Corporate Recovery and Liquidation in Vietnam: A Guide for Foreign Investors

Foreign-invested companies in Vietnam are increasingly under pressure from rising operational costs, tighter regulatory enforcement, and weakening global demand. While some seek to restructure, others are planning an orderly exit. Vietnam provides legally defined pathways for both recovery and liquidation, but these are governed by domestic laws that require close navigation and local expertise.

Corporate insolvency is primarily regulated under the Law on Bankruptcy No. 51/2014/QH13, which outlines procedures for both recovery and liquidation through the People’s Court, supported by court-appointed asset managers. Solvent companies may exit through voluntary dissolution under the Law on Enterprises 2020, bypassing the court system. Since Vietnam has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, recognition of foreign judgments relies on bilateral agreements and judicial discretion, making it critical for foreign investors to understand Vietnam’s domestic legal framework.

Pre-bankruptcy recovery options available to distressed companies

Companies facing financial strain are encouraged to initiate out-of-court restructuring negotiations. Although Vietnamese law does not provide for formal pre-packaged bankruptcy, it allows businesses to settle with creditors, renegotiate debt terms, or reorganize internal structures. These arrangements must be properly documented and may require notarization or regulatory filing to be enforceable.

While these efforts fall outside the court’s supervision, they offer a viable route to recovery before insolvency is formally triggered.

Step-by-Step Process of Filing for Bankruptcy in Vietnam

When recovery efforts are insufficient, a formal bankruptcy process may be initiated. This is governed by a structured procedure that must be followed in sequence:

Step 1: Determine insolvency condition

A business is deemed insolvent if it fails to repay debts for more than three months. This condition forms the legal basis for filing a bankruptcy petition.

Step 2: Submit a bankruptcy petition

The petition can be filed by creditors, shareholders, or the company itself with the People’s Court at the business’s registered location.

Step 3: Court review and acceptance of the petition

The court reviews the submission to ensure legal thresholds are met. If accepted, it formally opens the bankruptcy case.

Step 4: Appointment of an asset manager

The court assigns an asset manager or administrator to take control of the company’s financial records and oversee the process.

Step 5: Inventory and creditor identification

The asset manager compiles a full inventory of company assets and a verified list of creditors. This report is submitted to the court and disclosed to stakeholders.

Step 6: Convening of the creditors’ meeting

A creditors’ meeting is held to review the company’s financial status and discuss any proposed recovery plans.

Step 7: Voting on the recovery plan

If a recovery plan is proposed, it must be approved by a majority of creditors based on claim value.

Step 8: Plan implementation or liquidation

Upon approval, the recovery plan is implemented under court oversight. If rejected or if implementation fails, the court orders the liquidation of assets.

Recovery during insolvency proceedings

Where a recovery plan is accepted, the business may be allowed to continue operations while restructuring its obligations. This could involve debt rescheduling, sale of non-core assets, share transfers, or adjustments to corporate governance. The court-appointed asset manager supervises implementation. If recovery fails to meet agreed milestones, the court will move to liquidation.

Liquidation and winding down through court order

If recovery is not feasible, the company proceeds to liquidation under court supervision. The asset manager is responsible for selling off company assets, through auction or private sale, and distributing proceeds to creditors.

Creditors are paid in a strict order of priority: secured creditors first, followed by employee entitlements, tax obligations, and then unsecured creditors. Shareholders are the last to receive any remaining funds. Upon completion, the court issues a termination order, and the business is deregistered from the national registry.

Tax and customs clearance requirements must be completed before closure. These procedures often lead to delays in repatriating remaining capital or retained earnings, particularly for foreign companies.

Voluntary dissolution for solvent companies

Foreign-invested enterprises that are still solvent but planning to exit Vietnam can pursue voluntary dissolution under the Law on Enterprises 2020. This process is distinct from bankruptcy and allows for a clean exit without court involvement, provided all legal and financial obligations are met. Below is a breakdown of the key stages involved:

Initiating the dissolution process

The process begins with a formal resolution by the company’s governing body—such as the Board of Directors, Members’ Council, or General Meeting of Shareholders—depending on the type of entity. This resolution must clearly state the decision to dissolve and appoint a person or team to carry out the closure procedures.

Settling outstanding obligations

Before moving forward, the company must settle all financial obligations. This includes paying debts to suppliers, fulfilling employment-related obligations (including final salaries and social insurance), and resolving any contractual liabilities. Any disputes or unpaid dues must be resolved to prevent delays in the dissolution.

Tax clearance and audit

A critical step is obtaining tax clearance from the local tax office. The company must complete all outstanding tax filings and may be subject to a final tax audit. Common issues that cause delays include discrepancies in VAT reporting, corporate income tax filings, or failure to remit employee income tax.

Public notice and stakeholder notification

The company is required to publish a public announcement of its dissolution on the National Business Registration Portal. It must also notify all known creditors and relevant stakeholders. Creditors are given a 30-day window to file any claims before the dissolution can proceed further.

Final deregistration with authorities

After settling debts and securing tax clearance, the company submits its dissolution dossier to the Department of Planning and Investment (DPI). This includes the tax deactivation notice, public announcement proof, shareholder resolution, and final financial statements. Once approved, the DPI issues a termination decision and formally removes the business from the registry.

Legal risks and enforcement challenges for foreign stakeholders

Foreign investors face several legal and procedural challenges when navigating recovery or exit in Vietnam. Language barriers can affect filing accuracy, and court interpretations may vary by jurisdiction. Enforcement of foreign judgments is not automatic, and recognition of arbitral awards can be slow.

Delays in finalizing tax audits or customs procedures can prolong the closure process and affect capital repatriation. These challenges underscore the importance of early legal planning and working with bilingual advisors who understand Vietnam’s legal system.

Conclusion

Vietnam provides structured legal routes for both recovery and exit, but navigating them requires early action, local expertise, and strict compliance. Foreign investors should plan to ensure an efficient and risk-managed closure.

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