In Vietnam, an enterprise is considered insolvent when it fails to perform its obligation to repay a debt within three months from the maturity date and an insolvent enterprise is bankrupt when it is so declared by the court.

A lender's main rights on the insolvency of an enterprise are as follows:

• File a petition for the commencement of bankruptcy proceedings on the expiration of the period of three months from the maturity date of a debt in respect of which the debtor fails to perform its obligation to repay (except that a fully secured creditor does not have this right).
• As the petitioner for the bankruptcy procedure, nominate the asset management officer (an individual responsible for managing and liquidating assets during a bankruptcy procedure) or the asset management and liquidation enterprise (an enterprise established by one or more asset management officers with the same function as an asset management officer) to the court before the commencement of bankruptcy proceedings.
• Request individuals, bodies or organizations keeping and managing the documents and/or evidence relating to the lenders' legitimate rights and interests to provide those documents and/or evidence for submission to the court.
• Request the judge, asset management officer or asset management and liquidation enterprise to verify and/or collect documents and/or evidence that the lender is unable to do or seek an examination, valuation and/or appraisal of the value of the assets.
• Request that the judge audit the insolvent enterprise and summon witnesses.
• Access, take notes and/or make copies of the documents and/or evidence presented by other participants in the bankruptcy proceedings or collected by the judge.
• Request the application, change or cancellation of interim injunctive relief.
• Receive valid notices for the lender to exercise their rights and obligations.
• Protect or ask another person to protect their legitimate rights and interests.
• Attend the creditors' meetings.
• Request a replacement of the asset management officer or asset management and liquidation enterprise in accordance with the law.
• Request the asset management officer or asset management and liquidation enterprise to add creditors to the list of creditors and/or debtors to the list of debtors.
• Make a recommendation to the asset management officer or asset management and liquidation enterprise on the recovery of the debtors' money and assets.
• Participate in the asset management and liquidation as requested by the judge, the civil judicial enforcement office and/or the asset management officer or asset management and liquidation enterprise.
• Request a review of the court's decisions in accordance with the law.

A lender's main duties on the insolvency of an enterprise are as follows:

• As the petitioner for the bankruptcy procedure, pay the bankruptcy fee and make an advance payment of bankruptcy costs.
• Satisfy requests from the judge, the asset management officer or asset management and liquidation enterprise, and/or the civil judicial enforcement office in accordance with the law.
• Provide documents and/or evidence relating to the bankruptcy resolution.
• Present itself as requested by the asset management officer or asset management and liquidation enterprise, or as summoned in writing by the court, and compliantly implement the court's decisions in relation to a bankruptcy resolution.

Moratorium

There is a process in Vietnam known as the "recovery of business operations." It is a process by which an insolvent enterprise is intended to be returned to a state of solvency. A moratorium (together with other measures for the recovery of business operations (if any) and the conditions, time limit and plan for the payment of debts) must be included in the plan for the recovery of business operations of the insolvent enterprise. This is prepared by the insolvent enterprise (if the meeting of creditors passes a resolution for the application of the procedures for the recovery of business operations), reviewed by the creditors, the asset management officer or asset management and liquidation enterprise, and the judge and it is submitted to the meeting of creditors for consideration and approval. The judge will issue a decision to acknowledge the approval of the plan for recovery of the insolvent enterprise's business operations by  meeting  creditors.

Time Limit 

The time limit for the implementation of the plan for the recovery of the insolvent enterprise's business operations is subject to the creditors' approval in a meeting of creditors. If the meeting of creditors fails to specify the time limit, the applicable time limit is three years or less from the date the plan is approved.

Conditions 

The conditions for the validity of a meeting of creditors approving the plan for the recovery of the insolvent enterprise's business operations are as follows:

• The number of creditors attending the meeting must represent at least 51% (in value) of the total unsecured debts. Any creditor that did not attend the meeting of creditors but sent its written approval or disapproval of the plan to the judge before the date of the meeting is deemed to have attended the meeting.
• The asset management officer or asset management and liquidation enterprise assigned to resolve the petition for the commencement of bankruptcy proceedings must attend the meeting of creditors.

Approval of the plan at the creditors' meeting 

A resolution of the meeting of creditors is passed when the plan is approved by at least 51% of the total number of unsecured creditors attending the meeting and representing at least 65% (in value) of the total unsecured debts. If a plan for recovery of the insolvent enterprise's business operations involves the use of assets that are subject to a security granted by the enterprise in favor of secured creditors, the resolution must be approved by the creditors whose obligations are secured by the collateral, specify the period that those assets are permitted to be used and include a plan for the enforcement of the security.

Recognition of decision

The judge recognizes a resolution approving the plan for the recovery of the insolvent enterprise's business operations passed at the meeting and it is binding on all participants in the bankruptcy proceedings. As from the effective date of the resolution approving the plan for the recovery of the insolvent enterprise's business operations, the insolvent enterprise is no longer subject to prohibitions on and the supervision of its business operations.

The court will send the judge's decision recognizing the resolution of the meeting to the insolvent enterprise,  all creditors and the Supreme People's Procuracy of Vietnam that corresponds with the relevant court within seven working days from the date of issue of the decision.

No meeting or no resolution

If no meeting of creditors is held or if the meeting is held but it fails to pass a resolution as set out above, the court will declare the insolvent enterprise bankrupt.

Transactions that are deemed invalid

A transaction carried out by the insolvent enterprise within six months (or within 18 months if the transaction is conducted with a related person) before the date on which the court issues a decision to commence bankruptcy proceedings is deemed invalid if it falls into one of the following categories:

• A transaction related to a transfer of assets that is not at market value.
• The conversion of an unsecured debt into a debt that is fully or partially secured by the insolvent enterprise's assets.
• A payment or set-off that benefits a creditor in respect of a debt that has not yet become due or with a sum that is bigger than a debt that has become due.
• A donation of assets.
• A transaction outside the purpose of the business operations of the insolvent enterprise.
• A transaction for the purpose of disposing of the insolvent enterprise's assets.

In addition, the following transactions of an insolvent enterprise that are carried out after a decision to commence bankruptcy proceedings are prohibited and deemed invalid:

• A concealment, disposal or donation of any assets of the insolvent enterprise.
• A payment of any unsecured debts (except for unsecured debts arising after the commencement of bankruptcy proceedings and the payment of wages to employees as stipulated by law).
• The abandonment of any right to claim a debt.
• The conversion of unsecured debts into debts secured wholly or partly by the insolvent enterprise's assets.

Termination or temporary suspension of the performance of effective contracts

The insolvent enterprise or a creditor may request the court to issue a decision to temporarily suspend the performance of a contract (except for the settlement of secured debts in accordance with the law) if it finds that the performance of the contract (which has come into effect and is either being performed or has not yet been performed) may result in a disadvantage to the insolvent enterprise. This type of request must be made within five working days from the date on which the court accepts jurisdiction over a petition for the commencement of bankruptcy proceedings.

Within five working days from the date on which the court issues a decision to commence bankruptcy proceedings, it must review any temporarily suspended contract to decide on one of the following options:

• Continuing the performance of the contract if it is currently effective and being performed or if the performance will cause no disadvantage to the insolvent enterprise.
• Terminating the performance of the contract.

If the court decides not to commence bankruptcy proceedings, it must annul any decision for temporary suspension.

Enforcement timeline

Upon the occurrence of an enforcement event, the lender or its security agent shall deliver an enforcement notice to the securing party and other registered secured parties, if any. 

A lender can only enforce its security after the expiry of the waiting period as from the date of the enforcement notice. The waiting period can be either:

• The period as agreed between the parties; or
• A reasonable period as decided by the lender in the absence of a mutually agreed period, but no less than 10 days for moveable assets or 15 days for immovable assets

However, if the secured asset is in danger of damage resulting in it diminishing in value or the loss of its entire value, the lender can enforce immediately and concurrently deliver the enforcement notice.

Enforceability

Security can be enforced out of court following an event of default or another contractual trigger event. However, the lender may need to rely on the cooperation of the securing party to a certain extent for an efficient enforcement process. If the securing party is not cooperative and repossession of the collateral is necessary for enforcement purposes, the secured party will, in most cases, have to resort to the agreed dispute resolution forum, which could cost significant time and expense.

Restriction on enforceability

Within five working days from the date the court accepts jurisdiction of a bankruptcy matter, the enforcement of security given by the insolvent enterprise to secured creditors will be temporarily suspended by the competent authorities.

After the commencement of bankruptcy proceedings, the asset management officer or asset management and liquidation enterprise must make a recommendation to the judge on the settlement of secured debts where the payment has been temporarily suspended.

If secured assets that are subject to a security granted by the enterprise in favor of secured creditors are used for the recovery of the insolvent enterprise's business, the enforcement of the secured assets will be decided in the resolution of the creditors' meeting referred to in the answer to question 2 of this section.

If the recovery of the insolvent enterprise's business is not approved or the secured asset is not required for carrying out the recovery of the insolvent enterprise's business, the settlement of secured debts that have become due is permitted to be satisfied in accordance with the timing specified in the relevant agreement. In the case of secured debts that have not become due, before declaring the insolvent enterprise bankrupt, the court must terminate the contract and settle the secured debts. Secured debts established before the court's acceptance of the jurisdiction of the petition for the commencement of bankruptcy proceedings are repaid out of the secured asset. If the value of the secured asset is not enough to repay the debt, the unpaid part of the debt is repaid in the course of the liquidation of the assets of the bankrupt enterprise. If the value of the secured asset exceeds the amount of the debt, the difference is included in the value of the assets of the insolvent enterprise.

After the court accepts the jurisdiction of a bankruptcy matter or the commencement of bankruptcy proceedings, if the secured asset is at risk of destruction or a considerable decrease in value, the asset management officer or asset management and liquidation enterprise must recommend that the judge permit the immediate realization of the secured asset. The enforcement of the secured asset must be in accordance with the above principles. However, the issue of whether a secured loan with first ranking security interests over a secured asset will have the priority of repayment by such secured asset over other loans with lower ranking security interests in the bankruptcy procedures has not been tested before Vietnamese courts.

No. 

In practice, the enforcement of security requires the cooperation of the securing party, especially in respect of the repossession of secured assets by the secured party. If the securing party is not cooperative and the repossession of the secured assets is necessary for the purpose of enforcement, in most cases, the secured party will have to bring the dispute to the agreed dispute resolution forum to enforce it, which could cost significant time and expense.

In the case of equity enforcement, a foreign lender may be subject to certain foreign ownership limitations and regulatory approvals imposed by Vietnamese law if the foreign lender takes an assignment of the secured assets in satisfaction of the prompt and complete payment and performance in full of the secured obligations. However, the foreign lender can also sell or assign the secured assets by way of a public sale, private sale or otherwise to avoid such circumstance.

Further, security enforcement proceeds arising from Vietnam must be carried out through a bank or branch of a foreign bank incorporated and operating in Vietnam ("Security Supporting Bank") before remitting to the foreign lender/security agent. Details of the Security Supporting Bank must be registered with the SBV in the application for foreign loan registration. For foreign loans that are already registered with the SBV before 15 November 2022, although Vietnamese law does not require the registration to be updated with the details of the Security Supporting Bank, considering that the enforcement proceeds must be carried out through a Security Supporting Bank, lenders should consider registering the Security Supporting Bank with the SBV for those registered loans.

A decision or judgment by any court other than a Vietnamese court is unlikely to be recognized and enforced in Vietnam, as Vietnam is not a member of the Convention of 1 February 1971 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. However, a Vietnamese court may consider recognizing and enforcing a civil judgment or decision made by a foreign court where the foreign country is a party to a judicial assistance agreement with Vietnam or it is a participant or signatory to a relevant international treaty to which Vietnam is also a participant or signatory, or such judgment is permitted to be recognized and enforced under Vietnamese law or on a reciprocal basis.

Vietnam is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; therefore, an arbitral award given by an arbitration center of another New York Convention member country will be recognized and enforced in Vietnam by a competent court of Vietnam, unless the court deems that the said award is contrary to "fundamental principles of Vietnamese laws." However, as the "fundamental principles of Vietnamese laws" have not been explicitly and completely provided in any legal documents, except for the fundamental principles of civil law and commercial law, the recognition and enforcement of a foreign arbitral award will be subject to the court's discretionary interpretation of the "fundamental principles of Vietnamese laws".

Vietnamese law also anticipates parties constructing a hybrid arbitration-litigation clause in a contract, as further discussed in the answer to question 10 of this section.

To our knowledge, this question has not been tested in Vietnam. However, Vietnamese law recognizes agreements whereby the parties agree to use either arbitration or the court to resolve the dispute (except for certain cases where the dispute will fall under the jurisdiction of the court regardless of the agreement of the parties) in accordance with the following:

• Where the claimant submits the dispute to arbitration before requesting the court to resolve the dispute or submits the dispute to arbitration when the court has not yet accepted jurisdiction over the dispute, the court will reject jurisdiction to resolve the dispute. If the court has already accepted jurisdiction over the dispute, the court will suspend the resolution of the dispute as not being subject to the court's jurisdiction and it will return the statement of claim and accompanying documents.
• Where the claimant requests that the court resolve a dispute, after receiving the statement of claim, the court must immediately determine whether one of the parties has submitted the dispute to arbitration. If the respondent or the claimant has not submitted the dispute to arbitration, the court will consider accepting jurisdiction over the dispute for resolution. Where the court discovers that the dispute was submitted to arbitration before it accepted jurisdiction over the dispute, the court will issue a decision suspending the resolution of the dispute as not being subject to the court's jurisdiction and it will return the statement of claim and accompanying documents.