Dear PL & Partners Law Firm, my company is a joint stock company. I am a shareholder as well as the legal representative of the company with the title of General Director. Currently, due to long-term working abroad, my company would like to appoint Mr. A, who is currently a CEO, to act on my behalf as the legal representative. I want to ask if the legal representative of business is required to be a shareholder of the company. Does the law stipulate the mandatory title of a legal representative? Hope to receive an answer from your lawyer soon. Thank you.
PL & Partners would like to thank you for trusting and sending questions to us. For your questions, we would like to reply as follows:
1/ The concept of legal representative of the enterprise
Clause 1, Article 12 of the Law on Enterprise 2020 stipulates: 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 in court, arbitration, and performs other rights and obligations prescribed by law.
2/ Number of legal representatives of the enterprise
Clause 2, Article 12 of the Law on Enterprise 2020 stipulates: A limited liability company or joint stock company may have one or more legal representatives. The enterprise’s charter shall specify the quantity, position, rights, and obligations of each legal representative.
3/ Residence of the legal representative
Clause 3, Article 12 of the Law on Enterprise 2020 stipulates that 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 that case, the authorizing person is still responsible for the authorized person’s performance.
4/ Can the legal representative be hired?
Clause 2, Article 137 of the Enterprise Law 2020 stipulates: For a joint-stock company, if there is only one legal representative, the Chairman of the Board of Directors or Director/General Director shall be the legal representative. If the company has more than one legal representative, the Chairman of the Board of Directors and Director/General Director shall be obviously the company’s legal representative.
Thereby, it can be seen that a Joint Stock Company can hire a person to act as a legal representative for the business and he/she is NOT REQUIRED to be a shareholder of the company to act as a legal representative.
For your case, the Company can choose one of the following solutions, depending on the factual circumstances and needs of your business:
- First, appoint an additional legal representative for the enterprise with the title of CEO, and you are still the legal representative of the enterprise with the current title of General Director. When you exit Vietnam, the business still ensures the condition that the legal representative resides in Vietnam.
- Second, you no longer act as the legal representative, appoint Mr. A as the legal representative of the enterprise instead. However, Mr. A’s title must be adjusted in accordance with the provisions of Clause 2, Article 137 of the Law on Enterprise 2020 as analyzed above, that is, the Chairman of the Board of Directors or General Director.