Vietnam’s 2025 Law on Rehabilitation and Bankruptcy fundamentally reshapes the country’s insolvency framework, introducing a debtor-led rehabilitation regime that emphasizes early intervention, court supervision, and structured creditor participation.
Vietnam has enacted a comprehensive overhaul of its insolvency framework through the Law on Rehabilitation and Bankruptcy No. 142/2025/QH15 (RBL 2025), which will take effect on March 1, 2026. The new law replaces the Law on Bankruptcy No. 51/2014/QH13 (Bankruptcy Law 2014) and responds to long-standing criticism that Vietnam’s existing bankruptcy regime was slow, court-centric, and largely ineffective as a tool for resolving corporate distress.
RBL 2025 seeks to rebalance the system around two core objectives:
- Preserving enterprise value through early-stage rehabilitation where recovery is viable; and
- Facilitating faster liquidation where recovery is not feasible, in order to reduce value erosion and creditor losses.
The reforms mark a significant step toward internationally recognizable restructuring standards, while retaining features that reflect Vietnam’s legal and institutional context. This article explains how the new regime works, the practical costs and compliance implications, how it differs from the prior law, where gaps remain, and how Vietnam’s approach compares with restructuring frameworks in Singapore and the United States.
Introducing rehabilitation as a distinct pre-bankruptcy process
A new concept: “imminent insolvency”
A foundational change under RBL 2025 is the introduction of a stand-alone rehabilitation procedure, designed to intervene before full insolvency occurs.
The law distinguishes between:
- A company “facing imminent insolvency”, meaning it may be unable to pay debts falling due within the next six months, or has overdue debts of less than six months; and
- An “insolvent company”, defined as one that has failed to pay debts overdue by six months or more.
This distinction did not exist under the Bankruptcy Law 2014, where proceedings were largely reactive and triggered only after prolonged default. The new framework allows earlier court involvement, reflecting international best practice that favors timely restructuring over delayed liquidation.
Who can initiate rehabilitation – and why it matters
Only the debtor may initiate a rehabilitation process when facing imminent insolvency. Eligible applicants include:
- The legal representative of the company;
- The board of directors (for joint stock companies);
- The members’ council (for multi-member limited liability companies) or partners (for partnerships); and
- The owner (for sole proprietorships or single-member limited liability companies).
Creditors are expressly excluded from initiating rehabilitation at this stage. According to the legislative proposal papers, this restriction is intentional: creditors may lack sufficient access to operational and financial information to formulate a viable rehabilitation plan, which must accompany the petition. Creditors instead exercise control through voting and supervision once proceedings commence.
This approach contrasts with creditor-driven insolvency filings under the prior regime and under U.S. Chapter 11 and signals a shift toward debtor-led early intervention.
How the rehabilitation process works in practice
Procedural timeline and court involvement
The rehabilitation process is highly structured and court-supervised:
- Filing of petition with the competent court.
- Initial court review within approximately 15 days.
- If accepted, the court determines court fees and rehabilitation expenses, which must be advanced by the applicant. The petition is formally accepted only once payment is made.
- Appointment of an administrator within three business days of acceptance. The administrator verifies creditor claims and oversees compliance.
- The debtor has 30 days from acceptance to finalize and submit a rehabilitation plan.
- Within five business days of receiving the plan, the court considers convening a creditors’ meeting.
- If approved by creditors, the plan must be sanctioned by the court within seven days, after which it becomes binding and is implemented under supervision.
Compared with the Bankruptcy Law 2014, this represents a front-loaded and time-bound process, reducing procedural drift but increasing pressure on debtors to prepare early and accurately.
Costs and compliance obligations
Upfront financial burden
RBL 2025 explicitly requires the applicant to advance court fees and rehabilitation expenses, including administrator costs. While the law does not yet provide a standardized fee schedule, this requirement introduces a tangible liquidity threshold for access to rehabilitation. Smaller or highly distressed companies may struggle to meet these upfront costs without sponsor support.
Ongoing compliance and oversight
Once accepted:
- The debtor operates under heightened scrutiny, subject to supervision by both the administrator and a creditor committee.
- Certain transactions are restricted (discussed below).
- Timely disclosure and cooperation become legal obligations, not merely commercial expectations.
Failure to comply may jeopardize the rehabilitation or expose management to liability under related regulations.
Creditor rights and key risk areas
Voting mechanics and creditor exposure
A major departure from prior law is that both secured and unsecured creditors vote on the rehabilitation plan. A plan is approved if creditors representing at least 65 percent of total debts held by attending creditors vote in favor.
This unified voting pool increases the risk of cram-like outcomes, particularly for secured creditors who fail to actively participate or properly file proofs of debt. In expedited proceedings, the threshold drops to 51 percent, further increasing execution risk.
If collateral is required for the rehabilitation plan, enforcement of security is only permitted with:
- Approval of the creditors’ meeting, and
- Consent of the relevant secured creditor.
Automatic stay: earlier and broader
Within five business days of petition acceptance, an automatic stay comes into effect, suspending:
- Enforcement actions against the debtor’s assets, including security enforcement; and
- Potentially, tax collection, subject to applicable tax law grace periods.
This stay applies before bankruptcy proceedings formally commence, materially reducing the window for out-of-court enforcement that creditors previously relied on under the 2014 law.
Treatment of existing and new debts
- Existing debts and interest incurred before acceptance are suspended, though interest continues to accrue.
- New debts incurred for rehabilitation purposes may carry payable interest, offering a foundation for rescue financing.
However, the law does not establish a clear super-priority or priming lien regime, leaving uncertainty around lender protections and pricing of rescue capital.
Restricted transactions
After acceptance, unless expressly permitted by law or the court, the debtor is prohibited from:
- Paying pre-petition debts;
- Converting unsecured debt into secured debt using its own assets; or
- Distributing profits or revenues.
These restrictions limit late-stage collateral enhancement and constrain sponsor-led rescue strategies.
Broader regulatory constraints
Rehabilitation does not operate in isolation. Debt restructuring may intersect with:
- Foreign exchange controls,
- Investment licensing requirements,
- Sector-specific regulations, and
- Tax compliance rules.
RBL 2025 does not harmonize these regimes, meaning restructurings may be legally permissible under insolvency law but constrained elsewhere, increasing execution complexity.
Other key changes from the 2014 Bankruptcy Law
Creditor committee formation
Under the prior law, creditor committees were appointed by creditors themselves. RBL 2025 mandates that the court appoint the committee, limited to no more than five members representing “material debts.” The term “material” is undefined and awaits further guidance, introducing interpretive risk.
Avoidance actions: narrower but unclear
The look-back periods remain:
- Six months for general transactions; and
- Eighteen months for related-party transactions.
However, the basis for avoidance shifts from “transactions not for business purposes” to “transactions not for profit-seeking purposes.” The law provides no clarification, potentially narrowing avoidance exposure but increasing uncertainty until judicial interpretation develops.
Avoidance provisions apply only once bankruptcy proceedings commence, not during voluntary rehabilitation.
Shorter claims filing deadline
Creditors now have 15 days (down from 30) to file claims after bankruptcy proceedings commence. Failure to meet this deadline results in loss of participation rights, making procedural vigilance critical.
Expedited procedures for small companies
Small enterprises (generally with 20 or fewer creditors and debts of VND10 billion or less) may be subject to expedited processes with timelines reduced by 50 percent. Voting thresholds are also lowered, accelerating outcomes but increasing creditor risk.
Cross-border bankruptcy
RBL 2025 introduces mechanisms for:
- Vietnamese courts to request foreign court assistance; and
- Responding to foreign court requests involving Vietnamese assets or parties.
While Vietnam has not adopted the UNCITRAL Model Law, these provisions materially improve cross-border coordination compared to the previous regime.
Key gaps and open questions
Several areas will require clarification through implementing regulations and court practice:
- Definition of “material debt” for creditor committee composition;
- Priority and protection of rescue financing;
- Interaction between insolvency stays and contractual close-out rights; and
- Practical scope of cross-border cooperation without Model Law adoption.
Conclusion
RBL 2025 represents a substantial modernization of Vietnam’s insolvency regime, shifting the system from a liquidation-centric, reactive model to one that recognizes early intervention, business continuity, and creditor coordination. While gaps remain, particularly around financing, creditor classification, and cross-border certainty, the reforms bring Vietnam materially closer to international restructuring standards.
For investors, lenders, and sponsors, the new law demands earlier engagement, stronger procedural discipline, and careful coordination with broader regulatory frameworks. How courts apply these tools in practice will determine whether rehabilitation becomes a genuinely viable alternative to liquidation in Vietnam’s evolving commercial landscape.
