Tiếng ViệtAccording to a VCCI report, 65% of enterprises have encountered contract disputes, 40% have faced tax or accounting penalties, and 30% have experienced labor-related claims within the past three years. A manufacturing company in Binh Duong was fined VND 12 billion for tax violations, while a Hanoi-based startup was forced to suspend operations for six months due to a labor dispute.
These figures reveal that internal legal risks are no longer potential threats — they are immediate and tangible dangers to business continuity. So how can enterprises detect these risks early and manage them effectively?
In this article, LexConsult & Partners analyzes the four most common categories of internal legal risks, providing practical solutions for early prevention and effective internal control. For comprehensive legal support, businesses are encouraged to explore LexConsult’s corporate legal services.
1. Internal Legal Risks Arising from Contracts and Commercial Commitments
1.1. Indicators of Contractual Risk
In business, a contract serves as the legal shield that safeguards the rights and obligations of the parties. However, in practice, nearly 65% of corporate disputes stem from poorly drafted contracts or procedural signing errors.
Many enterprises enter into agreements without conducting proper legal due diligence, resulting in disputes, loss of rights, or situations where the counterparty exploits contractual loopholes to evade obligations. Others rely on “copy–paste” templates or sign bilingual/foreign-language contracts without legal review — leading to serious financial and legal consequences.
| Common Risk | Potential Consequence |
|---|---|
| Ambiguous payment terms; absence of penalty clauses | The counterparty delays or refuses payment without clear legal grounds for enforcement |
| Signing without proper authority or power of attorney | Contract may be declared invalid under Article 117 of the 2015 Civil Code |
| Lack of clear dispute resolution clause | Jurisdiction cannot be determined when disputes arise |
| Relying on a foreign partner’s contract template governed by foreign law | Disadvantageous if foreign law and court jurisdiction apply |
To self-assess potential risks, businesses should consider:
– Does the company have a standardized set of contract templates?
– Is the signatory properly authorized in writing?
– Are payment terms, penalties, and dispute resolution provisions clearly defined?
– Has the governing law and dispute resolution forum been identified?
– Are contracts and appendices centrally stored and managed?
If the answer to any of these questions is “no,” contractual risk already exists.
To mitigate such risks, many companies now engage corporate lawyers from the drafting and legal review stages.
1.2. Practical Solutions for Contract Risk Management
To strengthen internal control and minimize exposure, enterprises should adopt the following measures — regardless of size or sector:
– Establish standardized contract templates: Develop model contracts for each transaction type — sales, services, distribution, agency, or business cooperation. Each template should be periodically reviewed by a lawyer to ensure compliance with updated laws and to incorporate lessons from past disputes.
– Clearly define signing authority: Only the legal representative or a duly authorized person in writing may sign contracts. When contracting with partners, always request a copy of their Business Registration Certificate and evidence of signing authority to avoid invalidity risks.
– Conduct legal due diligence before signing: Particularly for high-value contracts, English-language agreements, or foreign transactions, legal review is essential before execution. Pay special attention to clauses on termination, compensation, force majeure, governing law, and penalties.
– Centralize contract management and storage: Establish a secure, centralized system for storing contracts, appendices, acceptance records, payment receipts, and relevant email correspondence — all of which serve as critical evidence in dispute resolution.
– Periodic review and improvement: After each dispute or audit, update internal templates and create a contract risk register to track and prevent recurring issues.
Do not wait for a dispute to arise to review your contracts. Engage a corporate lawyer from the drafting stage — a small investment that can save your company millions in potential losses from contractual disputes.
2. Internal Legal Risks in Tax and Accounting Compliance
2.1. Common Tax and Accounting Violations Within Enterprises
Compliance with tax and accounting laws is not only a statutory obligation but also a core element of financial transparency and corporate integrity.
In practice, however, many enterprises—particularly small and medium-sized enterprises (SMEs)—face internal legal risks due to weak internal control systems or inadequate understanding of legal regulations.
Failure to stay updated with new tax regulations, errors in declarations, late submissions, or misapplication of tax rates often lead to tax reassessments, administrative penalties, or even criminal liability. For instance, several foreign-invested enterprises (FDIs) have been penalized for misreporting VAT due to confusion between taxable and non-taxable services.
| Tax & Accounting Risk | Legal and Financial Consequences |
|---|---|
| Incorrect accounting entries or violation of accounting standards | Misstated financial reports due to improper recognition of revenue, expenses, or liabilities. Violations under the Law on Accounting 2015 and Decree 41/2018/NĐ-CP may result in administrative sanctions, or even criminal prosecution in severe cases. |
| Failure to declare, or incorrect/late tax filings | Violations of obligations regarding VAT, Corporate Income Tax, and Personal Income Tax filings. Under the Law on Tax Administration 2019 and Decree 125/2020/NĐ-CP, companies may face heavy fines, back taxes, late payment interest, and enforcement measures. |
| Transactions without valid invoices or using fake invoices | One of the most serious tax risks, potentially leading to charges of tax evasion under Article 200 of the 2015 Penal Code (amended 2017). Such invoices cannot be used for tax deduction or as legitimate expenses. |
| Failure to maintain accounting records and financial documents for the statutory period | Enterprises must preserve accounting books and supporting documents for at least 10 years under Article 41 of the Law on Accounting 2015. Missing documentation may severely disadvantage companies during tax inspections or audits. |
The impact of these violations extends far beyond fines or tax arrears — they may disrupt cash flow, impair access to financing, undermine investor confidence, and damage corporate reputation in a competitive market.
Quick Risk Checklist:
– Has your company updated the latest tax regulations?
– Is there a cross-check process for financial statements?
– Are invoices and documents fully digitized and stored for 10 years?
– Does your company conduct periodic audits with an independent auditor?
If any of these answers are “no,” your business is exposed to tax and accounting risks. In fact, some companies have had to engage corporate dispute lawyers to handle tax penalties or administrative appeals against regulatory agencies.
2.2. Practical Solutions for Managing Internal Tax and Accounting Risks
To effectively control and mitigate these risks, enterprises should implement the following measures:
– Standardize tax and accounting procedures: Establish a comprehensive internal accounting and tax compliance process aligned with the latest legal updates. Appoint a dedicated accounting team or engage professional legal and tax advisors to ensure accurate invoicing, declaration, and settlement procedures.
– Continuous training and regulatory updates: Tax and accounting laws are constantly evolving — for example, the Amended Corporate Income Tax Law 2025, effective from 1 July 2025. Companies should organize regular training sessions for accounting personnel or seek legal consultation to ensure compliance.
– Internal audit and periodic review: Conduct cross-departmental reviews or hire independent auditors to periodically evaluate the financial and accounting system, enabling early identification and correction of potential risks.
– Systematic document retention: Implement a combined digital and physical archiving system, ensuring all invoices, financial statements, and supporting records are securely stored and easily retrievable during inspections or audits.
Strict compliance with tax and accounting regulations is not merely about avoiding penalties — it is a strategic component of sustainable risk management. By proactively monitoring and controlling financial–accounting compliance, enterprises can protect themselves from unnecessary crises and maintain long-term operational stability.
3. Internal Legal Risks in Labor and Human Resources Management
3.1. Common Labor Violations Leading to Internal Legal Risks
In today’s increasingly competitive labor market — where employment laws are constantly evolving — labor and human resources management has become one of the most complex and risk-prone legal areas for enterprises, particularly those that are scaling up or employing a large workforce.
Below are some typical violations that often expose businesses to internal legal and financial risks:
| Labor Violation | Legal and Financial Consequences |
|---|---|
| Failure to execute the correct type or term of labor contract | Contract may be declared invalid; disputes may arise; administrative fines under Articles 7 and 18 of the Labor Code 2019 |
| Failure to register wage scales, labor regulations, or submit them to authorities | Lack of legal basis for disciplinary actions; risk of administrative fines under Decree 12/2022/NĐ-CP |
| Unlawful termination of labor contracts | Litigation, compensation liabilities, and reputational damage |
| Violations of working hours, rest periods, or overtime limits (especially in manufacturing sectors) under Articles 105–110 of the Labor Code 2019 | Fines, ESG score reduction, or even contract termination by international partners |
| Late or non-payment of social, health, or unemployment insurance contributions | Administrative fines or criminal liability under Article 216 of the Penal Code 2015 (amended 2017) in severe cases |
| Absence of internal dispute resolution mechanisms | Labor unrest, collective complaints, strikes, or recruitment reputation crises |
For FDI enterprises or export-oriented manufacturers, non-compliance with labor standards can also harm ESG ratings, factory audit results, and long-term contracts with foreign partners.
Quick Self-Check:
– Has your company registered internal labor regulations and wage scales?
– Are 100% of employees under written contracts?
– Are social and health insurance contributions made fully and on time?
– Does your company maintain periodic internal dialogues and dispute resolution procedures?
If you answered “no” to any of the above, your business is at high risk of labor non-compliance — a key reason many companies now engage retainer corporate legal services for ongoing labor compliance management.
3.2. Building a Legally Compliant Human Resource System
To effectively manage labor-related legal risks, enterprises should develop a compliance-oriented HR management system that is preventive, transparent, and synchronized across all levels.
Key recommendations include:
– Maintain comprehensive labor records: Ensure complete documentation — labor contracts, internal regulations, collective agreements, appointment and salary decisions, termination records — all compliant with legal formats and procedures. These serve as the first line of legal defense in the event of a dispute.
– Develop and register internal labor policies: Build internal labor rules, wage scales, and reward–disciplinary regulations, and register them with competent authorities. Clear rules not only reduce disputes but also establish a legal framework for internal discipline.
– Fulfill social insurance obligations fully and on time: Ensure compliance with social, health, and unemployment insurance contributions. Monitor new regulations — for example, the Amended Social Insurance Law 2024 (effective 01 July 2025) — which revises retirement age and pension eligibility conditions.
– Train HR and middle management on labor law compliance: Conduct regular training on labor relations and dispute prevention, especially for companies with large numbers of workers, to minimize internal conflicts and procedural errors.
– Establish internal dialogue and grievance mechanisms: Implement transparent and periodic employee dialogue procedures to identify early signs of conflict and prevent escalation into larger disputes.
Labor management is not merely an administrative function — it is a strategic legal pillar that underpins sustainable business growth.
By controlling legal risks in this area, enterprises can avoid costly lawsuits, retain talent, build employer credibility, and strengthen long-term competitiveness in both domestic and international markets.
4. Internal Legal Risks in Intellectual Property and Brand Protection
4.1. Common Mistakes Leading to Loss of Intellectual Property Rights
According to WIPO, more than 35% of Vietnamese enterprises have lost their trademark rights in international markets due to delayed registration.
This is one of the most underestimated yet most damaging legal risks, as the consequences can be severe and long-lasting.
Common mistakes include:
– Failure to register trademarks or trade names → Competitors may register first and obtain exclusive rights, resulting in loss of brand ownership. Under the Law on Intellectual Property 2005 (amended in 2009, 2019, and 2022), ownership of a trademark is established only upon registration and issuance of a Certificate of Trademark Registration — following the “first-to-file” principle.
– Unauthorized use of intellectual assets belonging to others — such as images, software, documents, or creative products without proper licensing or proof of copyright ownership → constitutes a copyright infringement, subject to administrative penalties or lawsuits under Articles 28 and 35 of the Law on Intellectual Property.
– No clear internal agreement on ownership of creative products — for example, software developed by employees or designs created by in-house designers without a written IP transfer agreement → leading to future disputes over usage or ownership rights.
– Failure to enforce rights against counterfeiting or imitation — when third parties infringe upon the company’s industrial property rights, but the company lacks sufficient legal documentation or evidence to pursue enforcement or litigation.
4.2. Solutions to Protect Intellectual Property Assets
| Preventive Measure | Key Benefits |
|---|---|
| Early registration of trademarks, trade names, patents, and industrial designs | Prevents misappropriation and establishes a strong legal foundation |
| International registration (Madrid System, WIPO) | Protects the brand across multiple jurisdictions |
| Establish internal IP management procedures | Clarifies ownership among employees, freelancers, and partners |
| Timely monitoring and enforcement of IP infringements | Prevents counterfeiting, protects market share, and maintains brand integrity |
| Maintain ownership records and evidence of use | Strengthens the company’s legal position in disputes and court proceedings |
Quick Self-Check:
– Has your trademark been registered in Vietnam and internationally?
– Do you have written agreements transferring IP ownership from employees or partners?
– Is there a process to monitor and handle counterfeiting or imitation?
– Are ownership certificates and usage evidence properly archived?
Once an intellectual property dispute arises, the damage is not limited to financial loss — it directly affects market share, brand reputation, and investor confidence. Numerous Vietnamese brands have lost ownership of their trademarks abroad due to delayed international registration.
Similarly, startups with innovative products but unclear IP ownership often face investor rejection or ineligibility for IPO.
When counterfeit or imitation products appear and the enterprise lacks an effective protection mechanism, it risks losing both market share and consumer trust — especially in industries such as food, cosmetics, pharmaceuticals, and technology.
Intellectual property is not merely a legal issue — it is a valuable intangible asset that can be valued, transferred, licensed, or pledged as collateral. The earlier a company establishes an IP risk management system, the more effectively it can protect its creative assets and build a solid foundation for fundraising, M&A transactions, and international expansion.
Internal legal risks — if left uncontrolled — can cause businesses to lose money, reputation, and growth opportunities. The solution lies not in reactive measures but in proactively establishing a robust internal legal governance framework from the outset.
Let LexConsult & Partners be your trusted corporate legal advisor in building a comprehensive “legal shield” — the foundation for sustainable growth and long-term stability.
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