Legal violations in business operations are a pressing concern, severely affecting the sustainable development of enterprises and socio-economic order. Understanding and complying with the law is a matter of survival for businesses to operate effectively and avoid unforeseeable legal consequences. This article by NPLaw analyzes the current situation, legal framework, common violations, methods of resolution, and key notes for preventing legal violations in business operations, helping enterprises untangle legal issues, establish effective risk management systems, and mitigate potential risks.

I. Current situation of legal violations in business operations

In today’s market economy, with deeper international integration, Vietnamese enterprises face numerous challenges and risks, including the risk of legal violations in business operations. In practice, such violations occur frequently across various industries and types of enterprises, negatively affecting the business environment, economic order, and the legitimate rights of stakeholders. Common violations include:

  • Tax evasion and tax fraud.
  • Production and trading of counterfeit, imitation, or substandard goods.
  • Violations of food safety and hygiene regulations.
  • Infringement of intellectual property rights.
  • False advertising and unfair competition.
  • Violations of labor and social insurance regulations.
  • Violations of environmental protection regulations.

These violations cause not only financial losses to consumers, business partners, and the state, but also undermine enterprise reputation and affect the overall investment environment.

II. What constitutes legal violations in business operations?

1. Definition

Legal violations in business operations refer to acts committed by organizations or individuals engaged in business that contravene the law, thereby infringing economic management order and the lawful rights and interests of the state, organizations, or other individuals. Such violations may consist of acts (performing prohibited activities) or omissions (failing to perform required activities).

2. Circumstances leading to violations

Common causes include:

  • Tax violations: Tax evasion, incorrect declaration of corporate income tax or VAT, in breach of the Law on Tax Administration 2019.
  • False advertising: Providing inaccurate information on products or services, violating the Law on Commerce 2005.
  • Counterfeit goods: Producing or distributing goods infringing intellectual property rights, under the Law on Intellectual Property 2005.
  • Contract breaches: Failure to perform contractual obligations, violating the Civil Code 2015.
  • Consumer protection violations: Selling low-quality goods, failing to provide warranties, or concealing information, in breach of the Law on Consumer Rights Protection 2023.
  • Data protection breaches: Unauthorized collection or use of customer data, violating the Law on Cybersecurity 2018.

3. Resolution of legal violations

When a violation is identified, enterprises should:

  • Immediately cease the violation and take remedial measures.
  • Collect evidence (contracts, invoices, documents, working records).
  • Report to competent state authorities (inspection, police, etc.).
  • Cooperate with authorities by providing information and facilitating investigations.
  • Compensate for damages caused to affected parties.

III. Legal framework governing business violations

1. Relevant regulations and procedures

Depending on the nature and seriousness of the violation, resolution may take the form of:

  • Mediation: Voluntary settlement between the parties.
  • Commercial arbitration: If agreed upon, disputes are resolved by arbitration pursuant to the Law on Commercial Arbitration 2010.
  • Court proceedings: Civil or administrative cases brought before competent courts under the Civil Procedure Code 2015 and Law on Administrative Procedure 2015.
  • Administrative penalties: Competent state authorities (inspection, police, etc.) may impose sanctions under the Law on Administrative Sanctions 2012 (as amended in 2025).
  • Criminal prosecution: Where acts constitute criminal offenses, criminal liability may be imposed under the Penal Code 2015 (as amended in 2017).

2. Competent authorities

  • State authorities:
    + Market Surveillance Authority (Ministry of Industry and Trade): Handles counterfeit goods and false advertising under Decree 98/2020/ND-CP.
    + Competition and Consumer Protection Authority: Enforces consumer protection under the Law on Consumer Protection 2010.
    + Tax authorities: Handle tax violations under the Law on Tax Administration 2019.
    + Inspectorate of the Ministry of Science and Technology: Handles IP infringements under Decree 99/2013/ND-CP.
  • Arbitration: Commercial disputes resolved at arbitral institutions such as VIAC, under the Law on Commercial Arbitration 2010.
  • Courts: Provincial/district People’s Courts where the enterprise is headquartered or where the violation occurred, under the Civil Procedure Code 2015.

3. Consequences if violations cannot be addressed

If violations cannot be addressed due to inability to identify the violator or insufficient evidence, there will be no remedial measures or compensation, adversely affecting the rights of stakeholders and undermining confidence in the legal system. This may also create negative precedents, encouraging further violations and destabilizing social order.

IV. Questions on legal violations in business

1. Can third parties claim damages caused by business violations?

Under Article 584 of the Civil Code 2015, third parties (consumers, partners) may claim compensation if:

  • Actual damage (property loss, health damage, lost profits) is caused.
  • A causal link between the violation and damage is proven.
  • Claims may be pursued by:
    + Sending notice to the enterprise,
    + Filing complaints with authorities, or
    + Initiating lawsuits before court.
  • Compensation includes actual damages and lost profits, pursuant to Article 302 of the Law on Commerce 2005.

2. Are small enterprises more likely to be sanctioned for violations?

The law does not distinguish between large and small enterprises in administrative sanctions. Penalties depend on the seriousness of the violation and aggravating/mitigating factors. However, small enterprises often face more challenges due to limited resources and lack of compliance capacity, leading to unintentional violations.

3. If an employee commits a violation, is the company liable?

If violations are committed in the course of assigned duties, the company may bear joint or vicarious liability, including:

  • Compensation for damages,
  • Administrative fines,
  • In certain cases, criminal liability, if the employee’s conduct constitutes a crime and the company is at fault.

4. Is periodic compliance review necessary?

Regular compliance audits are crucial to:

  • Detect violations early (tax, contracts, advertising, etc.),
  • Ensure compliance with updated laws (Enterprise Law 2020, Commerce Law 2005, Tax Administration Law 2019, etc.),
  • Reduce legal risks and safeguard reputation.
  • Methods include:
  • Hiring law firms or accountants for compliance audits,
  • Using compliance management software,
  • Training employees on legal responsibilities.

5. How can enterprises adjust operations to ensure compliance and prevent violations?

Enterprises should:

  • Review all business activities to identify legal risks,
  • Research applicable laws and regulations,
  • Develop compliance plans,
  • Train employees on compliance awareness,
  • Engage legal advisors for complex legal matters.

V. Why engage legal counsel on business violations?

Consulting lawyers specializing in business law and dispute resolution is crucial, especially when enterprises are at risk of or accused of violations. Lawyers can:

  • Provide objective, comprehensive legal assessments,
  • Guide evidence collection and preparation of valid legal documentation,
  • Represent enterprises in dealings with competent authorities,
  • Litigate before courts to protect legitimate rights,
  • Minimize legal risks and adverse consequences.

NPLaw offers professional legal consulting services on business law violations, assisting enterprises to:

  • Assess legal risks and design effective preventive measures,
  • Draft legal documents (contracts, regulations, procedures) in compliance with the law,
  • Provide legal support in administrative procedures with authorities,
  • Represent enterprises in resolving disputes,
  • Conduct training programs for managers on business law compliance.

Contact NPLaw today for professional legal consultation and support, safeguarding your business against legal risks and ensuring safe, sustainable operations.