Bankruptcy in Vietnam applies to enterprises (including foreign invested enterprises), co operatives and co operative unions (hereafter collectively referred to as enterprises). Unlike certain countries, this does not apply to individuals.
Bankruptcy procedures are governed by the Law on Bankruptcy No. 51/2014/QH13 which came into effect on 1 January 2015:
- a petition must be filed to start an action in court for bankruptcy proceedings
- petitioners can be creditors (including unsecured or partially secured creditors), employees, trade unions, legal representatives, owners or key managers
- in order to file a bankruptcy petition, the petitioner must establish that the enterprise has fallen ‘into a state of insolvency’, i.e. that the enterprise has failed to pay its debts (due and payable sums) over the previous three months
- following a bankruptcy order, a creditors’ meeting will be called during which the creditors may decide whether the business of the enterprise can be rescued
- in cases where a rehabilitation plan is approved by creditors, the enterprise will carry out such plan under the supervision of the court and creditors within the approved time-limit or failing that, within a maximum of three years from the date of approval
- if the rehabilitation plan fails to achieve its purposes within the approved period, the court will declare the enterprise bankrupt.
Bankruptcy enforcement lies under the purview of the people’s courts of the localities where the enterprises in Vietnam are headquartered. There is often a delay in enforcement and there is a growing need to create more transparency in the implementation of the processes and procedures.