Every company in Vietnam is required to have at least one Legal Representative. The Legal Representative engages in transactions that bind the company, acts as the company’s representative in legal proceedings, and exercises all other rights and obligations under the law. Having the sole power to bind and represent the company, the Legal Representative is in many ways similar to the Director or Board of Directors in Western companies.
With the Legal Representative being the primary person to represent the company, most government documents need a signature from the Legal Representative in order to be valid. The Legal Representative’s full name and details are recorded on the Business Registration Certificate and the company charter. Government entities therefore often don’t accept signatures of individuals that are not printed on the Business Registration Certificate.
Under the previous legal regime, the Legal Representative had to also be either the General Director, or the Chairman of the Board of Members (the Board of Members being the collective shareholders). However, when the Law on Enterprises went into force in July 2015, this system was abolished. The founders of the company may now appoint more than one Legal Representative, and these no longer need to hold other positions in the company.
Normally, the Legal Representative has the supreme power to bind the company, commence or take part in legal proceedings and sign government documentation. Since this could cause difficulties or confusion if there is more than one Legal Representative, in such a case the company charter will have to further specify the rights and obligations of the Legal Representatives.
One of the reasons the law now allows multiple Legal Representatives is that previously, the Legal Representative had to permanently reside in Vietnam and was not allowed to leave. Obviously, this can become rather impractical if the company has any foreign dealings, or if the Legal Representative is a foreigner.
If there is more than one Legal Representative, at least one of them must reside in Vietnam at any given time. The company can authorize another individual to assume the position in absence, until the Legal Representative has returned.
Difference with the Director
Apart from the Legal Representative, Limited Liability Companies in Vietnam also have a Director. The Director is appointed and dismissed by a Board of Members resolution. Since changing the Legal Representative requires an amendment of the company charter and a renewal of the Business Registration Certificate, the Legal Representative has far more power and autonomy vis-à-vis the Board of Members.
Obviously, the Board of Members is also authorized to change the company charter, but this is a far more time consuming matter than simply adopting a resolution to dismiss the Director.
Also, the powers of the Director are limited to those listed in the Law on Enterprises, whereas the Legal Representative in principle has unlimited power to act on behalf of the company. The Director’s powers are:
- Conduct the company’s daily affairs and operations
- Implement resolutions of the Board of Members
- Implement business and investment plans
- Sign contracts on behalf of the company
- Hire employees
- Submit plans for profit designation
- Submit annual reports to the Board of Members
To put it briefly, the Director’s duties are geared more towards daily management of the company, whereas the Legal Representative is exclusively authorized to deal with regulatory matters and major company decisions.
For instance, the signature of the Legal Representative is required in the following cases:
- Company creation (application for a Business Registration Certificate)
- Establishment of branches or representative offices
- Company dissolution
- Make changes to the Business Registration Certificate
- Record asset contribution to the company’s registered capital
- Adjustments to the registered capital
- The list of members or shareholders maintained by the company
- Registration for an offshore loan
- Application for licenses
- Tax returns
- Opening a bank account
Given the crucial role the Legal Representative plays in a Vietnamese company, foreign investor would be well-advised to carefully consider.