Table Of Contents

1.1. The Law on Enterprise 2020 (Law No. 68/2020/QH14)

This foundational legal document serves as the cornerstone for establishing, organizing, and operating enterprises in Vietnam. Within it, several articles directly address the concept of representatives managing contributed capital:

  • Article 14: This article establishes the framework for organizations to appoint authorized representatives. It outlines the conditions under which an organization, as an owner, member, or shareholder, can delegate its authority to an individual representative.
  • Article 15: Defines the scope of the rights and obligations held by authorized representatives. It underscores their ability to exercise the powers associated with the contributed capital they manage on behalf of the appointing organization.

1.2 Guiding Documents

Alongside the Law on Enterprise, several guiding documents issued by relevant Vietnamese authorities provide further clarification and detailed implementation instructions. These documents may include:

  • Circulars: Circulars issued by government ministries offer interpretations and practical guidance on various sections of the Law on Enterprise, potentially including aspects related to contributed capital management.
  • Decisions: Specific decisions made by relevant authorities can further clarify the application of the legal framework in particular cases or scenarios.

Key Points

  • The Law on Enterprise establishes the core principles and regulations for representatives managing contributed capital.
  • Guiding documents complement the law, providing additional details and practical interpretations.
  • Staying informed about both the law itself and subsequent guiding documents is essential for ensuring compliance and staying updated on evolving regulations.

Important Note: It's vital to consult with a legal professional for specific advice on the legal basis governing contributed capital, especially for complex situations. The legal landscape can be subject to change, and professional guidance ensures you're working with the most up-to-date and accurate information.

 

 

2. Who can be a Representative?

In Vietnam, specific criteria and conditions determine who can serve as a representative managing contributed capital for an organization within a company. Here's a breakdown:

Key Requirements:

  • Individual Authorization: Only individuals can be appointed as authorized representatives. Organizations cannot fulfill this role directly.
  • Legal Capacity: The individual must be at least 18 years old and possess full civil act capacity, meaning they have the legal right to make their own decisions and be held responsible for their actions.
  • No Restrictions: The individual must not fall under any of the categories of persons prohibited from being representatives, as outlined in Clause 2, Article 17 of the Enterprise Law 2020. These restrictions generally apply to individuals with past convictions for economic crimes or those holding certain positions in state-owned enterprises.

Additionally:

  • Written Authorization: The organization appointing the representative must provide clear written authorization. This document outlines the scope of the representative's authority and the capital contribution they are responsible for managing.
  • Company Charter Specifications: The company's charter may establish additional standards or conditions for individuals to serve as representatives. Adherence to these company-specific requirements is essential.

Important Considerations:

  • Family Relations Restrictions Members and shareholders who are state-owned enterprises cannot appoint individuals with certain family relations to the company manager or to those who hold the authority to appoint the company manager. This aims at preventing potential conflicts of interest.

Who CAN NOT Typically Act as Representatives:

  • Organizations
  • Minors (under 18 years old)
  • Individuals lacking full civil act capacity
  • Individuals with specific past convictions or disqualifying roles

Remember: The specific eligibility criteria for representatives managing contributed capital are designed to ensure responsible and accountable management of an organization's stake within a company.

 

3. Number of Representatives

While Vietnamese law generally doesn't impose a strict limit on the number of representatives that an organization can appoint to manage its contributed capital, there are some important nuances to consider:

Firstly, the company's charter plays a crucial role. The charter must explicitly state the number of representatives that the organization is permitted to appoint. If the company's charter doesn't specify a number, organizations have more flexibility in this regard.

Secondly, the size of the organization's ownership stake in the company matters. There are limitations placed on organizations with significant shares:

  • Limited Liability Companies: If a limited liability company holds at least 35% of the company's charter capital, it can appoint a maximum of three representatives to manage that capital contribution.
  • Joint Stock Companies: If a joint-stock company owns at least 10% of the total ordinary shares, the maximum number of representatives they can appoint is also three.

Finally, in cases where multiple representatives are appointed, the capital contribution and the number of shares corresponding to each representative must be determined. If the organization fails to do this, the contributed capital and the number of shares will be divided equally among the authorized representatives. This allocation is mandated by Vietnamese law to ensure a clear distribution of responsibilities.

 

4. Appointment Process

1. Formal Appointment Document:

  • The organization intending to appoint a representative must create a formal written document. This document is crucial and outlines the following essential details:
    • Organization's Information: Name, business code, and head office address.
    • Representative Details: Number of authorized representatives, proportion of shares and capital contributions managed by each representative, full name, contact address, nationality, and legal document number of each representative.
    • Authorization Period: Start and end dates of the representative's authority.
    • Signatures: Signatures of the organization's legal representative, as well as each authorized representative.

2. Notification to the Company:

  • This formal appointment document must be submitted to the company to which the organization holds contributed capital.
  • The document is only considered effective for the company from the date it is officially received.

3. Additional Considerations:

  • Company Charter: The company's charter may contain specific requirements or procedures related to the appointment process. It's essential to adhere to these company-specific guidelines.

Important Notes:

  • Meticulous preparation of the appointment document is crucial, ensuring it encompasses all required information.
  • Prompt and formal notification to the relevant company ensures the representative's authority is recognized and takes effect.

 

5. Rights and Obligations

5.1 Rights

  • Exercising Shareholder/Member Rights: The representative acts on behalf of the appointing organization at the Board of Members and General Meetings of Shareholders. They can exercise the rights associated with the contributed capital they manage, such as:
    • Voting on important company decisions
    • Participating in discussions and deliberations
    • Receiving dividends or profit distributions (if applicable)
  • Meeting Attendance: Representatives have the right to attend all relevant Board of Members and General Meetings of Shareholders meetings.

5.2 Obligations

  • Responsibility to Attend Meetings: Representatives must attend all relevant meetings to actively represent the interests of the appointing organization.
  • Honesty and Care: The representative must act honestly, diligently, and carefully in their role, always safeguarding the legitimate interests of the organization they represent.
  • Accountability to Appointing Organization: The representative is directly accountable to the organization that appointed them. They are responsible for any violations or breaches of their duties as defined in the Law on Enterprise 2020.
  • Liability to Third Parties: The appointing organization bears responsibility before third parties for any liabilities arising from the actions or decisions of their authorized representative.

Key Points to Remember

  • The representative's rights are tied to upholding their corresponding obligations.
  • Any restrictions imposed on the organization's rights or obligations as an owner, member, or shareholder do not apply to the authorized representative. This means the representative can fully exercise the rights associated with the contributed capital.
  • The goal is to ensure responsible management and decision-making on behalf of the appointing organization.

 

6. Additional Considerations

  • Company Charter: A company's charter holds significant sway in this process. It may outline further rights, obligations, restrictions, or specific procedures related to the appointment and actions of representatives. The charter is a legally binding document for both the company and its shareholders, so awareness of its provisions is crucial.
  • Third-Party Liability: It's essential to remember that the organization appointing the representative remains liable to third parties for the representative's actions and decisions. This means that if the representative causes harm or financial loss to others, the organization could be held responsible. Careful selection and oversight of representatives are vital for risk mitigation.
  • Evolving Legislation: The laws and regulations governing representatives in Vietnam may change over time. Staying updated on the current interpretations and any amendments to the Law on Enterprise 2020 and relevant guiding documents is crucial to ensure ongoing compliance.
  • Seeking Professional Guidance: The management of contributed capital through representatives can be complex, especially in specific business scenarios. Consulting with qualified legal and business professionals in Vietnam is highly recommended. They can provide tailored advice, assist with documentation, and ensure processes are followed correctly, protecting the organization's interests.

Key Takeaway: Understanding these additional considerations enables organizations to make informed decisions regarding the appointment and management of representatives, minimizing risks while maximizing the benefits of contributing capital to other companies within the Vietnamese market.

Disclaimer: This explanation is intended for educational purposes. For specific and up-to-date legal guidance regarding representatives managing contributed capital in Vietnam, always seek the expertise of a qualified legal professional.

 

7. Conclusion

The Vietnamese legal framework allows organizations to appoint authorized representatives to manage their contributed capital within companies. This article has provided an overview of the key aspects surrounding these representatives, from legal basis and eligibility to appointment processes and rights and obligations. Understanding these points is crucial for both organizations considering appointing representatives and companies working with organizations that utilize them. Organizations must adhere to legal requirements while appointing and authorizing representatives, ensuring clarity in roles and responsibilities. Companies, on the other hand, should recognize the legal extent of a representative's authority and limitations.

By navigating these arrangements transparently and compliantly, all parties can foster efficient and secure collaboration within the Vietnamese business landscape. However, it is crucial to remember that this article offers general information and should not be taken as legal advice. Consulting with a qualified legal professional is highly recommended for detailed and case-specific guidance regarding representatives managing contributed capital in Vietnam.

If you need further explanation on this subject, please don't hesitate to contact us through email at lienhe@luatminhkhue.vn or phone at: +84986 386 648. Lawyer To Thi Phuong Dzung