CORPORATE DEBT RECOVERY IN VIETNAM: PROCEDURES AND KEY LEGAL CONSIDERATIONS

In business operations, customers or business partners who delay payments or fail to make payments on time can directly affect a company’s cash flow and operational capacity. However, corporate debt recovery is not simply a matter of demanding payment from debtors. Creditors must also accurately determine payment obligations, prepare sufficient supporting evidence, and select appropriate legal remedies. What procedures should businesses follow to recover outstanding debts and protect their lawful rights and interests? What legal issues should they be aware of to avoid disputes or legal violations during the debt recovery process?

Overview of Corporate Debts and the Right to Recover Debts

In business operations, debts commonly arise from transactions involving the sale and purchase of goods, provision of services, loans, leases, or other contracts that give rise to payment obligations. When a payment becomes due and the obligated party fails to perform or fully perform its payment obligations, the creditor is entitled to demand payment and take legal action to protect its interests.

Under the principles governing the performance of obligations set out in the 2015 Civil Code, an obligor must duly and fully perform the obligations undertaken. In cases of late payment, Article 357 of the 2015 Civil Code provides that the late-paying party must pay interest on the overdue amount corresponding to the period of delay, unless otherwise agreed by the parties or otherwise provided by law. The applicable interest rate shall be determined by the parties’ agreement. In the absence of such an agreement, Clause 2, Article 468 of the Civil Code shall apply.

For debts arising from commercial activities, Article 306 of the 2005 Commercial Law provides that where a party to a contract delays payment for purchased goods, service fees, or other reasonable expenses, the aggrieved party is entitled to claim interest on the overdue amount at the average overdue debt interest rate prevailing in the market at the time of payment, corresponding to the period of delay, unless otherwise agreed by the parties or otherwise provided by law.

Accordingly, businesses are not only entitled to demand repayment of the principal debt but may also claim late payment interest if the applicable legal requirements or contractual conditions are satisfied. Properly identifying the legal basis for the debt and the grounds for calculating interest is an essential step before initiating corporate debt recovery.

Corporate Debt Recovery Procedures

Reviewing Documents and Accurately Determining Outstanding Debts

Before issuing a payment demand, a business should review all relevant documents to determine whether the debt has actually arisen, whether it has become due, and the exact outstanding amount payable.

The review should focus on payment deadlines, payment conditions, amounts already paid, outstanding balances, late payment interest, and any agreements concerning remedies for contractual breaches. In particular, the business should verify whether the person signing the contract had proper authority, whether it has fully performed its own contractual obligations, and whether the debtor has any lawful grounds for refusing or delaying payment.

Under Clause 1, Article 91 of the 2015 Civil Procedure Code, a party requesting the Court to protect its lawful rights and interests must collect, provide, and submit documents and evidence to the Court to establish that its claims are well-founded and lawful.

Therefore, evidence supporting the debt should be prepared from the outset rather than collected only after a dispute arises.

Sending a Formal Payment Demand and Negotiating with the Debtor

After verifying the outstanding debt, the business should send a formal payment demand to the party responsible for payment. The notice should clearly specify the legal basis for the debt, the outstanding amount, the payment deadline, the receiving bank account details, and the potential legal consequences if the debtor continues to fail to fulfill its payment obligations.

Businesses should choose delivery methods that allow them to verify receipt, such as registered mail, courier services with delivery confirmation, or email sent to the contact address used by the parties during their transactions. Keeping proof of dispatch and acknowledgment of receipt is important in case the business subsequently needs to demonstrate that it has formally requested payment.

At this stage, the parties may negotiate payment arrangements, including full payment, installment payments, or an extension of the repayment deadline. If an agreement is reached, the business should prepare a written record clearly specifying the outstanding amount, payment schedule, consequences of further breaches, and any security measures, if applicable.

Important note: Any extension or renegotiation of payment obligations should be carefully considered. Businesses should clearly determine whether the new agreement replaces the original payment deadline, adjusts the late payment interest, or affects their right to initiate legal proceedings or the applicable limitation period for initiating legal action.

Initiating Court Proceedings or Resolving Disputes Through Commercial Arbitration

If negotiations fail or the debtor continues to breach its payment obligations, the business may consider initiating legal proceedings before a competent Court or referring the dispute to commercial arbitration, provided that a valid arbitration agreement exists.

Court proceedings: The business must prepare a statement of claim and supporting documents and evidence to substantiate its payment claims. It must also identify the competent Court in accordance with the 2015 Civil Procedure Code and its amendments and supplements.

Since July 1, 2025, the Court system has been reorganized under a new structure, under which Regional People’s Courts have first-instance jurisdiction over many civil, business, and commercial disputes. Therefore, businesses should verify the Court’s jurisdiction based on the geographical area and nature of the dispute at the time of filing the claim.

Commercial arbitration: Under Article 5 of the 2010 Law on Commercial Arbitration, a dispute may be resolved through arbitration if the parties have entered into an arbitration agreement. Such an agreement may be established either before or after the dispute arises.

Commercial arbitration is often chosen by businesses when their contracts contain an arbitration clause and the parties wish to resolve disputes through non-public proceedings. Arbitral awards are final and binding in accordance with the provisions of this Law.

One particularly important issue is the limitation period for initiating legal proceedings. For commercial disputes, Article 319 of the 2005 Commercial Law provides for a limitation period of two years from the date on which the lawful rights and interests were infringed, unless otherwise provided by specialized legislation.

For general civil contractual disputes, Article 429 of the 2015 Civil Code provides for a limitation period of three years from the date on which the person entitled to bring a claim knew or should have known that their lawful rights and interests had been infringed.

For disputes resolved through arbitration, Article 33 of the 2010 Law on Commercial Arbitration also provides for a limitation period of two years, unless otherwise provided by specialized legislation.

Requesting Enforcement of Judgments and Awards to Recover Outstanding Debts

After obtaining a legally enforceable Court judgment or decision, or an arbitral award that has been recognized and is eligible for enforcement, the business must proceed with the enforcement procedures in accordance with applicable laws.

For judgments and decisions subject to enforcement upon request, the business may submit an application to the competent civil judgment enforcement authority, together with the judgment or decision and other required documents. The enforcement authority will assess the conditions for enforcement and apply appropriate measures within its jurisdiction to ensure that the relevant obligations are fulfilled.

Important Legal Considerations During Corporate Debt Recovery

Avoid Using Debt Collection Services in Violation of the Law

One particularly important issue businesses must be aware of is that Vietnamese law prohibits the business of providing debt collection services.

Specifically, Point h, Clause 1, Article 6 of Law No. 143/2025/QH15 on Investment provides that the business of providing debt collection services is a prohibited business investment activity. This Law took effect on March 1, 2026.

Therefore, businesses must distinguish between recovering their own outstanding debts and hiring another organization to provide debt collection services as a commercial activity.

Businesses may engage legal consultants or lawyers to review documents, prepare legal notices, participate in negotiations, or represent them in legal proceedings in accordance with applicable laws. However, they should not enter into contracts with organizations providing unlawful debt collection services.

Do Not Use Threats, Coercion, or Measures That Infringe Upon the Debtor’s Rights

A debtor’s failure to make timely payments does not entitle the creditor to arbitrarily seize the debtor’s property, issue threats, use violence, cause disturbances at the debtor’s business premises, or publicly disclose information to exert unlawful pressure.

Such conduct may give rise to independent legal liability and may even result in administrative or criminal penalties, depending on the nature and severity of the violation.

Proactively Monitor Limitation Periods and Preserve Evidence

Prolonged debt recovery processes may make it more difficult for businesses to collect evidence, identify the debtor’s legal representative, or assess the debtor’s legal status and financial capacity.

Therefore, businesses should establish regular debt monitoring procedures, identify payment due dates, keep records of all payment demands, and retain complete transaction documents.

Businesses should pay particular attention to the provisions on the recommencement of limitation periods under Article 157 of the 2015 Civil Code. Accordingly, a limitation period may recommence when the obligor acknowledges part or all of its obligations, performs part of its obligations, or when the parties reach a settlement through self-negotiation.

In the context of corporate debt recovery, businesses should proactively prepare debt acknowledgment records, document payment commitments, or enter into installment repayment agreements to establish evidence that the debtor has acknowledged its obligations.

If the debtor subsequently fails to comply with its commitments, the business should reassess the commencement date and applicable limitation period based on the event that triggered its recommencement, while also reviewing any new agreement concerning the payment deadline.

Businesses should not rely solely on the debtor’s repeated promises to make payment as a reason to delay initiating legal proceedings, since a unilateral payment reminder does not automatically cause the limitation period to recommence.

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