Summary of the Key Highlights of the Law on Bankruptcy and Recovery 2025
The Law on Bankruptcy and Recovery 2025 was passed by the National Assembly and officially takes effect from 1 March 2026, marking an important reform in legislative thinking regarding the handling of cases where enterprises and cooperatives lose their ability to pay in Vietnam. Unlike the traditional approach that primarily viewed bankruptcy as a liquidation procedure, the Law on Bankruptcy and Recovery 2025 clearly demonstrates an orientation toward prioritizing the recovery of business operations, preserving the value of enterprises and cooperatives and harmonizing the interests of related stakeholders. The innovations introduced by the Law on Bankruptcy and Recovery 2025 have profound practical significance for enterprises, cooperatives, creditors, investors and credit institutions in determining strategies for debt resolution, restructuring and value recovery.
1. Fundamental change in legislative thinking: from “bankruptcy” to “bankruptcy and recovery”
One of the most prominent features throughout the Law on Bankruptcy and Recovery 2025 is the clear change in legislative philosophy. While previous legislation mainly focused on determining bankruptcy status and organizing the liquidation of assets of enterprises and cooperatives that had lost their ability to pay, the Law on Bankruptcy and Recovery 2025 shifts the focus toward enterprise recovery as a priority objective of the procedure. This approach reflects the view that maintaining business operations, preserving the value of enterprises and cooperatives and sustaining cash-flow generation capacity are more effective solutions than terminating legal existence through bankruptcy.
This shift in thinking is clearly reflected in the name of the legislative instrument, where the former Bankruptcy Law is replaced by the Law on Bankruptcy and Recovery and where the scope of regulation is designed around two independent but closely connected procedures: the recovery procedure and the bankruptcy procedure. This approach establishes a clearer and more transparent legal foundation for selecting and implementing solutions that are appropriate to the actual condition of enterprises and cooperatives, thereby enhancing the feasibility and effectiveness of legal application in practice.
2. Establishment of an independent, clearer and more feasible recovery procedure
A significant innovation of the Law on Bankruptcy and Recovery 2025 is the first-time establishment of the recovery procedure for enterprises and cooperatives as an independent legal mechanism, regulated in a separate chapter with clearly defined procedures, timelines and supervision mechanisms. This approach marks a shift in legislative thinking from post-event handling to proactive recovery and restructuring of enterprises that have lost their ability to pay.
Under the new regulations, enterprises, cooperatives, creditors or other related parties may propose a recovery plan from the early stage of the procedure, no longer depending on prior approval by a creditors’ meeting as required under the Law on Bankruptcy 2014. The recovery plan is developed based on a comprehensive assessment of the financial situation, cash flow, market conditions and management capacity, reflecting the view that recovery is a substantive restructuring process rather than merely a focus on restructuring debt obligations.
Compared to the Law on Bankruptcy 2014, which provided that recovery could only be implemented after a resolution of the creditors’ meeting had been adopted, the new regulation significantly shortens procedural delays, reduces dependence on goodwill at a particular point in time and increases the likelihood of rescuing enterprises and cooperatives that still have recovery potential. This creates favorable conditions for enterprises and cooperatives to access legal protection mechanisms at an earlier stage, while also enabling creditors to participate more effectively in selecting appropriate resolution options, thereby enhancing the feasibility and practical effectiveness of the recovery procedure.
3. State budget support in recovery and bankruptcy procedures
An important new feature of the Law on Bankruptcy and Recovery 2025 is the codification of a mechanism whereby the State budget guarantees the advance payment of bankruptcy costs. Previously, the Law on Bankruptcy 2014 allowed exemption from the obligation to advance bankruptcy costs for employees, trade unions or in cases where enterprises and cooperatives had no remaining assets but it did not clearly identify the source of funding for such expenses, resulting in many cases being stalled in practice.
Pursuant to Clause 3, Article 20 of the Law on Bankruptcy and Recovery 2025, in the above-mentioned cases, the advance payment of bankruptcy costs shall be covered by the State budget and reimbursed when the assets of the enterprise or cooperative are liquidated. This provision removes financial obstacles in bankruptcy proceedings, ensures access to bankruptcy procedures for vulnerable parties and enhances the feasibility and effectiveness of enforcement of the Law on Bankruptcy and Recovery 2025.
4. Introduction of simplified recovery and bankruptcy procedures
The Law on Bankruptcy and Recovery 2025 introduces, for the first time, simplified recovery and bankruptcy procedures as an independent resolution mechanism aimed at promptly handling cases of enterprises and cooperatives that have lost their ability to pay and have simple legal and financial conditions, few disputes and limited conflicting interests. This represents an important step in addressing the prolonged resolution timelines that existed under the practical application of the Law on Bankruptcy 2014.
Under the new regulations, simplified procedures apply to cases where enterprises or cooperatives no longer conduct actual business activities; have no assets or very few assets; have no complex disputes regarding ownership or financial obligations; or where there is clear evidence of insolvency and no possibility of recovery. On that basis, the court is permitted to shorten procedural steps and litigation timelines, while eliminating certain unnecessary intermediate stages such as creditors’ meetings or prolonged verification procedures.
Under the Law on Bankruptcy 2014, all bankruptcy cases were required to follow an almost uniform procedure, including cases where enterprises and cooperatives had ceased operations; had no remaining assets; and had no recovery potential. This rigid application of standard procedures resulted in prolonged resolution times, unnecessary litigation costs, pressure on the courts and reduced effectiveness in protecting the rights and interests of related parties. The simplified procedure under the new law directly addresses this shortcoming by classifying cases from the outset according to their nature and level of complexity.
Notably, simplified procedures apply not only to bankruptcy but may also be applied to the recovery of enterprises and cooperatives in simple cases where the parties have reached a high level of consensus on the recovery plan, debt restructuring and reorganization of business operations. This approach saves time, reduces costs and creates conditions for enterprises and cooperatives to stabilize their operations promptly, instead of being drawn into prolonged litigation procedures.
5. Expansion of entities entitled to file petitions for bankruptcy procedures
An important new feature of the Law on Bankruptcy and Recovery 2025 is the expansion of entities entitled to file petitions requesting the court to apply bankruptcy procedures, including for the first time recognizing tax authorities and social insurance authorities as entities with the direct right to request the court to initiate such procedures.
Under the Law on Bankruptcy 2014, the right to file a petition to open bankruptcy proceedings primarily belonged to unsecured creditors, employees, trade unions, legal representatives of enterprises and cooperatives and certain other related parties. Meanwhile, tax authorities and social insurance authorities were not granted the direct right to file petitions. In practice, this resulted in many enterprises and cooperatives accumulating tax debts and social insurance arrears over many years, ceasing operations without initiating bankruptcy procedures, causing loss of state budget revenues and seriously affecting employees’ rights and interests.
The Law on Bankruptcy and Recovery 2025 addresses this gap by granting tax authorities and social insurance authorities the proactive right to file petitions requesting the application of bankruptcy procedures when enterprises or cooperatives lose the ability to pay corresponding obligations. This is a significant step forward, as tax debts and social insurance debts are not merely civil obligations but are closely linked to public interests, financial and budgetary order and the State’s social security policies.
From a legal advisory perspective, the Law on Bankruptcy and Recovery 2025 requires a shift in approach from purely handling bankruptcy to comprehensively assessing recovery potential and the long-term value of enterprises. Early participation by creditors, particularly credit institutions, in developing recovery plans will help enhance debt recovery efficiency and minimize legal risks. At the same time, the Law on Bankruptcy and Recovery 2025 opens up genuine recovery opportunities for enterprises that have feasible and transparent restructuring strategies. Accordingly, enterprises, cooperatives, creditors, employees and other stakeholders need to promptly grasp the new legal provisions in order to proactively develop appropriate resolution plans and maximize their lawful rights and interests in the current context of financial difficulties.
