7 Core Legal Issues Every Vietnamese Tech Startup Must Address - Tran Tran Law

In the era of digital transformation, Tech Startups are playing a pioneering role in shaping Vietnam’s new economy. Rapid innovation and exponential growth are the hallmarks of these enterprises. However, the disparity between the “Move Fast” pace of technology and the complexity of the legal framework is creating serious barriers. A lack of solid legal preparation is a leading cause of startup failure during fundraising, internal disputes, or penalties for regulatory non-compliance.

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This in-depth article, compiled by legal experts at Tran & Tran International Intellectual Property Law Firm, provides detailed guidance and extensive analysis of the 7 core legal issues that every tech startup must master. We will delve into every aspect, from corporate structure and intellectual property protection to data compliance, helping you build a robust legal foundation for sustainable growth and investment attraction.

I. Legal Context for Tech Startups in Vietnam: A Strategic Survival Factor

1. The Gap Between Innovation Speed and Legal Frameworks

Legal compliance is not merely an obligation; it has become a strategic survival factor for the sustainable development of any tech startup.

A. Why Legal Compliance is a Solid Foundation

Tech startups often tend to prioritize product development speed and market expansion, sometimes overlooking complex legal aspects. However, ensuring legal business operations, fully complying with tax obligations, and obtaining necessary regulatory approvals form a solid foundation for startups to:

Avoid Potential Crises: Prevent unexpected legal risks, such as labor disputes, contract breaches, or tax investigations that could paralyze business operations.
Protect Proprietary Technology (IP): This is the core asset. Legal compliance helps protect ownership rights to technology, ideas, and other intangible assets of the creators, ensuring the enterprise can confidently use and develop its assets without fear of infringement. Tran & Tran emphasizes that proactive intellectual property registration is an indispensable legal shield.

B. Compliance and Fundraising Capability

In a fiercely competitive context, compliance has become a strategic factor directly influencing fundraising ability and business valuation.

Legal Due Diligence (LDD): Professional investors, especially Venture Capital (VC) funds, will conduct very thorough legal due diligence before injecting capital.
Enterprise Value: Any unresolved legal risk, no matter how small—related to tax, contracts, or especially Intellectual Property—can significantly reduce the startup’s valuation or even cause the investment deal to collapse. These risks are often quantified and deducted from the final valuation.
Competitive Advantage: Building a robust legal foundation from the outset creates a major “plus point,” enhancing the startup’s attractiveness in the eyes of investors and providing a significant competitive advantage.

C. Challenges and the Maturation of Vietnam’s Legal Environment

The legal environment for tech startups in Vietnam is still in the process of completion.

Grey Areas and Lack of Definition: As of 2016, Vietnam did not have specific regulations for startups, and startups were often equated with ‘Small and Medium Enterprises’ (SMEs). The absence of a separate legal framework for tech startups creates a legal ‘grey area’, leading to the rigid application of regulations that do not fit the “move fast, break things” nature of startups.
Lack of Proactivity from Founders: A significant challenge is the lack of thorough legal knowledge and business perspective from Vietnamese founders, leading to a failure to genuinely address legal issues from the early stages, exacerbating risks.
Positive Transformation: However, increasing interest from the Vietnamese Government has spurred the issuance of new legal documents, particularly in fields like Fintech (Decree 94/2025/ND-CP on Sandbox Mechanisms) and Personal Data Protection (Decree 13/2023/ND-CP, Law No. 91/2025/QH15). The “newness” of these regulations means startups must continuously update and adapt, proactively moving from the ‘grey area’ to the legal ‘light’.

II. 7 Core Legal Issues When Establishing and Operating a Tech Startup

1. Issue 1: Corporate Formation and Capital Structure

Core Legal Documents: Law on Enterprises 2020, Civil Code 2015.

Establishing a business for a tech startup is not just an administrative procedure but a fundamental strategic decision affecting management structure, liability, and long-term fundraising capability.

A. Choosing the Right Enterprise Type

Common types of enterprises that startups can choose include:

Limited Liability Company (LLC): Suitable for small and medium enterprises with 1 to 50 capital-contributing members. This model offers management simplicity but may be limited when needing to raise capital broadly from many investors.
Joint Stock Company (JSC): Most suitable for startups aiming to raise significant capital from numerous shareholders (unlimited number).

Risk of Wrong Choice: A common risk is startups choosing the JSC model solely with the belief that it is “easier to raise capital” without understanding the restrictions. For example, founding shareholders are often restricted from transferring shares within the first three years to ensure initial capital stability (with some exceptions under the Enterprise Law). If a startup chooses this type and business operations do not stabilize quickly, founders may face significant difficulties when wanting to restructure or transfer shares.

B. Charter Capital Management and “Phantom Capital” Risks

Charter Capital: A crucial factor, especially for conditional business lines.
Legal Loophole: Current laws primarily monitor declared capital data without a strict mechanism to monitor actual contributed capital, leading to the risk of internal disputes over capital among founders or contributing members.
Consequences: The situation of “phantom capital” (virtual capital) or insufficient actual capital not only causes financial risks but also creates grounds for serious internal disputes, affecting the startup’s operations and reputation.

C. Absolute Importance of Founders’ Agreements and Shareholders’ Agreements

The Founders’ Agreement and Shareholders’ Agreement (SHA) are critically important internal legal documents that determine the startup’s stability.

Founders’ Agreement: If the startup has not yet formed a legal entity, this agreement is considered a civil agreement under the Civil Code 2015.
Biggest Risk: The absence or lack of clarity in these agreements is a major internal legal risk, potentially causing serious disputes when the startup grows (e.g., disputes over ownership ratios, decision-making rights during conflicts) or faces difficulties.
Shareholders’ Agreement (SHA): An essential legal tool helping to increase control, manage the company, maintain ownership structure, restrict share transfer rights (Lock-up/Vesting), handle deadlocks, and define withdrawal rights (Buy-out/Drag-Along/Tag-Along). Constructing these agreements tightly will prevent many internal legal risks, ensuring stability for the fundraising process.

2. Issue 2: Intellectual Property (IP) in the Technology Sector

Core Legal Documents: Law on Intellectual Property 2005 (amended and supplemented in 2022), Decree 22/2018/ND-CP (Copyright), Circular 01/2007/TT-BKHCN (Patents, Trademarks).

Intellectual Property (IP) is the core asset and the main valuation driver of tech startups. A proactive IP protection strategy is essential to build sustainable value and avoid market dominance by competitors.

A. Computer Software Protection (Copyright)

Scope of Protection: Computer software is protected as a literary work under the Law on Intellectual Property, whether expressed in source code or object code.
Automatic Principle and Risks: The law stipulates that copyright protection is automatic, requiring no mandatory registration. However, failing to officially register with the Copyright Office of Vietnam is a major risk. Although “automatic,” it does not mean “safe”; holding a Registration Certificate creates the strongest legal evidence to prove authorship in disputes or during Legal Due Diligence (LDD).
Term of Protection: Moral rights are indefinite; economic rights last for the author’s lifetime plus 50 years after death.

B. Patent and Utility Solution Protection

Protection Standards: An Invention (Patent) and Utility Solution are technical solutions protected by Exclusive Patents with terms of 20 years and 10 years, respectively.
Strategic Gap: Although Vietnam has recorded a record number of granted patents, Vietnamese applicants are scarce on the list of protected high-tech patents. This indicates that Vietnamese tech startups may not fully realize the importance of patenting their innovations, leading to the risk of losing market share to foreign companies without a comprehensive IP strategy.
Procedure: Patent registration is the longest process, involving Formality Examination (1 month), Substantive Examination (can last 2-3 years after the request is made), and grant of the protection title.

C. Trademark and Trade Secret Protection

Trademark: Registering a trademark (brand name, logo) is necessary to prevent brand theft and avoid infringing on third-party IP rights. The registration process at the Intellectual Property Office typically takes 13-18 months (including search, formality exam, publication, and substantive exam).
Trade Secrets: Information with competitive value (e.g., formulas, algorithms, unpublished strategies). Trade secrets do not require registration but are established when the owner legally obtains them and implements necessary security measures (NDA, technical security systems). Risk: The lack of strict security measures is the biggest legal risk, making secrets easily disclosed without a solid legal basis to claim damages.

D. Tran & Tran’s Comprehensive IP Strategy

A proactive and comprehensive IP strategy must include both registering traditional IP objects (Trademarks, Patents) and establishing security mechanisms for trade secrets through Non-Disclosure Agreements (NDAs) and strict internal processes. This creates a solid ‘legal fence,’ enhancing the startup’s value in the eyes of investors.

3. Issue 3: Legal Aspects of Fundraising

Core Legal Documents: Law on Investment 2020, Law on Securities 2019, related guiding Decrees.

Fundraising is an essential stage, but it is also the time when tech startups easily lose control or accept disadvantageous terms due to a lack of legal understanding.

A. Forms of Fundraising and Legal Implications

Choosing a fundraising form depends not only on financial needs but also affects the level of shared ownership and control:

Angel Investment: Usually individuals, early-stage investment, requesting large equity (10%-50%).
Venture Capital (VC): Professional organizations with large financial resources, but accompanied by strict binding terms and tighter supervision.

Consideration: Founders must carefully weigh capital needs against maintaining company control, a key legal factor needing clear negotiation.

B. Legal Regulations on Foreign Direct Investment (FDI)

Compliance with Investment Law: For foreign investors, investing in Vietnam must meet market access conditions under the Law on Investment 2020, including charter capital ownership ratios and scope of activities.
Investment Registration Certificate (IRC): Investment projects by foreign investors may need to undergo procedures to obtain an Investment Registration Certificate.
Barriers: Complex regulations, especially market access conditions and IRC requirements, can be barriers slowing down the investment process and increasing compliance costs, requiring startups to prepare legally thoroughly.

C. Importance of Term Sheets and Investment Agreements

A Term Sheet is a non-binding document outlining the basic terms and conditions of the investment.

Risk of Losing Control: Lack of understanding of legal terms in the Term Sheet and investment contract can lead to founders losing control or accepting disadvantageous terms in the long run, even after successful fundraising.
Core Legal Terms (Typical Examples):
- Liquidation Preference: Ensures investors receive their investment back (usually 1x, 2x…) before any remaining assets are distributed to common shareholders.
- Anti-dilution Provisions: Protect investors’ ownership percentage when the company issues new shares at a lower price (Down Round).
- Board Control/Veto Rights: Regulations on appointing Board members and strategic decisions requiring investor approval.

4. Issue 4: Labor Law and HR Policy

Core Legal Documents: Labor Code 2019, Decree 155/2020/ND-CP (Securities), Decree 13/2023/ND-CP (Data Protection).

HR management and labor law compliance are critical aspects for tech startups in the context of rapid growth and fluctuating demand for high-quality personnel.

A. Labor Contracts and Risks of Abuse

Types: Indefinite-term contracts (stable), definite-term contracts (maximum 36 months, renewable once).
Challenges and Risks: Startups often need to change personnel quickly or use project-based labor. Abusing short-term contract forms or failing to ensure basic rights (Social Insurance, leave policies…) of employees can lead to legal disputes, affecting the startup’s reputation and operations.

B. ESOP (Employee Stock Ownership Plan) Policy

Purpose: ESOP is a powerful tool to attract and retain talent by issuing preference shares, creating work motivation and sharing benefits.
Compliance Risks: Issuing ESOPs involves complex regulations regarding securities and corporate governance. Failure to follow the correct legal process (e.g., issuance plan approved by the General Meeting of Shareholders) can lead to legal issues regarding the validity of shares or violations of securities laws.

C. Non-Disclosure Agreements (NDA) and Non-Compete Agreements (NCA)

NDA: An essential legal contract to protect confidential information (technology, business strategy) from being disclosed by employees or partners.
NCA: Prevents employees from using confidential knowledge to compete after leaving the job.
- Legal Aspect: The validity of NCAs in Vietnam is still controversial as they tend to infringe on the employee’s right to work.
- Solution: Terms need to be drafted carefully, potentially including compensation for the employee during the non-compete period to increase legality and feasibility, while clearly limiting scope, time, and geography.

D. Protection of Employee Personal Data

Enterprises must comply with Decree 13/2023/ND-CP on personal data protection, including employee data (personal info, salary, contracts…). Non-compliance can lead to administrative or criminal penalties, affecting the startup’s image and reputation.

5. Issue 5: Personal Data Protection and Cybersecurity

Core Legal Documents: Law on Personal Data Protection 2025 (Law No. 91/2025/QH15), Decree 13/2023/ND-CP, Law on Cybersecurity 2018, Decree 53/2022/ND-CP, Decree 165/2025/ND-CP.

This is the newest and most complex legal issue, creating a significant compliance burden and requiring a cultural shift in tech startups with data-driven business models.

A. Comprehensive Legal Framework on Personal Data Protection

The enactment of the Law on Personal Data Protection 2025 (effective Jan 1, 2026) and Decree 13/2023/ND-CP marks a significant shift, eliminating the “grey area” regarding data.

Data Classification: Data is classified into basic data and sensitive data (race, health, finance, location…), with different protection requirements.
Detailed and Complex Compliance Obligations:
- Consent: Must obtain clear, voluntary, and transparent consent from the data subject for each processing purpose.
- DPIA (Data Protection Impact Assessment): Prepare a dossier assessing the impact of personal data processing.
- DPO (Data Protection Officer): Establish a DPO department/position if processing sensitive data.
- Notification and Filing: Obligation to notify and submit the DPIA dossier to the Ministry of Public Security.

Challenge for Startups: These detailed obligations require startups to invest significantly in processes, technology, and legal personnel, going beyond core business activities. Non-compliance faces severe penalties.

B. Cross-Border Data Transfer Regulations

With globalization and the use of cloud services with servers located abroad, cross-border data transfer is a common activity for tech startups.

Supervision: The transfer of Vietnamese citizens’ personal data abroad is strictly supervised by the Law on Data 2024 and Decree 165/2025/ND-CP.
Requirements: Startups need to review their data flows, ensuring that transferring data abroad complies with new regulations, potentially requiring additional legal agreements or technical measures to ensure safety.

C. Law on Cybersecurity and Data Localization Requirements

Decree 53/2022/ND-CP: Stipulates that domestic and foreign enterprises providing services on the internet must store the following types of data in Vietnam for a minimum of 24 months:
1. Personal data of service users in Vietnam.
2. Data on relationships of service users.
3. Data created by service users in Vietnam.

Infrastructure Barrier: This requirement creates a significant barrier in terms of cost and infrastructure for both domestic and international tech startups, requiring large investments in server infrastructure in Vietnam or adjustments to existing system architecture, while reflecting increased state control over user data.

6. Issue 6: Contracts and Terms of Service

Core Legal Documents: Civil Code 2015, Decree 52/2013/ND-CP (E-commerce), Law on Consumer Rights Protection 2023, Decree 55/2024/ND-CP.

Contracts and Terms of Service are important legal documents shaping the relationship between tech startups and customers, partners, and users.

A. Tech Contracts (SaaS Agreements, IT Services)

Risk: Tech startups often lack a legal department and tend to use online contract templates. However, using generic templates may not fit the specific business model, leading to legal loopholes.
Required Terms: These contracts need clear and tight clauses regarding: Service Level Agreement (SLA), Confidentiality (even after contract termination), Intellectual Property Rights regarding created products, Payment Methods, Penalty/Damages Clauses, and Dispute Resolution Mechanisms.

B. Terms of Use (ToS) and Privacy Policy

These are not only mandatory legal documents but also tools to build trust with users.

Terms of Use (ToS): Regulate legal use of the service, user responsibilities, liability limitations for the startup, and IP rights regarding content on the platform.
Privacy Policy: Must be clear and transparent about how the company processes data. A privacy policy compliant with the Law on Personal Data Protection 2025 not only helps the startup comply with the law but also builds trust with customers, minimizing legal risks related to privacy.

C. Legal Liability when Providing Digital Services

Consumer Protection: The Law on Consumer Rights Protection 2023 and Decree 55/2024/ND-CP have added many regulations to protect consumer rights in e-commerce.
Platform Responsibility: Organizations establishing and operating intermediary digital platforms and large digital platforms are responsible for: providing accurate and transparent product information, securing personal information, and regulating the use of algorithmic systems and targeted advertising.

7. Issue 7: Sector-Specific Legal Issues

Core Legal Documents: Decree 94/2025/ND-CP (Fintech Sandbox), education licensing regulations, Decree 117/2025/ND-CP (E-commerce Tax Administration).

Tech startups operating in specialized fields also face industry-specific regulations, which are frequently changing and complex.

A. Fintech (Financial Technology)

Fintech is a rapidly innovative field but also harbors significant risks due to a lack of specific regulations.

Sandbox Mechanism (Decree 94/2025/ND-CP): A controlled testing mechanism, creating opportunities for Vietnamese Fintech companies to test new solutions (e.g., P2P Lending) in a controlled environment starting July 1, 2025. Fintech Startups need to proactively participate and comply with Sandbox regulations to legalize operations.
P2P Lending: Currently, related activities may be subject to the Law on Credit Institutions. The absence of an official legal framework creates risks of default and fraud.
E-wallets: Strictly regulated by the State Bank (e.g., maximum transaction limit of 100 million VND/month, prohibited from granting credit).

B. Edtech (Educational Technology)

Licensing Requirements: Education is a sensitive field, and providing online training services requires an online training license.
Quality Compliance: Edtech Startups need not only to develop technology platforms but also to invest in compliance with regulations on educational quality and teaching methods from the Ministry of Education and Training to avoid legal risks and build trust with learners.

C. E-commerce

Tax Management: The Government issued Decree 117/2025/ND-CP regulating tax management for business activities on e-commerce platforms and digital platforms.
Responsibility and Transparency: Tech startups in this field need not only to focus on revenue growth but also to build solid tax compliance processes and consumer protection policies to avoid legal risks and build long-term reputation.

III. Common Legal Risks and Proactive Prevention Strategies

1. Analysis of Core Legal Risks

Common legal risks in tech startups stem mainly from a lack of attention and legal knowledge by founders.

Legal Issue	Root Cause	Common Risk	Serious Consequence
Structure / Internal	Prioritizing speed over governance; absence of Founders’/Shareholders’ Agreement.	Ownership disputes, unclear equity allocation, Phantom Capital.	Loss of control, founding team breakup, difficulty raising further investment.
Intellectual Property (IP)	Assuming “automatic protection” for software and neglecting trademark registration.	Product copying, brand theft, loss of competitive advantage.	Significant financial losses, potential collapse of the business idea.
Fundraising (Term Sheet)	Limited understanding of complex financial and control provisions.	Acceptance of unfavorable terms (e.g. high liquidation preference), loss of Board control.	Loss of future economic benefits, excessive investor control.
Data / Cybersecurity	Absence of valid consent mechanisms, failure to store data in Vietnam.	Administrative or criminal penalties under Decree 13/2023, restricted international operations.	Loss of customer trust, suspension of operations, substantial regulatory fines.
Contracts	Reliance on online contract templates without professional legal review.	Ambiguous or unenforceable clauses, confidential information leakage.	Disputes with partners or customers, reputational damage.

2. Risk Mitigation Strategy: Proactive Legal Mindset

The key to minimizing legal risks for tech startups lies in shifting from a ‘reactive’ (firefighting) mindset to a ‘proactive’ (preventive) mindset in legal management.

A. Build a Solid Legal Foundation from the Start

Prioritize Internal Agreements: Immediately draft clear Founders’/Shareholders’ Agreements regarding IP Assignment (Transferring IP from employees/founders to the company), Vesting (Shares bound by time), and dispute resolution mechanisms.
Comprehensive IP Strategy: Plan to register Trademarks, Software Copyrights, and Patents/Utility Solutions as soon as possible. Establish internal processes to protect Trade Secrets (using standard NDAs, access control).

B. Invest in Data Compliance and Cybersecurity

Establish DPO and DPIA Process: Invest in personnel or specialized consultants to establish compliance processes with Decree 13/2023/ND-CP (data classification, obtaining consent, preparing DPIA dossiers, and submitting to the Ministry of Public Security).
Infrastructure Compliance: Ensure compliance with data storage requirements in Vietnam under Decree 53/2022/ND-CP, avoiding requirements to establish branches or representative offices.

C. Professional and Transparent Cooperation

Deep Legal Consultancy: Partner with law firms specializing in tech startups (like Tran & Tran) from the beginning to review internal legality, draft contracts, and advise on Term Sheet negotiations.
Transparency in Fundraising: Prepare full legal and financial records (audited) to build trust with investors. Transparency is not only a legal requirement but also a reputation-building factor.

IV. Legal Documents and Support Resources for Tech Startups

To enable tech startups in Vietnam to be proactive in legal compliance, accessing legal documents and support resources is crucial.

1. Key Legal Documents to Reference

The continuous updating of legal documents requires startups to have an effective mechanism for monitoring and accessing legal information.

Corporate Law: Law on Enterprises 2020.
Intellectual Property Law: Law on Intellectual Property 2005 (amended, supplemented in 2022).
Labor Law: Labor Code 2019.
Data and Cybersecurity Law:
- Law on Personal Data Protection 2025 (Law No. 91/2025/QH15, effective Jan 1, 2026).
- Decree 13/2023/ND-CP on personal data protection.
- Decree 53/2022/ND-CP guiding the Law on Cybersecurity (on data storage in Vietnam).
Sector/Commercial Law:
- Decree 94/2025/ND-CP on Controlled Testing Mechanism (Sandbox) in the banking sector (effective July 1, 2025).
- Decree 117/2025/ND-CP regulating tax management for business activities on e-commerce platforms.

2. Legal Support Organizations and Professional Consulting

Collaborating with professional consulting organizations helps startups solve compliance issues and improve governance capacity.

Law Firms Specializing in IP and Startups: These units provide consulting services for business establishment, IP protection (Trademarks, Patents, Copyrights), tech contract drafting, and dispute resolution. Tran & Tran is a trusted partner in building IP strategies and legal due diligence for startups.
Big Audit Firms (Big4): Provide audit services, tax consulting, and governance system consulting, helping startups gain financial and legal confidence during fundraising.
Startup Support Organizations: Provide thematic seminars and training courses on startup law and finance, helping to raise legal awareness for the startup community.

V. Conclusion and Recommended Actions

The legal environment for tech startups in Vietnam is undergoing rapid development, with many new regulations enacted in key areas such as Intellectual Property, Personal Data Protection, and Cybersecurity. This change creates both significant opportunities and challenges for startups.

Core legal issues, from capital structure and loose founders’ agreements to non-compliance with new data regulations, are the most common risks capable of causing severe losses for startups.

Recommended Actions for Sustainable Growth:

Proactively View Law as Strategy: Shift mindset from “reactive” to “proactive” in legal management. View compliance not as a cost but as a mandatory investment to build value and attract investors.
Comprehensive IP Protection from the Early Stage: Build a comprehensive IP protection strategy, including registering IP objects and establishing internal Trade Secret security measures (NDA, NCA). IP Assignment clauses from employees/collaborators to the company must be clearly defined in contracts.
Uncompromising Data and Cybersecurity Compliance: This is a mandatory and increasingly strict trend. Establish internal processes, invest in security technology, and consider appointing specialized personnel to ensure compliance with the Law on Personal Data Protection 2025 and Decree 13/2023/ND-CP, as well as data storage requirements in Vietnam.
Seek Professional Advice in Fundraising: Collaborate with law firms and financial consultants experienced in the tech sector to conduct legal due diligence and negotiate terms in the Term Sheet (such as liquidation preference, control rights) effectively, avoiding legal risks that could lead to loss of benefits or company control.

By shifting from a reactive to a proactive mindset in legal management, tech startups can turn challenges into opportunities, build trust with investors and customers, and thereby achieve sustainable growth and success in the international market.

Call to Action from Tran & Tran

Building a legal foundation for a tech startup is complex and requires deep understanding of corporate law, intellectual property, and technology.

Let the experience, dedication, and deep understanding of Tran & Tran International Intellectual Property Law Firm protect your priceless assets and your startup’s fundraising journey!

Contact us today to receive in-depth advice and build the most solid legal strategy, helping you confidently accelerate in the digital era.

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Email: ip@trantran.vn
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