Short answer: not automatically. The subsidiary is an independent legal entity — its crimes are not automatically attributed to the parent company. The parent is criminally liable only when the parent itself satisfies Article 75 of the Criminal Code (e.g., the parent directed or managed the subsidiary’s criminal conduct) and the offence is within Article 76.
1. The foundation: parent and subsidiary are independent enterprises
- Article 194(2) and Article 196(1) of the Law on Enterprises (consolidated document 67/VBHN-VPQH): the parent company, the subsidiary, and each member company enjoy the rights and obligations of an independent enterprise.
- Article 196(2): contracts, transactions, and other relations between the parent and the subsidiary must be established and performed independently and on an equal footing, under the conditions applicable to independent legal subjects.
Consequence: each legal entity answers for its own conduct. There is no rule of “the parent takes the fall for the subsidiary.”
Beware the article-number trap: the provisions on the parent company’s rights, obligations, and liability toward the subsidiary are in Article 196 (not Article 195 — Article 195 is only the definitional article). Many older articles cite the wrong number.
2. Capital control is not “approval” of the crime
The most common mistake: writing that “the parent is automatically criminally liable because it holds controlling power” — wrong. Capital/personnel control (Article 195) is a governance relationship, not a basis for criminal liability.
Definition of a parent company (Article 195 of the Law on Enterprises): a company is deemed a parent of another company if it: (a) owns more than 50% of charter capital or total ordinary shares; (b) has the direct or indirect right to appoint the majority or all members of the Board of Directors, the Director or General Director; or (c) has the right to decide amendments and supplements to the subsidiary’s charter. Article 195(2) prohibits the subsidiary from buying shares in or contributing capital to the parent, and prohibits cross-ownership.
The parent’s controlling power does not mean the parent “approved” the subsidiary’s crime (condition (c) of Article 75 of the Criminal Code). To prosecute the parent, it must be proven that the parent itself satisfies each Article 75 condition as an independent subject.
Nor should the opposite be written — “the parent is fully immune”: if the parent directed or managed the subsidiary’s criminal conduct, the parent is still prosecuted under Article 75.
3. Three independent layers of liability
Keep three layers strictly separate; do not infer one from another:
- (a) Criminal liability of the subsidiary — if the four Article 75 conditions are met and the offence is within Article 76;
- (b) Criminal liability of the parent — only when the parent itself satisfies Article 75 (e.g., directing or managing the subsidiary’s crime) and the offence is within Article 76;
- (c) Civil liability of the parent — under Article 196(3)–(4) of the Law on Enterprises: a parent that intervenes beyond the authority of the owner, members, or shareholders, forcing the subsidiary into business activities contrary to normal business practice or into non-profitable activities without reasonable compensation in the fiscal year, causing damage to the subsidiary → the parent is liable for that damage; the parent’s managers who carried out the intervention are jointly and severally liable. This is civil compensation liability, not criminal liability.
Example (illustrative): A parent holds 80% of the subsidiary (meeting the Article 195 definition). The subsidiary falsifies records to evade tax on its own, with the parent’s management unaware and uninvolved — the parent is not criminally prosecuted. Conversely, if evidence shows the parent issued resolutions directing the subsidiary’s fraud and benefited from it, the parent may be prosecuted under Article 75 as an independent subject.
4. No “piercing the corporate veil” doctrine in Vietnamese criminal law
Attributing liability to the parent in a criminal case goes only through the Article 75 filter case by case — there is no general “piercing the corporate veil” rule making the parent answer for the subsidiary.
Practical note: in major economic crime cases, prosecution authorities often examine the parent’s directing role through evidence (resolutions, directives, benefit flows) — this is an evidentiary process, not a default rule. Do not assert that “in practice the parent is always pursued.”
FAQ
Q: The parent owns 100% of the subsidiary; the subsidiary commits a crime — is the parent prosecuted?
A: Not automatically. It must be proven that the parent itself satisfies Article 75 of the Criminal Code (e.g., directing or managing the criminal conduct) and the offence is within Article 76. Capital control (Article 195) does not mean “approval” of the crime.
Q: The parent forces the subsidiary into loss-making business — what liability arises?
A: Civil liability under Article 196(3)–(4) of the Law on Enterprises (ultra vires intervention causing damage → compensation; the parent’s managers jointly liable) — not criminal liability.
Q: May the subsidiary contribute capital to the parent?
A: No. Article 195(2) of the Law on Enterprises prohibits the subsidiary from buying shares in or contributing capital to the parent, and prohibits cross-ownership.
Legal sources
- Criminal Code 2015 — consolidated document 135/VBHN-VPQH (05/9/2025) — Articles 75, 76 — in force (incorporating amendments by Law 86/2025/QH15, promulgated 25/6/2025, effective 01/7/2025)
- Law on Enterprises — consolidated document 67/VBHN-VPQH — Articles 194, 195, 196 — in force (Articles 195–196 unchanged since 01/01/2021, not amended by Law 76/2025/QH15)
- Full texts: thuvienphapluat.vn (accessed 14/10/2026)
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Transparency note: this draft is under internal review and has not been published. It is for general information only and does not replace legal advice for a specific case; it is not a lawyer’s opinion and is not marked as “reviewed by a lawyer”.
For reference only, not legal advice. Content quality-checked by the AI Legal Council; not yet reviewed by a human lawyer.