Personal Liability And Corporate Liability Under New Penal Code

On June 20, 2017, the National Assembly passed the revised Penal Code (“new Penal Code”). It became effective on January 1, 2018. Several significant changes have occurred. Several acts, previously criminal, are no longer punishable. On the other hand, several previously innocent acts have been criminalized. One very large change is that an enterprise--not just an individual-may now be guilty of a crime [1]

This article is intended to raise the awareness of corporate officials and white-collar workers. It discusses several new provisions that relate to: (i) brokering, giving or receiving a bribe; (ii) failure to contribute social, health, unemployment insurance (“SHUI”); (iii) illegal termination of employment; (iv) corporate liability; and (v) removal and addition of several economic offenses.

Brokering, giving or receiving a bribe

Previously, if brokering, giving or receiving a bribe or a commission, involved a non-state entity, the act was merely an employment matter. It was not a criminal act. That is, non-state entities were not able to take legal action against their employees for such conduct. The situation has changed. The following conduct is now punishable under the new Penal Code.

1. a manager, employee, salesperson of a company who gives or offers to give a bribe of VND 2,000,000[2] or more (whether directly or via an intermediary) to a potential customer in exchange for business, is accountable (Art. 364);
2. a person who brokers a bribe of VND 2,000,000 or more is subject to criminal charges (Art. 365)
3. an officer of a company is subject to criminal charges if he receives or takes steps to receive a bribe of VND2,000,000 or more (whether directly or via an intermediary) in order to take or forebear from taking action in favor of the giver or at the giver’s request (Art. 354);
4. a person who is aware of any case set out in (a), (b) or (c) above, which involves an amount of VND 500,000,000 or more, or multiple violations, etc., and who fails to report the matter to the police, is subject to criminal liability (Art. 390); and
5. a person who is coerced to give a bribe is not criminally accountable if he discloses the matter to the police before the act is detected. In case of proactive disclosure, he is entitled to the return of amounts which he has paid to the recipient (Art.364). This provision is intended to encourage a giver to report coerced payments.

Corporations should consider measures to take the new realities into account. For example:

• A serious, open commitment against corruption and bribery by senior management;
• A comprehensive code of business conduct and internal labor regulations which are effective tools to mitigate exposure;
• Regular training, internal audit and risk assessment to help establish rules and a proper culture;
• An investigation may be required in certain circumstances.

Criminal liability for evasion of SHUI

For the first time the law now imposes criminal liability for the evasion of SHUI. Particularly, a person who is responsible to pay SHUI and who fails to contribute SHUI for 10 or more employees is subject to criminal liability. This provision protects employees and fixes liability on the company’s legal representative. Criminal liability for the evasion of SHUI also applies to the employer. To avoid criminal exposure, a company must carefully review its SHUI contributions in the same way that it pays attention to its tax compliance.

Illegal termination of employment

The new Penal Code provides another protection for employees. A person who terminates an employee illegally or who issues a decision of dismissal of a public official /servant or who forces or threatens to force a public official/servant or employee to terminate employment for a self-seeking purpose, causing “serious consequences”, may be subject to criminal liability. The concept of “serious consequences” was used in the old penal code, and it has been elaborated upon in Supreme Court resolutions. Generally, it means consequences such as death, injury involving several people or a serious injury that is greater than the injury level set out in the Supreme Court’s guidance, or damages suffered by a pregnant woman, etc. This guidance still applies in the new Penal Code. However, there is no separate guidance on the concept of “serious consequences” used in this particular new provision. This matter may be elaborated upon by the Supreme Court in new resolutions.

Corporate liability

In the past, only natural persons were held for criminal liability. The new Penal Code introduces a new concept whereby a commercial legal entity (eg, a company, partnership, etc.) may also be liable for several offenses such as counterfeiting, insider trading, infringement of intellectual property, tax evasion, SHUI evasion, and much more (about 30 offenses). See the list of corporate criminal acts in footnote (1).

If a commercial legal entity commits an offense, it may face one of the following penalties:

• monetary fine;
• either temporary or permanent suspension of business operation;
• prohibition to operate in certain business areas;
• prohibition to raise capital.

Conviction of a commercial legal entity for a criminal act does not override the personal liability of any person involved in the offense.

Removal and addition of economic offenses

In the past, failure to register a business activity or to conduct business without an appropriate license was considered criminal. This is no longer so. Decriminalization of such acts has been welcomed, particularly by the start-up community.

A number of offenses that are not deemed to be harmful to society have also been abolished:

1. distribution of dividends by using additional surplus of the charter capital of a credit institution;
2. providing incorrect data and untrue documents that cause serious consequences in the establishment and implementation of socio-economic plans of the Government; and
3. offenses which involve a violation of rules governing issuance of an industrial property protection title. Frankly, these are marginal activities.

In parallel with the decriminalization of certain activities, certain other commercial matters have been criminalized. They are:

1. forging documents in order to make, list securities;
2. insurance fraud;
3. SHUI fraud;
4. SHUI evasion;
5. offenses involving a breach against regulations on competition;
6. offenses involving a breach against regulations on asset auction;
7. breach of regulations on use and management of state property which causes loss and leakage;
8. breach of regulations on use and management of public investment capital causing serious consequences;
9. breach of regulations on accounting affairs causing serious consequences;
10. breach of regulations on bidding which causes serious consequences;
11. abuse of power and authority to connive and protect taxpayers which cause serious consequences;
12. breach of regulations on investment and development of construction work which causes serious consequences;
13. breach of regulations on compensation, support and resettlement in respect of land recovered by the State; and
14. breach of regulations on management of wild animals.

The new provisions have not been tested nor elaborated upon. The Supreme Court is expected to issue guidance soon but the basic new rules are now set out. Companies should review the newly regulated areas and then look at their existing practices and compliance programs.  

LIST OF CRIMINAL ACTS FOR WHICH A COMPANY IS NOW LIABLE

1. Smuggling;
2. Illegal transport of goods or money across the border;
3. Manufacturing and trading of banned goods;
4. Possession and transport of banned goods;
5. Manufacturing and trading of counterfeit goods;
6. Manufacturing and trading of counterfeit food or food additives;
7. Manufacturing and trading of counterfeit medicines for treatment or prevention of diseases;
8. Manufacturing and trading of counterfeit animal feeds, fertilizers, veterinary drugs, pesticides, plant varieties, animal breeds;
9. Speculation;
10. Tax evasion;
11. Printing, issuing, dealing in illegal invoices and receipts for payment of state revenues;
12. Provision of false information or concealment of information in securities activities;
13. Use of internal information for trading securities;
14. Manipulation of securities market;
15. Insurance fraud;
16. Evading payment of social insurance, health insurance, unemployment insurance for employees;
17. Offenses involving a breach against regulations on the law on competition;
18. Infringement of copyright and related rights;
19. Infringement of industrial property rights;
20. Offenses involving a breach against regulations on survey, exploration and extraction of natural resources;
21. Offenses involving a breach against regulations on extraction and protection of forests and forest product management;
22. Offenses involving a breach against regulations on management and protection of wild animals;
23. Causing environmental pollution;
24. Offenses involving a breach against regulations on prevention, response and relief of environmental emergencies;
25. Offenses involving a breach against regulations on protection of irrigation works, embankments and disaster protection work, offenses against regulations on protection of river banks;
26. Bringing wastes into Vietnam’s territory;
27. Destruction of aquatic resources;
28. Destruction of forests;
29. Offenses involving a breach against regulations on management and protection of endangered, rare animals;
30. Offenses involving a breach against regulations on management of wildlife sanctuaries;
31. Importing, spreading invasive species;
32. Terrorism financing; and
33. Violations involving a breach of regulation on conscription.

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Nguyen Huu Hoai
Partner, Russin & Vecchi
T: +84-28 3824 3026
Email: nhhoai@russinvecchi.com.vn

Nguyen Huu Hoai is a Partner of Russin & Vecchi. He has practiced law for 20 years. His practice focuses mainly on M&A, corporate, power projects, project finance and taxation. He has assisted clients in complicated corporate-restructuring and tax matters. This article first appeared in Vietnam Law and Legal Forum magazine.