Who has authority to enter into labor contracts, and economic contracts in an enterprise?

As we know, the execution of contracts between the company and other individuals, and organizations shall be performed by the company’s representative. The company’s representative can be a legal representative or an authorized representative. Each form of representation is specifically prescribed as follows:

1. FIRST, THE AUTHORITY IN REPRESENTING ENTERPRISE TO ENTER INTO ECONOMIC CONTRACTS

The person who has the authority to enter into economic contracts is the legal representative or the authorized representative.

1.1 Legal representative:

The legal representative is shown in the Enterprise Registration Certificate, in the charter of the enterprise.

Pursuant to the provisions of the Law on Enterprise 2020, different types of enterprises shall result in the differences in regulations on the legal representative as follows:

Form of enterprise Title Legal basis

(Law on Enterprise 2020)

Multi-member limited liability company

–        Chairman of the Members’ Council

–        Director/General Director.

Article 54.3

One-member limited liability company

–        Chairman of the Member’s Council

–        The company’s Chairman

–        Director/General Director

Article 79.3
Joint stock company –        Chairman of the Board of Directors

–        Director/General Director

Article 137.2
Partnership All general partners Article 184.1
Sole proprietorship Sole proprietor Article 190.3

1.2 Authorized representative of an enterprise:

Pursuant to Article 138 of the Civil Code:

“Each natural or juridical person may authorize another natural or juridical person to enter into and perform a civil transaction.”

The authorized representation is usually carried out through a power of attorney or an authorization contract specifying the scope and content of the authorization, the duration of the authorization, etc.

An authorized representative must satisfy the following criteria and conditions:

  • Having full civil act capacity;
  • Not being prohibited from establishing and managing enterprises;
  • A member or shareholder being an enterprise with the contributed capital or shares held by the State over 50% of the charter capital is not allowed to designate the spouse, biological father, adoptive father, biological mother, adoptive mother, biological children, adopted children, biological siblings of the executive and of the person having the power to designate the executive as the authorized representative of another company;
  • Other requirements are specified in the company’s charter.

*** Note: There are transactions that prior to being signed by the company’s legal representative require the consent of:

–     Members’ Council (for limited companies);

–     General Meeting of Shareholders, Board of Directors (for joint stock companies);

  • For multi-member limited liability company: Contracts and transactions between the company and the following entities are subject to approval by the Board of Members (pursuant to Article 67 of the Law on Enterprise 2020):
  • Members and their authorized representatives, the Director/General Director, the company’s legal representative;
  • Related persons of members and their authorized representatives, the Director/General Director, the company’s legal representative;
  • Executives of the parent company and the person having the power to designate them;
  • Related persons of the executives of the parent company and the person having the power to designate them.
  • For single-member limited liability company owned by an organization: contracts and transactions between the company and the following persons are subject to approval by the Members’ Council or the company’s Chairman, Director/General Director and Controllers (pursuant to Article 86 of the Law on Enterprise 2020):
  • The owner of the company and the owner’s related persons;
  • Members of the Members’ Council, the company’s Chairman, Director/General Director and Controllers;
  • Related persons of the Members’ Council, the company’s Chairman, Director/General Director and Controllers;
  • Executives of the company’s owner, the person having the power to designate these executives;
  • Related persons of Executives of the company’s owner, the person having the power to designate these executives.
  • For joint stock company: The GMS or Board of Directors shall approve contracts and transactions between the company and the following related persons when:
  • Shareholders and authorized representatives of shareholders that are organizations holding more than 10% of the company’s total ordinary shares and their related persons;
  • Members of the Board of Directors, the Director/General Director and their related persons;;
  • Enterprises that must be declared by members of the Board of Directors, Controllers, Director/General Director and other executives as prescribed in Clause 2 Article 164 of the Law (Clause 1 Article 167 of the Law on Enterprise 2020).

The GMS shall approve the following contracts and transactions: 

  • Contracts and transactions other than those specified in Clause 2 Article 167 of the Law on Enterprise 2020;
  • Contracts and transactions that involve borrowing, lending, selling assets that are worth more than 10% of the company’s total assets according to the latest financial statement between the company and shareholders that hold at least 51% of the total voting shares or their related persons.

Ai là người có thẩm quyền ký kết hợp đồng?

2. SECOND, THE AUTHORITY IN CONCLUDING EMPLOYMENT CONTRACTS IN AN ENTERPRISE

2.1. On the employer’s side:

Pursuant to Clause 3, Article 18 of the Labor Code 2019, the person who concludes the employment contract on the employer’s side shall be:

  • The legal representative of the enterprise or an authorized person as prescribed by law;
  • The head of the organization that is a juridical person, or an authorized person as prescribed by law;
  • The representative of the household, artels or an organization that is not a juridical person, or an authorized person as prescribed by law;
  • The individual who directly hires the employee.

2.2. On the employee’s side:

Also pursuant to the Labor Code 2019, Clause 4 Article 18 stipulates that an employee himself/herself must enter into labor contracts. Specifically, the person who concludes the employment contract on the employee’s side shall be:

  • The employee himself/herself if he/she is 18 or older;
  • The employee aged 15 to under 18 with a written consensus by his/her legal representative;
  • The employee aged under 15 and his/her legal representative;
  • The employee is lawfully authorized by the group of employees to conclude the employment contract.

One question can be seen is how to avoid dealing with unauthorized people of an enterprise and avoid the case when the signed contract can turn out to be invalid.

Before making transactions:

  • You need to check the enterprise registration certificate of your partner to identify its legal representative;
  • If the person signing the contract is the legal representative of the company, you need to consider whether there is a need for the approval from the Board of Members or the General Meeting of Shareholders or the Board of Directors;
  • If the person signing the contract is not the legal representative, there must be a lawful power of attorney from the person who has the authority to enter into that contract. You must carefully check the information about the authorization term, content, and scope of authorization to determine the authority of the signer.

The article is based on the current legal regulations at the time of writing, and it may no longer be valid or relevant at the time you are reading it due to changes of the law. The article, therefore, is seen as reference only.

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