The Law on Bankruptcy 2014 (“New Law”) was officially approved at the 7th session of the XIII National Assembly.

The New Law expands its scope by clearly providing provisions on orders, application procedures and handling and opening of bankruptcy procedures; determination of property obligations and measures to preserve property in bankruptcy procedures; conditions and procedures for restoration of business operation, procedures for property liquidation and bankruptcy declaration and execution of judges’ decisions on bankruptcy.

The New Law promulgates legal terms and their definitions regarding bankruptcy, unsecured creditors, secured creditors, partially secured creditors, liquidators, paticipants of bankruptcy procedures, persons carrying out bankruptcy procedures, charges of bankruptcy application, expenses for bankruptcy, and so on... In particular, the new Law changes the term of “Property managing and liquidating teams” into “Liquidators” and provides conditions to become a Liquidator together with the rights and obligations of a Liquidator.

For the application of opening bankruptcy, the New Law specifies the time when creditors and employees of an insolvency enterprise or cooperative are entitled to submit an application to open bankruptcy procedures. It must be no more than three months from the date debts due are unable to be paid by such enterprise or the cooperative. Previously, employees had to appoint their representatives to submit or submit through their trade union representatives the application for opening bankruptcy, however, as stated in the New Law, employees are entitled to directly submit applications.

The New Law supplements provisions on responsibility to inform enterprises and cooperatives of their insolvency. Accordingly, individuals, agencies and institutions who detect the insolvency of the enterprise or the cooperatives shall be responsible to notify in writing persons having statutory rights and/or obligations to submit applications for opening bankruptcy procedures and must ensure the accuracy of the notices. Inaccuracy may give rise to incurred compensation for misinformation that causes the enterprise or the cooperative damages.

The New Law also issues specific provisions on responsibility of providing bankruptcy-related documents, evidence of relevant individuals, agencies, institutions (“relevant persons”). According to the new provisions, such relevant persons, as required by creditors, bankruptive (editor’s note: it’s not a word, but it’s so much fun) enterprises or cooperatives having bankruptcy-related documents and evidence must provide them to parties so requesting within 15 days from the date of receiving the request.

The courts with jurisdiction for handling bankruptcy are defined as district-level people’s courts and provincial-level people’s courts. Bankruptcy situations having assets abroad, or participants of bankruptcy proceedings being abroad, or a bankruptive enterprise or cooperative having branches, representative offices or property in many districts, towns or provincial cities shall be settled by provincial-level people’s courts. The remaining bankruptcy situations of enterprises and cooperatives shall belong to settling jurisdiction of district-level people’s courts.

The New Law supplements the provisions of negotiation between creditors who submit the application for opening bankruptcy proceedings and bankruptive enterprises or cooporatives. Accordingly, the parties shall have rights to request in writing the competent people’s court to negotiate the withdrawal of the application due to the reasonable time determined by the competent people’s court but not in excess of 20 working days from the date of receiving the application.

The New Law also refers to judicial authorization in bankruptcy. During the bankruptcy handling process, the competent people’s court may issue judicial authorization decisions to other people’s courts for asset recovery, testimony of participants of bankruptcy procedures, on-site appraisal, asset and/or property valuation or other methods to collect related documents, evidence and the requested courts have to conduct this assignment within 30 working days.

In addition, the New Law also issues more specific details for disposing interest of debts, secured liabilties, obligation set-off, creditors’ conferences, and applying temporary measures among others.

The New Law will take effect on 1 January 2015.