As the personal liability of corporate managers tightens, a practical question many FDI enterprises are asking is whether to buy liability insurance for directors, board members and executives — commonly known as D&O (Directors and Officers) liability insurance. The answer has two clear parts: legally, D&O is fully lawful in Vietnam but not mandatory; from a risk-management perspective, it is an increasingly worthwhile tool to consider, especially after 01/7/2025.
The Legal Framework: D&O Is Lawful but Not Mandatory
Managers’ liability insurance falls under non-life insurance business lines under the Law on Insurance Business 08/2022/QH15 (effective from 01/01/2023, amended by Law 139/2025/QH15 effective from 01/01/2026). Specifically, Article 4 of Decree 46/2023/ND-CP lists “liability insurance” among the non-life insurance business lines that insurers may offer. D&O products therefore have a full legal basis to be marketed and concluded in Vietnam.
It must be stated firmly, however: D&O is not compulsory insurance. Article 8 of the Law on Insurance Business sets out the categories of compulsory insurance, and managers’ liability insurance is not among them. No legal instrument requires enterprises — including FDI enterprises or public companies — to buy D&O. Every purchase decision is voluntary, based on each enterprise’s own risk assessment.
Why FDI Enterprises Should Consider D&O After 01/7/2025
The first reason is directly legal: from 01/7/2025, Law 76/2025/QH15 amending the Enterprise Law 59/2020 took effect, with indirect amendments increasing managers’ personal liability risk — from the personal liability of the legal representative and the beneficial owner regime to the capital declaration rules. As the legal risk ceiling rises, the need to transfer part of the financial risk to insurance naturally grows with it.
The second reason comes from practice: the market has recorded cases of corporate managers facing liability scrutiny over disclosure and corporate governance at companies such as Nam Long, DHG Pharma and Mavin. While each case has its own context, the general trend is that regulators and shareholders are increasingly willing to question the personal responsibility of executives. For FDI enterprises, where board members and executives are often foreign nationals seconded by the group, a personal-liability matter is not only a financial issue but also affects the reputation and career of the individuals concerned.
What D&O Covers — and What It Does Not
In principle, D&O pays the legal costs and compensation that a manager must bear when sued over acts within the scope of managerial functions — for example an investment decision causing losses that shareholders sue over, or errors in information disclosure. But the protection always has limits: intentional violations of law, fraud and personal enrichment are typically excluded. Enterprises should read the exclusion clauses in the insurance contract carefully instead of assuming that “buying D&O means peace of mind”.
Another point for caution: whether D&O premiums are deductible expenses when determining taxable corporate income is not yet clearly guided enough to be stated with certainty. Enterprises should seek tax advice before accounting for them. Similarly, the full list of insurers currently offering D&O products and the market premium levels are information to be surveyed directly, as the market is still developing.
How FDI Enterprises Should Approach D&O
Rather than asking “to buy or not to buy”, a more practical approach is to assess along a risk matrix: the scale and complexity of operations in Vietnam, the number of managers who are foreign nationals, the industry’s sensitivity to regulators, and any history of internal disputes. For groups that already buy D&O globally, check whether the global programme extends coverage to the territory of Vietnam, to avoid duplication or gaps.
Conclusion
D&O insurance in Vietnam is a lawful product within the non-life insurance business, but entirely voluntary — no mandatory requirement exists. Against the backdrop of rising personal liability for managers after 01/7/2025 and increasingly strict governance-liability practice, D&O is a risk-management tool that FDI leadership should put on the agenda, alongside compliance and internal governance improvements.
If your enterprise is considering a D&O programme or needs a review of managers’ liability risk in Vietnam, talk to us.
Disclaimer: This article provides general legal information based on the cited legal instruments and does not constitute legal advice for any specific case. Laws and implementing guidance may change; you should consult a lawyer before making decisions.
Content reviewed by the FLAW AI Legal Council; publication is pending owner approval — FLAT Law Firm’s AI-assisted legal review system. This is not a lawyer’s opinion and does not replace direct legal advice.