When conducting debt collection activities, in some cases where negotiation solutions do not yield results, or when the debtor does not cooperate in payment, the creditor may consider applying Legal measures to recover the debt. In the following article, the lawyer of TNTP will provide the legal measures commonly applied when collecting debts, for businesses to refer to in their debt collection process.

1. Complaint to the competent tax authority

In some cases, when the debtor no longer operates at the registered address with the competent state agency, the business may file a complaint with the tax authority managing the debtor. According to the law, if the business changes its registered office address without notifying the competent tax authority, it may be subject to administrative fines, and in some cases, the tax authority has the right to suspend the tax code of the debtor. This is a very effective pressure measure if the debtor intentionally avoids changing the operating address without notifying the business.

Upon receiving the Complaint from the business, the tax authority will establish a task force to conduct initial verification of the debtor’s registered office address. The task force will include tax officials at the competent tax authority, combined with the district-level People’s Committee and the competent local police agency where the debtor has registered their address. After verifying that the debtor is no longer operating at the registered address, the verification team will prepare a Verification Report stating that the taxpayer is not operating at the registered address.

Once there is a Verification Report that the debtor is no longer operating at the registered address, the tax authority will issue a Notice stating that the taxpayer is not operating at the registered address. Accordingly, on the content of the information page of the General Department of Taxation, the debtor will be recorded in the state as “Taxpayers not operating at the registered address.”

When the debtor is in the state of “Taxpayers not operating at the registered address”, it will lead to the following consequences for the debtor:

• The debtor’s invoices will no longer be valid and the buyer cannot use them for declaration, deduction of VAT;
• The tax authority will not receive the notification file for issuing invoices from the taxpayer who has informed the tax authority that they are not operating at the registered address;
• The organization providing the e-invoice solution will be notified in case the taxpayer informs through the intermediary system of the e-invoice solution provider to stop issuing invoices.
• Compulsory tax debt as prescribed by law.

2. Proceed with filing a lawsuit at the competent authority to settle the dispute

This is a measure taken when the enterprise has carried out negotiation measures but has not achieved results or the debtor is not willing to pay the debt. At that time, the enterprise will start the process of filing a lawsuit as follows:

a) Submit a lawsuit application to the competent authority to settle the dispute.

According to the law, there are currently two authorities to settle disputes: the Commercial Arbitration Center and the People’s Court with jurisdiction.

The condition for the enterprise to initiate a lawsuit at the Commercial Arbitration Center is that the dispute must arise from commercial activities and the parties must agree to arbitration in the contract that they have signed, choosing the Commercial Arbitration Center to resolve any disputes that may arise during the contract execution process.

For the selection of the court, the enterprise must based on the content of the Civil Procedure Code file the lawsuit application to the court with jurisdiction to settle the dispute.

b) Procedural stage

After submitting the lawsuit application and accompanying documents to the dispute resolution authority, the authority will guide the enterprise to proceed with the next procedures, including reconciliation, dialogue, and participation in the trial session. In the case of a trial, the Commercial Arbitration Center will issue an arbitration award, while the court will issue a decision or a legally effective judgment (if not subject to appeal or protest as stipulated in the Civil Procedure Code).

c) Judgment execution stage

When the dispute resolution authority has issued an arbitration award, decision, or legally effective judgment, the enterprise can apply to enforcement to the competent authority to request the enforcement authority to carry out necessary legal measures, including seizing assets and bank accounts of the debtor until the debtor fulfills the debt obligation.

The above is the content of the article by the lawyer TNTP on “Legal measures often applied when collecting debts”, hope that this article is useful in the debt recovery process of enterprises.
Best regards,