Related-party transactions are where a joint venture’s profit quietly leaks away: a warehouse lease, a raw material order or an internal loan involving the majority partner can all be legitimate, yet each becomes a value-transfer channel if approval mechanics and market-price benchmarking are missing.
The legal framework
Law on Enterprises 59/2020/QH14 regulates the issue directly: Article 67 for limited liability companies and Article 167 for joint stock companies both require transactions between the company and related persons of managers, members or shareholders to be approved by the governing body, and the interested person may not vote on their own transaction.
Disclosure duties depend on company type: public and listed joint stock companies must disclose related-party transactions under securities law, while a closed joint venture has no equivalent public disclosure duty but must still approve, record and file the transaction for audit and tax finalisation purposes.
On the tax side, associated transactions must follow the arm’s length principle and transfer pricing documentation duties under the current tax administration frame, in which Decree No. 255/2026/ND-CP replaced Decree No. 132/2020/ND-CP from 1 July 2026; a re-priced related transaction leads to additional corporate income tax assessments for the venture.
Applied analysis and a practical example
A fair related-party transaction must answer three questions: is the price at market level, are payment terms the same as with a third party, and does the company genuinely need this transaction. The approval file should carry at least one independent price benchmark, because that is the first evidence both tax authorities and auditors ask for on review.
An effective approval mechanism combines a value-threshold list of transactions needing collective approval, a minority veto over dealings with the majority’s related persons, and a periodic consolidated report of all related transactions in the period. Without clear thresholds, either every small purchase needs a meeting or the mechanism becomes a formality that approves everything.
When an unfair transaction surfaces, the consequences go beyond unwinding it: the approving resolution may be void, the interested manager must compensate the company, shifted profit can be re-priced for tax, and inside the venture the injured side gains grounds to trigger a special audit or renegotiate the governance structure.
Practical example: A Singapore-invested electronics venture in Vinh Phuc bought components exclusively from the local partner’s trading affiliate. A year-end audit benchmark showed prices persistently above comparable imports; the venture re-tendered supply, booked a price adjustment for the excess margin, and adopted a rule that any affiliate supply contract above a set value needs an independent quotation attached before approval.
Action checklist
- Map the related persons of each contributor and manager
- Set value thresholds for transactions needing collective approval
- Apply the interested-party abstention rule to every such deal
- Require market price benchmarks inside each approval file
- Report all related-party transactions periodically to the board
- Align transfer pricing files with current tax duties
Deeper notes
Do not confuse internal approval with tax compliance: a transaction approved in perfect corporate form can still be re-priced by the tax authority if its price is off-market, and vice versa. The two files — the governance file and the transfer pricing file — must be built in parallel for the same major transaction.
Where one contributor is a multinational group, the group’s global related-party policy is often stricter than Vietnamese law; the charter should adopt the higher standard as the venture’s common standard, so a transaction cannot pass on one side’s rules while breaching the other’s.
Frequently Asked Questions
How must related-party transactions in a joint venture be approved?
A transaction between the venture and a related person of a contributor or manager must be approved by the members’ council, the board or the general meeting of shareholders, depending on company type and value thresholds, under Articles 67 and 167 of Law on Enterprises 59/2020/QH14. The hard rule is that the interested person does not vote on their own transaction, and the file must show that price and terms are no worse than a deal with an independent third party.
Must related-party transactions be disclosed?
A non-public joint venture has no duty to disclose the transaction to the market, but the deal must still be approved, recorded in governance files, presented in the financial statements and supported by transfer pricing documentation for the tax authority. If the venture is a public or listed company, securities-law disclosure duties apply on top, and disclosure breaches are penalised separately.
How is an unfair related-party transaction handled?
An unfair related-party transaction can be declared void or its approval annulled, the benefiting manager and related person must compensate the company, and the tax authority may re-price the deal and assess additional corporate income tax with late-payment interest. Inside the venture, the injured side may also demand a special audit and treat the episode as grounds to review the whole pattern of dealings with that related party.
This article has been quality-reviewed by the FLAW AI Legal Council
