The Easiest Guide to Enterprise Bankruptcy Procedures?

Short answer: Bankruptcy procedures are now conducted under the Law on Recovery and Bankruptcy 2025 (No. 142/2025/QH15, effective from 01/3/2026, replacing the Law on Bankruptcy 2014). An enterprise is deemed insolvent when it fails to pay a due debt after 06 months from the due date (Clause 2, Article 5). The petition to open bankruptcy proceedings is filed with the regional People’s Court where the enterprise’s head office is located.

Legal basis

• Law on Recovery and Bankruptcy 2025 (No. 142/2025/QH15, effective from 01/3/2026);
• Guiding documents of the Supreme People’s Court (as applicable).

Conditions for opening bankruptcy proceedings

• The enterprise is insolvent: unable to pay a debt after 06 months from the due date;
• Distinguish from “at risk of insolvency”: debts falling due within the next 06 months, or already due but less than 06 months overdue, with grounds for non-payment — in this case the recovery procedure applies;
• Jurisdiction: the regional People’s Court (district-level courts no longer exist after the administrative unit rearrangement).

Who may file a petition?

• Entitled to file: unsecured creditors, partially secured creditors; employees, trade unions (when 06 months have passed since wages were due and unpaid); shareholders/shareholder groups; cooperative members;
• Obliged to file: the legal representative; the Board of Directors/Members’ Council; the owner of a private enterprise; the owner of a single-member LLC;
• Tax authorities and social insurance agencies have the right/obligation to file in cases prescribed by law.

Procedure

1. Filing the petition with the regional People’s Court with documents proving insolvency; paying fees and advancing bankruptcy costs;
2. Acceptance: the Chief Judge assigns a Judge within 02 working days; the enterprise has 05 working days to give written comments;
3. Opening bankruptcy proceedings: the Judge issues a decision within 30 days from acceptance;
4. Business recovery (if feasible): developing a recovery plan, approved by the Creditors’ Meeting;
5. Declaration of bankruptcy when recovery is impossible; distribution of assets in the order of Article 46;
6. Simplified procedures apply to small and micro enterprises or those with no remaining assets.

Order of asset distribution (Article 46)

Bankruptcy costs → wage debts → compulsory social insurance, unemployment insurance, health insurance, occupational accident and disease insurance debts → severance allowances and other employee benefits → debts incurred for business recovery → financial obligations to the State → unsecured debts. Creditors of the same rank are paid pro rata if assets are insufficient.

Common risks

• Managers who fail to file when obliged must compensate for resulting damages;
• Dissipating assets before proceedings open — transactions made within 06 months before the Court’s decision to open bankruptcy proceedings (18 months for related persons) may be declared void (Article 49 of the Law on Recovery and Bankruptcy 2025);
• Confusing the 03-month threshold of the expired Law on Bankruptcy 2014 with the 06-month threshold of the current law.

If you need to determine the option best suited to your enterprise’s specific situation, you should discuss it with a lawyer in advance for dossier review and advice on the handling plan.

For quick advice, you may contact a lawyer at 0966.475.966.

Related articles

• Who is liable when an LLC goes bankrupt?
• What is the insolvency status of enterprises and cooperatives?
• Must the decision to open bankruptcy proceedings be publicly announced?