Discussion about legal representative of the foreign company in Vietnam

LexNovum Lawyers

01/12/2021

Discussion about legal representative of the foreign company in Vietnam

In some cases, the parent company in a foreign country, when establishing a subsidiary in Vietnam, would like to control compliance in the beginning or in the long term for the operation of the subsidiary, so it wants to appoint a foreigner to act as the legal representative of the subsidiary in Vietnam.

The reason is because the position of the legal representative of the company in Vietnam is likened to a “bridge” between the company and a third party such as a vendor or an authorities, specifically, an individual representing the company will exercise the rights and obligations arising from the transaction of the company, representing the company in the capacity of a claimant to settle civil matters, plaintiffs, defendants, persons with interests, related obligations at Arbitration, Court and other rights and obligations as prescribed by law (Article 12 Enterprise Law 2020). Thus, with the high practicality of this position, the management and control of the parent company’s activities for the subsidiary are more closely related.

Considering the detailed conditions applicable to the legal representative, the company must ensure that there is always at least one legal representative residing in Vietnam. The condition of “residence in Vietnam” is always a problem that makes investors hesitate to appoint a person to be present regularly in Vietnam, especially in the complicated situation of the epidemic. In addition, the labor law also requires foreigners in this case to apply for a work permit if they are not excluded (i) the owner or capital contributor of a limited liability company with high value capital contribution value of VND 3 billion or more, or (ii) Chairman of the Board of Directors or a member of the Board of Directors of a joint-stock company with a capital contribution value of VND 3 billion or more. Another difficulty related to having only one legal representative in Vietnam is that if this person suddenly does not want to hold the position of legal representative, problems arise while waiting to be found another one such as entering into contracts, participating in litigation, managing operations or carrying out procedures related to authorities are also obstacles that need attention.

Therefore, with the “openness” of the enterprise law to the legal representative of the company in allowing the company to have more than 1 legal representative, the rights and obligations of each representative is recognized in the company’s Charter, it will meet to solve problems, specifically the company has two legal representatives, one is a foreigner according to the needs of the parent company, this person can freely work and reside anywhere not necessarily in Vietnam, nor need to apply for a work permit; and one person is a resident in Vietnam who meets the minimum requirements for residence for the legal representative. One thing to be noted is that if the addition of a legal representative who is a resident in Vietnam is not “actual management”, to ensure control and avoid abuse of power over this person, the company should clarify clearly powers and obligations of each representative into the Charter from the beginning, ensuring smooth operation and compliance with the requirements of the parent company.

Executor: LexNovum Lawyers