Corporate criminal liability in the context of an M&A transaction in Vietnam

The Penal Code 2015 is silent as to whether corporate criminal liability incurred by one commercial legal person will be succeeded or extinguished if such legal person is liquidated, merged (sáp nhập), consolidated (hợp nhất) or split (chia) and ceases to exist. Under the Civil Code 2015, when a legal person is merged, consolidated or split, only “civil obligations” (nghĩa vụ dân sự) of such legal person are transferred to the relevant new (or succeeding) legal person. As such, criminal liability (trách nhiệm hình sự) of such legal person may not be transferred to the new (or succeeding) legal person. Similarly, under the Enterprise Law 2014, when an enterprise is merged, consolidated or split, only unpaid debts and property obligations (nghĩa vụ tài sản) are transferred to the relevant new (or succeeding) enterprises. It is not clear if criminal liability of the first enterprise could qualify as property obligations which can be transferred to or succeeded by the new (or succeeding) enterprise.

Under the Criminal Proceeding Code 2015, if a legal person, who has been convicted with a crime, undergoes a merger, de-merger, consolidation then the legal person succeeding the rights and obligations of the first mentioned legal person is responsible for performing penalties in form of monetary fine. This provision seems to suggest that not all criminal liabilities will be passed on the succeeding legal person. That said, in a recent seminar on corporate criminal liability, an official of the Ministry of Justice, being a member of the drafting team of the Penal Code 2015, has indicated that he is in favour of the requirement that in the context of the liquidation, merger, consolidation or split of a legal person, a new (or succeeding) legal person must inherit criminal liability of the disappearing entity.

The role of a compliance program in corporate criminal liability in Vietnam

Regarding corporate criminal liability, Vietnamese law does not have specific provisions concerning the role of a corporate compliance program. This means that an effective corporate compliance program cannot be used directly to preclude corporate criminal liability or reduce sentence. This is different from other jurisdictions. That said, a corporate compliance program may still be useful under the Penal Code 2015 for the following reasons:

• a corporation may refer to the existence of a corporate compliance program as an evidence that the corporation does not instruct, guide or accept a criminal act committed by the relevant individuals within the corporation; and
• compliance program may be regarded as a mitigating factor under the Penal Code 2015 (e.g., a mean to prevent or mitigate the damages caused by a crime).

No acting in concert concept under Vietnamese securities regulations

In other jurisdictions, acting in concert is generally understood to mean the intentional cooperation between two or more parties to exercise control of a listed company. And persons deemed to be acting in concert will have their voting rights combined for the purpose of calculating whether or not a mandatory disclosure and/or tender offer is required. Vietnamese securities regulations do not clearly contemplate or nor regulate the concept of “acting in concert”. As such, it is quite common in Vietnam for technically-unrelated persons to coordinate their voting to control (or influence the control) of a public company without having to disclose the coordination or making a public tender offer. This practice could potentially cause damages to public investors who are not aware of the potential change of control of a public company.

The provision under Vietnamese law which is most relevant to the “acting in concert” concept is the definition of a related person under the Enterprise Law 2014. Under the Enterprise Law 2014, a group of persons agreeing to co-operate among themselves to takeover a share of capital contribution, a share or interest in the company or to control the issuance of decisions by the company will be considered as a related person of the company. However, the Enterprise Law 2014 only considers a group of concerting parties as a related person to the company that such parties are trying to control but not as related persons between themselves.

Update 30 April 2017 - Remove the sentence "In addition, it is not clear if the concept of “related persons” under the Enterprise Law 2014 would apply to a public listed company since the Securities Law 2006 has its own definition of related persons." since under Decree 71/2017, a related person includes both related persons under the Securities Law 2006 and Enterprise Law 2014.