The judge observes that the business is still operating successfully, generating profits, but fails to make payment to creditors within the prescribed 3-month period. In such circumstances, will a decision be made to initiate bankruptcy proceedings?

Question:

“In the event that a company has overdue debts and fails to pay the creditor within a period of 03 months, and the creditor files a request for bankruptcy proceedings. However, during the resolution process, the Judge finds that the company is still operating well and gain profit. Does this mean that the company, cooperative is exempt from bankruptcy proceedings?

Answer:

The fact that a company or cooperative is operating well and profitable does not mean that the company or cooperative is not capable of making payment, because according to Clause 1,Article 4 of the Law on Bankruptcy , a company or cooperative is considered incapable of making payment if it fails to fulfill its obligation to repay the debt within a period of 03 months from the due date.

Therefore, despite the fact that the company or cooperative is operating well and gaining profit, if it has overdue debts for a period of 03 months without repayment (loss of ability to pay), the Judge will make a decision to initiate bankruptcy proceedings in accordance with the provisions of Clauses 1 and 2 ,Article 42 of the Law on Bankruptcy.”

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