In the current market economy, it is not uncommon for a business to initiate bankruptcy proceedings when they are unable to repay the debts. When a debtor falls into bankruptcy, the rights of creditors are often threatened. To protect these rights, Vietnamese law allows the application of emergency temporary measures. This article by TNTP will analyze the application of emergency temporary measures when the debtor initiates bankruptcy proceedings, to help readers better understand the mechanisms protecting the rights of the involved parties.
1. Concept of temporary emergency measures;
Emergency temporary measures are actions decided by the Court to address the urgent needs of the parties, protect evidence, and preserve assets to prevent irreparable harm or ensure the enforcement of judgments. According to the Code of Civil Procedure 2015, emergency temporary measures are applied when there are grounds to believe that failure to apply them promptly will cause irreparable harm or significant difficulties for the parties or hinder the resolution of the case.
2. Emergency temporary measures in bankruptcy proceedings
Vietnamese law stipulates several emergency temporary measures that can be applied when a debtor initiates bankruptcy proceedings. These measures are specifically outlined in Clause 1, Article 70 of the Law of Bankruptcy 2014, including:
(i) Allowing selling fragile goods, goods close to the expiration date, and goods that can hardly be bought if they are not sold on time; allowing harvesting and selling farm products or other goods and products;
(ii) Distraint and sealing assets of the entity;
(iii) Blocking the bank account of the entity;
(iv) Sealing stores and funds, keeping the accounting books and relevant documents of the entity;
(v) Prohibiting transferring the rights to the assets of the insolvent entity;
(vi) Prohibiting the change of status of the assets of the insolvent entity;
(vii) Prohibiting or forcing other relevant entities to perform some acts;
(viii) Compelling the employer to advance the salaries, wages, compensation, occupational accident and occupational disease pensions to the employees;
(ix) Other temporary emergency measures under the regulations of the law.
Each emergency temporary measure has a specific role and application suitable for each case to ensure the bankruptcy proceedings are conducted transparently, fairly, and efficiently.
3. Procedure for applying temporary emergency measures
a. Request for temporary emergency measures
• The subjects entitled to request the application of emergency temporary measures are stipulated in Clause 1, Article 70 of the Bankruptcy Law 2014, including: (i) The persons with rights and obligations who have filed for bankruptcy proceedings, which include creditors; (ii) Asset management officer; (iii) Asset management enterprise.
• The person requesting the application of emergency temporary measures must submit a written request to the competent People’s Court. The written request must include the following information: (i) Date; (ii) Name and address of the person requesting the application of temporary emergency measures; (iii) Name and address of the person to whom the temporary emergency measures are applied; (iv) Reason for applying the temporary emergency measures; (v) The temporary emergency measures to be applied and specific requirements.
Thus, creditors who have filed for bankruptcy proceedings have the right to request the Court to apply emergency temporary measures. However, the request must clearly state the reasons and the grounds proving the necessity of the emergency temporary measures.
b. Court decision
Upon receiving the request, the Court will review and decide whether to apply the emergency temporary measures. The Court’s decision must be made promptly to ensure the timely protection of the involved parties’ rights.
4. Significance of temporary emergency measures
Applying emergency temporary measures helps prevent the dissipation of assets or actions that cause damage to the debtor’s assets. This ensures that the debtor’s assets will be used to pay off the creditors.
5. Considerations
• However, it should be noted that according to Clause 1, Article 113 of the Code of Civil Procedure 2015, the persons who send the request to the Court to apply provisional emergency measures must be responsible before law for their petitions. Where the request for the application of provisional emergency measures is made improperly and causes damage to the persons against whom the temporary emergency measures are applied or to the third person, compensation must be made.
• According to Clause 1, Article 136 of the Code of Civil Procedure 2015, the person requesting the Court to apply temporary emergency measures must submit to the Courts the following guarantees: (i) A guarantee invoice secured by assets of banks or other credit institutions or other agencies, organizations or individuals; or (ii) A monetary sum, precious metals, gemstones or valuable papers as determined by the courts. However, this guarantee must be equivalent to the potential loss or damage that may arise from applying the emergency temporary measures.
The value of the guarantee is determined by the Court but must not be less than 20% of the estimated value of the assets subject to the temporary emergency measures, except when clear evidence proves that the potential loss or damage is less than 20% of the estimated asset value.
If the request for emergency temporary measures is incorrect, the requester must pay the actual costs incurred from enforcing the decision. The advance payment or guaranteed assets will be used to cover these costs.
Therefore, to ensure accurate requests from selecting the appropriate measures to providing proper grounds for the request, readers should consult legal experts or lawyers. These professionals have in-depth knowledge of bankruptcy procedures and related legal measures, thus providing detailed information and guidance on emergency temporary measures and how to appropriately and accurately establish the grounds for the request.
Legal expert consultation not only helps readers understand their rights and obligations during bankruptcy proceedings but also assists in making informed and beneficial decisions. Additionally, expert consultation helps minimize legal risks and ensures that the bankruptcy process follows the legal regulations.
This article by TNTP on “Applying temporary emergency measures while the debtor undergoes bankruptcy proceedings” aims to provide useful information to readers.
Best regards,
