PROCEDURES FOR CORPORATE BANKRUPTCY UNDER THE AMENDED LAW ON BANKRUPTCY

As the market continues to develop and competition becomes increasingly intense, not all enterprises are able to maintain stable and efficient operations over the long term. When falling into a state of insolvency, bankruptcy becomes a necessary legal mechanism to handle debts, protect the rights and interests of relevant parties, and restore economic order. Bankruptcy law not only serves as a termination mechanism for weak enterprises but also contributes to screening, promoting transparency, and ensuring a healthy business environment.

On that basis, the procedures for corporate bankruptcy under the amended Law on Bankruptcy are developed with a strict and clear process, ensuring a balance of interests among enterprises, creditors, and other related entities. This article by Siglaw Law Firm provides regulations related to corporate bankruptcy procedures under current law.

Definition of Bankruptcy

Pursuant to Clause 2 and Clause 4, Article 5 of the Law on Bankruptcy Recovery 2025, an enterprise is considered bankrupt in the event that it fails to perform its debt payment obligation after 06 months from the due date of payment. In addition, an enterprise may also be considered bankrupt when it receives a decision declaring bankruptcy issued by the Court.

Persons Having the Right and Obligation to File a Petition for Bankruptcy Procedures

Pursuant to Clause 1, Article 38 of the Law on Bankruptcy Recovery 2025, the following persons have the right to file a petition requesting the application of bankruptcy procedures when an enterprise becomes insolvent:

• Unsecured creditors: individuals, agencies, or organizations having the right to request the enterprise to perform debt payment obligations that are not secured by assets of such enterprise or of a third party;
• Partially secured creditors: individuals, agencies, or organizations having the right to request the enterprise to perform debt payment obligations secured by assets of such enterprise or of a third party, where the value of the secured assets is lower than the debt that must be paid;
• Employees and trade unions (in cases where, after 06 months, the enterprise fails to pay wages or other debts to employees);
• Shareholders or groups of shareholders owning more than 20% of ordinary shares or a lower ownership ratio if stipulated in the company charter;
• Members or groups of members owning more than 65% of the total charter capital of a multi-member limited liability company or a lower ownership ratio if stipulated in the company charter.

Clause 2, Article 38 of the Law on Bankruptcy Recovery stipulates that the following persons have the obligation to file a petition requesting bankruptcy procedures in cases where the enterprise has become insolvent, except where a petition for recovery procedures has already been filed:

• The legal representative of the enterprise;
• The Board of Directors of a joint-stock company, the Members’ Council of a multi-member limited liability company, and partnerships;
• The owner of a private enterprise; the owner of a single-member limited liability company.

In the above cases, if such individuals, agencies, or organizations fail to file a petition for bankruptcy procedures and damages arise after the time the enterprise becomes insolvent, they must compensate for such damages.

Jurisdiction of the People’s Courts in Corporate Bankruptcy Procedures

Jurisdiction of Regional People’s Courts

Pursuant to Point c, Clause 1, Article 5 of Resolution No. 01/2025/NQ-HĐTP and Clause 2, Article 4 of Resolution No. 81/2025/UBTVQH15, regional People’s Courts have jurisdiction to settle bankruptcy cases within their territorial competence, specifically as follows:

• Regional People’s Court No. 2 – Hanoi has territorial jurisdiction over 18 provinces and centrally governed cities, including: Hanoi, Hai Phong; and the provinces of Bac Ninh, Cao Bang, Dien Bien, Ha Tinh, Hung Yen, Lai Chau, Lang Son, Lao Cai, Nghe An, Ninh Binh, Phu Tho, Quang Ninh, Son La, Thai Nguyen, Thanh Hoa, and Tuyen Quang;
• Regional People’s Court No. 1 – Da Nang has territorial jurisdiction over 07 provinces and centrally governed cities, including: Da Nang, Hue; and the provinces of Dak Lak, Gia Lai, Khanh Hoa, Quang Ngai, and Quang Tri;
• Regional People’s Court No. 1 – Ho Chi Minh City has territorial jurisdiction over 09 provinces and centrally governed cities, including: Can Tho, Ho Chi Minh City; and the provinces of An Giang, Ca Mau, Dong Nai, Dong Thap, Lam Dong, Tay Ninh, and Vinh Long.

Jurisdiction of Provincial People’s Courts

Pursuant to Clause 3, Article 6 of the Law on Bankruptcy Recovery 2025, provincial People’s Courts have the authority to propose reconsideration and lodge protests against decisions declaring bankruptcy of enterprises; and decisions recognizing and enforcing bankruptcy regulations of foreign courts or competent authorities issued by regional People’s Courts within their territorial jurisdiction.

Jurisdiction of the Supreme People’s Court

Pursuant to Clause 4, Article 6 of the Law on Bankruptcy Recovery 2025, the Supreme People’s Court has the following authority:

To review decisions of provincial People’s Courts where such decisions infringe public interests or national interests, or infringe the lawful rights and interests of participants in bankruptcy procedures or other persons, on one of the following grounds:

• Serious violations of bankruptcy law;
• Discovery of new circumstances that may fundamentally change the content of the bankruptcy decision, which the Court or participants could not have known at the time the decision was issued;

To resolve disputes over jurisdiction among regional People’s Courts.

Process of Handling Bankruptcy Procedures in Enterprises

Bankruptcy procedures are stipulated in detail in Article 39 of the Law on Bankruptcy Recovery 2025. Accordingly, enterprises undergoing bankruptcy procedures must follow these steps:

Step 1: Filing a Petition for Bankruptcy Procedures

Persons having the right or obligation to file a petition shall submit a bankruptcy dossier to the competent People’s Court, including the following documents: petition for bankruptcy procedures; list of creditors and debtors (if any); and documents and evidence proving that such list is grounded and lawful.

Step 2: Assignment of Judge to Handle the Case

Within 02 working days from the date of receipt of the dossier, the Chief Justice assigns a Judge or a panel of Judges to handle the case. Within 02 days from the date of assignment, the Judge or panel of Judges must notify the enterprise.

Within 05 working days from the date of receiving the notification, the enterprise must submit a written response regarding the request for bankruptcy procedures, together with relevant documents and evidence.

Step 3: Review of the Dossier and Decision by the Judge

Within 07 days from the date the enterprise submits its written response and supporting documents, the Judge shall decide on one of the following:

1. Request the enterprise to pay an advance of bankruptcy fees (except for cases eligible for exemption);
2. Request amendment or supplementation of the dossier;
3. Transfer the dossier to a competent Court;
4. Return the dossier and notify within 03 working days in the following cases:

• The petitioner does not have the right or obligation to file;
• The petitioner fails to amend or supplement the dossier as requested;
• The case has already been accepted by another Court;
• The dossier is withdrawn or fees are not paid as agreed.

Step 4: Review by the Chief Justice of Returned Dossier (if any)

Within 03 working days from the date of receiving the notice of return, the petitioner has the right to request reconsideration, and the Procuracy has the right to make recommendations to the Chief Justice.

Within 03 working days from receiving such request, the Chief Justice must issue a decision to either uphold the return notice or cancel it and accept the dossier in accordance with the law.

This decision is final and must be sent to the petitioner and the Procuracy within 03 working days from the date of issuance.

Step 5: Acceptance of the Petition

The Court shall accept the bankruptcy petition when there are grounds confirming that bankruptcy fees and advance costs have been paid, except in cases of exemption. Notification of acceptance must be made in writing and sent to the petitioner, the enterprise, relevant agencies and organizations, and the Procuracy.

Decision to Open or Not Open Bankruptcy Procedures

Pursuant to Article 41 of the Law on Bankruptcy Recovery 2025:

1. Within 30 days from the date of acceptance, the Judge must issue a decision to open or not open bankruptcy procedures. This decision takes effect from the date of notification;
2. Within 03 working days, the decision must be sent to the petitioner, the enterprise, creditors, the Procuracy at the same level, civil enforcement authorities, tax authorities, business registration authorities, and relevant parties;
3. Within 10 days from receipt of the decision, participants have the right to request reconsideration, and the Procuracy has the right to make recommendations;
4. Within 10 days from receipt of such request or recommendation, the Chief Justice must decide to:

• Uphold the decision;
• Cancel the decision and proceed with procedures;
• Cancel the decision and terminate procedures;
• Suspend the consideration of the request.

Simplified Bankruptcy Procedures

Cases Eligible for Simplified Procedures

Pursuant to Clause 1, Article 70 of the Law on Bankruptcy Recovery 2025, simplified bankruptcy procedures apply in one of the following cases:

• Enterprises having no more than 20 unsecured creditors and total principal debt under VND 10 billion;
• Small and micro enterprises;
• Enterprises having no assets, or assets that cannot be liquidated or recovered, or insufficient to cover bankruptcy costs;
• Credit institutions;
• Insurance or reinsurance enterprises that fail to remedy their condition after being subject to control measures by the Ministry of Finance;
• Other cases as prescribed by law or guided by the Supreme People’s Court.

Process of Simplified Bankruptcy Procedures

For enterprises under points (a) and (b):

• Within 10 days from the date of acceptance, the Judge must decide on the application of simplified procedures;
• The duration of procedures is reduced by half compared to normal procedures;
• A resolution of the creditors’ meeting is adopted when creditors representing at least 51% of total unsecured debt vote in favor.

For enterprises under point (c):

• Within 30 days from the date of acceptance, the Court shall consider and declare bankruptcy;
• Within 30 days from the date the creditors’ meeting passes a resolution but the enterprise cannot pay costs, the Court shall declare bankruptcy and refund remaining advance costs to the petitioner.

The above constitutes preliminary advice from Siglaw Firm regarding corporate bankruptcy procedures under the latest legal regulations. Should you require further consultation, please contact:

Head Office in Hanoi: No. 44/A32 – NV13, Area A Geleximco, Le Trong Tan Street, Tay Mo Ward, Hanoi

Southern Branch: No. 103–105 Nguyen Dinh Chieu Street, Xuan Hoa Ward, Ho Chi Minh City

Central Branch: ICT Building No. 2, Nhu Nguyet Street, Hai Chau Ward, Da Nang

Hotline: 0961 366 238

Facebook: https://www.facebook.com/hangluatSiglaw