Draft Law on Bankruptcy (amended) 2025: Strengthening the Corporate Rehabilitation Mechanism

After nearly 10 years of implementation, the 2014 Bankruptcy Law has revealed various limitations and practical obstacles. In line with Resolution No. 68-NQ/TW of the Politburo, the Draft Bankruptcy Law (amended) 2025 (“the Draft”) has been developed with significant procedural reforms, prioritizing corporate rehabilitation instead of solely declaring bankruptcy, and is expected to take effect on 1 March 2026. The Draft also introduces simplified procedures and the use of electronic platforms for filings, notifications, and creditor meetings to shorten processing time and enhance transparency.

First, the Draft proposes adjusting the criteria for determining insolvency by extending the overdue period for payable debts from 03 months to 06 months, aiming to prevent premature commencement of bankruptcy proceedings and allow at-risk enterprises additional time to remedy their financial situation.

Next, the Draft proposes introducing a rehabilitation procedure as an independent mechanism that enterprises at risk of insolvency may proactively initiate. Accordingly, an enterprise at risk of insolvency may submit a petition to a competent court requesting rehabilitation, together with a corporate rehabilitation plan. The court may seek opinions on the proposed plan from administrators, asset management enterprises, and relevant organizations and individuals.

Based on these assessments, the competent court may issue a decision approving the rehabilitation plan. During the implementation period of the plan, the enterprise’s business activities will be placed under the supervision of asset management enterprises, and supervisory individuals or organizations, all of whom must submit monthly reports to the court on the plan’s implementation. During this period, creditors are not permitted to request the commencement of bankruptcy proceedings. The enterprise may also suspend interest payments on debts incurred prior to the approval of the rehabilitation plan, have its outstanding tax liabilities frozen, and temporarily suspend contributions to the retirement and survivorship fund.

The court will issue a decision to terminate the rehabilitation plan if the enterprise successfully completes it and restores solvency, or if implementation proves ineffective based on reports from asset management enterprises. Termination also applies where the enterprise engages in prohibited acts—such as gifting or dispersing assets, waiving receivables, prematurely paying debts, or distributing profits—during the rehabilitation period.

Overall, the Draft Bankruptcy Law (amended) 2025 reflects a clear reform-oriented approach, shifting the focus from bankruptcy liquidation toward enhancing corporate rehabilitation mechanisms, while modernizing procedures through simplified steps and digital applications. These revisions are expected to address long-standing shortcomings of the 2014 Bankruptcy Law and establish a more effective and transparent legal framework for corporate restructuring in the coming years.