Are enterprises required to have legal representatives in Vietnam?

1. Are enterprises required to have legal representatives in Vietnam?

Pursuant to Article 12 of the Enterprise Law 2020, the legal representative of enterprises is as follows:

1. The enterprise’s legal representative is the person that, on behalf of the enterprise, exercises and performs the rights and obligations derived from the enterprise’s transactions, acts as the plaintiff, defendant or person with relevant interests and duties before in court, arbitration, and performs other rights and obligations prescribed by law.

2. A limited liability company or joint stock company may have one or more than one legal representative. The enterprise’s charter shall specify the quantity, position, rights and obligations of its legal representatives. In case there are more than one legal representative, the charter shall specify the rights and obligations of each of them. Otherwise, each of the legal representatives shall fully representative the enterprise and take joint responsibility for any damage to the enterprise as prescribed by civil laws and relevant laws.

3. An enterprise shall have at least one legal representative residing in Vietnam. Whenever this representative leaves Vietnam, he/she has to authorize another Vietnamese resident, in writing, to act as the legal representative, in which case the authorizing person is still responsible for the authorized person’s performance.

4. In case the authorizing person has not returned to Vietnam when the letter of authorization mentioned in (3) expires and does not have any further actions:

a) In case the enterprise is a sole proprietorship, the authorized person shall continue acting as the enterprise’s legal representative until the authorizing person returns;

b) In case the enterprise is a limited liability company, joint stock company or partnership, the authorized person shall continue acting as the enterprise’s legal representative until the authorizing person returns or until the enterprise’s owner, Board of Members/Partners or Board of Directors designates another legal representative.

5. In case the only legal representative of an enterprise she is not present in Vietnam for more than 30 days without authorizing another person to act as the enterprise’s legal representative, or is dead, missing, facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, has difficulty controlling his/her own behaviors, is banned by the court from holding certain positions or doing certain works, the enterprise’s owner, Board of Members/Partners or Board of Directors shall appoint another legal representative, except for the cases specified in Clause 6 of this Article.

6. In a two-member limited liability company, if the member who is the company’s legal representative is  dead, missing, facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, making getaway; has limited legal capacity or is incapacitated, has difficulty controlling his/her own behaviors, is banned by the court from holding certain positions or doing certain works, the other member shall obviously assume the position of the company’s legal representative until the Board of Members issues a new decision on the company’s legal representative.

7. The court and other proceeding authorities are entitled to appoint the legal representative who participates in proceedings as prescribed by law.

According to this Article, enterprises are required to have at least one legal representative residing in Vietnam. If your company does not guarantee to have at least one legal representative residing in Vietnam, your company will be sanctioned in accordance with the law in Vietnam.

2. What are penalties for failure to have a legal representative residing in Vietnam? 

Pursuant to Article 51 of Decree 122/2021/ND-CP stipulating violations against regulations on legal representatives and authorized representatives of enterprises as follows:

1. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for any of the following violations:

a) Failure to have a legal representative residing in Vietnam;

b) Failure to authorize a person in writing to act as a representative or granting authorization with a written authorization which is expired but is not extended when the only legal representative of the enterprise leaves Vietnam;

c) Authorizing an unqualified person as a representative;

d) Exceeding the maximum limit on authorized persons prescribed by law.

2. Remedial measures:

The violator is compelled to:

a) appoint a person who is residing in Vietnam as the enterprise’s representative if the violation specified in Point a Clause 1 of this Article is committed;

b) authorizing another person as the representative if the violation specified in Point b Clause 1 of this Article is committed;

c) appoint a qualified person as the representative if the violation specified in Point c Clause 1 of this Article is committed.

According to Clause 2, Article 4 of Decree 122/2021/ND-CP, the fine levels are as follows:

2. The fines for administrative violations specified in this Decree are imposed upon organizations (except for the fines for violations specified in Point c Clause 2 Article 28; Points a and b Clause 2 Article 38; Article 62 and Article 63 of this Decree, which are imposed upon individuals). For the same violation, the fine incurred by an individual is 1/2 (half) that incurred by an organization.

Thus, if the enterprise does not have a legal representative residing in Vietnam, it may be fined from VND 20,000,000 to VND 30,000,000 and be forced to appoint a person who is residing in Vietnam as the enterprise’s representative.

Best Regards!