When a Vietnamese or foreign-invested company hits a liquidity wall, the choice between a negotiated workout and a court filing shapes what creditors ultimately recover. Debt restructuring Vietnam practice changed materially in 2026: the Law on Rehabilitation and Bankruptcy No. 142/2025/QH15 (RBL 2025) took effect on 1 March 2026, replacing the 2014 Bankruptcy Law and reshaping the leverage each side brings to the negotiating table.
For lenders, sponsors, and boards navigating a distressed Vietnamese borrower, understanding how standstill agreements, debt-for-equity swaps, and director liability rules interact with this new statutory framework is now essential to any cross-border workout. This guide sets out the current legal position for out-of-court debt restructuring Vietnam practice, explains how the new rehabilitation regime changes creditor leverage, and flags the practical steps that protect both lenders and directors during a workout.
- Why debt restructuring Vietnam in Vietnam Has Changed in 2026
- The Standstill Agreement: Pausing Enforcement to Create Room for Negotiation
- Debt-for-Equity Swap Structures in Vietnam
- Bank and Credit Institution debt restructuring Vietnam Under the 2024 Law
- Directors’ Duties When a Company Approaches the Zone of Insolvency
- Workout vs. Formal Rehabilitation: A Comparison
- Frequently Asked Questions
- Conclusion and Next Steps
Why debt restructuring Vietnam in Vietnam Has Changed in 2026
For over a decade, out-of-court workouts in Vietnam were negotiated in the shadow of the 2014 Bankruptcy Law, a statute widely regarded by practitioners as slow, creditor-unfriendly, and short on rehabilitation tools. That changed on 1 March 2026, when the Law on Rehabilitation and Bankruptcy No. 142/2025/QH15 came into force.
The new law does not merely amend procedure. It introduces a two-track system that separates companies facing imminent illiquidity (unable to pay debts falling due within six months) from those that are already technically insolvent (debts overdue for six months or more). This distinction matters enormously for anyone structuring a debt restructuring Vietnam strategy today. A company that still qualifies for the rehabilitation track can access a court-supervised process with a statutory automatic stay, while a company that has drifted into the liquidation track loses much of that protection.
Because the six-month thresholds are measured from the payment due date, timing a standstill negotiation — and any related court filing — against these windows has become a first-order strategic decision for both debtors and creditors in every debt restructuring Vietnam matter.
From the 2014 Bankruptcy Law to RBL 2025: What Actually Changed
Under RBL 2025, only the debtor may initiate rehabilitation proceedings, and it has 30 days after court acceptance to finalize a rehabilitation plan. Within five business days of accepting the petition, the court imposes a statutory “temporary protection” period — an automatic stay that suspends enforcement actions and payment of pre-petition debt, although interest continues to accrue.
Creditor approval of a rehabilitation plan now requires 65% approval by debt value, with secured and unsecured creditors voting together in a single class, a marked departure from the class-based voting structures common in other jurisdictions. Courts also now appoint creditor committees of up to five members holding “material debts,” rather than leaving committee composition entirely to creditor self-organization. The law leaves “material debt” undefined, which in practice hands courts considerable discretion over who sits at the table.
For lenders financing Vietnamese counterparties, these changes raise the value of an early, negotiated standstill relative to waiting for a court process whose voting thresholds and committee composition are still being tested in practice.
Cross-Border Considerations for Foreign Lenders
Foreign lenders and bondholders approaching debt restructuring Vietnam matters for the first time should note that RBL 2025 also introduces cross-border cooperation provisions intended to give Vietnamese courts a clearer basis for recognizing foreign insolvency proceedings and coordinating with them — a gap that was widely criticized under the 2014 law.
In practice, this means a Vietnamese subsidiary’s debt restructuring Vietnam can now be sequenced more predictably alongside a parallel proceeding for its offshore parent or co-obligor, though the courts’ actual approach to recognition requests remains to be tested. Foreign creditors should also expect an expedited process for smaller companies, which lowers the creditor-approval threshold to 51% of debt value rather than the standard 65%, changing the calculus for debt restructuring Vietnam smaller Vietnamese portfolio companies or joint-venture vehicles.
Because RBL 2025 does not yet include a developed super-priority financing regime comparable to debtor-in-possession financing available in other markets, foreign lenders extending new money into a Vietnamese debt restructuring Vietnam workout should expect to rely on negotiated contractual priority and security rather than a statutory priming lien.
The Standstill Agreement: Pausing Enforcement to Create Room for Negotiation
A standstill agreement remains the most common first step in a Vietnamese out-of-court workout. Creditors agree to suspend enforcement actions — litigation, bankruptcy petitions, and security enforcement — for a defined period, and in exchange the company commits to financial transparency and refrains from transactions that would prejudice creditors during the standstill window.
Because Vietnamese law imposes no statutory mechanism compelling a dissenting minority creditor to join a private standstill, multi-creditor situations require careful sequencing. A single non-participating creditor retains full enforcement rights throughout the negotiation, and can file for court protection, or accelerate its own claim, at any point — a risk that the RBL 2025 automatic-stay regime has not eliminated, since that stay only attaches once a rehabilitation petition is accepted by the court.
Multi-Creditor Standstills: Key Risks and Mitigations
| Issue | Legal Position | Commercial Impact | Risk Level | Mitigation |
|---|---|---|---|---|
| Minority creditor non-participation | No statutory mechanism compels a minority creditor to join a private standstill absent consensus | A single creditor can pursue individual enforcement, disrupting the broader negotiation | High | Approach the highest-risk creditors bilaterally before any broad standstill announcement |
| Preference exposure if rehabilitation follows | RBL 2025 allows avoidance of certain transactions completed within a defined look-back period before a petition is accepted | Creditors preferred during the standstill period may be ordered to return the benefit received | Medium–High | Document the reasonable commercial basis for every debt restructuring Vietnam-period payment or transfer |
| Interaction with the new automatic stay | Temporary protection under RBL 2025 attaches only after court acceptance of a rehabilitation petition, not during a purely private standstill | Creditors outside the private agreement can still file first and trigger the statutory stay on their own terms | Medium | Build a court-filing contingency and timeline into the standstill negotiation from day one |
Effective debt restructuring Vietnam practice treats the standstill and the statutory rehabilitation track as complementary, not alternative, tools: the private agreement buys time and confidentiality, while the RBL 2025 process remains the credible fallback that gives the standstill its negotiating weight.
Considering a workout with a Vietnamese counterparty or borrower? IVLF Advisors offers a confidential preliminary risk review of standstill terms, security positions, and rehabilitation exposure before creditors commit to a negotiating strategy. All discussions are held under standard confidentiality and NDA protections — reach out to arrange an initial, no-obligation conversation with our corporate debt restructuring Vietnam services team.
Debt-for-Equity Swap Structures in Vietnam
A debt-for-equity swap converts some or all of a creditor’s claim into company equity, immediately reducing the debtor’s debt-service burden while giving the creditor a claim on future recovery through equity value rather than a fixed repayment stream. In Vietnam, the mechanism sits at the intersection of the Law on Enterprises 2020, securities regulation for public companies, and sector-specific foreign-ownership rules, and remains a core tool in any well-structured debt restructuring Vietnam negotiation once a standstill has bought time for diligence.
The Law on Enterprises 2020 permits shares to be issued for in-kind contributions, which can in principle include the relinquishment of a debt claim, and non-public companies can in theory structure a swap this way, although the mechanism is used less often outside the listed-company context. For public companies, Decree 155/2020 provides more explicit regulatory support for converting debt into shares, subject to specified conditions and disclosure.
Either route requires a defensible valuation showing that the company’s underlying enterprise value justifies the equity issued in exchange for the debt written off — a threshold issue in almost every Vietnamese debt-for-equity negotiation, since an over-valued swap simply shifts loss onto the remaining shareholders and can later be challenged.
Foreign Ownership Caps and Share Issuance Rules
Where the creditor is a foreign lender or fund, sector-specific foreign-ownership caps frequently complicate a straightforward swap. Some sectors restrict foreign ownership below a majority stake, and a swap that would push foreign ownership past the applicable threshold typically requires a pre-swap internal debt restructuring Vietnam — for example, carving out the restricted business line — before the equity conversion can proceed.
The process also requires securing shareholder or member approval for the new issuance, updating the enterprise registration certificate and, where applicable, the investment registration certificate, and, for public companies, clearance from the State Securities Commission and relevant exchange disclosures. None of these approvals is a formality; each can extend the transaction timeline by weeks or months, and should be mapped at the term-sheet stage of any debt restructuring Vietnam negotiation rather than left until documentation.
Bank and Credit Institution debt restructuring Vietnam Under the 2024 Law
Where the distressed counterparty is itself a bank or other credit institution, a separate framework applies, and it sits alongside — rather than inside — the general debt restructuring Vietnam rules described above. The Law on Credit Institutions 2024, effective since 1 July 2024, replaced the 2010 law and introduced clearer chapters on early intervention, special control, and dissolution for weak credit institutions.
The 2024 law also introduced a new mechanism requiring banks to report mass deposit withdrawals to the State Bank of Vietnam and take remedial steps such as suspending dividends and tightening lending limits.1 The State Bank retains tools to support an institution in distress, including purchasing valuable papers at zero interest and extending special loans, but these tools sit within a supervisory framework rather than a negotiated private workout, and creditors of a distressed bank face a materially different process than creditors of a distressed non-bank corporate.
The 2024 law also lowered single-borrower and related-party lending caps for commercial banks — from 15% to 14% of equity for a single borrower, and from 25% to 23% for related-party groups, with further reductions scheduled through 2029.1 These caps shape how much exposure any one lender can restructure bilaterally with a single distressed borrower before syndication becomes necessary, and are a relevant diligence point whenever a workout involves a Vietnamese bank as one of the creditors at the table.
Directors’ Duties When a Company Approaches the Zone of Insolvency
As a company approaches insolvency, Vietnamese directors’ duties expand beyond ordinary shareholder-focused management to take account of creditor interests. Continuing to trade while unable to service debt, or making payments that unfairly prefer one creditor over others, creates personal liability exposure for directors if the company subsequently enters rehabilitation or liquidation proceedings under RBL 2025.
Documenting Decisions to Limit Personal Liability
The single most effective protective measure available to a board is contemporaneous documentation. Directors facing a genuine going-concern question should record, in board minutes, the commercial rationale for continuing to trade, the cash-flow forecasts relied upon, and the reasons for choosing a standstill negotiation over an immediate rehabilitation filing.
Where a preference-sensitive payment is made during a standstill — for example, paying one supplier or lender ahead of others — the board should separately document the commercial justification, since RBL 2025’s avoidance rules apply a look-back period to transactions completed before a rehabilitation petition is accepted. Boards running a live debt restructuring Vietnam process should treat this documentation discipline as a standing agenda item at every meeting held during the distress period, not a one-off exercise.
Workout vs. Formal Rehabilitation: A Comparison
| Factor | Private Standstill / Workout | Formal Rehabilitation (RBL 2025) |
|---|---|---|
| Who can start it | Any creditor or the company, by negotiation | Debtor only, by court petition |
| Enforcement pause | Contractual only, binds only signing creditors | Statutory automatic stay after court acceptance, binds all creditors |
| Approval threshold | Negotiated; typically a large majority by value | 65% approval by debt value (51% for eligible smaller companies) |
| Confidentiality | High — no public filing required | Low — court process is a matter of public record |
| Speed | Fast, driven by negotiation | Plan due within 30 days of acceptance |
| Best suited for | A cohesive creditor group and a viable business | Dissenting creditors or a need to bind holdouts |
Frequently Asked Questions
Does out-of-court debt restructuring Vietnam in Vietnam require the consent of every creditor?
No. There is no statutory requirement for unanimous consent, but practical effectiveness usually requires a large majority by debt value, since any non-participating creditor keeps full enforcement rights throughout the negotiation.
How does the new Law on Rehabilitation and Bankruptcy change standstill negotiations?
RBL 2025 gives debtors a credible statutory fallback with an automatic stay and a 65% creditor-approval threshold, which shifts negotiating leverage and makes early, well-documented private standstills more attractive than waiting for a court process.
Does a debt-for-equity swap dilute existing shareholders in a Vietnamese company?
Yes. Issuing new shares to creditors dilutes existing shareholders and generally requires their approval under the Law on Enterprises 2020 or, for public companies, Decree 155/2020.
Can directors face personal liability during a Vietnamese debt restructuring Vietnam?
Potentially, if the company continues trading without reasonable grounds while insolvent, or makes an unfairly preferential payment to one creditor that is later challenged under RBL 2025’s avoidance provisions.
When should a company move from a private workout to formal rehabilitation?
When sufficient creditor consensus cannot be reached, when a dissenting creditor threatens to accelerate or enforce, or when the six-month insolvency thresholds under RBL 2025 make a court-supervised stay the only way to bind holdout creditors.
Conclusion and Next Steps
The 2026 shift from the 2014 Bankruptcy Law to the Law on Rehabilitation and Bankruptcy has changed the calculus behind every Vietnamese workout. The statutory rehabilitation track is faster, more structured, and harder for holdout creditors to ignore than before, which in turn makes early, well-documented private negotiation more valuable, not less.
Companies and creditors approaching financial distress should map their debt restructuring Vietnam strategy against the new six-month insolvency thresholds and 65% approval mechanics before committing to a course of action. IVLF’s banking & finance team advises boards, lenders, and sponsors on standstill negotiation, debt-for-equity structuring, and director liability assessment under Vietnam’s current rehabilitation and bankruptcy framework.
Sources: 1 Freshfields Bruckhaus Deringer, “Vietnam’s new law on credit institutions 2024”, freshfields.com; Baker McKenzie, “New Rehabilitation and Bankruptcy Law introduces significant reforms”, bakermckenzie.com.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
