A lot of businesses stopped their operation, but they could not declare the bankruptcy because of the administrative procedures barriers.
Spending money to be able to die
Phuc is the owner of a limited company in Tan Phu district in HCM City which specialises in distributing construction materials. The difficulties have become unbearable to him and he decided to dissolve the business.
However, Phuc still has not reached the summit of hope. “The administrative procedures are very complicated. I have to go to the taxation body regularly in the last two months, while the work has not been finished,” he complained.
Another businessperson related that when he came to the HCM City Planning and Investment Department in HCM City to learn about the procedures to follow. An officer here gave him a piece of paper with the address of the department’s website, telling him to access to the website to learn about the procedures.
The businessperson said one can avoid the complicated procedures if he hires others to follow the formalities for him. There are a lot of companies providing the services of helping set up new businesses or dissolve enterprises.
T. an officer of such a company, headquartered in district 1, advised the businessperson to dissolve the business, because the “procedures for dissolving businesses prove to be less complicated than the ones for bankruptcy.” The businessperson was asked to pay 2.5 million dong for the service package. Especially, T affirmed that his company, which has close relations with taxation officials, can help companies get the permissions to reduce tax or delay tax payment.
Under the Enterprise Law, businesses must pay debts and fulfill other duties before they stop operation legally. However, most of the enterprises which wanted to go bankrupted or be dissolved, did not have more money to pay the debts. Therefore, they quietly stopped operation and disappeared from the market.
A report by the Vietnam Chamber of Commerce and Industry VCCI showed that by early March 2012, some 1200 businesses in HCM City had disappeared that way.
There are two ways to stop operation legally, either to registering the dissolution or declaring the bankruptcy. In order to file for bankruptcy, businesses have to file for bankruptcy to the court and follow a lot of complicated formalities, which may take them some years. Therefore, getting dissolved is the choice of many enterprises which cannot maintain their operation.
A businessperson in district 1 in HCM City said that he needed the consultancy from a law firm to get dissolved. Though his business was set up just one year ago, which means it has no big problem relating to tax payment, he still had to pay 200 dollars to the law firms to get the support in legal procedures.
The loopholes of the law
When a business wants to declare bankruptcy, it must have written notice to two management agencies, including the taxation body and local planning and investment department, and inform about the unsettled debts.
However, many businesses only informed about the debts they were owing to the State, while hiding other debts.
According to Lawyer Tran Quang Thang, in this case, it depends on the businesses’ self-awareness of paying tax. Meanwhile, this proves to be unfeasible.
“The businesses all try to die in the way that can bring them the highest possible benefits. They want to quietly vanish from the sight while no need to pay debts,” Thang said.
Therefore, in many cases, it is very difficult for his law firm to demand debt payment for its clients, because the creditors got dissolved and left.