Nguyen Danh Cong & Phan Thi Hang
The Bankruptcy Law 2014 effective from 1 January 2015 is considered to be the procedural “unleashing” of corporate bankruptcy for the time being. However, a question is asked as to whether the Bankruptcy Law 2014 actually avoids following in the “footsteps of the failed Bankruptcy Law 2004” or has continued leaving enterprises faced with overly complicated procedures and institutions…
One of the core reforms of the Bankruptcy Law 2014 points to the institution of Asset Receiver with regard to the procedures of managing and liquidating assets. Although the Bankruptcy Law 2014 has been in force for nearly half a year, in reality, its enforcement remains a very difficult problem even for the courts that handle the cases, due to a lack of the Asset Receiver in charge of managing the bankrupt enterprise’s assets. Rather, the local courts are yet to know how to apply the institution of Asset Receivers. The enterprises that have not completed implementing the bankruptcy procedures under the Bankruptcy Law 2004 now have to await any change in procedures and implementation guidelines while they have already waited in desperation for guidelines on such procedures.
Asset receiver – who are you?
Asset receiver is a completely new title in areas such as law, economics, accounting, finance and banking, surfacing for the first time in the Bankruptcy Law 2014. Accordingly, the Asset Receiver falls within one of the two subjects, that being eligible to practice management and liquidation of assets during a bankruptcy settlement besides the enterprise for asset management and liquidation. An Asset Receiver can independently practice as an individual or by joining an enterprise for the management and liquidation of assets through its establishment or employment contract therewith.
In order to become an Asset Receiver, a person must be granted an Asset Receiver practice certificate similar to that of lawyer or auditor practice at present. The subjects who are granted the Asset Receiver practice certificate must be Lawyers, Auditors or persons with a bachelor degree in law, economics, finance, banking and have 5 or more years of experience in the field in which they have been trained. However once the said subjects have practiced in a certain field, probably very few of them think about undergoing too many administrative procedures in quest of an enterprise that is on the road to bankruptcy for management and liquidation of its assets. That is not to mention the procedure for obtaining an Asset Receiver practice certificate is not simple.
Besides, the Asset Receiver who wants to join any process of managing and liquidating assets has to be designated by the applicant for bankruptcy procedures; has no related benefit to the bankruptcy case; has no relative of the participant in bankruptcy procedures; and above all, must hold a statutory Asset Receiver practice certificate. Additionally, the current bankruptcy law does not specify what the “next of kin” is. However, it is likely that they will refer to similar regulations to see that the “next of kin” is one of the following persons who have a blood relation with the Asset Receiver: (i) spouse, biological father/mother, adoptive father/mother, adoptive child; (ii) paternal grandparents, maternal grandparents, elder/younger full brother/sister; or (iii) paternal grand grandparents, maternal grand grandparents, elder/younger fully paternal uncle, fully maternal uncle, fully paternal aunt, fully maternal aunt, nephew/niece of such Asset Receiver as elder/younger fully paternal uncle, fully maternal uncle, fully paternal aunt, fully maternal aunt.
During practice, the Asset Receiver must not lease, lend or let other individuals and organisations to use his Asset Receiver practice certificate to practice management and liquidation of assets, will be prohibited from such acts suggesting or receiving any sum of money or material benefits from any participant in bankruptcy procedures or abusing the name of an Asset Receiver to benefit from individuals and organisations apart from the Asset Receiver’s remuneration. With this provision, the law has imposed “harshness” on the receipt of remuneration by the Asset Receiver whereas the provisions on his remuneration rate are very “vague” based on his time, effort and task performance. Specifically, in case of suspending the bankruptcy procedures, the Magistrate and the Asset Receiver shall reach an agreement on remuneration while if enterprises or cooperatives are declared bankrupt, the Asset Receiver’s remuneration is calculated by percentages based on the total proceeds of the corporate assets after liquidation. With such calculation, it is asked whether the Asset Receiver can earn a sufficient living when the number of bankruptcy cases each year can be counted on the fingers of one hand while an Asset Receiver must spend a great amount of time on a bankruptcy case. And whether anyone will have a passion for the profession… of an Asset Receiver?
To timely guide the Bankruptcy Law 2014, the Government recently issued Decree 22/2015/NĐ-CP providing detailed regulations on financial management, staff management practice and asset liquidation. A combination of regulations of the Law and the guiding decree shows that the journey for an Asset Receiver to “meet” an enterprise conducting bankruptcy procedures must undergo very cumbersome procedures, in particular: (i) Individuals must apply for a certificate of Asset Receiver practice to the Ministry of Justice; (ii) Upon issuance of the Asset Receiver practicing certificate, the Asset Receiver is required to submit registration dossiers for the practice of management and liquidation of assets to the Department of Justice of the province or city under the central authority where that individual resides; (iii) The Department of Justice establishes and publishes a list of local Asset Receivers; The Ministry of Justice establishes and publishes a list of national Asset Receivers on a national scale in the electronic portal; (iv) The Judge conducts bankruptcy procedures and issues a letter appointing an Asset Receiver and sends it to the Asset Receiver appointed; (v) The Asset Receiver sends a letter notifying of his participation in the case to the Judge, then participates in the management and liquidation of the assets of the enterprise assigned.
With the current policy of administrative reform, it is obvious that a series of such procedures is causing difficulties, and the procedures of Asset Receiver appointment will again be a very long journey for enterprises that are looking forward to bankruptcy every day. Therefore, it is thought that Asset Receivers are only required to have a practice certificate to be qualified to practice, and they should not be required to do the practice registration in order to simplify the procedures prescribed by the Bankruptcy Law 2014. Not to mention that a series of these complicated procedures also makes individuals “afraid” to become Asset Receivers.
It will take a long time to form a team of Asset Receivers
Asset Receivership is a completely new institution, so at present, while the Bankruptcy Law 2014 has been in effect, the Courts have had headaches in finding Asset Receivers in charge of management and liquidation of assets of enterprises implementing bankruptcy procedures. Currently, it is known that some enterprises having undergone the procedures of establishing an asset management and liquidation team under previous procedures and conducting an inventory of assets, but now have to stall to await guidance on the next procedures under the Bankruptcy Law 2014. Accordingly, if an asset management and liquidation team are forced to be replaced by an Asset Receiver to continue to be in charge of the case, it is not known when the Asset Receiver officially takes over the case. Accordingly, it is evident that it takes a lot of time to start the journey “searching” for an Asset Receiver to continue the implementation of bankruptcy procedures for the enterprise. And does the goal of simplifying bankruptcy procedures soon become a reality? Or does the Bankruptcy Law 2014 still make some enterprises to be hovered between life and death… To get answers to these questions we must wait for guidelines of competent authorities in the coming time.