According to the provisions of Point dd, Clause 1, Article 108 of the Law on Bankruptcy 2014, one of the mandatory contents of the decision declaring bankruptcy is the content of termination of the labor contract with the employee, settlement of the employee’s rights and interests. of workers.

Clause 7, Article 34 of the Labor Code 2019 provides as follows:

“7. The employer who is a natural person dies; and is declared by the court as a legally incapacitated person, missing or dead. The employer that is not a natural person ceases to operate, or a business registration authority affiliated to the People’s Committee of the province (hereinafter referred to as “provincial business registration authority”) issues a notice that the employer does not have a legal representative or a person authorized to exercise the legal representative’s rights and obligations.”

Therefore, when the enterprise goes bankrupt, the labor contract between the employer (enterprise) and the employee will terminate.

II. Responsibility when terminating the labor contract

Article 48 of the Labor Code, 2019 stipulates that when bankrupt, an enterprise must ensure its responsibility to pay the following sums of money to employees:

“2. Priority shall be given to payment of the employees’ salaries, social insurance, health insurance, unemployment insurance, severance allowance, and other benefits under the collective bargaining agreement and employment contracts in case of shutdown, dissolution, or bankruptcy of an enterprise or cooperative.”

How are wages for employees resolved when the business goes bankrupt ?

III. Order of property division

Clause 1, Article 54 of the Law on Bankruptcy 2014 provides as follows:

Where a judge issues a decision declaring bankruptcy, the assets of the enterprise or cooperative shall be distributed in the following order:

“(a) Unpaid wages, severance allowances, social insurance and health insurance of the employees and other benefits by the executed labor contracts and collective labor agreement;

(b) Bankruptcy costs

(c) Debts arising after the commencement of the bankruptcy procedure which serves the purpose of business recovery of the enterprise or cooperative;

(d) Financial obligations to the State; unsecured debts payable to the creditors named in the list of creditors; secured debts that remain unpaid due to the value of the assets being insufficient to repay them”.

Therefore, when an enterprise goes bankrupt, its assets will be divided in the decision to declare bankruptcy in the order of asset division. Including the employee’s salary debt (Priority Order 2) and the employee still has the right to enjoy the money during the working period according to the contract between the two parties.

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