Insolvency, restructuring and bankruptcy under Law No. 142/2025/QH15 on Recovery and Bankruptcy: the insolvency tests, who may and must file, the rehabilitation procedure, the moratorium, creditors' meetings, the simplified procedure, administrators, ranking of claims, secured and foreign creditors, cross-border matters, managers' duties and informal restructuring

The new law and its approach

Vietnam's insolvency regime was rebuilt by Law No. 142/2025/QH15 on Recovery and Bankruptcy, passed by the National Assembly on 11 December 2025 and in force from 1 March 2026, except Article 38(3), which applies from 1 July 2026. It replaced Law No. 51/2014/QH13 on Bankruptcy, which had been criticised for producing very few completed cases and for treating insolvency almost entirely as liquidation (FAQ 99). The new law, of 88 articles, puts rehabilitation first: Article 3 makes the recovery of enterprises and cooperatives that can overcome financial difficulty a basic principle, and a separate rehabilitation procedure (thủ tục phục hồi) in Chapter II is available to a debtor before it becomes insolvent. It also introduces a simplified procedure for small and asset-less cases, electronic filing and virtual creditors' meetings (Article 23), a national portal for publishing decisions, shorter claim-filing periods and new categories of petitioner.

The law applies to enterprises and cooperatives, including foreign-invested companies. Credit institutions and insurers are subject to it with special features, alongside the special control and restructuring regimes administered by the State Bank of Vietnam and the Ministry of Finance under their own laws. Implementing guidance from the Supreme People's Court is still developing in 2026, and several concepts, such as what counts as a material debt for membership of the creditors' committee, await clarification.

The insolvency tests

Article 5 defines an enterprise as insolvent (mất khả năng thanh toán) if it fails to pay a debt within six months after the debt falls due. The 2014 law used three months, and the change gives debtors more time to negotiate before creditors can petition. The law also recognises a risk of insolvency (có nguy cơ mất khả năng thanh toán), described in professional commentary as the situation where the enterprise may be unable to pay debts falling due within the next six months, or has debts that are overdue by less than six months. The distinction drives the procedure: a debtor at risk of insolvency, or already insolvent but wishing to recover, may apply for rehabilitation; once it is insolvent, creditors and others may petition for bankruptcy, and its managers must file.

The test is a cash-flow test applied to individual debts: a single undisputed debt unpaid for six months after its due date is enough. It is not a balance-sheet test, so a company with negative equity that pays its debts on time is not insolvent, although its managers must consider whether distributions or new obligations are lawful (Legal representative and governance).

Rehabilitation: the debtor-led procedure

Only the debtor can open a rehabilitation. Article 24 gives the right to apply to the legal representative, the board of a JSC, the members' council of a multi-member LLC or partnership, and the owner of a single-member LLC or private enterprise, and the application must include a rehabilitation plan. Creditors cannot force a company into rehabilitation; they participate by voting and supervision. The court considers the application within about 15 days and may hold meetings with the parties in that time. If it proceeds, the applicant advances the court fee and the costs of the procedure, and the application is accepted when they are paid. An administrator is appointed within three working days of acceptance and verifies the creditor list, the debtor finalises and submits its plan within 30 days of acceptance, and within five working days of receiving the plan the court considers convening a creditors' meeting.

A plan is approved by creditors holding at least 65% of the total debts of the creditors attending the meeting, and in rehabilitation secured and unsecured creditors vote together. The court recognises the resolution within seven days, after which the plan is implemented under the supervision of the administrator and a creditors' committee of no more than five members representing creditors with material debts (Article 14). A rehabilitation may last no more than three years. If the plan fails or is not approved, the procedure ends and the company may become the subject of a bankruptcy petition. Collateral may be used in the plan only with the creditors' meeting's approval and the consent of the secured creditor concerned; collateral not used in the plan is enforced according to the security documents once the moratorium ends. Avoidance actions under the bankruptcy provisions do not apply in a voluntary rehabilitation.

The moratorium and restrictions after acceptance

Acceptance of a rehabilitation application has immediate effects. Article 27 requires the enforcement of security held by secured creditors to be suspended unless another law provides otherwise. Under Article 30, payment of debts that arose before acceptance is suspended, and although interest continues to accrue, interest payments are deferred until the court recognises the plan or ends the procedure; the court may also suspend tax collection consistently with the tax law's deferral rules. Until a plan is approved and recognised, the company may not conceal, disperse or donate assets, waive claims, pay pre-acceptance debts other than as necessary to keep operating, convert unsecured debts into secured debts using its own assets, or distribute profits or income. It must report to the administrator before borrowing, granting security, selling or leasing assets, terminating contracts and making certain other payments, including salary payments.

To encourage rescue financing, debts incurred to restore the company's operations are given priority in a later distribution (Articles 28 and 46), and interest on new financing may be paid as agreed. Commentators note that the law does not create a super-priority or priming lien over existing security, so new lenders will still look for unencumbered assets or for consent from existing secured creditors.

Rehabilitation, step by step

1. Board or owner decides to applyThe legal representative, board, members' council or owner resolves to apply and prepares the application with a rehabilitation plan, the creditor and debtor lists and the financial statements (Article 24).
2. File with the competent courtFile with the people's court having jurisdiction under Article 6, electronically where available (Article 23). The court considers the application within about 15 days.
3. Advance fees and costsOn the court's notice, pay the court fee and the advance on rehabilitation costs; the application is accepted on payment.
4. Moratorium and administratorEnforcement of security and payment of old debts are suspended; an administrator (an individual Quản tài viên or an asset management and liquidation enterprise) is appointed within three working days and verifies the creditor list.
5. Finalise the plan within 30 daysThe plan sets out the measures (new capital, sale of assets, debt rescheduling or conversion, cost reduction), the treatment of each class of debt and the timetable, up to three years.
6. Creditors' meeting and voteWithin five working days of the plan, the court considers convening the meeting; approval needs creditors holding at least 65% of the debts of those attending, secured and unsecured together, or 51% in the simplified procedure.
7. Court recognition and implementationThe court recognises the resolution within seven days; the plan is implemented under supervision of the administrator and the creditors' committee; restrictions on the debtor lift once the plan is recognised.

Bankruptcy: who may and who must petition

Article 38 lists the persons who may petition for bankruptcy once the enterprise is insolvent: unsecured creditors and partly secured creditors; employees and the trade union, once six months have passed after wages or other debts to employees fell due without payment; shareholders holding at least 20% of the ordinary shares of a JSC, or a lower percentage set by the charter; members holding at least 65% of the charter capital of a multi-member LLC, or a lower percentage set by the charter; and, from 1 July 2026 under Article 38(3), the social insurance agency, where it has sent notices demanding overdue or evaded contributions and the enterprise has not responded for three consecutive years. Fully secured creditors are not among the petitioners.

The same article places a duty to file on the legal representative, the board of a JSC, the members' council of a multi-member LLC or partnership, and the owner of a single-member LLC or private enterprise once the enterprise is insolvent, unless a rehabilitation application has already been made. A person who fails to file when obliged may be held liable and must compensate losses caused by the delay. After the petition, the court assigns a judge, the enterprise is notified and responds in writing, and the judge decides within the periods in Article 39 whether to require the fee and the advance on costs, require amendments or return the petition; the case is accepted when the advance is paid. Under Article 41 the judge decides within 30 days of acceptance whether to open bankruptcy proceedings, and the decision is sent to the parties, the tax authority and the business registration office and published on the national portal. Creditors must file their claims within 15 days of the opening decision, down from 30 days, or lose the right to take part.

From opening to declaration of bankruptcy

After opening, the administrator or the company's management prepares the creditor and debtor lists and inventories and values the assets, and the court convenes a creditors' meeting to consider whether the business can be restored. In the bankruptcy procedure only unsecured creditors vote. If the meeting resolves that the business can be restored and the enterprise qualifies, a rehabilitation follows; if the grounds for terminating the proceedings are met, the court terminates them; otherwise, under Articles 65 and 66, the court declares the enterprise bankrupt within 15 days of receiving the relevant report or resolution. The declaration orders the termination of operations, suspension and avoidance of transactions, termination of employees' contracts, sale of assets, the order of distribution and the prohibition on holding management positions under Article 84.

Transactions entered into in the six months before the opening, or 18 months for transactions with related persons, may be declared void, the test having shifted to transactions not made for profit-seeking purposes, such as gifts, transactions at an undervalue, and security or payments preferring a creditor. A declaration of bankruptcy can be reviewed by the provincial court on application within 10 days under Article 67, and by the Supreme People's Court in limited cases. Assets are then sold and proceeds distributed, with the civil judgment enforcement agency organising enforcement under Article 12.

The simplified procedure

Article 70(1) allows a simplified procedure where the enterprise has no more than 20 unsecured creditors and total principal debt of VND 10 billion or less; is a small or micro enterprise; has no assets, or assets that cannot be recovered or realised, or assets worth less than the fees and costs; is a credit institution; is an insurer or reinsurer that has not remedied the situation under supervisory measures; or falls within other cases provided by law or Supreme People's Court guidance. Under Article 71 the judge decides to apply it within 10 days of acceptance in the first two cases, the procedural time limits are halved, and creditors' resolutions pass with unsecured creditors holding at least 51% of the unsecured debt. A company with no realisable assets is declared bankrupt within 30 days of acceptance. A simplified rehabilitation is also available, with a maximum duration reported at 18 months and a 51% voting threshold.

Ranking of claims and secured creditors

On a declaration of bankruptcy, Article 46 fixes the order of distribution: first, bankruptcy costs; second, wages owed to employees; third, compulsory social, unemployment, health and occupational accident and disease insurance; fourth, severance and other employee entitlements under collective agreements and labour contracts; fifth, debts incurred to restore the business's operations; sixth, financial obligations to the State; and seventh, unsecured debts on the creditor list together with the part of secured debts not paid because the collateral was worth less than the debt. Creditors in a tier that cannot be paid in full share pro rata, and anything left goes to the owners. A foreign parent's shareholder loan therefore ranks behind employees, rescue financing and tax, alongside trade creditors, unless it is secured.

Secured creditors look first to their collateral. The moratorium suspends enforcement during a rehabilitation, collateral can be used in a rehabilitation plan only with the secured creditor's consent, and a shortfall ranks with unsecured debts. Security over land use rights cannot be granted to a foreign lender directly, so offshore lenders use an onshore security agent, and security over movable assets is effective against third parties only once registered (FAQ 80; Project finance, security and the financial centre).

Foreign creditors and cross-border cases

The law does not distinguish between Vietnamese and foreign creditors: a foreign supplier, lender or parent company files its claim within the 15-day period, votes and is paid in the same tier as a Vietnamese creditor of the same kind. In practice a foreign creditor needs its documents legalised or apostilled and translated, a local lawyer to file within the short deadline, and attention to the national portal on which opening decisions are published. Foreign-currency claims are converted for the purposes of the proceedings, and the remittance of any dividend abroad follows the foreign exchange rules.

Vietnam has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. Vietnamese courts may request judicial assistance from foreign courts, for example to identify and recover offshore assets, and handle similar requests from foreign courts through the judicial assistance mechanism and any applicable treaty (Article 18). A foreign insolvency order is not automatically recognised and does not stay proceedings by creditors in Vietnam; a foreign judgment can be recognised only under a treaty or on reciprocity (FAQ 75). A group restructuring that includes a Vietnamese subsidiary therefore needs a Vietnamese plan as well, negotiated with the subsidiary's local creditors.

Managers' duties near insolvency and informal restructuring

As a company approaches insolvency, its managers' general duties of honesty, prudence and loyalty under the Law on Enterprises are reinforced by specific rules. Profits may not be distributed unless the company can still pay its debts as they fall due after the distribution; unpaid charter capital exposes the members; the legal representative and the board or owner must file for bankruptcy once the six-month test is met, and are liable for losses caused by failing to do so; and, on a declaration of bankruptcy, managers responsible for the insolvency may be barred from holding management positions under Article 84. Concealing assets after insolvency, or paying favoured creditors, invites avoidance and personal liability. Separately, the legal representative can be prevented from leaving Vietnam while the company has large overdue tax debts (Tax administration, audits and disputes).

Most restructurings of foreign-invested companies nonetheless take place outside court: the parent provides new capital or a subordinated loan, banks reschedule under their own credit rules, trade creditors agree payment plans, debt is converted into capital (which requires the usual capital increase registration and, for a foreign creditor, any Article 21 registration), or the business is sold to an investor. Article 22 of the law contemplates negotiation and mediation, and a rehabilitation application can be used to give a negotiated plan the protection of the moratorium and bind dissenting creditors. Where no rescue is possible, a solvent dissolution funded by the parent is often cleaner than bankruptcy (Dissolution and closing a project).