Author: TNTP LAW

Recovering debts is a necessary activity for businesses to maintain their cash flow in operations. However, this activity only applies when debts have already been incurred. One of the effective ways to proactively protect a company’s cash flow is to minimize the incidence of bad debts before they occur. In the following article, TNTP’s lawyer will present viewpoints and ways to minimize the rate of bad debt arising from partners in business activities.

1. Analyze the financial capacity of partners before entering into a contract

One way to determine whether a business is stable and valuable when entering into a contract or not is to determine the financial capacity of that business. Typically, partners seek out businesses that always offer attractive promises and profits. However, to ensure that this information is correct, the business should proactively seek information to analyze the financial capacity of the partner. This information can be obtained by consulting their annual financial reports, previous projects that the business has implemented, or evaluations from other partners about that business,…

Having a good financial capacity will help the cooperation process between the two parties become smoother and also ensure that the business has the ability to pay off debts if unforeseen circumstances occur during the cooperation process.

2. Regularly reconcile bad debt with partners

When partners incur debts, the first thing businesses need to do is to regularly reconcile debts every month or quarter to always accurately grasp the amount owed and the confirmation of the partner with that debt. In addition, debt reconciliation is a gentle “reminder” to partners about their obligation to pay off debts.

Debt reconciliation is a necessary document to serve the debt recovery process in the future, so from the early days of debt generation, businesses must quickly send debt reconciliation and request confirmation from the debtor. Sometimes, in cases where partners refuse to verify debts, it will also be an initial indication for the business to suspect the partner’s ability to operate with problems and may incur bad debts in the future, and prepare necessary debt recovery measures.

a) Specific regulations on payment deadlines and dispute resolution in contracts and agreements always require partners to make a deposit or pay a significant portion of the contract value in advance.

In business operations, debts between partners are typically between service providers or buyers. In these cases, the enterprise needs to clearly state in the contract that it requires partners to pay a significant portion of the contract value or order before the enterprise delivers goods or provides services. This is an important provision to limit risks and protect the rights and interests of the enterprise before delivering goods or providing services without receiving payment. However, this provision may be quite disadvantageous to partners, so the enterprise needs to consider including this provision in the contract depending on the importance of the partner to avoid causing them to hesitate to sign the contract and affecting the operation of the enterprise.

b) Specific provisions on penalties for late payment

One of the common causes of partners being willing to pay the bad debt late is the absence of sanctions for this late payment behavior. Enterprises often do not include provisions on penalties for late payment in contracts or agreements because they are concerned that it may make partners feel disadvantaged and not sign the contract. However, in business operations, it is necessary to be clear and these binding provisions will ensure the best protection of the rights and interests of all parties if a dispute arises. At the same time, these provisions will also make partners consider carefully before intending to pay late because they will have to pay a large amount to the enterprise, causing a loss of money in their budget.

c) Specific regulations on dispute resolution agencies

Typically, when entering into a contract, the parties often choose a competent court or a commercial arbitration center to resolve disputes. However, in many cases, businesses without legal experience have mistakenly identified the dispute resolution agency, leading to an unfavorable dispute resolution process if any disputes arise later on. According to legal regulations, the parties in the transaction have the right to choose a dispute resolution agency as long as it is not contrary to the law. However, sometimes there are cases where the same incident has multiple competent authorities to resolve disputes, leading businesses unsure which agency to choose to best protect their legitimate rights and interests. In some cases, such as commercial arbitration centers, they only resolve disputes if the relevant parties have a clause choosing the correct arbitration center to resolve disputes.

The decision on the dispute resolution agency will affect the time, effort, and costs of the business if it proceeds with the litigation to resolve disputes. Therefore, businesses need to research legal regulations accurately to determine the desired dispute resolution agency to protect their legitimate rights and interests.

Above is an article on the topic ” How to minimize the rate of bad debt arising from partners in business activities?
” by TNTP lawyer. Hopefully, this article will be helpful to the operations of businesses.

When a company initiates a suing the debtor at an authorized dispute resolution agency such as a Court or a Commercial Arbitration Center, in addition to the Lawsuit Petition, the company needs to prepare many other documents to ensure the legitimate rights and interests of the company, as well as to provide evidence for the debtor’s obligation to pay the debt. In this article, TNTP will analyze and provide the important documents that need to be provided when initiating a suing the debtor.

1. Contract or agreement between parties

To determine the debtor’s obligation to pay the debt and the company’s right to demand payment, it is necessary to start with the contract between parties. Legally binding contracts will give rise to the rights and obligations of each party. Therefore, this is the first document that the company needs to provide to the authorized agency to prove the company’s right to demand payment from the debtor.

The terms of the contract will also affect the company’s demands, even some terms such as the agreement on the dispute resolution agency when a dispute arises will decide which agency has jurisdiction over the dispute resolution between the parties. According to the law, the company is only allowed to file a suing the debtor at the Commercial Arbitration Center when the content of the contract between parties clearly states the choice of the Commercial Arbitration Center as the dispute resolution agency or the parties agree to choose the Commercial Arbitration Center after signing the contract. In cases where the parties do not have any agreement or the contract does not mention the Commercial Arbitration Center as the dispute resolution agency, the jurisdiction for dispute resolution will always belong to the authorized Court.

In addition, the demand for the interest of the parties also depends on the content of the contract. In some cases, if the parties do not agree on the late payment interest rate or if the agreed late payment interest rate exceeds the provisions of the law, the request to apply the late payment interest rate when filing a suing the debtor must be based on the relevant provisions of the Civil Law or the Commercial Law. Therefore, the company needs to rely on the contents of the contract to make reasonable and compliant demands with the provisions of the law. If not, the dispute resolution agencies will not accept the company’s lawsuit demands

2. Debt reconciliation report

This is a very important document to provide accurate evidence of the amount of debt that the business requests the debtor to pay when initiating legal proceedings against the debtor. The debt reconciliation report is a document that records the amount of debt or the entire process of occurrence, payment, and remaining debt between the parties throughout the entire contract execution process. And most importantly, the debt reconciliation report is confirmed by authorized persons of both parties such as accountants, directors, or legal representatives of the business and the debtor. Therefore, based on this document, the business can accurately verify the amount to be requested from the debtor for payment and provide evidence to prove that the debtor has acknowledged the figures of the debt. Thus, the dispute resolution agency will have clear grounds to determine the payment obligations as well as the legitimate requirements of the business.

Although this document has great value in the litigation process at dispute resolution agencies, many businesses do not know or pay attention to the importance of the debt reconciliation report in their operations. In many cases, the entire operation process of the parties is not recorded in writing but is only stored through emails or text messages exchanged between the accountant or authorized individuals of the business. Storage forms of operational or debt information like this will not ensure the interests of both parties and in case of disputes arising, the creditor will be at a disadvantage because the dispute resolution agencies may not accept information or evidence stored on phone messages or emails. After all, this information and evidence do not have enough legal value to be considered similar to the debt reconciliation report.

3. Invoices, delivery notes, and warehouse withdrawal slips

These are documents that prove the process of fulfilling the agreement/contract between the business and the debtor. They are also important documents to prove the extent of the business’s obligations during the implementation of the agreement/contract with the debtor, as well as the receipts, expenses, and delivery of goods between the parties as the basis for proving the debt that the business requires the debtor to pay.

In addition, these documents also demonstrate that the process of implementing the agreement/contract between the parties is legal and fully documented in accordance with the law. A business can only make a legitimate claim when the process of entering into and implementing the contract is carried out in accordance with the provisions of the law.

Submitting complete delivery notes and warehouse withdrawal slips will help the competent authorities to accurately determine the process from the time the contract is entered into between the parties until the debt arises, whether the parties have delivered the number of goods and the value matches the accounts receivable reconciliation report or not, as a basis for accepting the business’s claim to initiate legal proceedings and having a clear and accurate overall view of the case

The above is an article by TNTP on the topic: “Important documents to provide when suing a debtor.” It is hoped that this article will be useful in the process of recovering debts for businesses.

Sincerely,

Debt collection is currently one of the essential needs for businesses to maintain their stable source of capital. However, not all businesses are familiar with the process of debt collection. In this article, TNTP will analyze and provide a debt collection process for customers to refer to in their operations.

1. Negotiating with the debtor

Before taking further measures to collect the debt, the first step is to negotiate and exchange to determine the debtor’s willingness to pay. Specifically, through the following ways:

1.1 Using email, and official letters to request payment.

The purpose of the request for payment letter is to gauge the debtor’s willingness to pay. In reality, the percentage of debtors who decide to pay back the business when the business sends a request for a payment letter is relatively low. However, this is an option worth trying because contacting through email and official letters is relatively fast and cost-effective. In addition, the request for a payment letter is also necessary evidence to create an advantage in resolving disputes at the competent state agency.

1.2 Negotiation process

The process of negotiating to recover the debt can be divided into several stages. Depending on each stage, businesses can use different negotiation skills. To negotiate with the debtor effectively, businesses can refer to some of the following skills:

• Inquiry stage: When the payment deadline is approaching and the debtor has not responded, the business can call, email, or send a letter to remind the debtor to fulfill their obligations according to the law. This stage is carried out in a gentle and sympathetic spirit towards the debtor’s delay, and at the same time, the business can extend a specific payment deadline (usually within 1 week).

• Reminder stage: After the business has extended the deadline for the debtor, but the debtor still has not fulfilled their payment obligation, the business can remind them more strongly to cooperate in resolving the debt through negotiation between the two parties. However, the business should still show goodwill and trust that the debtor will fulfill their payment obligations in full.

• Warning stage: If the debtor continues to fail to meet the deadline, the business needs to show a stricter attitude towards demanding payment and may indicate the legal consequences if the debtor fails to fulfill their payment obligation. This time, the business should ask the debtor to commit to payment in writing to ensure that the debtor fulfills their obligation. In case the debtor fails to fulfill the commitment, this document will be submitted to the competent court as evidence of the debtor’s uncooperative attitude in resolving the debt.

In case the debtor does not cooperate in payment, the enterprise may consider filing a lawsuit at the competent dispute settlement agency.

2. Proceed to file a lawsuit in a court of competent jurisdiction or initiate arbitration

After determining that the debtor has no willingness to pay the debt, the enterprise has the right to initiate legal proceedings to request the court or arbitration to resolve the dispute and recover the debt from the debtor if three conditions are met simultaneously: (i) a debt arises and the debtor does not repay it as promised, leading to a dispute, and the enterprise believes that its rights and interests have been infringed; (ii) the dispute between the enterprise and the debtor must fall within the jurisdiction of the court or arbitration, not any other agency or organization; (iii) in some cases, if there is an agreement or mandatory legal regulations that require pre-litigation procedures such as conciliation, negotiation, notification, etc., the enterprise must complete those procedures before requesting the competent authority to settle the dispute between the enterprise and the debtor.

Litigation can be costly, time-consuming, and require effort, so the enterprise needs to consider whether the benefits are worth the debt that can be recovered. From there, the enterprise can proceed to file a lawsuit in a court of competent jurisdiction or initiate arbitration as provided by law.

Best regard.

Debt collection is a necessary process for businesses to ensure their financial resources during their operations. However, for various reasons, debt collection may be ineffective and negatively affect the interests of the business. In this article, we will analyze and present the reasons for ineffective debt collection.

1. Ineffective debt collection team

The human factor is crucial in every profession, and debt collection is no exception. When a business’s debt collection staff is equipped with the necessary skills such as legal knowledge, communication skills, negotiation experience, and other necessary skills, the business is more likely to succeed in debt collection.
Conversely, if the business’s debt collection team lacks experience in debt collection, it will be difficult to recover debts. In some cases, debt collection staff who lack legal knowledge may engage in illegal debt collection activities, causing serious damage to the business’s interests or even constituting crimes under the provisions of the Criminal Code.

2. The prolonged period of debt

Another reason for ineffective debt recovery is when businesses do not take necessary measures to recover debts when they are due, which increases the likelihood that these debts will become bad debts, and difficult to collect. Debtors tend to avoid payment when not prompted or reminded by creditors. If businesses neglect to request payment from debtors for 6 to 12 months, the likelihood of debt recovery will decrease, and if the debts have been outstanding for over 3 years, the likelihood of recovery is even lower.

Allowing debtors to delay payments also increases the risk for creditors because if debtors have too many outstanding debts, they may become unable to pay. In that case, the creditor may no longer be able to recover the debt, or it may take a lot of time, effort, or cost to do so. Moreover, if a business considers filing a lawsuit against a debtor with overdue debts, it may be too late to file within the timeframe specified in the Civil Procedure Code. In that case, the business’s rights may not be guaranteed, and even if there is a court judgment or decision, the execution phase can be very difficult and prolonged.

3. Businesses no longer keep documents to support debt recovery

A debt between businesses always arises from business activities. Therefore, to recover debts, businesses need a basis to request debtors to fulfill their payment obligations. The most important are the documents related to the debt and the contract between the creditor and debtor, such as contracts, delivery notes, invoices, and most importantly, a debt reconciliation agreement confirmed by both parties. These documents are the clearest legal basis to prove payment obligations and determine the exact amount that debtors must pay.

If a business does not store complete records leading to the loss of these important documents, debt recovery will be very difficult when there is not enough evidence to request the debtor to make payment and accurately determine the amount requested for payment. Moreover, if the business initiates legal proceedings against the debtor at authorized dispute resolution agencies but cannot provide the above documents to prove the litigation claim, it will seriously affect the interests of the business. Even the authorized agencies may not accept the claim for litigation because the business cannot submit the documents, or evidence to prove the request for debt repayment.

It can be seen that the debt recovery process is not simple and has many inherent risks when implemented. Therefore, when carrying out debt recovery activities, businesses need to carefully prepare the necessary factors. In addition, to ensure that debt recovery is carried out effectively and professionally, businesses can consider using debt recovery services from law firms. At that time, the rights and interests of the business will be guaranteed and at the same time, the ability to recover debts of the business will be improved.

Above is an article analyzing the reasons for ineffective debt recovery. Hopefully, this article will be helpful to the activities of businesses.

Best regards.

Continuing from the first part, in this article TNTP will analyze in detail the debt collection process for businesses during the litigation phase at the competent authority to resolve disputes. This is a complex process that requires handling experience to ensure work efficiency. Therefore, based on its experience, TNTP will provide specific steps to explain to businesses so they can understand the process and serve their debt collection.

Step 2: Filing a lawsuit at the competent authority to resolve disputes

In cases where the business has used all measures to contact the debtor but has not achieved results due to the debtor’s unwillingness to voluntarily pay the debt, the business may consider filing a lawsuit against the debtor and requesting the debtor to fulfill the obligation to pay at the competent authority to resolve disputes, including the Arbitration Center or the competent court, depending on the dispute resolution authority that the parties have chosen in the contract or agreement.

1. Filing a lawsuit at the Commercial Arbitration Center

To file a lawsuit at the Commercial Arbitration Center, the parties must agree in the contract to choose the Commercial Arbitration Center to resolve any disputes arising during the contract execution (referred to as the “Arbitration Agreement”). If the parties do not have an Arbitration Agreement in the contract, they cannot file a lawsuit at the Commercial Arbitration Center.

When initiating a lawsuit at the arbitration center, the enterprise is required to submit a dossier including:

• The lawsuit petition
• An explanation of the case
• Documents proving the enterprise’s request for the lawsuit, such as contracts between parties, invoices, delivery notes, warehouse receipts, payment requests, etc.
• Documents proving the legal status of the enterprise as a legal entity
• Documents proving the legal status of the debtor
• Contact information of the debtor

After receiving the enterprise’s lawsuit dossier, the Arbitration Center will inform the enterprise of the selection of an arbitrator to resolve the case. After the enterprise completes the procedure of selecting the arbitrator or fails to elect an arbitrator, the arbitration center will proceed to select an arbitrator and establish an Arbitration Council to resolve the dispute.
The Arbitration Council will act on behalf of the Arbitration Center to conduct dispute resolution. If the enterprise proves that its lawsuit request is legitimate, the Arbitration Council will issue an Arbitration Award that has the force of an enforceable judgment. At that point, the enterprise may submit the Arbitration Award to the competent enforcement authority to request necessary measures to recover the debt.

2. Filing a lawsuit in a competent court

In cases where there is no agreement on arbitration in the contract between the parties, the dispute resolution authority will be the competent court. The filing of a lawsuit in a competent court is carried out according to the provisions of the Civil Procedure Code, under which the enterprise needs to accurately determine the competent court for jurisdiction. Otherwise, the enterprise’s lawsuit may be returned by the court.

After determining the competent court to resolve the case, the enterprise needs to submit a lawsuit dossier, including:

• A petition for filing a lawsuit
• A statement of the case
• Documents proving the enterprise’s claim for filing a lawsuit, such as a contract between the parties, invoices, bills of lading, delivery notes, payment requests, etc.
• Documents proving the enterprise’s legal entity status
• Documents proving the legal entity status of the debtor
• Contact information of the debtor

After receiving the enterprise’s lawsuit dossier, the court will examine the dossier and assign a judge to handle the case. If the enterprise’s dossier is complete, the court will issue a Notice of Acceptance of the case.

After issuing the Notice of Acceptance of the case, the court may summon the parties to attend reconciliation sessions and publicly present evidence. Here, the enterprise and the debtor can reconcile or provide additional documents and evidence to protect their rights and interests. If the parties agree on a reconciliation plan, the court will issue a Decision recognizing the reconciliation of the parties, which is equivalent to a Judgment and can be enforced.

In cases where the parties cannot reconcile, the court will proceed with the trial process. The court will conduct a trial based on the content of the documents and evidence provided by the parties or collected by the court to issue a First-instance Judgment. This Judgment will be legally effective and enforceable within 15 days from the date of the verdict unless the parties file an appeal or protest.
In case either party appeals or protests the verdict within 15 days from the date of the judgment, the case will be resolved by the Court of Appeal according to the procedures prescribed in the Criminal Procedure Code.

After the trial process is completed and the verdict becomes legally effective, the enterprise may submit a Request for Enforcement to the competent authority to request the enforcement agency to take necessary legal measures to recover the debt.

The above is the content of TNTP’s article on “Effective debt collection steps for enterprises”, hope that this article will be helpful in the debt collection process of enterprises.

Best regard,