The case study below is anonymized and compiled from practical situations handled by FLAT Law Firm. Company names, locations, and some details have been changed to protect client confidentiality.
Background
Company A (foreign-invested, owner of a 5,000 m² factory in an industrial park) leased the factory to Company B (a manufacturer) for 10 years. Rent was paid quarterly. From Q2, Company B began paying late; by Q4, B owed 3 quarters of rent and had ceased production. Early the following year, the court issued a decision opening bankruptcy proceedings against Company B.
Company A wanted to recover the factory for re-leasing — but could not simply "change the locks."
Table of contents
- 1. Why self-help repossession is not possible
- 2. Is the factory a liquidation asset?
- 3. Handling unpaid rent
- 4. The lease's fate in bankruptcy proceedings
- 5. Steps Company A took
- 6. Five lessons for asset owners
- Q&A
1. Why self-help repossession is not possible {#s1}
When the court issues a decision opening bankruptcy proceedings, all civil enforcement and case resolution activities relating to the insolvent enterprise are suspended; asset disposal is brought into the common bankruptcy procedure.
Consequence: the factory owner cannot unilaterally repossess the premises after this point. Every action must be taken within the bankruptcy procedure, coordinating with the asset administrator and the court. Locking doors, cutting utilities, or moving the tenant's assets on one's own can expose the owner to legal liability.
2. Is the factory a liquidation asset? {#s2}
No. This is the key point favoring the asset owner: the factory belongs to the lessor (Company A), not to the bankrupt enterprise (Company B). Leased assets are not included in the liquidation estate for distribution to creditors.
The owner may reclaim their property — but must follow proper statutory asset-recovery procedures: sending a claim to the asset administrator, presenting ownership documents (land use right certificate, factory ownership certificate…), and receiving the asset back under the court's decision.
A point to distinguish: machinery and equipment belonging to the tenant and still inside the factory are assets of the bankrupt enterprise — the owner may not dispose of them on their own.
3. Handling unpaid rent {#s3}
The 3 quarters of rent Company B owed is a debt of the bankrupt enterprise. Company A:
- Declared the debt on time to the asset administrator, attaching the lease and debt reconciliation;
- Participated in the creditors' meeting to protect its interests and vote on the resolution plan;
- Checked the payment order: secured debts are prioritized over unsecured debts — ordinary rent is unsecured debt, so full recovery depends on the remaining asset value after priority claims.
Lesson: the deposit/security collected at the start of the lease is the most practical "buffer" for rent arrears — in this case, a 3-month security deposit covered part of the loss.
4. The lease's fate in bankruptcy proceedings {#s4}
The lease may be reviewed by the asset administrator on whether to continue or terminate it, depending on how the enterprise is resolved:
- If the enterprise is recovered (new procedure under the 2025 Law): the lease may continue under the recovery plan;
- If the enterprise is declared bankrupt and liquidated: the lease terminates and the owner recovers the factory.
In this case, Company A's lease contained a clause allowing unilateral termination upon the tenant's insolvency — an important legal basis keeping Company A proactive in every scenario.
5. Steps Company A took {#s5}
- When B first paid late: sent a debt demand letter, preserved evidence;
- At signs of insolvency: consulted a lawyer, reviewed the lease's termination clauses;
- After the court opened proceedings: no self-help repossession; sent an asset-recovery request to the asset administrator with ownership documents;
- Declared the rent debt on time; participated in the creditors' meeting;
- Recovered the factory under the procedure; handled B's remaining assets per the administrator's guidance;
- Re-leased to a new tenant under a reviewed lease with added protective clauses.
6. Five lessons for asset owners {#s6}
- Security deposit must be large enough: at least 3–6 months of rent — the most practical "buffer" when the tenant collapses;
- Termination clause upon insolvency: must be in the contract, with a clear definition of "insolvency" and notice procedures;
- Parent company guarantee: for tenants that are subsidiaries, require a payment guarantee from the parent;
- Periodic financial monitoring: rights to request financial reports and inspection — detect problems early;
- Act early, follow procedures: consult a lawyer at the first signs; after proceedings open, never use self-help repossession.
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Q&A {#faq}
Q: If the tenant goes bankrupt, can the factory owner lock the doors and repossess the premises?
A: No. After the court opens bankruptcy proceedings, disposal of the enterprise's assets is brought into the common procedure. The factory owned by the lessor is not a liquidation asset, but the owner must follow statutory asset-recovery procedures, coordinating with the asset administrator and the court — self-help repossession can create legal risks.
Q: How is unpaid rent handled in bankruptcy proceedings?
A: Unpaid rent is a debt of the enterprise. The factory owner must declare the debt on time and participate in the creditors' meeting. The payment order of debts is determined under the 2025 Law on Recovery and Bankruptcy — secured debts are prioritized over unsecured debts.
Q: Which lease clauses protect the asset owner when the tenant goes bankrupt?
A: Key clauses: (1) unilateral termination upon the tenant's insolvency/bankruptcy; (2) a deposit/security large enough to cover rent arrears; (3) a parent company payment guarantee; (4) periodic financial inspection rights; (5) clauses on fixtures upon termination. A lawyer should review before signing.
Q: What is new in the 2025 Law on Recovery and Bankruptcy affecting this case?
A: Law 142/2025/QH15 (effective 01/3/2026) replaces the 2014 Bankruptcy Law and adds enterprise recovery procedures. An enterprise may be recovered instead of liquidated — the lease may then continue under the recovery plan instead of terminating immediately.
Q: What extra points should foreign asset owners leasing factories in Vietnam note?
A: Beyond the above: (1) the contract should clearly choose governing law and a dispute resolution mechanism; (2) register secured transactions if there are secured assets; (3) closely monitor the tenant's finances through periodic reports; (4) at the first signs of insolvency, consult a lawyer before the tenant enters bankruptcy proceedings.
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This article is general legal information and does not replace legal advice for any specific matter. The case study is anonymized.
Need a lawyer for lease advice — handling a bankrupt tenant? Contact FLAT Law Firm — we help draft and review leases and represent asset recovery. Hotline: 0988424851.
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