Early 2010, two Australian executives of Jestar Pacific, a joint venture airline between the State-owned Vietnam Airline and Australia’s Qantas Airways, were not permitted to leave Vietnam after the carrier reported losses on fuel contracts. To protect its men, Qantas claimed that these persons did nothing wrong and the loss of Jestar Pacific was due to the then global financial crisis. Their Vietnamese partner was silent.

In 2012, 04 board directors[1] of a well-known private bank in Vietnam were imprisoned because they signed a resolution in the belief that it would be good for the bank and its contents were not expressly prohibited by laws. The resolution’s implementation later on resulted in huge losses to the bank (i.e. – depositing the bank’s money in another bank for higher interest rate but all the money was finally lost to an individual).[2] In that incident, the rest of the board including expatriates who did not sign the document were untouched.[3]


I was asked by several directors and officers about stuff like ‘what are my personal liabilities that may arise from wrongdoings while running a Vietnam-based company?’ or ‘how Vietnamese law protects me as an expatriate director?’.

Foreign investors should be concerned too because their nominated director(s) usually forms a minority block of a startup’s board.  The issue is what would happen to a director if the board, as a single voting block, has adopted a decision ultimately detrimental to the company? 

This issue becomes increasingly critical because the Enterprise Law,[4] for the first time, allows a qualified shareholder to sue managers on behalf of the company if the latter is deemed to have breached their ‘managers’ obligations or duties.[5]

As a matter of Vietnamese law, a board director or a CEO could be held liable individually if he/she has breached obligations and responsibilities of a manager. Among them, a failure to ‘perform assigned works’ or ‘a breach of fiduciary duties’ would be the most relevant. When it comes down to fiduciary duties, following key qualifiers might be counted:

  • duty of care: (a) having acted in a sufficient and reasonable manner when making his/her decision or (b) having reasonably sought information that may affect his/her decision;
  • duty of loyalty: having no business in competition with the company;
  • duty of acting in good faith/obedience:  not intentionally having breached the laws or aimed at objectives other than those of the company

Once sued, even if a director is not ultimately held liable, the litigation consequences could be devastating in terms of both time and money spent. To protect him/herself, a director would basically have 02 options:

  • to seek the target company’s indemnification (Target Indemnification); and/or
  • to request a directors’ and officers’ liability insurance policy (D&O Insurance).

The below table which discusses key characters of both may help you to choose the appropriate one(s).



Most common forms
  • Indemnification letter/agreement;
  • Charter (articles of association) of the target company;
  • Labor contracts/separate agreements with the relevant directors;
  • Shareholders’ agreement to which the target company is  also a party.
D&O insurance policy
Contracting parties
  • Target company;
  • Directors/officers.
  • Target company;
  • Insurance company;
  • Directors [as the insured party]
Coverage of ‘wrongful acts’ 6 Unclear but normally target company’s indemnification excludes breaches of the directors/officers’ duties. Depending on policies but generally wrongful acts are covered (i.e. – with fraudulent and criminal activities excluded).7
Enforceability Unclear because the Enterprise Law is totally silent on such indemnification, especially with respect to derivative suit. Though such arrangement should be ultimately considered parties’ freedom of contract and therefore legally binding, the enforceability of which has not been tested in practice. Yes.
Renewal N/A Annual until the director’s walking away.
Director’s vulnerability Yes, if the target company goes bankrupt, does not have sufficient cash or simply is not willing to pay for whatever reasons. Virtually no.
Relationship Indemnification agreements often require a target to obtain (or use commercially reasonable or best efforts to obtain) D&O insurance.
Widely used in Vietnam among Foreign invested enterprises (FIEs) including startups invested or acquired by foreign investors.
  • Local banks and major local companies;
  • Large FIEs


[1] One of these directors was the former Minister of Planning and Investment, the key State body in charge of investment and business activities in Vietnam.

[2] They were charged with the crime of ‘deliberately contravene the State’s regulations on economic management causing serious consequence’

[3] http://cand.com.vn/Ban-tin-113/Khoi-to-Chu-tich-HDQT-Ngan-hang-ACB-cung-3-dong-pham-khac-210881/

[4] Enterprise Law of Vietnam dated 26 November 2014.

[5] Also known as ‘derivative suit’.

[6] Wrongful acts often refer to ‘any breach of duty, neglect, error, misstatement, misleading statement or omission by the director or officer committed in their capacities as such’.

[7] For public companies, D&O of directors must be approved by the General Meeting of Shareholders and must not cover liabilities arising from ‘violation of laws and charter of the public company’.