SEQUENCE OF REDISTRIBUTION OF ASSETS IF ENTERPRISES GO BANKRUPT

Legal basis:

– Law on Bankruptcy 2014.

 

  1. When does an enterprise go bankrupt?

Bankruptcy is a legal status of an insolvent enterprise that is declared bankrupt by the People’s Court. An insolvent enterprise is an enterprise or a cooperative having failed to meet the debt liability for 03 months from the deadline for repayment.

 

  1. Sequence of redistribution of assets

When the judge gives the decision on the declaration of bankruptcy, the assets of the insolvent entity shall be redistributed in the following sequence:

– Cost of bankruptcy;

– The unpaid salaries, severance pay, social insurance and medical insurance to employees, other benefits according to the labor contracts and collective bargaining agreements;

– Debts incurred after the initiation of bankruptcy which are used for resuming the business operation;

– Financial obligations to the Government; unsecured debts payable to the creditors on the list of creditors; secured debts which are not paid because the value of collateral is not enough to cover such debts.

The remaining amount of the asset value after every payment mentioned above has been made shall belong to: Owners of the private enterprises; Owners of the single member limited companies; Members of multi-member limited liability companies, shareholders of the joint-stock companies; Members of the partnerships;

If the value of the assets of the insolvent entity is not enough to make the payment mentioned above, the entities given the same priority shall be paid in proportion to the debt.