7 Strategic Lessons from Vietnam’s Rehabilitation and Bankruptcy Law on Timing, Control, and Value

The new Vietnam’s Rehabilitation and Bankruptcy Law was passed on December 11, 2025 and took effect on March 1, 2026. It replaced the old law, which focused mainly on closing down bankrupt companies.

There are new arisen matters worth discussing including the cost of waiting too long, the growing power of court-appointed administrators, the fact that the State may now pay upfront bankruptcy costs in some cases, the weakness of the surrounding market, and what happens when rehabilitation fails.

Why This Rehabilitation and Bankruptcy Law Now?

This law as a legal reform that brings Vietnam closer to international standards. But more than that, the main purpose of the new system is to save businesses earlier, protect the value of companies, and balance the interests of all parties involved, while also admitting that putting the new system into practice will not be easy.

It is expected a stronger role of the court-appointed administrators, the need for real oversight during rehabilitation, and the new rule that allows the State to pay bankruptcy costs upfront in certain cases.

The law changes the old way from one that only dealt with bankruptcy to one that covers both rehabilitation and bankruptcy. It signal companies and creditors to think about rescue earlier, not just liquidation later. The rehabilitation is meant to be at the centre of the new system, not a secondary option. These practical points make the law a strategic signal, not just a legal update.

How the Rehabilitation and Bankruptcy Process Works: A Step-by-Step Overview

Before reading the strategic lessons below, it helps to understand the basic steps of how Vietnam’s Rehabilitation and Bankruptcy Law works in practice.

The law creates two separate directions: a rehabilitation direction for companies that may still be saved) and a bankruptcy direction for companies that cannot.

The Rehabilitation Direction

Step 1: A company recognises it is in financial trouble. Under the new law, a company is considered to be at risk of insolvency if it cannot pay debts that will come due within the next six months, or if it has debts that are overdue but by less than six months. A company is considered insolvent if it has failed to pay debts for six months or more. Under the old law, this period was only three months.

Step 2: The company files a rehabilitation petition with the regional People’s Court. Only the debtor can initiate the rehabilitation process. Creditors cannot file for rehabilitation, they can only file for bankruptcy.

Step 3: The court decides whether to accept the petition. The court has 15 days from receiving the petition to accept or reject it. During this period, the court may hold meetings with the parties to consider the situation.

Step 4: Once the court accepts the petition, immediate protections take effect. Enforcement of secured assets is temporarily suspended. Payment of debts and interest from before the acceptance date is paused. Tax collection may also be temporarily frozen. The company can continue to operate, but it is now under supervision.

Step 5: An administrator is appointed by the court. This person oversees the company’s assets, monitors its operations, and reports to the court and the creditors.

Step 6: The company prepares a rehabilitation plan. The debtor has 30 days from the court’s acceptance to submit its plan. The plan must cover how the company intends to restructure its debts, operations, and finances.

Step 7: A creditors’ meeting is held. Creditors vote on whether to approve the rehabilitation plan. A resolution needs the support of creditors holding at least 65% of the company’s total debt. In an expedited process for smaller companies, the threshold is lower at 51%.

Step 8: If creditors approve the plan, the court reviews and formally recognises it within seven days. The plan then becomes legally binding and is carried out under the supervision of the administrator and the creditor committee.

Step 9: The rehabilitation process runs for a maximum of three years or 18 months under the expedited process. If the company meets its obligations under the plan, the process ends successfully and the company continues to operate normally.

Step 10: If the rehabilitation plan fails, or if creditors reject it, the case may move to the bankruptcy track.

The Bankruptcy Direction

Step 1: A bankruptcy petition is filed. This can be filed by creditors, the company itself, its legal representative, employees, trade unions, or, for the first time under the new law,  tax authorities and social insurance authorities.

Step 2: The court accepts the petition and opens bankruptcy proceedings. It appoints an administrator to take control of asset management and reporting.

Step 3: Creditors must file their claims within 15 days. This is shorter than the 30 day period under the old law. If a creditor misses this deadline, it loses the right to participate in the proceedings.

Step 4: The administrator prepares a full inventory of the company’s assets and a verified list of creditors. This report is submitted to the court and shared with all parties.

Step 5: A creditors’ meeting is held. Creditors may decide to attempt rehabilitation which is sending the case back to the rehabilitation direction, or to proceed to liquidation.

Step 6: If no rehabilitation is possible, the court issues a bankruptcy declaration. The company’s assets are then valued and sold, either through auction or direct negotiation, following the procedures set out.

Step 7: Proceeds from the sale of assets are distributed in the following order: bankruptcy costs and procedure expenses first, then unpaid wages and employee benefits, then debts that arose during the rehabilitation period, then State obligations (taxes), then unsecured creditors, and finally shareholders.

Understanding these steps is important because the strategic lessons below explain what each stage means for timing, control, and value, and where the real risks and opportunities arisen for management and investors.

Delay Is No Longer a Choice

The first lesson is straightforward, which under the new law, time matters more than before. The rehabilitation procedure as an early stage tool is designed to protect the value of a business before it falls apart completely. This means that waiting is no longer just a management habit. It becomes a way of destroying value.

For management of the company, this changes the key question. The old way of thinking was to linger a bit more but the better question now is how much value to lose if waiting for some time.

If management waits too long, the legal tools may still be available, but the business reasons for rehabilitation may already be gone. Suppliers, employee, customers, creditors may have lost confidence and moved on. 

For an investor, timing matters just as much. A troubled company may look cheap, but only because time has already destroyed most of the value that could be saved. The new law gives investors more reason to watch for distress earlier. The best moment to act may be before a business looks completely broken, but after it becomes clear that management optimism alone is not enough.

Rehabilitation May Save the Business Without Preserving Full Management Freedom

The new law is expected to give more power to the administrators and the firms that manage and liquidate company assets. These people are not just observers. They oversee the rehabilitation plan, report to the court and the creditors, and can even ask the court to end the rehabilitation process if they find violations.

This matters because control can start to shift before ownership changes. A founder may still own the shares. A legal representative may still sign documents. But in practice, their freedom to act may become much narrower. How they handle payments, assets, the rehabilitation plan, and communication with creditors may all come under closer watch. That is a real commercial change, not just a legal one.

For investors, this is a critical point when assessing a deal. In a distressed company, the question is not just who owns the business. The question is who actually influences the process. Real control may sit between three parties: management, key creditors, and the supervising administrators. 

Bargaining Power Now Shifts Earlier

The rehabilitation framework changes how people negotiate, even before the process produces any final result. Once a formal rehabilitation path becomes a real possibility, creditors, suppliers, and potential rescue investors stop negotiating the way they did before. The law works not only through court decisions, but through the pressure it creates in the background.

For management, this means that informal promises lose their weight. Once stakeholders believe that formal intervention may be coming, simple promises become harder to be accepted. Management needs stronger evidence, better governance, and more realistic plans to keep influence over the situation.

For investors, this same shift creates opportunity. A company that still has operating value but is running out of options may become a realistic target for rescue investment, structured financing, or a strategic purchase. But the law does not make every distressed company attractive. It simply changes the roles of who has leverage. It may make the process easier to understand. It does not make the outcome easy to achieve.

Value Preservation Is a Strategic Discipline

The law is a tool to protect enterprise value and balance the interests of all parties. This means the most important question is not whether a company is already in trouble. The most important question is whether enough value still exists to make restructuring, financing, or a M&A opportunity worthwhile.

For boards, this means that simply staying alive is not enough. A board should ask whether the business still has real going-concern value that can be protected. A company that keeps operating while its relationships, contracts, workforce, and financing are all falling apart may be surviving on paper but losing value in reality. 

For investors, a distressed company may be heavily discounted and still not be worth buying. The better question is whether the business can still be saved, managed, and made stable. Value preservation is not a technical legal point. It is the centre of the investment decision.

The Market Around the Law Still Matters

The success of the new law depends heavily on how well it is put into practice. The law may be modern, but the market still needs experienced judges, skilled insolvency practitioners, reliable valuation work, and good coordination between institutions. These are practical difficulties.

One especially important point is the role of the administrators, the extended arm of the court. It means the system depends on the quality of its people and institutions, not just the quality of its written rules. If administrators do not have enough experience in restructuring, finance, or valuation, then a better law may still lead to poor results.

The management should not treat the rehabilitation process as something that works automatically. And investors should not treat the new law as proof that Vietnam is now a fully developed market for distressed deals.

State Advances of Bankruptcy Costs Change Who Can Access the Process

The State budget may pay upfront bankruptcy costs in certain situations. This applies when the person filing is an employee, a trade union, the tax authority, or the social insurance authority, or when the company has no assets left. In the past, some troubled companies did not have enough money even to start the legal process that was meant to help them. That created a dead end that the companies that needed the law most could not afford to use it.

For management, this means the new system may be easier to access than the old one, especially when a company’s cash has almost run out. The law has a stronger claim to being a real tool for action, not just a promise on paper.

For investors, this matters because a legal system only works if distressed companies can actually enter it. A market where companies cannot afford to start the process is not a serious restructuring market. A market where the process can still move forward, even when the company has little money left, is more likely to produce clear results and workable timelines. This does not solve every problem, but it is a real improvement.

What Happens When Rehabilitation Fails

The final lesson is that the promise of rehabilitation must be matched with clear rules for what happens when rehabilitation does not work. The law is the overall framework. But the important matter is how bankruptcy decisions are enforced, meaning the rules for selling assets, valuing property, and supervising administrators after a company is declared bankrupt.

This matters directly for value. The government has also sets out the steps for asset valuation, sale of assets by auction or direct negotiation, and oversight of administrators during enforcement. For investors looking at distressed assets, and for management trying to avoid a rushed sale at a low price, these enforcement rules are part of the value calculation.

What CEOs and Investors Should Do Now

For management

Act earlier and keep better records. Build internal warning systems that flag distress before it becomes a crisis. Keep detailed board minutes. Consider the company’s main relationships with creditors, suppliers, and customers. Look at the difference between a short-term cash problem and a deeper structural failure. Do not wait until trust has already broken down. One should take advantage of the the new law when companies use it early enough to protect real business value.

For investors

Use the new framework as a tool for understanding distress more clearly. Look beyond who holds the shares. Study who actually controls the process. Test whether the company still has enough value to be worth saving. Check the quality of administrators, the experience of the relevant court, and the practical enforcement options. Check the difference between a cheap price and a workable deal. The law may make Vietnam a clearer market for restructuring and special situations, but in the end, execution is what decides returns.

Conclusion

The best way to read Vietnam’s Rehabilitation and Bankruptcy Law is not as a tool for companies that have already failed. It is a framework for deciding when value can still be saved, when control has already started to shift, and when a distressed business is still worth backing.

The law itself is modern but is it practical? The harder questions are about practice, including delay, oversight, access to the process, the quality of institutions, and enforcement.

For management, that means acting before hope turns into delay. For investors, it means pricing execution, not just opportunity.

Frequently Asked Questions

Q1: When did Vietnam’s Rehabilitation and Bankruptcy Law take effect?

The law (No. 142/2025/QH15) was passed on December 11, 2025 and took effect on March 1, 2026. It replaced the Law on Bankruptcy 2014.

Q2: What is the main change compared to the old law?

The new law creates a separate rehabilitation procedure. This allows companies facing financial trouble to restructure before they default for a long time. The old law mainly dealt with liquidation, closing companies down and selling their assets.

Q3: What are the steps of the rehabilitation process?

The company files a petition with the court. The court decides within 15 days. If accepted, protections take effect immediately, an administrator is appointed, and the company has 30 days to submit a rehabilitation plan. Creditors vote on the plan (65% approval needed). If approved, the plan runs for up to three years under supervision.

Q4: Can the State pay bankruptcy costs upfront under the new law?

Yes. The State budget may advance bankruptcy costs when the person filing is an employee, trade union, tax authority, or social insurance authority, or when the company has no remaining assets. This money is repaid when the company’s assets are sold.

Q5: What court-appointed administrators do?

They supervise the rehabilitation and bankruptcy process, manage assets, report to the court and creditors, and play a central role in carrying out rehabilitation plans.

Q6: Does the rehabilitation procedure apply to all companies?

The rehabilitation and standard bankruptcy procedures apply to enterprises and cooperatives in Vietnam. However, the rehabilitation procedure does not apply to credit institutions like banks, insurance companies, or reinsurance companies.

Q7: How long can the rehabilitation process last?

The standard rehabilitation process can last up to three years. An expedited process, available for smaller companies with 20 or fewer unsecured creditors and total debts under VND 10 billion, can last up to 18 months.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest protection, risk mitigation and regulatory compliance. ANT Lawyers has lawyers in Ho Chi Minh city, Hanoi, and Danang, and will help customers in doing business in Vietnam.