Clarifying Insolvency Criteria and Overdue Debt Standards: A Parliamentary Inquiry

Delegate Tran Hoang Ngan (Ho Chi Minh City) reported that in the first nine months of 2025, 174,900 businesses exited the market, with over 22,000 completing dissolution procedures. However, over the past decade, only about 1,000 bankruptcy cases have been fully processed.

“Very few businesses that ‘fail’ complete the necessary procedures, which complicates matters for businesses, leading to issues like debt. Therefore, a law is urgently needed to streamline legal processes for bankruptcy resolution,” stated Delegate Tran Hoang Ngan. He emphasized that bankruptcy is often viewed negatively, but it is an inevitable part of business life, akin to the cycle of birth, aging, illness, and death.

The delegate proposed renaming the law to the “Bankruptcy and Recovery Act” to fully encompass both processes. He also supported the idea of the government covering bankruptcy costs and providing advances to businesses to expedite the process. “When businesses thrive, they contribute significant taxes to the state. Thus, it’s appropriate for the state to provide advances when businesses face difficulties,” argued Delegate Tran Hoang Ngan.

From another perspective, Delegate Pham Trong Nhan (Ho Chi Minh City) suggested retaining the original name, “Bankruptcy Act,” instead of the proposed “Bankruptcy and Recovery Act.” He argued that the term “bankruptcy” reflects a business’s right to exit the market under legal provisions. He also proposed dedicating a separate chapter to post-bankruptcy recovery.

Delegate Pham Trong Nhan also noted that the draft’s definition of “insolvency” lacks clarity. He recommended adding quantifiable criteria, such as the ratio of overdue debt to total assets or equity, to determine insolvency. Additionally, he urged clearer definitions of overdue debts to prevent businesses from exploiting loopholes. He suggested the Supreme People’s Court’s Council of Judges provide detailed guidance to ensure uniform application and discourage using bankruptcy as a debt collection tool.

Meanwhile, Delegate Truong Trong Nghia (Ho Chi Minh City) shared his practical experience as a lawyer, highlighting challenges in bankruptcy cases. He cited a large-scale project that lost its ability to pay, where judgments and decisions were issued but bankruptcy proceedings stalled due to land-related issues.

He explained that land-related issues often involve local authorities, who sometimes aim to retain projects to attract new investors. Additionally, bankruptcy impacts labor issues. Delegate Truong Trong Nghia stressed that the Bankruptcy Act cannot be effectively implemented unless other laws interact seamlessly with it.

National Assembly Chairman Tran Thanh Man urged the drafting agency and the Economic and Financial Committees to further review potential risks, including the misuse of recovery procedures. “Allowing independent recovery efforts may be exploited to delay actual bankruptcy, leading to asset losses or creditor harm. This issue requires attention,” he cautioned.

Some commentators noted that the draft law lacks detailed provisions on asset sales, merely outlining principles and delegating guidance to the government. Chairman Tran Thanh Man warned this could delay asset disposal. He also emphasized the need for clear guidelines regarding foreign businesses, as expanding the law’s scope is beneficial but must avoid complicating procedures, especially in international legal contexts.