One of the major steps when incorporating a company in Vietnam is choosing an individual to act as a legal representative of your company. This person represents the company before the laws and is often recognized by other individuals in transactions with the company. The importance of choosing a legal representative therefore cannot be overlooked. This article will provide a crash course on Vietnamese jurisdiction concerning legal representatives and the various roles and responsibilities such an individual will assume.
Who is a legal representative?
Every company legally registered in Vietnam is required to have at least one legal representative (đại diện pháp luật). The legal representative is, by definition, an individual representing an enterprise, exercising rights and obligations arising from transactions, representing the enterprise as a plaintiff, defendant, or authorized person before the jurisdiction and other rights and obligations as provided for by law.
To put it simply, only the legal reps. can bind the company, act on behalf of the company in legal matters as well as perform other rights and obligations of the company. The legal rep. must be involved in business activities such as application of business licenses, registered capital adjustments, and corporate bank account opening. Details of the legal representative are recorded in the business registration certificate of such company, and government authorities tend to recognize the individual whose details are recorded in the business registration certificate. Thus, the legal representative is usually an individual of a management role or higher.
Requirements for legal representatives in Vietnam
First of all, the legal representative is required to have labor contracts. There are some cases that foreigners can have Work permit exemption like the owner of a company. If you wish to register one legal rep. that needs to have a work permit, he/she needs to reside in Vietnam for a total of at least 183 days per year and cannot leave the country for more than 30 consecutive days.
For foreign investors who are not able to reside in Vietnam permanently to be the legal representatives of the company, engaging a nominee director provides a solution. A Nominee Director is a dedicated and chosen representative of the company. This person can be of any nationality but is required to reside in Vietnam full time.
Companies incorporated in Vietnam must at all time have at least one legal representative residing in Vietnam. When such individual is absent, he/she must authorize in writing another person (agent) to exercise the rights and perform legal obligations. Upon expiration of the authorization period, if the legal rep. has yet to return to Vietnam, the authorized agent continues to represent the company within the scope of authorized rights and obligations until the legal rep. returns.
Responsibilities and Roles of the legal representative
Under the Civil Code only the legal representative of a company or a person authorized by the legal rep. can act on behalf of and make decisions that bind the company. However, since there is no apparent authority doctrine under Vietnamese law, more often than not the court does hold a contract signed by a person who is not properly authorized by the legal representative enforceable against such company.
A limited company or a joint stock company may have one or more legal representatives. The company’s charter specifies the number, managerial position, rights, and obligations of the legal rep. (Clause 2, Article 13 of the Law on Enterprises 2014). Enterprises can decide for themselves the number of their legal representatives in the exercise of rights and obligations arising from business transactions.
Article 14 of the Law on Enterprises 2014 stipulates that the legal representative of an enterprise assumes the following responsibilities:
- Implement the assigned rights and obligations in an honest, careful and best manner to ensure the legitimate interests of the enterprise;
- Loyal to the interests of the business; not using information, know-how or business opportunities of the enterprise; not to abuse the position, position or assets of the company for self-interest or for the benefit of other organizations or individuals;
- Promptly, fully and accurately notify the company of the ownership of such representatives and their related persons, with dominant shares and contributed capital in the enterprises.
- The legal representative of the enterprise is personally responsible for any damage caused to the enterprise by the breach of the above obligations.