On 8 April 2024, the People’s Court of An Giang Province began bankruptcy proceedings against Hanh Phuc General Hospital at the request of Mr. Tran Van Tuong, the hospital’s former accountant, who claims the hospital owes him VND 1.42 billion (approximately USD 56,800). By 7 November 2024, the court reported 189 creditors with total claims amounting to VND 1,022,295,844,621 (approximately USD 40.89 million). These developments have raised significant concerns about the hospital’s financial stability and future.

Stakeholder Reactions

Vietnam Oman Investment’s Appeal

Vietnam Oman Investment Joint Stock Company (“VOI”), a key investor in Hanh Phuc Hospital, has submitted an appeal to Mr. Le Hong Quang, Secretary of the An Giang Provincial Party Committee. VOI’s concerns include:

1. Disputed Debt: The VND 1.42 billion owed to Mr. Tuong is under judicial review by the Long Xuyen City People’s Court to determine whether it constitutes a corporate debt or a personal liability of Ms. Lu Bich Nguyen, the hospital’s former Chairperson.
2. Operational Impact: Closure would waste the hospital’s 300-bed capacity, negatively affecting patients reliant on its maternity packages and chronic disease care.
3. Employment Loss: Shuttering the hospital would result in 554 job losses, disrupting the livelihoods of employees and their families.
4. Economic Ramifications: The hospital has contributed an average of VND 5 billion annually in taxes from 2019 to 2023, highlighting its economic significance.
5. Investor Confidence: Bankruptcy could tarnish Vietnam’s investment climate and complicate future fundraising efforts.
6. Alleged Mismanagement: VOI alleges misconduct by Ms. Nguyen, raising questions about governance failures.
   Legal Concerns: VOI emphasizes the need for transparency and fairness in adjudicating the bankruptcy petition.

Involvement of Other Investors

ResponsAbility AG (Switzerland) is another major investor, having joined VOI in providing approximately VND 470 billion in funding for the hospital. The involvement of prominent international investors underscores the broader implications of these proceedings for Vietnam’s investment climate.

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Legal and Strategic Considerations

1. Due Diligence and Risk Allocation: This case underscores the fundamental importance of thorough due diligence before investment. Risk allocation in Share Purchase Agreements demands careful attention to representations and warranties, particularly concerning the target company’s financial condition, undisclosed liabilities, and corporate governance. These provisions serve as crucial mechanisms for transferring potential liabilities to sellers and establishing clear indemnification frameworks, thereby protecting buyers against financial or operational risks. However, the effectiveness of representations and warranties ultimately depends on the warranting party’s financial capacity and integrity. Even the most comprehensive due diligence process may not uncover every liability, making it essential to structure agreements with multiple layers of protection and to carefully assess the creditworthiness of counterparties.

2. Bankruptcy as a Strategic Tool: Filing for bankruptcy can exert pressure on debtors and stakeholders to negotiate more favourable terms or expedite the resolution of disputes. However, initiating bankruptcy should be carefully considered, as it carries reputational and operational risks.
3. Procedural Path: Under Vietnam’s Bankruptcy Law, the initiation of proceedings does not immediately lead to liquidation. Creditors’ meetings and recovery plans offer opportunities to restructure debts and revive operations. Close monitoring of these subsequent steps is essential.
4. Investor Advocacy: For VOI and ResponsAbility, leveraging public appeals and emphasising the socio-economic importance of Hanh Phuc Hospital may strengthen their position in negotiations.

Conclusion

The Hanh Phuc Hospital case reveals how shareholder disputes, when weaponized through legal proceedings, can threaten the very existence of a vital healthcare institution. A single creditor’s $56,800 (VND 1.42 billion) claim has triggered proceedings affecting a hospital backed by $18.8 million (VND 470 billion) in investment, now facing over $40.89 million (VND 1.022 trillion) in total creditor claims. While bankruptcy laws serve important purposes, courts must exercise wisdom in distinguishing between legitimate financial distress and tactical maneuvers in shareholder battles. The stakes are too high – 554 jobs, community healthcare access, and Vietnam’s investment reputation – to let internal power struggles destroy value for all stakeholders. This case will test whether Vietnam’s legal system can uncover the true dynamics at play and protect the broader public interest while ensuring justice is served.

Disclaimer

Vilasia’s analysis is based solely on publicly available information, without any privileged access to internal data or discussions among the parties involved. Readers should seek professional legal and financial advice for their specific situations rather than relying solely on this analysis.