1. Legal Framework Governing Startup Investments
Legal due diligence in connection with startup investments in Vietnam is primarily governed by the following legislation:
- The Law on Enterprises 2020, regulating corporate structures, share capital, voting rights, the powers of the Board of Directors and the General Meeting of Shareholders, and restrictions on the transfer of shares or capital contributions.
- The Law on Investment 2020, governing foreign investment conditions, conditional business sectors, and procedures for capital contributions and acquisitions of shares or equity interests.
- The Law on Intellectual Property 2005 (as amended in 2022), establishing ownership rights over software, algorithms, trademarks, industrial designs, copyrights, and trade secrets—assets that often constitute the core value of technology startups.
- The Law on Support for Small and Medium-sized Enterprises 2017 and Decree No. 38/2018/ND-CP, providing the legal framework for investment in innovative startup enterprises.
- The Law on Personal Data Protection 2025 and Decree No. 13/2023/ND-CP, regulating the collection, processing, and protection of personal data by digital platforms and technology businesses.
2. Principal Areas Reviewed During Legal Due Diligence
During the due diligence process, the investor’s legal advisors will typically require the startup to establish a secure Data Room containing corporate records and supporting documentation for review.
The review generally focuses on five principal areas.
2.1. Corporate Structure and Capitalization (Corporate Structure & Capitalization Table)
Capital Contributions
Pursuant to Articles 47 and 113 of the Law on Enterprises 2020, founding shareholders or members are required to fully contribute their committed capital within 90 days from the issuance of the Enterprise Registration Certificate.
Failure to contribute charter capital in full or on time, or recording fictitious capital contributions, may distort the company’s capitalization table (“Cap Table”) and expose the company to administrative penalties under Decree No. 122/2021/ND-CP.
Founders’ Arrangements
Investors typically examine whether the founders have entered into a Founders’ Agreement containing:
- vesting arrangements;
- transfer restrictions;
- founder lock-up provisions; and
- long-term commitment mechanisms.
Where a founder retains a substantial equity interest without any vesting or retention obligations, investors may regard the company as presenting a significant governance risk.
2.2. Intellectual Property
Intellectual property is often the most heavily scrutinized area during legal due diligence, particularly for technology companies.
Investors seek confirmation that the company is the sole legal owner of its:
- source code;
- proprietary software;
- algorithms;
- trademarks;
- copyrights; and
- other proprietary technology.
Employment Agreements and IP Assignment
Pursuant to Articles 133 and 134 of the Law on Intellectual Property, software or other intellectual property created by employees during the course of employment belongs to the employer only where appropriate contractual provisions clearly assign ownership of works created in the performance of assigned duties.
Accordingly, investors routinely review:
- employment agreements;
- confidentiality agreements (NDAs); and
- Intellectual Property Assignment Agreements.
Risks Associated with Founders and Developers
Where the original source code was developed by a founder or software engineer while employed by another company, the startup may face claims involving:
- copyright ownership;
- trade secret misappropriation; or
- breach of contractual obligations owed to the previous employer.
Such issues frequently constitute material due diligence concerns.
2.3. Licensing and Regulatory Compliance
Investors carefully assess whether the startup possesses all licenses and approvals required for its business activities.
Businesses operating in regulated sectors—including FinTech, EdTech, MedTech, and e-commerce—may require sector-specific licenses such as:
- payment intermediary licenses;
- e-commerce platform registration;
- social network operating licenses; and
- other regulatory approvals applicable to the relevant industry.
Personal Data Protection Compliance
Following the enactment of the Law on Personal Data Protection 2025, technology companies processing users’ personal data are generally expected to implement:
- legally compliant consent mechanisms; and
- Data Protection Impact Assessments (DPIAs), where required by law.
Failure to comply with personal data protection requirements may represent a significant regulatory risk for investors.
2.4. Commercial Contracts and Operational Stability
Investors typically review the startup’s material commercial agreements, including contracts with:
- key customers;
- strategic partners; and
- cloud infrastructure providers (such as AWS or Google Cloud).
Particular attention is given to contractual provisions including:
- overly restrictive exclusivity clauses;
- unlimited indemnity obligations;
- change of control provisions allowing counterparties to terminate contracts following an investment transaction; and
- other clauses that could adversely affect the company’s operations after closing.
2.5. Employment Matters and Pending Disputes
Legal due diligence also encompasses employment compliance and litigation risk.
Investors generally review:
- employment contracts;
- compliance with compulsory social insurance obligations under the 2019 Labour Code; and
- any existing or threatened litigation, administrative investigations, employment disputes, or regulatory sanctions involving the company.
3. Typical Legal Due Diligence Process
| Stage | Principal Activities | Primary Responsible Party |
| Execution of NDA and Due Diligence Checklist | Execution of a Non-Disclosure Agreement and delivery of the investor’s due diligence request list | Founders and the Investor’s Legal Counsel |
| Establishment of the Data Room | Uploading corporate records, contracts, intellectual property documents, accounting records, and regulatory approvals | Startup Legal and Finance Teams |
| Due Diligence Review and Q&A | Review of documentation, requests for clarification, and management interviews | Legal Advisors for Both Parties and Founders |
| Legal Due Diligence Report | Preparation of a report identifying material legal risks, “red flags,” and recommended remedial actions | Investor’s Legal Counsel |
| Remediation and Transaction Closing | Resolution of outstanding issues and execution of the Shareholders’ Agreement (SHA) and Share Subscription or Share Purchase Agreement (SSA) | Founders, Investors, and Legal Counsel |
4. Common Legal Risks and Practical Pitfalls
Failure to Include Intellectual Property Assignment Provisions in Employment Agreements
Many startups recruit highly skilled software developers using standard employment contract templates that fail to address ownership of intellectual property.
As a result, departing employees may retain ownership of source code or other intellectual property developed during their employment, making it considerably more difficult for the company to prevent the creation of competing products or enforce its intellectual property rights.
Company Assets Registered in the Founder’s Personal Name
Another common issue involves key business assets—such as trademarks, domain names, cloud service accounts, or software licences—being registered in the personal name of a founder rather than the company.
Because investors acquire shares in the company rather than assets owned personally by the founders, transferring ownership of these assets shortly before closing may delay or complicate the transaction.
Failure to Disclose Material Legal Risks
Attempting to conceal outstanding liabilities, ongoing disputes, or regulatory investigations is among the most serious due diligence concerns.
Once discovered, such non-disclosure may irreparably damage the relationship of trust between investors and founders and may result in the immediate termination of investment negotiations.
5. Practical Recommendations for Founders Preparing for Fundraising
- Conduct an Internal Legal Due Diligence Review. Before approaching investors, founders should engage experienced legal counsel to perform an internal legal audit and identify material legal risks that should be addressed in advance of fundraising.
- Maintain a Well-Organized Data Room. Corporate records—including constitutional documents, enterprise registration certificates, board and shareholder resolutions, employment agreements, customer contracts, and intellectual property documentation—should be maintained in a structured and readily accessible electronic data room. A well-organized data room demonstrates strong corporate governance and facilitates a more efficient due diligence process.
- Ensure All Intellectual Property Is Owned by the Company. Founders should verify that all trademarks, source code, software, domain names, and other proprietary assets have been formally assigned to the company through appropriately drafted Intellectual Property Assignment Agreements.
- Obtain Experienced Venture Capital Legal Advice. Investment documents—including the Shareholders’ Agreement (SHA) and the Share Subscription Agreement (SSA) or Share Purchase Agreement (SPA)—often contain sophisticated provisions relating to anti-dilution protection, drag-along rights, tag-along rights, liquidation preferences, investor consent rights, and founder governance arrangements. Experienced venture capital counsel can help founders negotiate these provisions while preserving appropriate management control and protecting the company’s long-term strategic interests.
CONTACT LEGAL CONSULTANT:
TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.
1. Lawyer Vu Thi Phuong Thanh, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Ha Noi Bar Association
Email: tmle@tlalaw.vn
Nguyen Thuy Duong