Vietnam’s Rehabilitation and Bankruptcy Law (No. 142/2025/QH15)
The Cost
of Waiting Just Got Higher
Imagine a manufacturing company in Ho Chi
Minh City that has been struggling with overdue payments for months. Management
keeps believing the next quarter will turn things around. Suppliers start
pulling back. Key employees leave. By the time the board finally considers
legal options, the company’s value has already collapsed.
This scenario is common across Vietnam’s
business landscape. Until recently, the legal system offered little incentive
to intervene early. The old Bankruptcy Law of 2014 was built around one
outcome: shutting companies down and selling their assets.
That has changed. Vietnam’s Rehabilitation
and Bankruptcy Law (No. 142/2025/QH15) took effect on March 1, 2026, and it
rewires the entire approach to corporate distress. The system now encourages
companies to restructure before they fail, not after.
For CEOs, the biggest risk is no longer
insolvency. It is delay. For investors, the risk is mispricing distressed
opportunities by ignoring how timing, control, and execution shape whether any
value can still be recovered.
Here are seven strategic lessons from the
new law.
How the
Rehabilitation and Bankruptcy Process Works
The law creates two distinct pathways. One
is designed for companies that can still be rescued. The other handles those
that cannot.
The Rehabilitation
Pathway
Under the new framework, a company is
considered at risk of insolvency if it cannot pay debts coming due within six
months or has debts overdue by less than six months. Full insolvency is defined
as a failure to pay debts for six months or more. This is a notable shift from
the old law, which used a three month threshold.
Only the debtor can initiate
rehabilitation by filing a petition with the regional People’s Court. Creditors
do not have the right to file for rehabilitation. They can only file for
bankruptcy.
The court has 15 days to accept or reject
the petition. Once accepted, several protections kick in immediately.
Enforcement of secured assets is suspended. Payment of pre acceptance debts and
interest is paused. Tax collection may be temporarily frozen. The company can
continue operating, but under supervision.
A court appointed administrator then takes
charge of overseeing the company’s assets, monitoring operations, and reporting
to the court and creditors. The debtor has 30 days from the court’s acceptance
to submit a rehabilitation plan.
Creditors vote on the plan. Under the
standard process, approval requires support from creditors holding at least 65%
of total debt. For smaller companies using the expedited process, the threshold
drops to 51%. Once approved, the court formally recognizes the plan within
seven days, and it becomes legally binding.
The standard rehabilitation process runs
for a maximum of three years. The expedited process, available to companies
with 20 or fewer unsecured creditors and total debts under VND 10 billion,
lasts up to 18 months.
The Bankruptcy Pathway
Bankruptcy petitions can be filed by
creditors, the company, employees, trade unions, and for the first time under
the new law, tax authorities and social insurance authorities.
Once the court opens proceedings,
creditors must file claims within 15 days, shorter than the 30 day window under
the old law. Missing this deadline means losing the right to participate.
The administrator prepares a complete
inventory and a verified creditor list. Creditors may then decide to attempt
rehabilitation or proceed to liquidation. If no rehabilitation is viable, the
court declares bankruptcy, and assets are valued and sold through auction or
direct negotiation.
Proceeds follow a strict distribution
order: bankruptcy costs first, then unpaid wages and employee benefits, then
debts from the rehabilitation period, then State obligations such as taxes,
then unsecured creditors, and finally shareholders.
Lesson
1: Delay Destroys Value Faster Than Insolvency
The rehabilitation procedure is built as
an early stage tool. It is meant to protect value before a business collapses
entirely. Under this framework, waiting is not just a management habit. It is a
value destroying decision.
The old mindset of holding on a little
longer needs to be replaced with a harder question: how much value disappears
with each month of inaction? If management delays too long, the legal tools may
still exist, but the commercial foundation for a successful rehabilitation may
already be gone. Suppliers, employees, customers, and creditors may have moved
on.
For investors, a distressed company may
appear cheap, but only because time has already eroded most of the value that
could have been saved. The best window for action is before a company looks
completely broken but after it becomes obvious that management optimism alone
will not fix things.
Lesson
2: Saving the Business Does Not Mean Saving Full Management Control
The law significantly expands the role of
court appointed administrators. These professionals are not passive observers.
They supervise the rehabilitation plan, report to the court and creditors, and
can request the court to end the process entirely if they uncover violations.
This means control can start shifting well
before ownership changes. A founder may still hold every share. A legal
representative may still sign documents. But in practice, their ability to act
freely on payments, asset decisions, the rehabilitation plan, and creditor
communications will narrow considerably.
Investors assessing a distressed
opportunity need to look beyond the ownership structure. The real question is
who influences the process. In most cases, effective control sits between three
parties: management, key creditors, and the supervising administrator.
Lesson
3: Bargaining Power Shifts Earlier Than You Expect
The rehabilitation framework changes how
negotiations play out, even before any court ruling is issued. Once formal
rehabilitation becomes a realistic possibility, creditors, suppliers, and
potential investors stop negotiating the same way they did before. The law
creates pressure in the background, not only through court orders.
For management, informal promises carry
less weight once stakeholders sense that formal intervention may be on the
horizon. Holding influence requires stronger evidence, better governance, and
more credible restructuring plans.
For investors, this same dynamic opens
doors. A company with real operating value but shrinking options may become a
viable candidate for rescue investment, structured financing, or strategic
acquisition. But the law does not make every distressed business worth
pursuing. It changes leverage and clarifies the process. It does not guarantee
a good outcome.
Lesson
4: Value Preservation Is a Strategic Discipline
The law is designed to protect enterprise
value and balance the interests of all parties. This makes the central question
not whether a company is struggling, but whether enough value remains to
justify restructuring, financing, or a merger and acquisition opportunity.
Boards need to move past mere survival.
The relevant test is whether the business retains genuine going concern value
that can still be protected. A company that continues operating while its
relationships, contracts, workforce, and financing steadily erode may look
alive on paper but is losing value in reality.
A distressed company selling at a deep
discount is not automatically a bargain. The smarter investor question is
whether the business can still be stabilized, managed, and rebuilt.
Lesson
5: The Supporting Market Still Has Gaps
A well written law only works as well as
the people and institutions that implement it. Vietnam’s new framework still
requires experienced judges, skilled insolvency practitioners, reliable
valuation professionals, and strong institutional coordination.
The role of court appointed administrators
is especially critical. They serve as the operational arm of the court. If
administrators lack sufficient expertise in restructuring, finance, or asset
valuation, even a well designed law can produce disappointing results.
Management should not assume the
rehabilitation process will operate smoothly on autopilot. Investors should not
interpret the new law as evidence that Vietnam is already a mature market for
distressed asset transactions.
Lesson
6: State Funded Bankruptcy Costs Open the Door Wider
One of the most practical changes in the
new law is that the State budget may now cover upfront bankruptcy costs in
specific situations. This applies when the filer is an employee, a trade union,
the tax authority, or the social insurance authority, or when the company has
no remaining assets.
Previously, some financially distressed
companies could not afford to begin the very legal process meant to help them.
That paradox left many businesses in limbo. The new provision removes a
significant barrier to entry.
For investors, this improvement matters
because a functioning insolvency system depends on distressed companies
actually being able to enter the process. A market where companies can still
access the system even when their cash reserves are nearly gone is more likely
to produce clear outcomes and workable timelines.
Lesson
7: Know What Happens When Rehabilitation Fails
Not every rehabilitation attempt will
succeed. The law recognizes this by establishing clear rules for what follows a
failed rehabilitation, including procedures for asset valuation, sale through
auction or negotiation, and oversight of administrators during enforcement.
These enforcement rules have a direct
impact on value. For investors evaluating distressed assets and for management
trying to avoid a fire sale at deeply discounted prices, the post
rehabilitation framework is a core part of the financial calculation.
What
CEOs and Investors Should Do Now
For Management
Start acting earlier and documenting
everything. Build internal early warning systems that flag distress before it
becomes a crisis. Maintain thorough board minutes. Evaluate your core
relationships with creditors, suppliers, and customers. Distinguish between a
temporary cash flow issue and a deeper structural problem. The new law works
best when companies use it early enough to protect real business value.
For Investors
Use the new framework to assess distress
more clearly. Look beyond share ownership to understand who truly controls the
process. Evaluate whether the company retains enough value to justify a rescue.
Assess the quality of the appointed administrators, the relevant court’s track
record, and available enforcement options. A low price does not automatically
equal a good deal. The law may position Vietnam as a more transparent market
for restructuring and special situations, but returns ultimately depend on execution.
Frequently
Asked Questions
What is Vietnam’s Rehabilitation and
Bankruptcy Law?
It is Law No. 142/2025/QH15, passed on
December 11, 2025 and effective from March 1, 2026. It replaces the Law on
Bankruptcy 2014 and introduces a separate rehabilitation procedure that allows
financially distressed companies to restructure before being forced into
liquidation.
How does the rehabilitation process work
in Vietnam?
The debtor files a petition with the
People’s Court. If accepted within 15 days, protections take effect
immediately. An administrator is appointed, the company has 30 days to submit a
rehabilitation plan, and creditors vote on it (65% approval needed under the
standard process). The plan can run for up to three years under court
supervision.
Why does Vietnam’s new insolvency law
matter for foreign investors?
The law creates a clearer framework for
assessing distressed companies in Vietnam. It shifts the system toward earlier
intervention, gives court appointed administrators stronger oversight roles,
and makes the process more accessible. Investors gain better visibility into
restructuring timelines and value preservation opportunities.
How long can the rehabilitation process
last?
The standard process runs for up to three
years. The expedited version, available for companies with 20 or fewer
unsecured creditors and total debts under VND 10 billion, lasts up to 18
months.
What happens when rehabilitation fails
under the new law?
If creditors reject the plan or the rehabilitation process does not achieve its goals, the case moves to the bankruptcy track. The court declares bankruptcy, and assets are valued and sold through auction or direct negotiation. Proceeds are distributed in a legally defined priority order.
Read
the full guide from ANT Lawyers:
If you are managing a company facing
financial difficulty or evaluating a distressed investment in Vietnam, what is
your biggest concern: timing, control, or enforcement? Share your thoughts in
the comments.
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