Commenting on the Draft Bankruptcy Law (amended) according to Official Dispatch No. 20/TANDTC-PC of the Supreme People's Court, the Vietnam Chamber of Commerce and Industry (VCCI) said that Clause 1, Article 5 of the Draft Bankruptcy Law (amended) on 'insolvent enterprises and cooperatives' is one of the issues that enterprises are most concerned about when approaching the Bankruptcy Law.

VCCI proposes to study the regulations on “insolvent enterprises and cooperatives”. Illustrative photo

It is known that compared to the 2014 Bankruptcy Law, the Draft Bankruptcy Law (amended) has made important amendments to the concept of “insolvent enterprises and cooperatives”, accordingly proposing two options.

Option 1: “Insolvent enterprises and cooperatives” are enterprises and cooperatives that do not fulfill their debt payment obligations within 6 months from the due date, except in cases of force majeure or objective obstacles.

Option 2: “Insolvent enterprises and cooperatives” are enterprises and cooperatives that do not fulfill their debt payment obligations within 3 months from the due date.

VCCI analyzed that, basically, both of these options are the same, the only difference is the time limit for enterprises to not pay debts due for 3 months or 6 months.

In essence, an insolvent enterprise is an enterprise that is unable to pay its debts when due, with a total debt greater than its total assets.

The Draft's provision that enterprises "fail to fulfill payment obligations" does not reflect the insolvency of the enterprise' - VCCI stated its opinion.

According to VCCI, in reality, there are many enterprises that have full payment capacity but for many reasons refuse to pay or cannot pay at the time of debt collection (due to not having recovered the debt, ...). This basis has the potential to become a "tool" for partners to "collect debts" from each other. This can lead to the consequence that the enterprise being collected for debt is damaged in terms of reputation and actual damage.

Therefore, VCCI proposes to study the regulation on “insolvent enterprises and cooperatives” in the direction that enterprises and cooperatives are unable to pay their debts when due, and can study and consider the actual situation of enterprises with total debts greater than total assets. In case there is a reason to retain the method of regulation as proposed in the draft, VCCI proposes to consider choosing option 1.