Decree No. 114/2008/ND-CP detailing the implementation of certain provisions of the Bankruptcy Law for businesses operating in the insurance, securities, and other financial sectors.

DECREE

Detailed guidance on implementing certain provisions of the Bankruptcy Law for businesses operating in the insurance, securities, and other financial sectors. insurance, securities, and other financial sectors.

______________________________

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Bankruptcy Law dated June 24, 2004;

Pursuant to the Insurance Business Law dated December 9, 2000;

Pursuant to the Securities Law dated June 29, 2006;

Considering the proposal of the Minister of Finance,

DECREE:

Chapter I GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

1. This Decree stipulates on:

a) List of businesses operating in the insurance, securities, and other financial sectors to which the bankruptcy regulations of this Decree apply.

b) Guidance on applying certain provisions of the Bankruptcy Law for businesses operating in the insurance, securities, and other financial sectors. Other issues related to the bankruptcy of businesses operating in the insurance, securities, and other financial sectors shall be implemented in accordance with the provisions of the Bankruptcy Law and the guiding documents for its implementation.

Article 2. The subjects to which this Decree applies include:

a) Businesses established and registered for business in accordance with the law and included in the list prescribed in Article 2 of this Decree.

b) Organizations and individuals related to the resolution of bankruptcy requests for businesses operating in the insurance, securities, and other financial sectors.

Article 2. List of businesses operating in the insurance, securities, and other financial sectors.

1. For the insurance sector: these are insurance companies established and operating in Vietnam in accordance with the Insurance Business Law (hereinafter referred to as insurance enterprises), excluding insurance brokerage companies.

2. For the securities sector: these are securities companies, investment fund management companies, and securities investment companies established and operating in Vietnam in accordance with the Securities Law (hereinafter referred to as securities enterprises).

3. For the other financial sector: these are lottery enterprises operating lottery businesses in accordance with Decree No. 30/2007/NĐ-CP dated March 1, 2007 of the Government on lottery business.

In cases where new business models are established and operate under licenses or decisions of the Ministry of Finance or operate under the state management of the Ministry of Finance to directly provide financial services, and the bankruptcy of such enterprises has a significant impact on the public and directly affects the safe and stable development of the financial system, the Minister of Finance shall announce the supplementary list of enterprises operating in the other financial sector to which this Decree applies (hereinafter collectively referred to as other financial enterprises) after obtaining approval from the Prime Minister.

Article 3. Bankruptcy proceedings

1. In cases where enterprises are not subject to measures to restore their ability to pay, the bankruptcy proceedings applicable to insurance, securities, and other financial enterprises that have entered a state of bankruptcy include:

a) Submitting a petition and initiating bankruptcy proceedings;

b) Restoring business operations;

c) Liquidating assets and debts;

d) Declaring the enterprise bankrupt.

2. In cases where enterprises have been subject to measures to restore their ability to pay but still fail to restore it and cannot settle maturing debts when creditors request, and the Ministry of Finance, the State Securities Commission, or the enterprise's owner decides to terminate the application of measures to restore the ability to pay, and there is not a majority of unsecured creditors representing at least two-thirds of the total amount of unsecured debt requesting a creditors' meeting, the Judge shall immediately apply asset liquidation and debt settlement procedures as provided in point c clause 1 and declare the enterprise bankrupt without applying the business operation restoration procedure as provided in point b clause 1 of this Article.

Article 4. Asset Management and Liquidation Team

1. Simultaneously with the decision to initiate bankruptcy proceedings, the Judge responsible for the bankruptcy of insurance, securities, and other financial enterprises shall issue a decision to establish the Asset Management and Liquidation Team to perform the tasks of managing and liquidating the assets of the enterprise that has entered into a state of bankruptcy.

2. The members of the Asset Management and Liquidation Team include:

a) One enforcement officer from the enforcement agency at the same level as the court with jurisdiction over the application to initiate bankruptcy proceedings, serving as the Team Leader;

b) One staff member from the People's Court with jurisdiction over the application to initiate bankruptcy proceedings;

c) A representative of the creditor organization or individual with the largest amount of debt among creditors. In case the creditors' meeting considers it necessary to replace the representative for the creditors within the asset management and liquidation team, the meeting will elect a replacement;

d) A lawful representative of the enterprise subject to bankruptcy proceedings;

đ) A representative of the Ministry of Finance when conducting bankruptcy of insurance enterprises and other financial enterprises licensed, established, and operated by the Ministry of Finance, or the Securities Commission when conducting bankruptcy of securities enterprises, or the owner of the enterprise when conducting bankruptcy of other financial enterprises not licensed, established, and operated by the Ministry of Finance;

e) A representative of the trade union or a representative of the employees (where there is no trade union) for enterprises owing wages or other debts to employees.

3. The agencies and organizations specified in Clause 2 of this Article shall be responsible for nominating representatives to participate in the Asset Management and Liquidation Team upon the request of the Judge.

4. The establishment, change in composition, dissolution, and re-establishment of the Asset Management and Liquidation Team shall be carried out according to the provisions of Articles 16, 17, 18, and 19 of Decree No. 67/2006/NĐ-CP dated July 11, 2006, guiding the implementation of the Bankruptcy Law for special enterprises and the operation of the Asset Management and Liquidation Team.

Article 5. Tasks, Authorities, and Working System of the Asset Management and Liquidation Team

1. The Asset Management and Liquidation Team performs tasks and authorities as stipulated in Articles 10 and 11 of the Bankruptcy Law.

2. The working system of the Asset Management and Liquidation Team is implemented according to the provisions of Article 20 and from Article 22 to Article 33 of Decree No. 67/2006/NĐ-CP dated July 11, 2006, guiding the implementation of the Bankruptcy Law for special enterprises and the operation of the Asset Management and Liquidation Team.

Chapter II

SUBMITTING APPLICATIONS AND HANDLING APPLICATIONS TO INITIATE BANKRUPTCY PROCEEDINGS

Article 6. Subjects with Rights and Obligations in Submitting Applications to Initiate Bankruptcy Proceedings

1. The subjects entitled to submit applications to initiate bankruptcy proceedings for insurance, securities, and other financial enterprises shall comply with the provisions of Articles 13, 14, 15, 16, 17, and 18 of the Bankruptcy Law.

2. While performing their functions and duties, if they find that insurance, securities, and other financial enterprises have entered a state of bankruptcy, the Ministry of Finance, the Securities Commission, and related agencies as stipulated in Article 20 of the Bankruptcy Law shall be responsible for notifying in writing those persons mentioned in Clause 1 of this Article so that they may consider submitting applications to initiate bankruptcy proceedings. The notifying agency shall bear responsibility for the accuracy of such notifications.

3. Persons submitting applications to initiate bankruptcy proceedings as stipulated in Clause 1 of this Article shall fulfill obligations and responsibilities as provided for in Article 19 of the Bankruptcy Law.

Article 7. Notification of Acceptance of Bankruptcy Proceedings Petition

1. In cases where the petitioner is the business owner or the legitimate representative of the enterprise, within five (05) days from the date of accepting the petition, the Court shall notify the following agencies:

a) The Ministry of Finance in cases where the petition for bankruptcy proceedings is received against insurance enterprises and other financial enterprises licensed, established, and operated by the Ministry of Finance.

b) The State Securities Commission in cases where the petition for bankruptcy proceedings is received against securities enterprises.

2. In cases where the petitioner is not the business owner or the legitimate representative of the enterprise that has entered into a state of bankruptcy, within five (05) days from the date of accepting the petition, the Court shall inform the enterprise and simultaneously send notifications to the following agencies and organizations:

a) The Ministry of Finance in cases where the petition for bankruptcy proceedings is received against insurance enterprises and other financial enterprises licensed, established, and operated by the Ministry of Finance.

b) The State Securities Commission in cases where the petition for bankruptcy proceedings is received against securities enterprises.

c) The enterprise's owner in cases where the petition for bankruptcy proceedings is received against other financial enterprises not licensed, established, and operated by the Ministry of Finance.

Article 8. Responsibilities of Enterprises and State Management Agencies Regarding the Application of Measures to Restore Solvency

1. Upon recognizing the risk of losing solvency, before deciding to file a petition for opening bankruptcy proceedings, insurance, securities, and other financial enterprises must proactively implement measures to restore solvency, strengthen organizational structure and operations of the enterprise, and immediately report in writing to state management agencies and owners about the current financial status, reasons leading to the risk of losing solvency, and plans to restore solvency as prescribed by law.

2. Within five (05) days from the date of receiving the Court’s notification regarding the filing of a petition for opening bankruptcy proceedings by a petitioner who is neither the business owner nor the legitimate representative of the enterprise, insurance, securities, and other financial enterprises must report in writing to state management agencies and owners about the current financial status, reasons leading to the risk of losing solvency, and plans to restore solvency as prescribed by law. 3 Within fifteen (15) days from the date of receiving the Court’s notification regarding the filing of a petition for opening bankruptcy proceedings by insurance, securities, and other financial enterprises, state management agencies and owners notified under Article 7 of this Decree must issue a document regarding whether or not to apply or terminate the application of measures to restore the enterprise's solvency.

Article 9. Authorities of State Management Agencies and Owners to Require Enterprises to Implement Measures to Restore Solvency

1. In cases where insurance enterprises face the risk of losing solvency, the Ministry of Finance has the right to require insurance enterprises to implement measures to restore solvency, including the following measures:

a) Supplementing equity capital;

b) Reinsurance; narrowing the scope, range, and geographical area of operations; suspending part or all activities;

c) Strengthening organizational structures and changing the management and operation personnel of the enterprise;

d) Requesting the transfer of insurance contracts;

đ) Other measures as prescribed by law. In cases where insurance enterprises fail to restore solvency as required by the Ministry of Finance, the insurance enterprises will be placed in a state of solvency control. The Ministry of Finance decides to establish a Solvency Control Board to apply measures to restore solvency as stipulated in Article 80 of the Insurance Business Law and related guiding documents.

2. In cases where securities enterprises face the risk of losing solvency, the State Securities Commission has the authority to:

a) Require securities enterprises to hand over rights and obligations towards funds, entrusted investors, and stock trading account holders of the enterprise to other replacement enterprises. The selection of partners for the handover of rights and obligations is agreed upon by the enterprise and must be approved by the State Securities Commission. In cases where the enterprise cannot agree on a partner for the handover, the selection of a similar industry enterprise will be designated by the State Securities Commission.

b) Require securities enterprises to temporarily seal part or all customer cash accounts and securities accounts and the enterprise's proprietary trading accounts to apply measures to restore solvency.

c) Place securities enterprises in a warning state as prescribed in Article 74 of the Securities Law and related guiding documents.

d) Measures as prescribed by law.

3. In cases where other financial enterprises face the risk of losing solvency, the Ministry of Finance (for enterprises licensed, established, and operated by the Ministry of Finance) or the Owner (for enterprises not licensed, established, and operated by the Ministry of Finance) has the right to require enterprises to implement measures to restore solvency, including the following measures:

a) Narrowing the scope, range, and geographical area of operations; suspending part or all activities;

b) Strengthening organizational structures and changing the management and operation personnel of the enterprise;

c) Other measures as prescribed by law.

4. In cases where securities and other financial enterprises are not subject to measures to restore solvency, the State Securities Commission, the Ministry of Finance, or the Owner shall notify the Court of the non-application of measures to restore solvency for the enterprise to proceed with bankruptcy proceedings as prescribed in Clause 1, Article 3 of this Decree.

Article 10. Returning the Application for Bankruptcy Proceedings

The court shall issue a decision to return the application for opening bankruptcy proceedings in respect of businesses operating in insurance, securities, and other financial sectors in the following cases:

1. The applicant does not pay the provisional bankruptcy fee within the time limit set by the court.

2. The applicant does not have the right to submit the application.

3. Another court has already opened bankruptcy proceedings against that business.

4. There is clear evidence indicating that the submission of the application for opening bankruptcy proceedings is not objective, affecting the reputation, credibility, or business operations of the business, or there is fraud in the request for opening bankruptcy proceedings.

5. The business proves that it is not in a state of insolvency.

6. The business has been notified by the State Management Agencies or the Owners specified in Article 7 of this Decree about the application of measures to restore payment capacity.

Article 11. Decision on Opening or Not Opening Bankruptcy Proceedings

1. The court shall issue a decision to open bankruptcy proceedings when the following conditions are met:

a) The State Management Agencies or the Owners specified in Article 7 of this Decree have issued a document regarding the non-application or termination of the application of measures to restore the payment capacity of businesses operating in insurance, securities, and other financial sectors.

b) The insurance, securities, and other financial businesses still lack the ability to pay their due debts.

2. The decision to open bankruptcy proceedings must include the contents stipulated in Clause 3 of Article 28 of the Bankruptcy Law.

3. The court shall issue a decision not to open bankruptcy proceedings if the conditions specified in Clause 1 of this Article are not met. Appeals against the decision not to open bankruptcy proceedings shall be made in accordance with Article 32 of the Bankruptcy Law.

Article 12. Business Operations of Insurance, Securities, and Other Financial Businesses After Issuance of Decision to Open Bankruptcy Proceedings

1. All business operations of insurance, securities, and other financial businesses continue normally after the issuance of the decision to open bankruptcy proceedings, but they must be subject to supervision and inspection by the Judge and the Asset Management and Liquidation Team, except as provided in Clauses 3 and 4 of this Article.

2. If it is found that the management of insurance, securities, and other financial businesses lacks the ability to manage or continuing to manage would not benefit the preservation of the business's assets, upon the request of the Creditors' Meeting, the Judge shall issue a decision to appoint a manager to oversee the business operations.

3. From the date of receipt of the decision to open bankruptcy proceedings, insurance, securities, and other financial businesses are strictly prohibited from carrying out the following activities:

a) Concealing or disposing of assets.

b) Paying unsecured debts.

c) Abandoning or reducing claims.

d) Converting unsecured debts into secured debts by the business's assets.

đ) Paying debts to creditors who are also debtors of the business.

e) Accepting to open securities trading accounts for customers, conducting securities brokerage activities.

g) Conducting investment activities and other activities related to customer deposit accounts and securities accounts, and the business's own accounts.

4. After receiving the decision to open bankruptcy proceedings, the following activities of insurance, securities, and other financial businesses must be approved in writing by the Judge before implementation:

a) Pledging, mortgaging, transferring, selling, giving away, leasing assets.

b) Receiving assets from a transfer contract.

c) Terminating the performance of an effective contract.

d) Borrowing money.

đ) Selling, converting shares, or transferring ownership of assets.

e) Paying newly incurred debts from business operations and paying wages to employees in the business.

Chapter III

ASSETS OBLIGATIONS AND MEASURES TO PRESERVE ASSETS

Article 13. Determination of Property Obligations, Handling Debts, and Returning Assets to the State

The determination of property obligations, handling debts that have not yet matured, debts secured by collateral or pledge, and returning assets to the State shall be carried out in accordance with the provisions of Articles 33, 34, 35, and 36 of the Bankruptcy Law.

Article 14. Order of Distribution of Assets

After performing the property obligations as stipulated in Article 13 of this Decree, the value of the assets of insurance, securities, and other financial enterprises shall be distributed in the order prescribed in Article 37 of the Bankruptcy Law.

Article 15. Transactions Deemed Void

1. Transactions deemed void under the provisions of Article 43 of the Bankruptcy Law, except for the cases specified in Clause 2 of this Article.

2. If within three months prior to the court accepting the application to initiate bankruptcy proceedings, the insurance, securities, and other financial enterprises are implementing measures to restore their payment capacity, then the repayment of debts that have not yet matured, the implementation of collateral or pledge for debts, payment of customer funds on securities accounts, settlement and transaction payments in securities will not apply the provisions regarding void transactions.

3. Unsecured creditors, the asset management and liquidation organization have the right to request the court to declare transactions void as provided in Article 44 of the Bankruptcy Law.

Chapter IV

CREDITORS' MEETING

Article 16. Creditors' Meeting

1. Except for the cases stipulated in Article 78 of the Bankruptcy Law, the Judge decides to convene a Creditors' Meeting to consider the application of measures to restore business operations when the competent state agencies or owners as prescribed in Article 7 of this Decree have issued a notification about not applying or terminating measures to restore payment capacity.

2. Matters related to the Creditors' Meeting shall be implemented in accordance with the provisions from Article 61 to Article 77 of the Bankruptcy Law.

Chapter V

ASSET LIQUIDATION PROCEDURE

Article 17. Decision to Initiate Asset Liquidation Procedure

The Court, Judge shall carry out the decision to initiate the asset liquidation procedure for insurance, securities, and other financial enterprises in accordance with the provisions from Article 78 to Article 80 of the Bankruptcy Law.

Article 18. Asset Liquidation

1. The liquidation of assets of bankrupt insurance, securities, and other financial enterprises shall be conducted through the following methods and priority order:

a) Auctioning the entire enterprise to an entity operating in the same industry to continue business operations;

b) Auctioning the entire enterprise to other entities if there is no entity operating in the same industry participating in the auction to purchase the enterprise to continue business operations;

c) Directly selling the entire enterprise to an entity operating in the same industry to continue business operations if only one entity has registered to purchase;

d) Auctioning individual assets separately if it is not possible to conduct a full enterprise auction;

đ) Selling individual assets directly if it is not possible to conduct an individual asset auction or the asset value is below the threshold required for auction according to the law.

2. The sale of state-owned enterprises, auctioning state-owned companies, and asset auctions shall be carried out in accordance with the provisions of the law.

Chapter VI

Article 20. Handling Violations

||| Article 19. Violation Disposition

The handling of violations during the bankruptcy process shall be carried out in accordance with the provisions of Article 93 of the Bankruptcy Law and guiding documents.

Article 20. Effective Date

1. This Decree shall take effect fifteen days after its publication in the Official Gazette.

2. Ministers, heads of agencies at the ministerial level, heads of government agencies, Chairmen of provincial People's Committees, and Chairmen of municipal People's Committees directly under the Central Government are responsible for enforcing this Decree.