptcy. And, most importantly, for bankruptcy to be considered a normal procedure in business, the bankruptcy procedure must be simple and concise so that people can easily accept it," said the Chairman of the Economic and Financial Committee.

Thanh Hai

Source: https://daibieunhandan.vn/can-chinh-sach-du-manh-de-khuyen-khich-phuc-hoi-doanh-nghiep-post408806.html