New bankruptcy law to help defaulted businesses die more easily A new bankruptcy law is being compiled which is hoped to help declare death for tens of businesses which do not exist in reality, but still exist on papers. However, some provisions of the laws prove to be more complicated.  The biggest problem of the currently applied bankruptcy law is the complicated procedures businesses have to follow to declare death. This explains why tens of thousands of businesses have “died,” but still cannot declare the bankruptcy. According to the Deputy Chief of the People’s Supreme Court Nguyen Son, only 83 businesses have declared the bankruptcy over the last nine years of implementing the bankruptcy law. Deputy Chair of the National Assembly Uong Chu Luu also noted that the law comprises of the unreasonable provisions, because of which the dead businesses cannot be buried. Therefore, the new law must be designed in a way which allows the enterprises which want to leave the market to fulfill the bankruptcy procedures in the most convenient way. The ridiculous provisions The draft of the amended law says that the enterprises and cooperatives, which cannot pay the due debts worth VND200 million are more within three months, since the day the creditors request the debt payment, will be considered as falling into the bankruptcy situation. The suggested “threshold for the death” has surprised all the members of the National Assembly’s Standing Committee. The Economics Committee has asked the compilers to point out the foundation for the suggested threshold of VND200 million. Meanwhile, Chair of the Legal Committee Nguyen Van Hien noted that the suggested provision is worse than the currently applied law. Hien said that enterprises have different business scales, which means that their debt scales are different. Some businesses have trillions of dong in capital, while others only have several billions of dong. “It would be a laughter provoking story of shrimp paste if the conglomerates and general corporations with trillions of capital would be considered as falling into the bankruptcy situation with just the debts of VND200 million,” Hien said. 99 percent of businesses fallen into bankruptcy situation Agreeing with Hien, Chair of the Finance and Budget Committee Phung Quoc HIen also said that it is unreasonable to force businesses to the bankruptcy when they cannot pay the due debts of VND200 million. He said that there are many enterprises whose stockholder equity just accounts for 15-20 percent of the total capital, while the remaining is the borrowed money. If the suggested threshold is applied, 99 percent of Vietnamese businesses would be considered as falling into the bankruptcy situation. Replying to the comments that the threshold of VND200 million is unreasonable, Deputy Minister of Planning and Investment Dang Huy Dong said in other countries, no thresholds or limits of the debts are set up. Once enterprises cannot pay debts, workers and creditors will request the courts to declare the death of the enterprises. “If you are a big enterprise with trillions worth of capital, then why can’t you pay the modest debt of VND200 million?” Dong said. The report of the People’s Supreme Court showed that 69,874 businesses registered their business in 2012, while 54,261 businesses stopped operation or dissolved. Source: DNSG