Can Foreign Founders Be Liable When Their Company Violates the Law in Vietnam?

Foreign founders who start businesses in Vietnam often choose the limited liability company or joint-stock company model, expecting that the business will be an independent legal entity and that the founder’s legal liability will be limited to the company.

However, when a startup faces risks such as inspections by authorities, accusations, or even criminal investigation, the issue of the founder’s personal liability for the company’s violations becomes a real concern.

Vietnamese law provides relatively clear principles for distinguishing the liability of the enterprise from that of individual managers. Nevertheless, in certain situations, founders may still be held responsible if they are connected to the unlawful conduct.

So, can a foreign founder be personally liable for violations committed by a company in Vietnam?

The biggest concern of foreign founders when startups face legal trouble

One question many foreign founders ask when their startup in Vietnam encounters legal issues is:

If the company violates the law, will I be personally liable?

This concern often arises when:

• The company is invited by the police to work on a matter

• The enterprise is investigated for tax evasion, fraud, illegal data use, or financial violations

• The founder or director is summoned to work with investigators

• Or when a partner accuses the company of criminal misconduct

For many foreign founders, Vietnam is an attractive business environment, but the legal system and criminal investigation procedures may differ significantly from those in Western countries. Therefore, receiving an invitation to work with the police can cause considerable anxiety.

In practice, Vietnamese law clearly distinguishes between the liability of a legal entity (the company) and that of individual managers, although in some cases these liabilities may exist simultaneously.

(Note: This article provides general legal information and does not replace legal advice for specific cases.)

When does the startup bear legal responsibility instead of the founder?

To understand this issue, it is necessary to look at the fundamental principles of Vietnamese law regarding the liability of commercial legal entities and the liability of individuals who commit acts.

Under the Criminal Code 2015 (amended 2017) and the Law on Enterprises 2020, a company is an independent legal entity separate from its founders. Therefore, in many situations, legal responsibility primarily belongs to the enterprise rather than the founder.

Commercial legal entities may face criminal liability

According to Article 75 of the Criminal Code 2015, a commercial legal entity may be subject to criminal liability when:

• The criminal act is committed in the name of the legal entity

• The act is committed for the benefit of the legal entity

• The act is directed, administered, or approved by the legal entity

• The statute of limitations has not expired

In simple terms, if a violation occurs within the company’s business operations, investigators may prosecute the legal entity first.

Common examples include:

• Violations of tax regulations

• Environmental violations

• Violations of business regulations

• Violations related to data or e-commerce regulations

In such cases, the company may face:

• Significant fines

• Suspension of operations

• Prohibition from conducting certain business activities

Founders are personally liable only when directly involved

Under Vietnamese criminal law, criminal liability is personal liability. This means investigators must prove that an individual carried out, directed, or approved the unlawful conduct.

If a founder:

• Did not participate in direct management

• Did not make the relevant decisions

• Was unaware of the violation

they may not necessarily face criminal liability.

However, investigators often carefully examine:

• The founder’s role in the company’s management structure

• Decision-making authority over finance, strategy, and data

• Emails, messages, and internal documents

Therefore, determining personal liability depends heavily on the specific facts of each case.

When can a foreign founder be held personally liable?

Although the law distinguishes between corporate and personal liability, founders may still face criminal liability if they directly participate in or direct the unlawful conduct.

Direct involvement in violations

Under Articles 17 and 58 of the Criminal Code, individuals who:

• Organize

• Direct

• Execute

• Or assist in committing a crime

may be considered accomplices.

Examples include:

• A founder directing employees to commit financial fraud

• Approving an unlawful business model

• Signing contracts involving fraudulent activities

When the founder is the legal representative

The founder’s legal position is also important.

If the founder is also:

• Director or General Director

• Legal representative

• Chairman of the company

authorities may consider them primarily responsible for the company’s operations.

Under the Law on Enterprises 2020, the legal representative must ensure that the company operates in compliance with the law and must perform duties honestly and prudently.

Knowing about violations but failing to prevent them

In some cases, a founder may not directly commit the act but:

• Knows about the violation

• Has the authority to stop it

• But fails to take action

Such situations may still lead to criminal or managerial liability depending on the evidence.

What should foreign founders do if invited to work with the police?

A common situation is when a foreign founder receives:

• An invitation from the police

• A request to provide documents

• Or a summons to work with investigators

At this stage, early decisions can significantly influence the legal outcome.

Do not assume the company alone is responsible

A common mistake is assuming that the matter concerns only the company. During investigations, authorities often need to determine:

• Who made the decisions

• The role of each individual

• Internal documents and communications

Providing incomplete or inaccurate information may create unnecessary legal risks.

Understanding your rights when working with investigators

Under the Criminal Procedure Code 2015, individuals have the right to:

• Invite a lawyer

• Be informed of their rights and obligations

• Present statements and provide evidence

For foreigners, having a lawyer familiar with both Vietnamese law and international context is particularly important.

Experience handling cases involving foreign founders

Many legal situations begin with misunderstandings or lack of legal knowledge, such as:

• Startup models not yet permitted under Vietnamese law

• Disputes between founders leading to criminal accusations

• Errors in financial or data management

These cases do not always result in criminal liability, but the initial handling strategy is crucial.

When should you seek a lawyer in Vietnam?

You should consider consulting a lawyer if:

• A founder or director is invited to work with the police

• The company is under criminal investigation

• A partner accuses the company of criminal conduct

• A foreigner has been arrested or detained in Vietnam

Early legal advice can help clarify your legal position and prepare an appropriate strategy.

Contact DEDICA Law Firm

DEDICA is a law firm based in Ho Chi Minh City with lawyers experienced in assisting international clients and cases involving criminal elements in Vietnam.

Are you facing a similar legal issue?

Contact DEDICA Law for strategic legal advice tailored to your situation.

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