Director duties in Vietnam

The recent arrests of three former directors of ACB, one of the largest private commercial joint stock banks, have demonstrated that how vulnerable a director (or former director) of a public company is exposed to criminal liability when the law is enforced. The Vietnamese Penal Code contains a number of crimes that may be relevant to the activities of a director of a public joint stock company including:

·         A person who unintentionally causes damage to another person’s property valued at VND 50 million or above may be subject to a criminal penalty. Arguably, this provision can be used against a director, who makes a decision resulting in loss for the public joint stock company even if such director can prove that his/her decision is made with good faith and for the best interest of the public joint stock company when it was made.

·         If a person (1) knows information relating to a public company which has not been disclosed and if disclosed would affect materially the price of the public company’s securities, (2) uses such information to trade securities or provides such information to other persons or advises other persons to trade securities on the basis of such information and (3) gains large illegal profit then such person may be subject to a criminal penalty. This provision can be used against a director who violates the insider trading restriction under Vietnamese law.

·         A person who commits various money laundering activities may be subject to criminal liability of up to 5 years or 15 years in serious cases. Monies laundering activities include, among other things, (i) directly involving in financial transactions intended to conceal the illegality of monies or assets obtained from criminal liability, (ii) using monies or assets obtained from criminal liability for business activities or other activities, and (iii) conceal information regarding original, nature or movement of monies or assets obtained from criminal liability.

·         A person who is directly responsible for managing State property but neglects that responsibility causing damage to the State’s property valued at more than VND 50 million may be subject to criminal penalties. This provision could be used against a director of a public joint stock company in which the State owns certain shares.

·         A person who abuses his/her positions and/or powers to deliberately act against the State’s regulations on economic management, causing a loss of more than VND 100 million may be subject to a criminal penalty.

·         A person who negligently fails to perform an assigned task and causes serious consequences may be subject to a criminal penalty.

·       The Penal Code imposes criminal liability on the act of receiving bribes, which is defined as an act, among others, of a person who holds an official position or power and directly or indirectly has received or will receive money, properties or other “material benefit” in any form, which has a value of VND 2,000,000 (approx. USD100) or more “with the intent of taking advantage of his/her official position or power in order to perform or refrain from performing certain acts for the benefit of, or as requested by, the person who offers the bribe”.

The crimes listed in the last four bullet points above in principle should apply only to those who are State officials under the Law on State officials or those who are otherwise entrusted with State power. However, in practice, Government authorities have applied these provisions to staffs or personnel of companies especially State-owned companies. In case a Public joint stock company is a private company, the possibility that these provisions may apply to the company’s staff and personnel is lower than with respect to State-owned companies. However, one cannot rule out the risks from these provisions. If the report on the recent arrest of a construction engineer by Vietnamese police on the ground of bribery action taken by the engineer is correct then such arrest now seems to confirm that the anti-bribery provision under the Penal Code also applies to private companies at least from the police’s point of view.