Illegal business operations hide various risks and are subject to strict legal sanctions. The below article provides an analysis of the applicable legal provisions, liabilities, and specific handling measures.
I. Current situation of illegal business operations in the present context
Illegal business activities have become increasingly complex and sophisticated, ranging from tax evasion, smuggling, trading in counterfeit or substandard goods, to underground transactions in cyberspace. These acts not only result in significant losses of State budget but also severely affect fair competition, infringe upon consumer rights, and harm business reputations.
Despite intensified inspection and enforcement by competent authorities, such violations persist, demanding more comprehensive and sustainable solutions.
II. What constitutes an illegal business operation?
To better understand the current situation, it is necessary to clarify the concept and nature of illegal business activities.
1. Definition of illegal business operations
Illegal business operations refer to acts of organizing or conducting production, trading, or providing services in contravention of the law. These include operating without State-issued licenses, engaging in prohibited or restricted business sectors, evading taxes, committing commercial fraud, or violating standards relating to safety, environment, and consumer protection.
Such activities not only cause losses to the State budget but also create unfair competition and pose risks to society and consumers.
2. Circumstances leading to illegal business operations
During business operations, many businesses or individuals disregard legal regulations due to short-term benefits, leading to operations deemed illegal ones. Common situations include:
- Operating without registration or license: Businesses or business households conduct operations without completing statutory registration procedures.
- Engaging in prohibited or restricted business sectors: Businesses or business households conduct activities prohibited by law, such as trading in narcotics, weapons, or wildlife.
- Violating business conditions: Businesses or business households fail to meet legal requirements on capital, facilities, labor safety, or environmental hygiene.
- Obtaining commercial fraud and tax evasion: Businesses or business households use false invoices, misreporting revenue, or smuggling goods.
- Infringing upon consumer rights and intellectual property: Businesses or business households sell counterfeit, imitation, or substandard goods.
III. Legal provisions on illegal business operations
After clarifying the concept and common instances, it is important to examine the existing legal framework for addressing illegal business operations.
1. Relevant legal provisions in handling with illegal business operations
In the current context of strengthened business regulation in Vietnam, Laws not only impose administrative sanctions but may also hold violators criminally liable in serious cases.
Specifically:
- Administrative fines for unlicensed business activities:
- Decree No. 98/2020/NĐ-CP (Article 6) provides for fines ranging from 3,000,000 VND to 20,000,000 VND for engaging in conditional business lines without meeting the prescribed conditions, or for misusing licenses. Additional sanctions may include suspension or revocation of licenses.
- Operating without enterprise registration:
- Decree No. 122/2021/NĐ-CP (Article 46) stipulates fines from 50,000,000 VND to 100,000,000 VND for conducting business in the form of an enterprise without registration.
- Criminal liability:
- Under the Penal Code 2015 (as amended in 2017), the offense of illegal business operations has been abolished to align with the principle of freedom of enterprise recognized by the Constitution 2013. Previously, the Penal Code 1999 prescribed various sanctions for such offenses. Since the Penal Code 2015 took effect on July 1, 2016, such conduct is no longer subject to criminal prosecution. However, for cases occurring before that date but still under investigation, retroactive application of the Penal Code 1999 remains valid.
Depending on the nature and severity of the violation, illegal business operations may be subject to administrative sanctions to ensure deterrence and maintain business order.
2. Competent authorities for resolving illegal business operations
Pursuant to Article 30 of the Civil Procedure Code 2015, disputes arising from business operations shall be settled by the People’s Court.
In cases of administrative violations, competent State management agencies, specialized inspectorates, or People’s Committees shall handle them. If the acts constitute criminal offenses, the Investigation Agency and the People’s Procuracy shall proceed under the Penal Code 2015.
3. Steps to take upon discovering illegal business operations
When detecting illegal business operations, enterprises, individuals, or relevant authorities should take the following steps:
- Recording and collecting evidence: Retaining documents, records, images, or videos related to unlawful conduct.
- Reporting to competent authorities: Notifying State management bodies, specialized inspectorates, or local People’s Committees for inspection and resolution.
- Suspending related transactions: Parties involved in contracts or transactions should suspend dealings to avoid legal risks.
- Seeking legal advice: Consulting reputable lawyers or law firms for guidance on proper legal procedures to safeguard legitimate rights and interests.
Prompt action, supported by sufficient evidence and compliance with legal procedures, will help ensure effective resolution and minimize risks.
IV. Questions regarding illegal business operations
1. Under what circumstances can illegal business operations lead to criminal prosecution?
Although the offense of “illegal business operations” was abolished under the Penal Code 2015 (amended in 2017) in accordance with the constitutional principle of freedom of business, such activities may still lead to criminal liability if they involve other offenses, including:
- Fraudulent appropriation of property (Article 174, Penal Code 2015): When illegal business operations are conducted to defraud customers.
- Tax evasion (Article 200, Penal Code 2015): When unlawful business operations involve tax fraud.
- Trading in prohibited, counterfeit, or harmful goods (Articles 192 and 193, Penal Code 2015), or violations of food safety, environmental protection, and consumer rights laws.
Thus, although the specific offense of illegal business operations no longer exists, such acts may still be criminally prosecuted if they constitute other offenses under the Penal Code.
2. Do employees have the right to file complaints when working for businesses engaged in illegal business operations?
Employees are fully entitled to file complaints or lawsuits upon discovering that their employers engaged in illegal business operations.
Under Article 10 of Decree No. 24/2018/NĐ-CP, complainants have the right to file complaints themselves or through authorization, participate in dialogues, request access to documents, present evidence, seek restoration of rights and compensation, lodge a second complaint, or initiate lawsuits if the resolution is unsatisfactory.
Employees may bring lawsuits if the employer’s acts violate the law, infringe upon their legitimate rights, or if the complaint is not resolved within the prescribed period.
3. Are profits from illegal business operations subject to confiscation?
Profits derived from illegal business operations may be confiscated depending on the nature and severity of the violations.
- Clause 2(b), Article 3 of Decree No. 71/2014/NĐ-CP provides for confiscation of unlawful profits obtained from acts disrupting other enterprises’ business operations.
- Article 39 and Article 41 of Decree No. 98/2020/NĐ-CP provide for confiscation of profits (including goods) obtained through violations in entrusted import/export or cross-border trading activities.
Thus, depending on each specific case, all profits from illegal business operations may be confiscated in accordance with the law.
4. What are the liabilities of managers when their company engages in illegal business operations?
Corporate managers take legal responsibility if their enterprise participates in illegal business operations.
Specifically, under Article 358 of the Penal Code 2015 (amended in 2017) stipulating offense of abuse of position or power to influence others for personal gain, managers may be criminally prosecuted if they exploit their authority to influence others for personal or corporate benefit.
5. How are business licenses revoked when illegal business operations are detected?
Upon detection of illegal business activities, competent authorities shall apply the sanction of business license revocation as provided by law.
- Article 212 of the Law on Enterprise 2020 (amended 2025) provides that a business may have its Business Registration Certificate revoked in cases such as ceasing operations for more than one year without notice, falsifying registration documents, or under Court decisions.
- Article 69 of Decree No. 168/2025/NĐ-CP sets forth the procedures for license revocation, including notification of violations and requesting explanations from the enterprise.
Implementation Process:
- Detection of violation: Competent authorities identify or receive reports of illegal business operations.
- Notification: Competent authorities send notice of the violation and request explanations within a specified timeframe.
- Revocation decision: If the explanation is unconvincing or the violation remains unremedied, the authority issues a revocation decision.
- Public disclosure: Revocation information is updated on the National Enterprise Registration System and publicly announced.
Revocation of a business license is a significant administrative sanction, aimed at immediately terminating illegal business operations, protecting consumer interests, and maintaining legal order in the business environment.
V. Are you seeking a reputable lawyer to resolve issues related to illegal business operations?
If you are facing issues concerning illegal business operations and require in-depth legal consultation, NPLaw is ready to provide professional support, guidance on procedures, and protection of your legal rights efficiently and effectively.
