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.

New Decree (Decree 81/2018) on trade promotion in Vietnam

On 22 May 2018, the Government issued Decree 81/2018 on trade promotion activities. Decree 81/2018 will take effect from 15 July 2018 and replace Decree 37/2006. Decree 81/2018 introduces new regulations relating to promotion activities. In particular,

• Traders must not promote their products by directly comparing with products of other traders for any purpose. Previously, promotion by comparison among products is only prohibited if the promotion is for purpose of unfair competition. However, such purpose is abolished in Decree 81/2018 so the restriction in comparative promotion is stricter;
• There is a new maximum rate for promotion activities in mass/concentrated promotion programs (chương trình khuyến mại tập trung). In case of mass promotion programs, the maximum value of goods and services used for promotion and maximum discount rate for promoted goods and services can be 100% of the value of such promoted goods and services. Previously, the maximum rate of the value of goods and services used for promotion and the maximum discount rate in all circumstances can be 50%;
• Money can be used as goods, services for promotion except the case of giving the samples free of charges to customers, giving goods as gifts or selling goods or providing services at prices lower than previous price;
• Total duration of promotion by discount for a certain goods or services does not exceed 120 days in a year and does not include promotion sale in mass promotion programs and promotion activities approved by the Prime Minister. In Circular 37/2006, duration of promotion by discount cannot exceed 90 days per year and 45 days for one promotion program;
• Regarding promotion by games of chance, Decree 81/2018 has provided specific conditions of evidence to determine the prize winners such as this evidence being in material form (ticket, electronic information, etc.) and being different to the lottery exclusively issued by the State. There is no limitation of duration of promotion in the form of games of chance under Decree 81/2018. Time limit and procedure for submitting 50% of prize value to state budget in case of no prize winners is detailed under Decree 81/2018;
• Article 15.2 of Decree 81/2018 specifies obligation of traders providing e-commerce trading platform and online promotion website. Particularly, among others, they must request traders in the platform to provide information of promotion, be responsible as the third party in provision of promotion information for consumers;
• In case of sale of goods/ service with promotion by contest forms and games of chance, the prize must be announced within 45 days from the end date of promotion duration, instead of 30 days as provided under Decree 37/2006; and
• Informing of promotion programs (except promotion by games of chance) to competent authority is not required if total value of prize and gifts is under VND 100 million, or promotion is on e-commerce trading platform and online promotion website. This provision could potentially reduce much paperwork for small businesses with small scale promotion campaigns.

This post is contributed by Le Minh Thuy, a legal trainee at Venture North Law Limited.

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).