Debtor Goes Bust: Calling the Parent’s Guarantee — Claim Procedure — The subsidiary buyer has become insolvent, but its debt was guaranteed in writing by the parent company when the contract was signed. The creditor needs to know when it may turn to the parent, whether it can claim directly or must first exhaust remedies against the subsidiary, and what file a guarantee call requires.
The issue and its legal grounds
Guarantees are governed by Articles 335 to 343 of the Civil Code 91/2015/QH13: the guarantor undertakes to the beneficiary that it will perform in place of the guaranteed party if, at the due date, that party fails to perform or performs improperly; the beneficiary may require the guarantor to perform once the obligation is due and unpaid, unless the guarantee instrument sets other conditions. The guarantee scope covers principal, interest, penalties and damages unless the instrument limits it. When the subsidiary enters rehabilitation and bankruptcy proceedings, the debt is still lodged in those proceedings under the Law on Rehabilitation and Bankruptcy 142/2025/QH15, in parallel with calling the guarantor.
The boundary with similar cases
This article focuses on the moment of calling a parent-company guarantee when the principal debtor fails. The core is reading the guarantee instrument correctly: general guarantee or a guarantee conditional on first claiming against the debtor, its scope and validity period, and the two-track strategy of claiming from the guarantor while lodging the debt in the subsidiary’s bankruptcy without double recovery.
Answers to frequently asked questions
What does a parent company’s guarantee cover?
Under Article 336 of the Civil Code 91/2015/QH13, a guarantor may guarantee part or all of an obligation, and the guaranteed obligation includes interest, breach penalties and damages unless the parties agree otherwise. The original guarantee text therefore controls: if it guarantees only the principal sum, interest and penalties cannot be claimed from the parent; if it guarantees all payment obligations under the contract, the scope is far wider. Every dispute about calling a guarantee returns to the words of this document.
Can the parent be claimed against directly, or must the subsidiary be pursued first?
Vietnamese law does not default to a benefit-of-excussion model: Article 339 of the Civil Code 91/2015/QH13 lets the beneficiary require the guarantor to perform once the obligation is due and the guaranteed party has not performed properly, unless the guarantee instrument provides that the guarantor pays only after the guaranteed party’s assets have been dealt with. Checking this clause is the first task, because it decides whether the creditor may claim in parallel or must wait for the subsidiary’s asset liquidation outcome.
What steps does a claim against the guarantor take?
Four standard steps: establish the trigger event with evidence that the subsidiary failed to pay at maturity, such as a debt reconciliation record and an overdue notice; send a written demand for performance of the guarantee to the parent with a copy of the guarantee and the non-payment evidence, through a channel with receipt confirmation; allow the period the guarantee instrument gives the parent to perform; and if refused or ignored, sue the parent at court or arbitration under the dispute clause applicable to the guarantee. In parallel, still lodge the debt in the subsidiary’s bankruptcy to preserve rights on both tracks.
Does missing the guarantee’s time limit forfeit the claim?
If the guarantee instrument sets a validity period or a demand deadline, sending the demand after that point may forfeit the right against the guarantor — a very common practical error when creditors chase only the principal debtor. Even where the instrument sets no separate deadline, the guarantee demand should be sent as soon as the due obligation is unpaid, because the general civil limitation period keeps running. After paying in substitution, the guarantor may claim reimbursement from the guaranteed party under Article 340 of the Civil Code 91/2015/QH13, but that is a matter between them and does not affect a creditor already paid.
A concrete action plan
Practical steps: obtain and read the original guarantee the moment the debtor shows insolvency signs, underlining scope, trigger conditions and time limits; build the non-payment evidence formally and completely; send the guarantee demand to the correct address and recipient stated in the instrument; simultaneously lodge the debt in the subsidiary’s bankruptcy and inform the administrator of the guarantee call to avoid double-recovery disputes; and if the parent refuses, sue within the limitation period without waiting for the bankruptcy outcome.
This article has been quality-reviewed by the FLAW AI Legal Council