Vietnam Overhauls Insolvency Framework with New Rehabilitation and Bankruptcy Law

On December 11, 2025, Vietnam's National Assembly adopted the Law on Rehabilitation and Bankruptcy, replacing the 2014 Bankruptcy Law. Effective March 1, 2026, this legislation introduces significant reforms to the country's insolvency framework.

Introduction of Rehabilitation Process

The new law establishes a debtor-led rehabilitation process, allowing companies facing imminent insolvency to restructure before defaulting. This shift from a liquidation-focused approach to early intervention aims to provide more options for both creditors and debtors.

Key Provisions

• Automatic Stay: Upon court acceptance of a rehabilitation petition, an automatic stay is applied, suspending enforcement actions and limiting creditor recovery during the process.
• Creditor Participation: While only debtors can initiate rehabilitation, creditors play a role through voting and supervision once proceedings commence.
• Tax and Social Insurance Relief: From the date of acceptance of the rehabilitation application, businesses and cooperatives are allowed to temporarily suspend contributions to the pension and death benefit fund, with a maximum suspension period of 12 months.

Implications

This reform aligns Vietnam's insolvency practices more closely with international standards, offering a more balanced approach to financial distress situations and potentially improving the business environment.