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What to do when a Legal Representative is not Available in Vietnam?

“In the context of the complicated developments caused by Covid-19 today, in order to minimize the spread of the epidemic as well as maintain the Vietnamese economy, the Government has taken strong tightening measures such as shutting down some airline routes from abroad to Vietnam and quarantining before being able to move freely within the territory of Vietnam. This causes foreign businesses to become confused and fall into paralysis when things arise but there is lack of a legal representative to perform work within the powers of legal representatives.”

So what is the solution for foreign businesses when the legal representative is not present in Vietnam?

Article 12 of the Enterprise Law 2020 states: Enterprises must ensure that at least one legal representative resides in Vietnam. When only one legal representative remains in Vietnam, he / she, when leaving Vietnam, must authorize in writing another individual residing in Vietnam to exercise the rights and perform the obligations of the legal representative. In this case, the legal representative is still responsible for the performance of the authorized rights and obligations.

In other words, authorizing other individuals to reside in Vietnam will be a practical solution as global supply chains are becoming more diversified, and foreign companies expand their businesses in many countries, many areas, legal representatives are consequently required to move relentlessly to meet business conditions.

Therefore, for the authorized person to have the right to decide on matters related to the enterprise’s operations during the time the legal representative is absent in Vietnam, the enterprise must perform the following tasks:

  • Make a written authorization to appoint the remaining legal representative in case the company has more than 01 legal representative; or have written authorization for another individual depending on the company’s decision;
  • The content of the authorization document needs to record in detail the scope of work that the authorized person is allowed to perform. The failure to record such details easily leads to the status of the attorney not being accepted by the third party;
  • In order to prevent management work in Vietnam from being interrupted during the representative’s absence, the written authorization must be made in terms of content, form, and duration in accordance with regulations and methods and the work of the competent authorities in practice;
  • The legal representative is still the main responsible party for the acts made by the authorized person within the authorization scope. So, it is necessary to create a mechanism to monitor the compliance of the authorized person, accordingly, a company control department or a third party will indirectly manage, in a variety of ways, the work that the authorized person performs.

Foreign enterprises should also note that: Although there is an institution that authorizes another individual to reside in Vietnam to resolve some problems for the business when the legal representative is absent in Vietnam, some cases require the presence and issuance of the decision by the legal representative himself and do not accept the status of an authorized representative, which arises mainly in the areas of taxation, accounting, labor or criminal.

The best way is that a foreign enterprise creates an institution with 2 legal representatives to eliminate the limitations caused by the authorization mechanism. When applying the mentioned institution, the company charter must clearly define the powers of legal representatives. The failure to clarify by default makes the legal representatives jointly responsible for the same issue.

Understanding the authorization mechanism for other individuals residing in Vietnam will help foreign enterprises be more proactive in the normal operation of their business, as well as help enterprises operate more efficiently in the context of the Covid-19 pandemic caused complications.