The Law on Recovery and Bankruptcy No. 142/2025/QH15, effective from March 1, 2026, has introduced numerous changes compared to the Law on Bankruptcy 2014, particularly in adjusting the order of asset distribution. This aims to balance the rights of involved parties and enhance the efficiency of resolving bankruptcy cases.

Below is a detailed analysis of these new regulations.

1. Determining the scope of assets for distribution in bankruptcy

Under the Law on Recovery and Bankruptcy 2025, bankruptcy assets include all assets and rights to assets of an enterprise or cooperative at the time the Court decides to open bankruptcy proceedings. This comprises:

• Existing assets and rights to assets that can be realized.
• Proceeds from transactions concluded before bankruptcy proceedings were opened.
• Assets and rights to assets acquired after bankruptcy proceedings are opened, during the recovery or liquidation process.
• Collateral for secured obligations (the difference if the value of the collateral exceeds the secured debt).
• Land use rights as stipulated by land law.
• Assets recovered from acts of concealment or dissipation of assets by the enterprise.
• Assets and rights to assets arising from void transactions under the law.
• Other assets as prescribed by current law.

For sole proprietorships and partnerships, the distributed assets also include assets not directly used for the business operations of the proprietor or partners, after they have been distributed according to the Civil Code. Assets not subject to distribution include leased or borrowed assets, the sole residence of the proprietor, and assets held in trust for clients in the securities or banking sectors.

2. Order of asset distribution in bankruptcy cases under the Law on Recovery and Bankruptcy 2025

The most significant change in the new Law is the adjustment of the payment priority order, specifically by clearly classifying debts and costs related to business recovery. The order of asset distribution is stipulated as follows:

First priority: Bankruptcy and recovery costs

These are costs incurred throughout the recovery or bankruptcy proceedings and are prioritized for payment to ensure the continuous resolution of the case. These costs include:

• Court filing fees and court costs.
• Remuneration for the custodian, administrator, or liquidator.
• Costs for inventory, valuation, and auction of assets.
• Costs for business recovery activities.
• Other costs as prescribed by law.

Second priority: Debts related to employees

These rights are prioritized for payment to protect the basic livelihood of employees and include:

• Unpaid wages, allowances, and bonuses owed to employees.
• Severance pay and job loss allowances.
• Unpaid social insurance, health insurance, and unemployment insurance contributions.
• Other benefits as per labor contracts and collective bargaining agreements.

Third priority: Debts incurred after opening of recovery proceedings

These are debts arising during the implementation of the business recovery plan, prioritized for payment to encourage parties to continue supporting the enterprise’s chance of revival. This includes:

• New loans injected into the enterprise during the recovery phase.
• Costs for procurement and wages incurred during the recovery process.
• Other debts directly related to recovery activities.

Fourth priority: Financial obligations to the state

These are tax debts and other state fees owed by the enterprise, prioritized for payment before debts owed to private creditors.

Fifth priority: Remaining debts of creditors

After the above-mentioned obligations are settled, any remaining assets will be distributed to other creditors in the following order of priority:

• Secured debts: Secured creditors have priority for payment from the value of the collateral before other claims are distributed. If the collateral’s value is insufficient to fully cover the debt, the remaining portion will be categorized as unsecured debt and paid proportionally.
• Unsecured debts: Unsecured creditors will be paid proportionally to their debt amounts if the asset value is insufficient to fully settle all debts in this category.

Surplus assets after full payment

If, after fully settling all obligations according to the priority order, there are still surplus assets, they will be distributed as follows:

• For cooperatives: to the members.
• For sole proprietorships: to the proprietor.
• For single-member limited liability companies: to the owner.
• For two-member or more limited liability companies and joint-stock companies: to the members or shareholders.
• For partnerships: to the partners.

3. Important legal notes under the Law on Recovery and Bankruptcy 2025

• Court Jurisdiction Change: From March 1, 2026, the jurisdiction for first-instance bankruptcy cases will be with the Provincial People’s Courts within their territorial scope, instead of District-level People’s Courts as previously. Enterprises must file their petitions at the People’s Court in the district where their head office is located.
• Advance Payment of Bankruptcy Costs: The State will provide advances for bankruptcy costs in cases where the enterprise lacks the ability to pay, helping to resolve cost-related issues in bankruptcy proceedings.
• Simplified Procedures for Small Enterprises: The new law introduces simplified procedures for enterprises with no more than 20 unsecured creditors or total debts not exceeding VND 10 billion, helping to shorten the time and reduce the cost of resolving cases.
• Strict Supervision Mechanism: Administrators have the right to strictly supervise the enterprise’s operations during the recovery process, including the right to propose terminating the proceedings if illegal violations are detected.