Commercial Debt Collection

The occurrence of debts in commercial activities is always an issue in the business operations of individuals and enterprises. To collect these outstanding debts, debt recovery activities are necessary. In this article, TNTP’s lawyers will analyze commercial debt recovery in Vietnam.

1. What is Commercial Debt Recovery?

According to Article 3 of the 2005 Commercial Law, commercial activities are activities for profit-making purposes, including the purchase and sale of goods, the provision of services, investment, trade promotion, and other activities for profit. The parties involved in commercial activities are merchants. As stipulated in Article 6 of the 2005 Commercial Law, a merchant can be an economic organization legally established, or an individual who conducts commercial activities independently, regularly, and with business registration.

Commercial debt recovery is debt collection in which one of the parties is a merchant engaged in commercial activities, and the debt arises from or relates to commercial activities between the parties. Therefore, commercial debt recovery can be seen as a part of civil debt recovery, sharing certain similarities since commercial activities also fall under civil law. The subjects of commercial debt recovery may be individuals or organizations, but the key distinction is that debts must arise from commercial activities or other profit-making activities.

2. Legal Basis

• Article 3 of the Civil Code 2015 provides that individuals and legal entities establish, perform, and terminate their civil rights and obligations based on free and voluntary commitments and agreements. Any commitment or agreement that does not contrary to social ethics and is not violate prohibitions of the law is valid and binding on the parties and must be respected by others. This principle forms the foundation for parties to establish commercial relationships, which consequently lead to the creditor’s right to recover debts.
• Articles 274 and 275 of the Civil Code 2015 provide the legal grounds for the arising of obligations, under which obligations in commercial debt recovery may arise from legal bases.
• Article 280 of the Civil Code 2015 stipulates that payment obligations must be fully, on time, at the agreed place and method. Payment obligations include both principal and interest, unless otherwise agreed.

3. Commercial Debt Recovery Process

3.1 Negotiation

Negotiation is the process of direct exchange and discussion between the creditor and the debtor to voluntarily reach an agreement on repayment, without requiring intervention from competent authorities such as courts or arbitration centers.

Negotiation is entirely lawful and based on legal principles, such as Article 3 of the Civil Code 2015 on civil transactions founded on the principles of freedom, voluntariness, goodwill, and honesty between parties, and in Clause 1 of Article 317 of the 2005 Commercial Law, which grants parties the right to negotiate in dispute resolution.

3.2 Litigation

a) Grounds for Litigation

If the parties fail to reach an amicable agreement on repayment, one party has the right to initiate a lawsuit in court or arbitration.According to Article 30 of the Civil Procedure Code 2015, the courts have jurisdiction to resolve commercial disputes, including: “Disputes arising from business or commercial activities between individuals and organizations with business registration, where both parties have profit-making purposes.”. Since commercial debt recovery arises from business transactions between parties, litigation in court is appropriate under the law.

b) Litigation Procedures

• Filing a Lawsuit Petition:According to Article 189 of the 2015 Civil Procedure Code, a petition must contain specific information (date, court’s name, plaintiff and defendant information, claims, etc.), The petition must clearly present the claims of the plaintiff and must be accompanied by documents and evidence proving that the plaintiff’s claim. After completing the preparation of the petition, the plaintiff must submit it in accordance with Article 190 of the Civil Procedure Code 2015. The submission can be made either directly to the court or by post.
• Acceptance of the Case:Upon receiving the petition, the competent court assigns a judge to review the case. If the petition satisfies the conditions to accept the case, the court will accept the case under Article 195. If not, the court will guide the plaintiff to amend or supplement the petition (Article 193) or may return the petition under Article 192.
• Mediation in Litigation:According to Article 205 of the Civil Procedure Code 2015, from the date the case is accepted to the day the first-instance trial begins is the preparation stage. During the case preparation stage, the court may conduct mediation unless the case falls under exceptions specified in Articles 206 and 207. Mediation must respect voluntariness, prohibit coercion, and ensure that any agreement does not violate the law or social ethics.
• Trial:If mediation fails, the court proceeds to trial. The trial includes opening, determining participants, finalizing claims, adversarial proceedings (presentation of evidence, questioning, rebuttals, legal arguments), deliberation, and finally issuing a judgment in the name of the Socialist Republic of Vietnam.

If the judgment is appealed within the time limits of Article 273 or protested under Article 280, appellate proceedings will follow. Otherwise, the first-instance judgment becomes legally binding.

c) Enforcement of Judgment

This is the final stage, ensuring that effective judgments and rulings of the court are implemented in practice. It begins with the Enforcement Agency issuing an enforcement decision under Article 36 of the Law on Civil Judgment Enforcement 2015.

If the debtor fails to voluntarily comply, enforcement officers may apply coercive measures under Article 71, such as:

• Deduction from accounts; recovery and handling of money or valuable papers.
• Deduction from income.
• Seizure and disposal of assets, including those held by third parties.
• Exploitation of assets.
• Compulsory transfer of property rights or documents.
• Compelling or prohibiting certain acts.

Enforcement ends when obligations are fulfilled, enforcement is suspended, or enforcement requests are returned (Article 53, Law on Law on Civil Judgment Enforcement 2015).

4. Where to Resolve Commercial Debt Recovery

According to Vietnamese law, authorities competent to resolve dispute on commercial debt include:

a) The Court

The Court has the function of conducting judicial proceedings in cases where disputes arise within its jurisdiction. Representing the authority of the State, the Court will adjudicate cases based on the evidence and documents provided by the parties and issue a legally effective Judgment/Decision for enforcement.

b) Commercial Arbitration Center

As a non-governmental organization of a socio-professional nature that resolves disputes, the Arbitration Center does not have automatic jurisdiction over disputes but only has jurisdiction when selected by the parties. Arbitral Awards are final and binding, and they have enforceable value similar to effective Judgments/Decisions of the Court.

5. Period of Commercial Debt Recovery

Generally, the timeline for debt recovery activities is as follows:

• Negotiation: 01–03 months
• Litigation: 18–24 months from the date of notification of case acceptance
• Judgment enforcement: 12–24 months from the date of the Enforcement Decision

Thus, debt recovery may take approximately 1–5 years on average, depending on the stages of the process, the complexity of the case, and most importantly, the solvency of the debtor.

6. Can Enterprises Claim Principal, Interest, and Damages?

Under Vietnamese law, enterprises are fully entitled to request the debtor to pay the principal, interest, and compensation for damages if the following conditions are met:

• Principal amount: The enterprise proves that a civil relationship exists and that the debtor has not fulfilled its obligations as agreed.
• Interest: There is evidence that the debtor failed to perform payment obligations on time. The interest rate follows legal provisions or the parties’ lawful agreement.
• Compensation for damages: There is actual damage arising from the debtor’s failure to perform obligations, and there is evidence proving the value of such damage.

7. Necessary Documents for Debt Recovery

Documents required for commercial debt recovery include:

• Documents proving the debt and transaction: Contracts; Invoices; Delivery minutes; Bank account statements; Payment confirmations; Debt reconciliation records.
• Documents proving the debtor’s breach of obligations: Debt confirmation letters; Written correspondence acknowledging the debtor’s opinions.

8. Commercial Debt Recovery in Vietnam

Currently, debt recovery in Vietnam is mainly conducted by law firms with a thorough understanding of the law and appropriate, lawful methods. Law firms act under authorization from enterprises to carry out necessary tasks, including strategy consultation, negotiation, litigation, or enforcement support.

TNTP is a law firm with many years of experience in debt recovery in Vietnam. We are ready to provide Clients with the best services at reasonable costs and undertake appropriate legal measures to recover debts effectively for our Clients.

This concludes the article by TNTP’s lawyers on the topic “Commercial Debt Recovery in Vietnam.” We hope this article provides valuable insights to our readers.

Best regard,