Legal Representative of the Business: What Changes from 2021?

Legal representative of the enterprise - Illustrative image.

Specifically, Article 12 of the Law on Enterprises 2020 stipulates the legal representative (LR) of an enterprise, with noteworthy points as follows:

- The LR of an enterprise is an individual representing the enterprise in executing rights and obligations arising from the enterprise's transactions, representing the enterprise as a petitioner, plaintiff, defendant, individual with legal rights and obligations before Arbitration, the Court, and other rights and obligations as stipulated by law.

- Limited liability companies (LLC) and joint-stock companies (JSC) may have one or more LRs. The company charter specifies the number, management titles, rights, and obligations of each LR of the enterprise. If the company has more than one LR, the company charter specifies the rights and obligations of each LR. In case the rights and obligations of each LR are not clearly defined in the company charter, each LR of the company is considered an authorized representative of the enterprise before third parties; all LRs bear joint and several liability for damages caused to the enterprise under civil law and other relevant legal provisions.

- The enterprise must ensure at least one LR resides in Vietnam. If there is only one LR residing in Vietnam, this person must authorize in writing another individual residing in Vietnam to exercise the rights and obligations of the LR when leaving the country. In this case, the LR is still responsible for the execution of the authorized rights and obligations.

- If the authorization expires and the LR of the enterprise has not returned to Vietnam without any further authorization, the following rules apply:- The authorized person continues to exercise the rights and obligations of the LR of a private enterprise until the LR of the enterprise returns to work at the enterprise;- The authorized person continues to exercise the rights and obligations of the LR of an LLC, JSC, or partnership company until the LR of the company returns to work, or until the owner's council, members' council, or board of directors appoints another individual as the LR of the enterprise.

If the enterprise has only one LR and this person is absent from Vietnam for more than 30 days without authorizing another person to exercise the rights and obligations of the LR, or if the LR dies, goes missing, is under criminal investigation, is detained, serving a prison sentence, is undergoing administrative measure at a compulsory detoxification or education facility, has limited or lost civil act capacity, has difficulties in perception and behavior control, or is prohibited by the court from holding positions, practicing certain professions, or performing certain jobs, the owner of the company, members' council, or board of directors must appoint another individual as the LR of the company.

However, except for LLCs with two members, if a member who is an individual serving as the LR of the company dies, goes missing, is under criminal investigation, is detained, serving a prison sentence, is undergoing administrative measure at a compulsory detoxification or education facility, absconds, has limited or lost civil act capacity, has difficulties in perception and behavior control, or is prohibited by the court from holding positions, practicing certain professions, or performing certain jobs, the remaining member will automatically become the LR of the company until a new decision by the members' council regarding the LR of the company is made.

Furthermore, the court or other competent authority conducting proceedings has the right to appoint an LR to participate in proceedings according to legal provisions.

The full regulations are provided in Law on Enterprises 2020, which took effect on January 01, 2021.

Le Vy

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