GUIDANCE WHEN A LEGAL REPRESENTATIVE IS AWAY FROM VIETNAM – by JP Law Group (AusCham Member)
In this legal column, we introduce how to deal with the situation when the legal representative of a Vietnam company is away from Vietnam and specifically, when not present in Vietnam for over 30 days continuously.
When a legal representative is away from Vietnam
According to the Law on Enterprise 2014 effective from the 1st of July, 2015, an enterprise must ensure that there is always at least one legal representative permanently residing in Vietnam (the new law allows one or multiple legal representative in an enterprise in Vietnam). If the enterprise has only one legal representative, such person must reside in Vietnam and must authorize in writing another person to exercise the rights and perform the obligations of the legal representative when he/she exits Vietnam. However, unless the legal representative leaves Vietnam for over 30 days continuously, it is fine for the legal representative to only authorize all or part of the rights and/or obligations to the delegated person.
If an enterprise has only one legal representative who is not present in Vietnam for a period of more than thirty (30) days continuously without authorizing any person to perform the rights and obligations of the legal representative of the enterprise, then the company owner, the Members’ Council or the Board of Management shall appoint another person to act as legal representative of the company.
Meanwhile, if a legal representative residing in Vietnam is not designated or a delegated person is not appointed even if the legal representative is away from Vietnam for over 30 days continuously, such company can be fined from VND 10,000,000 up to VND 15,000,000 according to Article 31.1 of Decree 155/2013/ND-CP. Apart from such fine, the company can be required to follow the orders pursuant to Article 31.2 of the Decree (e.g. Order to authorize a third party residing in Vietnam to act as the legal representative in writing). The Inspection unit of Department of Planning and Investment of the applicable area of company establishment is the competent authority to deal with such administrative sanctions.
Methods of Delegation
Delegation is commonly done by power of attorney or by signing an authorization contract. The former method is done by a unilateral act of the authorizing person via a written Power of Attorney (commonly, with the signature of the delegate as well to prove consent), and the latter method is by contractual agreement between the legal representative and the delegate, with details of delegation specified in the contract.
Once the Authorization contract or Power of Attorney is signed, it is regulated by Article 581 of the Civil code. The delegate will conduct the authorized works under the power of attorney on behalf of the legal representative, and in this case, remuneration is not mandatory but depends on their agreement. In case of a power of attorney with remuneration, the authorizing person may unilaterally revoke the power of attorney at any time, but must pay the attorney a remuneration corresponding to the task already performed by the attorney and compensate for damages (e.g. the expected remuneration for the remaining term of the power of attorney, if any); if it is a power of attorney without remuneration, the authorizing person may revoke the power of attorney at any time, but must notify the attorney thereof in advance within a reasonable period of time.
The authorizing person must also notify in writing to the other party or parties of a contract whom relied on the power of attorney, of his/her unilateral revocation of the power of attorney; if not, the contract with the other party shall remain in effect, except in cases where the third party knew or must have known about the revocation of the power of attorney.
Power of Attorney takes effect at the time specified in the POA, after it is signed by the legal representative solely, however, an authorization contract takes effect only when signed by both parties. Accordingly, the effectiveness of the Power of Attorney can be adjusted whenever the legal representative withdraws or it is cancelled by the delegate, but the effectiveness of an authorization contract is decided only by mutual agreement. In addition, an authorization contract is more flexible and safer than Power of Attorney because both parties can freely adjust details of agreement under the contract and it is easier to enforce the delegate to implement as mentioned in the contract.
Other matters to consider
When drafting a Power of Attorney or an Authorization Contract, it is crucial to clarify the details of what to delegate and when it will take effect. Also, it is important to record the date and serial number of Power of Attorney or the Authorization Contract to avoid confusion, for clear identification.
We hope our above information assists you in dealing with situations when the legal representative leaves Vietnam, and your decision-making process in choosing the method of authorization in Vietnam.
JP Law Group is a foreign direct invested Vietnam based law firm with offices in Hanoi and Ho Chi Minh City. We have Vietnamese and foreign lawyers who work closely to provide a wide range of professional legal advice in a competitive price.
East-3101, 31st Floor, Lotte Center Hanoi, 54 Lieu Giai, Ba Dinh District, Hanoi, Vietnam
Tel: +84 4 3724 5201~2/ Fax: +84 4 3724 5204
Unit 2, 34th Floor, Bitexco Financial Tower 2 Hai Trieu Street, District 1, HCMC, Vietnam
Tel: / Fax: +84 8 3910 0620
OTHER NEWS ON THE AUSCHAM WEBSITE
In the toolbar of this website, click on “NEWS” for the drop down menu which includes: