Improving Due Diligence with AI: A Review of Enterprise Law 2020

In Vietnam’s fast-evolving business landscape, due diligence has become a defining feature of corporate integrity. Whether for mergers, acquisitions, capital contributions, or joint ventures, the process of verifying a company’s legal, financial, and operational health determines not only the safety of an investment but also the credibility of the transaction itself. As Vietnam continues to integrate into global markets and tighten its regulatory framework, improving due diligence practices is no longer optional — it is fundamental to sustainable business.

At its core, due diligence serves as the bridge between business ambition and legal certainty. The Luật Doanh nghiệp 2020 (Law on Enterprises 2020) requires transparency in corporate structure, shareholding, and governance. Under Articles 8 and 13, every enterprise must operate with legal compliance, integrity, and accountability, while the roles of the Hội đồng thành viên (Members’ Council) or Hội đồng quản trị (Board of Directors) are clearly defined in Articles 54 and 156. Yet, in practice, many transactions still rely on incomplete records, outdated charters, or inconsistent shareholder agreements. A well-executed due diligence process, supported by both legal expertise and modern technology, ensures that these vulnerabilities are identified before they evolve into disputes.

Corporate law in Vietnam offers a rich framework for assessing legal risks, particularly in areas such as ownership verification and capital contribution. Article 47 of the Law on Enterprises 2020 emphasizes that charter capital must be fully contributed within 90 days from the date of enterprise registration. Failure to comply results in automatic adjustment of the company’s capital structure and potential administrative penalties under Nghị định 122/2021/NĐ-CP. This provision highlights a common oversight uncovered during due diligence: firms declaring capital on paper but failing to complete the required transfer or valuation of in-kind assets. For investors, the absence of proper capital confirmation documents can signal significant legal exposure.

Similarly, corporate governance and shareholder rights — detailed in Articles 115 to 149 — are frequent focal points of due diligence reviews. Questions often arise about voting rights, dividend entitlements, or conflict resolution mechanisms in joint-stock companies (công ty cổ phần). Where minority shareholders are concerned, Article 115 grants them the right to access financial statements, minutes, and resolutions — a safeguard often neglected in private company transactions. Ensuring these rights are properly reflected in company records and charters is not just a procedural check; it is evidence of compliance with statutory governance standards.

The Bộ luật Dân sự 2015 (Civil Code 2015) also underpins the legal integrity of corporate transactions. Articles 117 and 122 establish the validity of civil transactions, requiring capacity, consent, and lawful purpose. When legal advisors conduct due diligence on share transfer contracts, loan agreements, or guarantees, these provisions serve as the baseline for assessing enforceability. An agreement executed without proper authorization — for instance, by a director acting beyond the powers granted under Article 162 of the Law on Enterprises 2020 — may later be deemed void or unenforceable. Detecting such defects early can prevent disputes that would otherwise delay or invalidate an acquisition.

Financial and investment due diligence must also take into account the Luật Đầu tư 2020 (Law on Investment 2020), which governs conditional business lines and foreign ownership limits. Under Articles 16 and 17, certain sectors — such as telecommunications, education, and finance — require specific approvals or licensing thresholds. Investors conducting cross-border transactions often overlook these restrictions, only to face regulatory intervention post-closing. AI-assisted legal review tools can now automatically cross-reference a company’s business lines (ngành nghề kinh doanh) with the official list of conditional sectors issued under Nghị định 31/2021/NĐ-CP, highlighting potential compliance gaps instantly. This combination of human legal reasoning and machine precision marks the future of due diligence in Vietnam.

The importance of transparency extends further into the capital markets. The Luật Chứng khoán 2019 (Law on Securities 2019) reinforces disclosure obligations for public and listed companies. Articles 122 and 123 require issuers to provide truthful and complete information on ownership, liabilities, and affiliated transactions. For firms preparing for IPOs or private placements, AI-driven document analysis can assist law firms and auditors in ensuring that prospectuses align with these statutory disclosure requirements — reducing the risk of administrative sanctions under Nghị định 156/2020/NĐ-CP.

Equally critical is compliance with tax and labor laws. The Luật Quản lý Thuế 2019 (Law on Tax Administration 2019) and Bộ luật Lao động 2019 (Labor Code 2019) shape a company’s operational footprint and liabilities. Hidden tax arrears, unregistered employee contracts, or violations of wage regulations under Articles 90 and 96 of the Labor Code can have severe implications for buyers. In Vietnam’s increasingly transparent digital tax environment, where electronic invoices (hoá đơn điện tử) and tax declarations are monitored in real time, due diligence must go beyond document collection to include systemic verification — a task now increasingly supported by AI-enabled compliance tools.

Ethical and environmental dimensions are also gaining prominence. The Luật Bảo vệ Môi trường 2020 (Law on Environmental Protection 2020) imposes obligations for environmental impact assessments and sustainability reporting. For manufacturers and exporters, failure to comply with Articles 28 and 111 may result in suspension or revocation of business licenses. Modern due diligence now includes ESG (Environmental, Social, Governance) assessments, combining legal, operational, and reputational factors to form a holistic risk profile.

Ultimately, improving due diligence in Vietnam requires a dual commitment — one to legal precision, and another to technological adaptation. AI can accelerate the process by extracting relevant clauses, detecting inconsistencies, and comparing company data against statutory benchmarks. But it is Vietnamese corporate law that provides the compass: the principles of transparency, good faith, and accountability embedded in the Law on Enterprises and the Civil Code ensure that every transaction, no matter how complex, remains grounded in lawful certainty. The synergy between these frameworks — legal tradition and technological innovation — defines the future of corporate practice.

As Vietnam continues to attract global investment and foster domestic entrepreneurship, the quality of due diligence will increasingly define the quality of commerce itself. A market that values verification over speculation, and compliance over convenience, is one that builds long-term confidence. The lesson from Vietnamese corporate law is clear: diligence is not simply a phase of the transaction — it is the discipline that sustains the entire legal and economic order.