Decree No. 187\/2026\/ND-CP strengthens governance, protects enterprise value and creates greater certainty during corporate distress.
\nVietnam continues to modernize its legal framework to support a more transparent and efficient investment environment. The latest example is Decree No. 187\/2026\/ND-CP, issued on 27 May 2026, which provides detailed guidance for the implementation of the Law on Recovery and Bankruptcy concerning the replacement of legal representatives and the continued operation of enterprises during bankruptcy proceedings.
\nWhile the Decree primarily applies to state-invested enterprises and cooperatives, its practical significance extends well beyond the public sector. International investors, commercial banks, project lenders, bondholders, private equity funds, strategic buyers and restructuring professionals frequently transact with companies that have state ownership or participation. Understanding how these entities will now be managed during financial distress has therefore become increasingly important.
\nPerhaps most importantly, the Decree demonstrates Vietnam\u2019s continuing effort to move away from uncertainty during insolvency and toward a system that prioritizes continuity of operations, preservation of enterprise value and protection of creditors.<\/p>\n
Why This Matters
\nHistorically, one of the greatest practical challenges in insolvency proceedings has been the sudden inability of an enterprise\u2019s legal representative to continue managing the company.
\nWithout a functioning legal representative:
\n\u2022\tcontracts cannot be executed;
\n\u2022\tbanks may refuse transactions;
\n\u2022\temployees remain without direction;
\n\u2022\tsuppliers become uncertain;
\n\u2022\trestructuring negotiations stall;
\n\u2022\tenterprise value rapidly deteriorates.
\nDecree 187 directly addresses this problem by establishing clear mechanisms ensuring that management continuity is maintained throughout recovery and bankruptcy proceedings.
\nFor investors, this represents an important step toward greater legal certainty.<\/p>\n
A Clear Definition of When a Legal Representative Becomes Incapable
\nOne of the most significant innovations is the introduction of objective criteria defining when a legal representative is legally incapable of performing his or her duties.
\nExamples include where the representative:
\n\u2022\tis absent from Vietnam for more than 30 consecutive days without valid authorization;
\n\u2022\tis detained or imprisoned;
\n\u2022\thas absconded;
\n\u2022\thas died;
\n\u2022\tor otherwise becomes legally incapable of exercising management authority.
\nFor wholly or partially state-invested enterprises, the relevant State owner\u2019s representative agency has express authority to determine when these circumstances exist.
\nThis removes uncertainty that previously delayed important management decisions.<\/p>\n
Preventing Leadership Vacuums
\nRather than allowing businesses to become paralysed, the Decree introduces rapid replacement procedures.
\n100% State-Owned Enterprises
\nWhere the enterprise is wholly state-owned, the competent State owner\u2019s representative agency may promptly nominate a replacement legal representative.
\nThe appointment may come from:
\n\u2022\tan existing authorized state representative; or
\n\u2022\tanother qualified individual meeting statutory requirements.
\nThe proposal is then submitted directly to the supervising Judge handling the bankruptcy proceedings.<\/p>\n
Partially State-Owned Enterprises
\nWhere the legal representative manages only the State\u2019s capital contribution, the competent State authority must nominate a replacement representative responsible for protecting State interests throughout the insolvency process.
\nThis ensures continued supervision of public assets while allowing the enterprise to continue operating.<\/p>\n
Protecting Enterprise Value Instead of Liquidating Too Early
\nPerhaps the most commercially significant aspect of Decree 187 concerns asset transfers during bankruptcy proceedings.
\nRather than assuming liquidation is inevitable, the Decree allows:
\n\u2022\ttransfer of the enterprise\u2019s entire assets;
\n\u2022\ttransfer of individual business divisions;
\n\u2022\ttransfer of viable operating units;
\n\u2022\tcontinuation of commercially valuable business activities.
\nThis represents an increasingly modern insolvency philosophy.
\nInstead of destroying enterprise value through immediate liquidation, viable operations may continue while restructuring or transferring valuable business lines to capable investors.
\nFor international investors seeking distressed acquisition opportunities, this may substantially improve transaction certainty.<\/p>\n
Increased Protection for Creditors
\nThe Decree also strengthens creditor confidence.
\nBy ensuring:
\n\u2022\tcontinuity of management;
\n\u2022\tjudicial supervision;
\n\u2022\tclearer governance;
\n\u2022\tpreservation of operating businesses;
\nthe likelihood of preserving recoverable value improves considerably.
\nCreditors generally benefit where businesses continue operating rather than ceasing operations entirely.<\/p>\n
Increased Responsibilities for Directors
\nThe new framework also carries important implications for directors and legal representatives.
\nExtended absence from Vietnam without proper authorization may now have significant legal consequences.
\nForeign managers serving as legal representatives should therefore ensure:
\n\u2022\tproper delegation arrangements;
\n\u2022\tvalid powers of attorney;
\n\u2022\tcontinuous management capability;
\n\u2022\tdocumented internal governance procedures.
\nInternational companies with expatriate management should review their corporate governance structures accordingly.<\/p>\n
A Broader Reform of Vietnam\u2019s Insolvency Framework
\nDecree 187 should not be viewed in isolation.
\nIt complements Decree No. 109\/2026\/ND-CP, which introduced administrative sanctions for violations of bankruptcy obligations.
\nTogether, the two Decrees signal a broader policy direction:
\nCorporate insolvency should no longer be ignored or delayed.
\nDirectors who fail to initiate bankruptcy proceedings when statutory insolvency thresholds have been met may now face personal administrative liability.
\nCombined with the governance provisions under Decree 187, Vietnam is steadily moving toward international standards of corporate responsibility and insolvency management.<\/p>\n
Opportunities for Foreign Investors
\nFor foreign investors, these reforms create several practical advantages.
\nGreater certainty during insolvency proceedings can facilitate:
\n\u2022\tacquisition of distressed assets;
\n\u2022\trestructuring of state-invested enterprises;
\n\u2022\tproject refinancing;
\n\u2022\tdebt restructuring;
\n\u2022\tspecial situations investing;
\n\u2022\tnon-performing loan transactions;
\n\u2022\tstrategic acquisitions of viable business divisions.
\nThe clearer governance framework also reduces transaction risk arising from uncertainty regarding who has authority to act on behalf of distressed enterprises.<\/p>\n
Practical Action Plan for Foreign Investors, Banks and Creditors
\nForeign businesses should not wait until a counterparty enters financial distress. Instead, they should proactively review their investment and contractual arrangements.
\n1. Review Counterparty Exposure
\nIdentify whether any suppliers, borrowers, joint venture partners or acquisition targets include state ownership or state capital participation.<\/p>\n
2. Verify Legal Representative Structures
\nEnsure contracts identify:
\n\u2022\tauthorized representatives;
\n\u2022\talternate signing authorities;
\n\u2022\tsuccession mechanisms;
\n\u2022\tpower-of-attorney arrangements.<\/p>\n
3. Strengthen Due Diligence
\nFor acquisitions involving distressed enterprises, examine:
\n\u2022\tpending bankruptcy proceedings;
\n\u2022\tjudicial supervision;
\n\u2022\treplacement of legal representatives;
\n\u2022\tvalidity of corporate approvals.<\/p>\n
4. Review Financing Documentation
\nBanks and lenders should ensure financing documents adequately address:
\n\u2022\tinsolvency triggers;
\n\u2022\tmanagement replacement;
\n\u2022\tinformation rights;
\n\u2022\tenforcement mechanisms.<\/p>\n
5. Prepare Distressed M&A Strategies
\nThe new framework may create attractive opportunities for acquiring:
\n\u2022\tviable business divisions;
\n\u2022\tproductive assets;
\n\u2022\tongoing projects;
\n\u2022\toperating subsidiaries.
\nEarly preparation often provides a competitive advantage.<\/p>\n
6. Monitor Director Compliance
\nForeign-appointed legal representatives should regularly assess compliance with Vietnamese insolvency obligations, particularly where financial distress may require timely bankruptcy filings.<\/p>\n
7. Integrate Insolvency Risk into Compliance Programs
\nCorporate governance policies should include procedures addressing:
\n\u2022\tmanagement continuity;
\n\u2022\temergency delegation;
\n\u2022\tcross-border absence;
\n\u2022\trestructuring protocols;
\n\u2022\tinsolvency response planning.<\/p>\n
Looking Ahead
\nVietnam\u2019s insolvency regime continues to evolve toward a more sophisticated and commercially pragmatic system.
\nDecree 187 reflects an important policy objective: preserving enterprise value while protecting creditors, maintaining governance and ensuring orderly restructuring rather than unnecessary liquidation.
\nFor international investors, the message is clear. Vietnam is building a legal environment that increasingly supports business continuity during financial distress, strengthens governance of state-invested enterprises and creates greater predictability for investment decisions.
\nThose who understand these reforms early will be better positioned to identify restructuring opportunities, protect existing investments and navigate distressed situations with greater confidence.
\n***
\nFor more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.<\/p>\n","protected":false},"excerpt":{"rendered":"
Decree No. 187\/2026\/ND-CP strengthens governance, protects enterprise value and creates greater certainty during corporate distress. Vietnam continues to modernize its legal framework to support a more transparent and efficient investment environment. The latest example is Decree No. 187\/2026\/ND-CP, issued on 27 May 2026, which provides detailed guidance for the implementation of the Law on Recovery … <\/p>\n
Continue reading “Lawyer in Vietnam Dr. Oliver Massmann – Vietnam\u2019s New Bankruptcy Playbook for State-Invested Enterprises: What Every Foreign Investor, Lender and M&A Professional Needs to Know”<\/span><\/a><\/p>\n","protected":false},"author":24,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"ppma_author":[1007],"class_list":["post-2081","post","type-post","status-publish","format-standard","hentry","category-vietnam-general"],"authors":[{"term_id":1007,"user_id":24,"is_guest":0,"slug":"omassmann","display_name":"Dr. Oliver Massmann","avatar_url":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-content\/uploads\/sites\/19\/2014\/08\/massmannoliver-125x150.jpg","author_category":"1","last_name":"Massmann","first_name":"Dr. Oliver","job_title":"","user_url":"http:\/\/www.duanemorris.com\/attorneys\/olivermassmann.html","description":"Read Oliver's bio.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/posts\/2081","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/users\/24"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/comments?post=2081"}],"version-history":[{"count":1,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/posts\/2081\/revisions"}],"predecessor-version":[{"id":2082,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/posts\/2081\/revisions\/2082"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/media?parent=2081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/categories?post=2081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/tags?post=2081"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/vietnam\/wp-json\/wp\/v2\/ppma_author?post=2081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}