Overview. The first Bankruptcy Law was introduced in 1993 (“1993 Law”). It remained in place for 10 years and was replaced in 2003 (“2003 Law”). Subsequently, the National Assembly adopted an entirely new bankruptcy law in 2014 (“2014 Law”[1]). The 2014 Law has recently been replaced by a new law, the Rehabilitation and Bankruptcy Law (“New Law”)[2]. The New Law contains 8 Sections and 88 Articles. It becomes effective in March 2026. This Article discusses notable points of the New Law.
Insolvency status. Under the 2014 Law, a company is considered to be insolvent if it is unable to pay its debts after three (3) months from the due date. The three-month period has been extended to six months in the New Law. The reason behind this change is that material adverse effects or unforeseeable events may occur. That is, insolvency may result from poor business decisions and also because of, say, regional or worldwide recession. Lawmakers have made this change in order help insolvent companies to have more time to pay their debts.
Rehabilitation. Under the 2014 Law, rehabilitation is just a part of the bankruptcy process. Now, the New Law deals with both rehabilitation and bankruptcy, but it focuses on rehabilitation. This change is reflected in the name of the New Law itself, and the rehabilitation process is regulated in a separate section of the New Law (Section II).
The New Law permits the following parties to initiate the rehabilitation process by submitting a petition in court:
(i) Company’s legal representative,
(ii) Board of Directors,
(iii) Members’ Council,
(iv) General Meeting of members of a cooperative,
(v) Owner of a private enterprise or owner of a single-member limited liability company.
Within 15 days from filling a petition to begin a rehabilitation process, the court (acting alone) will determine whether to accept or reject the petition. During this period, the court may convene meetings among the parties to consider the matter. If the petition is accepted, the maximum duration of a rehabilitation process may not exceed three years.
Restricted activities and supervision of the asset manager. After a petition has been filed and accepted by the court, the insolvent company is prohibited from conducting the following activities:
- conceal, disperse or donate any asset;
- waive any debt;
- pay any debt arising before the date on which the petition is accepted by the court;
- convert any unsecured debt to wholly or partially secured debt using assets of the company; or
- distribute profits, income.
The business of the company continues as normal, albeit under the supervision of an asset manager and the court. The insolvent company must report to the asset manager before implementing any of the following activities:
- Borrowing, pledging, mortgaging, guaranteeing, selling, transferring, leasing assets; selling, converting shares; assigning ownership of assets;
- Terminating any contracts that remain in effect;
- Re-paying debt that arose after the date on which the petition is accepted by the court; payment of salaries; and
- Other transactions that may be contrary to the company’s interest.
These restrictions and supervision by an asset manager can be removed upon adoption of a resolution of the creditor’s meeting, approving the rehabilitation plan. The resolution must be recognized by the court.
Enforcement of secured assets. If secured assets are used in the course of the rehabilitation process, the enforcement of secured assets will be conducted in accordance with resolutions of the creditors’ meeting. Importantly, the New Law imposes mandatory conditions for a resolution of the creditors’ meeting to become valid and enforceable. They are: a resolution of the Creditors’ Meeting can be passed only when creditors representing 65% of the total debt approve the resolution, the enforcement of secured assets requires the secured creditor’s consent, and a resolution of the creditors’ meeting can be enforced only after such resolution is recognized by the court.
Enforcement of secured assets will follow the terms of the security documents, if secured assets are not used in the rehabilitation process.
Expedited process. The New Law authorizes the court to apply an expedited process in certain circumstances.
Expedited rehabilitation proceedings:
An expedited process may be applied in one of the following circumstances:
(i) there are 20 or fewer unsecured creditors and the total debt of the principals is less than 10 billion Vietnamese dong;
(ii) the insolvent company is a super-small company[3]; or
(iii) other circumstances permitted by law.
If an expedited process is applied, the maximum duration of the rehabilitation process may not exceed 18 months. The rehabilitation process will be shortened, and resolutions of the creditors’ meeting will only require a simple majority vote (51% of the total debt).
Expedited bankruptcy proceeding:
An expedited process may also be applied in one of the following circumstances:
(i) there are 20 or fewer unsecured creditors and the total debt of principals is less than 10 billion Vietnamese dong;
(ii) the insolvent company is a super-small company;
(iii) there are no assets or assets cannot be collected or sold, or the value of the assets is less than court fees and expenses;
(iv) other circumstances permitted by law or as instructed by the Supreme Court.
The expedited process may also apply to credit institutions, insurance and re-insurance companies in special circumstances. For example, the State Bank of Vietnam (SBVN) determines that SBVN will not apply the rehabilitation of insolvency or SBVN terminates the rehabilitation of the bank’s insolvency or SBVN ceases its special control over an insolvent bank, but the bank remains insolvent.
If an expedited procedure is applied, bankruptcy will be shortened, and resolutions of the creditors’ meeting require only a simple majority vote (51% of the total unsecured debts).
Expansion of the list of parties entitled to initiate a bankruptcy proceeding.
Previously, bankruptcy could be initiated by unsecured or partially secured creditors, or by employees or trade union.
Under the New Law, this list has been expanded to: (i) shareholders holding 20% or more in a joint stock company (or a smaller percentage as set out in the Articles of Association); (ii) members holding 65% or more of the charter capital of a limited liability company (or a smaller percentage as set out in the Articles of Association), and (iii) Vietnam Social Security.
Other amendments. A number of new provisions have been introduced into the New Law. For example: (i) e-filling or virtual meetings are acceptable; (ii) bankruptcy cases involving foreign entities may be governed by international agreements; (iii) the number of members of the Committee of Creditors is limited to five persons; (iv) exemption from court fees may be granted in certain circumstances; (v) the asset manager has more power and responsibility.
[1] Law no. 142/2025/QH15 on Bankruptcy adopted by the National Assembly on December 11, 2025 (“Rehabilitation and Bankruptcy Law”).
[2] Law no. 51/2014/QH13 on Bankruptcy adopted by the National Assembly on June 19, 2014 (“2014 Law”).
[3] The term “super-small company” is used in the New Law. This term is not defined. The matter may be elaborated upon in implementing regulations of the New Law.
