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[Case study] Recovering VND 5 billion in debt from a fleeing partner through interim measures

14 min readFLAT LAW FIRM
[Case study] Thu hồi công nợ 5 tỷ đồng từ đối tác bỏ trốn bằ

[Case study] Recovering VND 5 billion from a fleeing partner through interim measures: lessons from practice

Collecting a debt is hard enough; collecting it when the debtor shows signs of "disappearing" is harder by an order of magnitude: the office is shut, the legal representative has changed, and the money in the account drains a little more each week. This article — presented as an anonymized case study — reconstructs a debt recovery against a fleeing partner involving nearly VND 5 billion in this illustrative case, in which interim measures (freezing accounts, prohibiting asset transfers) played the decisive role, allowing the creditor to preserve the debtor's assets before it was too late. From this matter we draw practical lessons that any business should know before finding itself in a similar situation.

The facts in this article have been anonymized and all identifying details removed; names and figures have been adjusted for illustration. Each case turns on its own circumstances, and this article is not a substitute for legal advice on any specific matter.

Contents

1. Background (anonymized)

The parties. The creditor is a Vietnamese enterprise trading in consumer goods, referred to as Party A. The debtor is a domestic distribution company, referred to as Company X. The two had no ownership or personnel overlap; this was a purely commercial sale-and-purchase relationship.

The transaction. Early in the year, Party A and Company X signed a goods sale contract worth tens of billions of dong. Under the contract, Party A delivered in tranches, and Company X paid after each delivery within an agreed credit period. This is a common commercial arrangement: the seller extends credit to keep the distribution relationship alive.

How the dispute arose. The first two deliveries went smoothly: goods were received in full, and the first tranche was paid on time. From the second tranche on, Company X began paying late. Each time Party A asked, X promised "next week", "end of the month", then pushed it to the following month. Notably, throughout this period Party A maintained periodic debt reconciliations and obtained a debt reconciliation statement signed and sealed by Company X, confirming an outstanding balance of nearly VND 5 billion. That document later became the single most important piece of evidence in the case.

Warning signs. About six months after the debt fell due, a cluster of alarming signs appeared almost simultaneously:

  • Company X's business office was shut down and its signboard removed;
  • Company X changed its legal representative on its enterprise registration;
  • The bank account Party A had always paid into showed almost no activity, its balance sharply reduced;
  • The X-side sales manager — Party A's only working contact — became unreachable.

In short, Company X displayed every sign of a counterparty preparing to "flee" its obligations: draining assets, cutting contact, and replacing its head to frustrate collection.

When counsel was engaged. By the time the debt was about six months overdue and all direct collection efforts had failed, Party A came to the firm. Their first question was blunt: "Can we still recover, when the other side has practically vanished?"

The matter raised four core legal questions, and how they were answered determined the entire strategy:

Question 1: Can the debt still be recovered when the debtor shows signs of dissipating assets? In principle, Company X's payment obligation does not disappear because it changed representatives or closed its office. But in practice, a winning judgment becomes "a piece of paper" if, by enforcement time, the debtor's assets have been drained. The issue was not "can we win the lawsuit" but "can we enforce the win".

Question 2: Can the debtor's assets be "locked" from the moment of filing? This was the crux. Civil procedure offers exactly the right tool for this situation: interim measures — allowing the court to freeze bank accounts and prohibit asset transfers by the obligated party during the proceedings, even simultaneously with filing the claim in urgent cases. But the tool is not automatic: the applicant must prove urgency and post counter-security.

Question 3: How is late-payment interest calculated? The contract between the parties had a penalty clause: 8% per year on overdue amounts. Would the court accept that figure? Under Article 357 of the 2015 Civil Code, a party late in paying money must pay interest for the period of delay; the rate is as agreed by the parties but may not exceed the cap in clause 1, Article 468 (no more than 20% per year). The contractual 8% fell within the permitted limit, so there was a solid basis for it to be upheld.

Question 4: Whom to sue when the representative has changed? This is a trap many creditors fall into: chasing the departed individual instead of suing the right entity. The payment obligation arose from a contract signed by Company X, so the defendant had to be Company X as a legal entity — which continued to exist on the enterprise register despite the change of its head. Changing the legal representative does not extinguish the company's obligations.

Why was this case difficult? The difficulty lay not in the law — the law provided all the tools needed. It lay in time and evidence: every passing week shrank the reachable assets a little more; and for the court to grant interim measures, Party A had to prove "urgency" with concrete evidence — "I fear they will dissipate assets" alone would not do.

3. Strategy

3.1 Options considered

Option 1: Keep negotiating. The advantage was saving litigation costs and preserving the business relationship. The drawback was that Company X had lost all good faith: no one answered the phone, the office was closed, the representative had changed. Experience shows negotiation only works when both sides still want a resolution; with a party quietly draining assets, each additional round of talks merely buys them time to finish the job. This option was abandoned after two final weeks of fruitless contact attempts.

Option 2: Sue for the debt through ordinary proceedings, without interim measures. The advantage was no counter-security deposit and simpler procedure. The decisive drawback: an ordinary civil case over a contract dispute typically takes many months, even a year, to reach an enforceable judgment. During that time nothing would stop Company X from continuing to drain its accounts or transfer assets. The likely result: winning the case but recovering nothing — the worst possible outcome for a creditor.

Option 3: Sue and simultaneously apply for interim measures. The advantage was "locking" the debtor's assets from day one: freezing bank accounts and prohibiting transfers of rights in property. The drawback was that the applicant had to provide counter-security — a sum of money or guarantee equivalent to the loss that could result from a wrongful application — and would be liable for damages if the application proved unjustified. This was the costliest option and demanded the most preparation, but it was the only one that secured enforceability.

3.2 The option chosen and why

The firm chose Option 3, on the following legal basis and implementation steps: the statement of claim was prepared following the checklist for filing a contract-dispute lawsuit.

Legal basis for the choice. Clause 2, Article 111 of the 2015 Civil Procedure Code allows a litigant to apply for interim measures at the same time as filing the statement of claim in urgent cases; the judge considers the application and decides within 48 hours of receipt. The measures selected were: freezing bank accounts (clause 10, Article 114) and prohibiting the transfer of rights in property (clause 7, Article 114). In parallel, the firm considered an exit ban against the obligated person (clause 13, Article 114, combined with Article 36 of the 2019 Law on Exit and Entry of Vietnamese Citizens) to prevent the representative from leaving Vietnam. The application was drafted in accordance with Article 133, and Party A provided counter-security under Article 136: a sum determined by the court, equivalent to the loss that could result from a wrongful application.

Key implementation steps.

Step 1 — Gathering evidence of urgency. This step decided whether the court would grant the application. The file included: the debt reconciliation statement confirmed by Company X (proving the debt was real and overdue); bank records showing an abnormally sharp drop in X's account activity; photographs and verification records of the closed office; and enterprise registration information showing the change of legal representative. Together they painted a consistent picture: the debtor was actively walking away from its obligations.

Step 2 — Drafting the statement of claim and the application for interim measures. The claim sought payment of the principal of nearly VND 5 billion plus late-payment interest under the contract. The application set out the urgency plainly: without an immediate freeze, the remaining account balance would continue to be drained and later enforcement would be impossible.

Step 3 — Simultaneous filing and posting counter-security. As soon as the judge ordered counter-security, Party A deposited the court-determined sum into a blocked account. A practical note: this money is not lost — if the application proves well-founded and the case is resolved in the applicant's favour, the security is returned.

Step 4 — The court grants interim measures. Within the statutory period, the court ordered the freezing of Company X's bank accounts and prohibited the transfer of rights in its property. The decision was sent to the relevant banks and asset registries for immediate enforcement. From that moment, the debtor's asset drain was officially shut off.

Step 5 — Resolution and enforcement. With the assets preserved, the case proceeded through ordinary proceedings while Party A no longer had to race against time. The judgment ordered Company X to pay the principal and late-payment interest; enforcement proceeded smoothly against the very accounts and assets frozen at the outset.

4. Outcome

The outcome can be summarized in three points:

First, Party A recovered the entire principal of nearly VND 5 billion plus late-payment interest during enforcement. Because Company X's assets had been frozen at the very start of the case, the enforcement authority did not have to spend time locating and tracing assets as in ordinary matters.

Second, timing was controlled. From the firm's engagement to the money landing in Party A's account took under a year — in this illustrative case; actual timelines vary with the court, the debtor's cooperation and other factors, and this figure is not a commitment as to timing. The difference-maker was the freeze order issued within the 48-hour statutory deadline under clause 2, Article 111 of the 2015 Civil Procedure Code (actual processing speed may vary between courts): the debtor's remaining balance was "frozen" in time, before it could be drained completely.

Third, costs were kept reasonable relative to the recovery. The counter-security posted under Article 136 was returned after the matter concluded in Party A's favour. (Under client confidentiality principles, we do not disclose the fee figures for this matter.)

The biggest lesson from this outcome: in debt collection where the debtor shows signs of dissipating assets, interim measures are not a "backup plan" — they must be part of the strategy from day one. Suing without locking assets is, in many cases, tantamount to surrendering half the chance of recovery.

5. Lessons learned

Lesson 1: Speed is an asset — do not negotiate with a party that has lost good faith. When the counterparty has closed its office, changed its representative and cut contact, every additional round of negotiation serves a single purpose: giving them more time to finish draining assets. The practical rule: set a "red line" for receivables — e.g. a certain number of days overdue plus two abnormal signs (unreachable, changed enterprise registration) — and when the line is crossed, move to a legal strategy instead of waiting. This applies to every business selling on credit, especially in sectors with long payment cycles such as construction, distribution and manufacturing.

Lesson 2: The debt reconciliation statement is the most valuable evidence in a collection case. In this matter, it was the signed-and-sealed reconciliation statement from Company X that let the court quickly accept the legitimacy of the claim — no argument needed over "whether there is a debt". Many businesses reconcile debts only through messages or casual emails, and when a dispute arises they have no document with real weight. Confirm reconciliations periodically in paper form or electronically signed documents, stating the balance, payment deadline and the signatures of authorized persons on both sides.

Lesson 3: Interim measures are not reserved for mega-cases. A common misconception is that only disputes worth tens or hundreds of billions "deserve" interim measures. The law sets no minimum value threshold — the only condition is proving urgency: grounds to believe assets are being or will be dissipated, or that later enforcement will be difficult. Small and medium enterprises can absolutely use this tool, provided they prepare evidence properly and early.

Lesson 4: Counter-security is the price of safety, not a barrier. Many creditors abandon interim measures because they balk at posting security under Article 136. But understand its true nature: it is a deposit to protect the affected party in case the application proves unjustified, set by the court at the equivalent of the potential loss — not a "fee" that disappears. If your application is well-founded and granted, the security is returned. Against the risk of losing the entire debt, it is an entirely worthwhile investment.

Lesson 5: Sue the right entity — the legal person, not the departed individual. When a company changes its legal representative, many creditors are confused about whom to sue, and some wrongly sue the departed individual and have their claim dismissed. The rule: the payment obligation arises from a contract signed by the legal entity, so the defendant is that entity itself, whoever currently heads it. In parallel, an exit ban against the current legal representative can be considered where there are sufficient grounds of flight risk — an effective supporting tool, but only within the statutory conditions.

Lesson 6: A good contract decides half the case. This matter was eased in part because the contract had clear terms on payment deadlines and 8%-per-year late interest — within the 20%-per-year cap of Article 468 of the 2015 Civil Code, so the court upheld it in full. By contrast, many collection cases stumble at the starting line over sloppy contracts: no payment deadline (so "overdue" cannot be determined), no penalty clause, no late-interest provision. Drafting a tight contract at the outset is always cheaper than any lawsuit later.

6. Prevention checklist from this case

Drawn from this matter, businesses should build a bad-debt prevention process with these seven controls: see also the legal options for debt recovery.

  1. Reconcile debts periodically in legally effective writing — at least quarterly, with the signature of an authorized person and the company seal (or digital signature), stating the balance and payment deadline.
  2. Review all current sale contracts — ensure three clauses are present: a specific payment deadline, a penalty for late payment, and late-payment interest (within the limits of Articles 357 and 468 of the 2015 Civil Code).
  3. Monitor the operating status of major debtors periodically — check enterprise registration information, office status, and abnormal signs in transactions.
  4. Set an internal "red line" for receivables — e.g. 60 days overdue plus two abnormal signs triggers mandatory referral to in-house counsel or external lawyers, with no further waiting.
  5. Preserve complete transaction evidence from day one — contracts, delivery records, invoices, payment documents, emails and messages. Complete evidence is the prerequisite for obtaining interim measures.
  6. Learn about interim measures early — do not wait until the debtor's assets are exhausted before asking counsel "is there any way to preserve the assets". This tool only works when used early.
  7. Contact counsel as soon as dissipation signs appear — the counterparty closes its office, changes its representative, shows abnormal account activity, goes silent. In debt collection, the first 48 hours after spotting the signs can decide the entire outcome.

Facing a similar situation?

See our overview of commercial dispute resolution and arbitration. Every collection case has its own circumstances: the debt's value, the contract type, the debtor's asset position and the evidence in your hands all directly affect strategy — particularly whether interim measures should and can be applied. If your business faces a hard-to-collect receivable or a counterparty showing signs of asset dissipation, contact us for a case-specific assessment: hotline 0988424851 (FLAT Law Firm).

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References

  • Civil Procedure Code 2015 (effective 01/7/2016, in force) — Article 111 (right to apply for interim measures), Article 114 (interim measures), Article 133 (application for interim measures), Article 136 (mandatory counter-security), Article 118 (liability for wrongful application).
  • Civil Code 2015 (effective 01/01/2017, in force) — Article 357 (liability for late payment of money), Article 468 (interest rate).
  • Resolution No. 02/2020/NQ-HDTP dated 24/9/2020 of the Council of Justices of the Supreme People's Court guiding the application of certain provisions on interim measures of the Civil Procedure Code (effective 01/12/2020, in force).
  • Law on Exit and Entry of Vietnamese Citizens 2019 (effective 01/7/2020, in force) — Article 36 (cases of exit suspension).

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