Establish new enterprise after bankruptcy: Many mistakes!

Establish a new company after bankruptcy

Clause 3, Article 130, Law on Bankruptcy 2014 prescribes as follows:

3. If holders of managerial posts in enterprises or cooperatives which are declared bankrupt intentionally violate the provisions of Clause 1, Article 18; Clause 5, Article 28; and Clause 1, Article 48 of this Law, judges shall consider and decide to deprive them of the right to establish, or act as managers of, enterprises and cooperatives within 3 years from the date bankruptcy declaration decisions are issued.

Firstly, in accordance with Clause 24, Article 4, the Law on Enterprise 2020: Enterprise managers mean managers of sole proprietorships and managers of companies, including owners of sole proprietorships, general partners of partnerships, chairpersons of Members’ Councils, members of Members’ Councils, presidents of companies, chairpersons of Boards of Directors, members of Boards of Directors, Chief Executive Officers, and individuals holding other managerial titles as specified in the company charters.

Secondly, acts prescribed in Clause 1, Article 18, Clause 5, Article 28, Clause 1, Article 48 of the Law on Bankruptcy include:

- To fulfill requests of judges, asset management officers, asset management and liquidation firms and civil judgment enforcement agencies in accordance with the bankruptcy law (Clause 1, Article 18).

- Persons fail to file petitions for initiation of bankruptcy procedures when enterprises and cooperatives become insolvent (Clause 5, Article 28).

- After decisions on initiation of bankruptcy procedures are issued, enterprises or cooperatives shall be prohibited from:

+ Hiding, dispersing or donating their assets;

+ Paying unsecured debts, except those arising after bankruptcy procedures are initiated and salaries are paid to employees of enterprises or cooperatives under Point c, Clause 1, Article 49 of this Law;

+ Waiving the right to claim debts;

+ Converting unsecured debts into debts secured or partially secured with assets of enterprises or cooperatives.

Therefore, after the bankruptcy, the judge may consider making decision on not fulfill the conditions to establish a new enterprise as follows:

- If holders of managerial posts in enterprises or cooperatives are declared bankrupt

- Intentionally violate the provisions prescribed in the Law on Bankruptcy 2014.

Note: Individuals and organizations are allowed to establish a new enterprise if not having the above 02 factors. The banning time of establishing a new enterprise is within 3 years from the date bankruptcy declaration decisions are issued.

Rights to establish a new enterprise after the bankruptcy of the state-owned enterprise

Clause 1, 2 Article 130, the Law on Bankruptcy 2014 prescribes as follows:

1. Holders of the posts of president, director, general director and member of the Board of Directors in enterprises with 100% state capital which are declared bankrupt shall be prohibited from holding such posts in any state enterprises from the date their enterprises are declared bankrupt.

2. Those who act as representatives of state capital at state-invested enterprises which are declared bankrupt shall be prohibited from holding managerial posts in any state-invested enterprises.

Pursuant to the above regulations, holders of the posts of president, director, general director and member of the Board of Directors in enterprises with 100% state capital which are declared bankrupt shall be prohibited from holding such posts in any state enterprises. However, they can establish private enterprises and take any position at that enterprise.

Besides, the Law on Bankruptcy 2012 Enterprises in which the State holds more than 50% of charter capital or total voting shares, except enterprises in which the State holds 100% of charter capital in accordance with Point b, Clause 1, Article 88, Law on Enterprise 2020. The Law on Bankruptcy 2014 does not have uniformity with the Law on Enterprise 2020 on state-owned enterprises.

Also, in accordance with Clause 1, Article 130, Law on Bankruptcy 2014, Those who act as representatives of state capital at state-invested enterprises which are declared bankrupt shall be prohibited from holding managerial posts in any state-invested enterprises.

In conclusion, the managers of enterprises can be restricted with the right to establish new enterprises within 03 years.