What options exist in Vietnam for restructuring an insolvent company and protecting creditors' interests?

Dear Client,

We are LawPlus - a law firm in Thao Dien, HCMC, Vietnam. We understand that this is a challenging time for your company, and we are here to provide the necessary legal support to navigate the restructuring process under Vietnamese law.

Summary of your request: We acknowledge your inquiry regarding the formal processes for restructuring an insolvent company in Vietnam. Specifically, you require advice on:

- Available formal restructuring processes and who can initiate them.

- The estimated timeline for these procedures.

- Implications for creditors, employees, and existing contracts.

To provide you with a preliminary legal opinion and an accurate fee quote, we kindly request the following initial information:

- Company Structure: What is your specific entity type (e.g., LLC, JSC, FDI) and where is your headquarters located?

- Debt Overview: Can you provide a rough estimate of the total debt and the number of creditors? Are there major secured creditors (banks)?

- Current Status: Has any creditor already filed a petition for bankruptcy against your company, or is this a proactive internal decision? Is the company currently involved in any other legal disputes or litigation (e.g., with suppliers, shareholders, or authorities) at Court or Arbitration?

- Employees: What is the approximate number of current employees?

Once we receive this information, LawPlus will send you a detailed proposal outlining our scope of work and service fees.

Please be assured that all information shared with us will be treated with strict confidentiality.

Best regards,

LawPlus Customer Services

Address: Floor 4A, 86 Xuan Thuy, An Khanh (Thao Dien), HCMC, Vietnam

Below is a practical map of the restructuring options for an insolvent company in Vietnam, focusing on formal (court-supervised) processesand what they mean for creditors, employees, and contracts.

 

1) What formal restructuring processes exist?

 

A. Court-supervised bankruptcy with a “business restoration”

 

Vietnam’s main formal framework is the Law on Bankruptcy 2014 (effective from 2015). It is a bankruptcy proceeding that can lead either to:

• Business restoration (a reorganisation/rescue plan approved by creditors and the court), or

• Liquidation / declaration of bankruptcy if rescue is not approved or fails.

 

This is the closest equivalent to “restructuring under insolvency law” for most companies in Vietnam.

 

B. Special regimes (notably for credit institutions)

 

Banks/credit institutions can be subject to separate supervisory/special control measures before bankruptcy, and the insolvency pathway can differ from ordinary companies.

 

C. Out-of-court workouts (informal, contractual)

 

Parties often do consensual restructuring (debt rescheduling, haircuts, new security, asset sales, M&A, etc.), but Vietnam is commonly described as not having a dedicated statutory “out-of-court restructuring” frameworkcomparable to some jurisdictions—so enforcement and coordination depend heavily on contract leverage and creditor alignment.

 

2) Who can initiate the formal process?

 

Under the Bankruptcy Law framework, petitions can be initiated by (commonly):

• The company (through its legal representative) — and the legal representative may have an obligation to file when the company is insolvent.

• Unsecured creditors / partially secured creditors (typically after the debtor fails to pay for 3 months after the due date).

• Employees / trade union (typically after 3 months of unpaid wages/employee-related debts).

 

3) How long does it take (statutory markers + real-world expectations)?

 

The law sets several key timing anchors (some are quite strict on paper):

• Negotiation window (if requested): within 3 working days of receiving a valid petition, parties may request negotiation; court sets the negotiation period but it must be no more than 20 days.

• Advance fees/expenses: court estimates advance; the petitioner generally has 15 days to pay after notice.

• Decision to open (commence) bankruptcy proceedings:generally within 30 days from acceptance of the petition, the judge issues a decision to open (or refuse).

 

In practice, overall duration varies widely (often many months to years) depending on asset complexity, disputes over claims/security, cross-border elements, and whether a restoration plan gains creditor support. (Vietnam is also actively discussing reforms, which underscores that practice can be challenging.)

 

4) Implications for creditors (how creditor interests are protected)

 

A. Collective process + limits on “race to collect”

 

A core feature is moving toward a collective resolution rather than individual enforcement. Practice commentary notes the Bankruptcy Law includes restrictions on payments during proceedings.

 

B. Secured vs unsecured creditors

• Secured creditors’ position is typically stronger; however, how security enforcement interacts with rescue efforts can be complex in practice.

• Creditors’ meetings and voting matter heavily: the restoration path requires creditor involvement and approval steps (and proposed reforms have even debated raising thresholds).

 

C. Avoidance / challenge of suspect transactions

 

The law contains concepts that can invalidate certain transactions around the insolvency period (to protect the estate and creditors as a whole).

 

5) Implications for employees

 

Employees are treated as high-priority stakeholders in distribution:

• The statutory payment waterfall puts bankruptcy costs first, then unpaid wages, severance allowances, social/health insurance and other employee benefits, ahead of many other claims.

 

Employees (and unions) may also have standing to file, as noted above.

 

6) Implications for existing contracts

 

Two important ideas to plan for:

1. Temporary suspension risk (early in the case): commentary on the Bankruptcy Law notes the debtor or creditors can seek temporary suspension of contract performance if it could adversely affect the debtor, and that this may need to be done very early after acceptance.

2. Termination upon bankruptcy declaration: Vietnamese legal commentary notes that a bankruptcy declaration can trigger termination of contracts by operation of law (linked to the Bankruptcy Law).

 

Because contract outcomes can be very fact-specific (termination clauses, governing law, security, set-off/netting, essential supply), companies usually triage contracts into: “must-keep,” “renegotiate,” and “exit.”

 

7) A practical decision path (what many insolvent companies do)

• If creditor group is small / cooperative: consensual workout first (reschedule, standstill, partial repayment plan, new collateral, asset sale/M&A), while preparing a “Plan B” bankruptcy filing.

• If there is enforcement pressure / many creditors: consider court-supervised bankruptcy with restoration plan, because it creates a single forum and a structured creditor process.