I. Understanding authorized representatives of foreign organizational shareholders
An authorized representative of a foreign organizational shareholder in a company in Vietnam is an individual designated by such a foreign organization to act on its behalf in exercising rights and fulfilling obligations as a shareholder. Such representatives may participate in shareholder meetings, vote on important matters, or make other legally binding decisions concerning the organization’s interests.
The appointment of authorized representatives must comply with the Law on Enterprise, which requires clear specification of the shareholding ratio or capital contribution of the authorizing organization and the authority assigned to each representative. The authorization document must be notified to the company and takes effect from the time the company receives such notice. This ensures transparency and legality in the company’s operations while protecting the interests of foreign organizational shareholders.
II. Legal provisions on authorized representatives of foreign organizational shareholders
1. Rights and obligations of authorized representatives of foreign organizational shareholders
According to Article 15 of the Law on Enterprise 2020, the rights and obligations of authorized representatives of foreign organizational shareholders are regulated as follows:
- The authorized representative has the right to exercise the rights and obligations of the foreign organizational shareholder at the Members’ Council or General Meeting of Shareholders, as delegated.
- Decisions made by the authorized representative are legally valid and not affected by any internal restrictions imposed by the shareholder on the representative (unless otherwise agreed by the parties).
- The authorized representative must fully attend meetings of the Members’ Council or the General Meeting of Shareholders.
- The authorized representative must exercise the rights and obligations delegated honestly, prudently, and in the best manner to protect the legitimate interests of the foreign organizational shareholder.
- The authorized representative is responsible for reporting their actions and decisions to the shareholder that appointed them.
- If the representative breaches these responsibilities, they take liability to the shareholder. Simultaneously, the shareholder also takes responsibility for the acts performed by the representative, especially toward third parties.
2. Procedures for appointing an authorized representative of a foreign organizational shareholder
Under Article 14 of the Law on Enterprise 2020, the procedures for appointing an authorized representative are as follows:
Step 1: Preparing the authorization dossier
The foreign organization prepares a written authorization document appointing the authorized representative, which must include:
- Name, enterprise code, and head office address of the authorizing organization;
- Number of representatives and the ownership ratio of shares or capital contributions of each representative;
- Personal details of each representative (full name, contact address, nationality, identification documents);
- Term of authorization for each representative (including the start date of representation);
- Signatures of the legal representative of the authorizing organization and of the authorized representative.
Step 2: Notifying the company of the authorization
- The foreign organization sends the authorization document to the company in which it is a shareholder to notify the appointment of the authorized representative.
- The authorization only becomes effective for the company from the date it receives such a notification.
Step 3: Determining the rights of the representatives
- If the organization appoints multiple representatives, it must clearly specify the capital contribution or share corresponding to each representative.
- If this is not specified, the capital contribution or share will be equally divided among all authorized representatives.
Step 4: Updating company records
- The company must update the authorized representative’s information in its records and registers to ensure legality and transparency in its management.
3. Legal status of authorized representatives of foreign organizational shareholders
Pursuant to Clauses 1 and 2, Article 14 of the Law on Enterprise 2020, the legal status is defined as follows:
- An authorized representative of an organizational shareholder must be an individual who is delegated in writing to exercise the rights and obligations of such an organization at the company.
- For organizations that are members of multi-member limited liability companies: if owning at least 35% of charter capital, they may appoint up to 03 authorized representatives.
- For organizations that are shareholders in joint stock companies: if owning at least 10% of total ordinary shares, they may appoint up to 03 authorized representatives.
4. Responsibilities of authorized representatives of foreign organizational shareholders
Responsibilities of authorized representatives are governed by Article 15 of the Law on Enterprise 2020, specifically:
- The authorized representative must fully attend meetings of the Members’ Council or the General Meeting of Shareholders.
- They must exercise the authorized rights and obligations honestly, prudently, and in the best manner to protect the legitimate interests of the shareholder or member they represent.
- The authorized representative takes liability to the owner, member, or shareholder that appointed them if they breach their responsibilities in exercising their rights and obligations. Such breaches include acts of dishonesty, negligence, or failure to protect the legitimate interests of the authorizing entity.
- The owner, member, or shareholder who appointed the authorized representative takes liability toward third parties for any acts performed by the representative in connection with the rights and obligations delegated.
Thus, authorized representatives of foreign organizational shareholders must strictly comply with these responsibilities. Doing so not only ensures transparency and effective enterprise governance but also protects the lawful interests of shareholders, members, and organizations, thereby maintaining company stability and sustainable development.
5. Legal issues related to authorized representatives of foreign organizational shareholders
Legal issues concerning authorized representatives of foreign organizational shareholders in Vietnam are primarily governed by Article 14 of the Law on Enterprise 2020, including:
- Authorized individual: The representative must be an individual authorized in writing to exercise rights and obligations under the Law on Enterprise 2020.
- Number of representatives: Unless otherwise provided in the company’s Charter, an organizational member owning at least 35% of charter capital in a multi-member limited liability company may appoint up to 03 authorized representatives; similarly, an organizational shareholder owning at least 10% of total ordinary shares in a joint stock company may appoint up to 03 authorized representatives.
- Allocation of representation rights: If the organization appoints multiple representatives, it must clearly determine the capital contribution or shares of each representative. If not specified, these will be equally divided among all representatives.
- Authorization document: It must be notified to the company and only takes effect upon the company’s receipt. It must include details such as the name and enterprise code of the shareholder, the number of representatives, the ownership ratio of each, their personal information, term of authorization, and signatures.
- Qualifications and conditions: The authorized representative must not fall under the restrictions of Clause 2, Article 17 of the Law on Enterprise (such as being prohibited from managing enterprises). In case of state-owned enterprise members or shareholders, the authorized person must not be a family member of the company’s managers or appointing authorities. Other standards may also be specified in the company’s Charter.
III. Questions regarding authorized representatives of foreign organizational shareholders
1. What rights may be included in the authorization to a representative? Are there limits on the scope?
According to Clause 1, Article 141 of the Civil Code 2015, the scope of authorization may include:
- Decisions of competent authorities;
- The Charter of the legal entity;
- The contents of the authorization;
- Other provisions of law.
Thus, the scope of authorization is clearly defined by decisions of competent authorities, the company’s Charter, the authorization document, and applicable laws. The representative may only exercise rights and obligations within the authorized scope and must comply with any limits imposed by the shareholder, company, or the law.
2. Is the authorized representative personally liable for the financial obligations of the organizational shareholder in a Vietnamese joint stock company?
According to Article 15 of the Law on Enterprise 2020, the authorized representative does not personally take liability for the financial obligations of the organizational shareholder in a joint stock company, as they merely perform rights and obligations delegated by such an organization. The organizational shareholder itself remains responsible for its financial obligations.
Thus, the authorized representative does not assume personal liability for the financial debts of the organizational shareholder in a Vietnamese joint stock company.
3. If a foreign organization is dissolved or bankrupt abroad, does the authorization for its representative in the Vietnamese joint stock company remain valid?
If the foreign organization is dissolved or declared bankrupt abroad, the authorization granted to its representative in the Vietnamese joint stock company terminates. Under the law, when the foreign organization’s legal status ends, its rights and obligations cease, leading to the termination of the authorization for its representative in Vietnam.
4. What special legal conditions apply to appointing a Vietnamese individual as an authorized representative of a foreign organization, and what must the authorization document include?
Pursuant to Clause 5, Article 14 of the Law on Enterprise 2020, the authorized representative must meet the following:
- Not fall under the prohibitions set out in Clause 2, Article 17 (e.g., certain persons banned from enterprise management);
- If the member or shareholder is a State-owned enterprise under Point b, Clause 1, Article 88, it cannot appoint as representative a person who is a family member of the company’s managers or of persons authorized to appoint managers at another company.
According to Clause 4, Article 14 of the Law on Enterprise 2020, the authorization document must include:
- Name, enterprise code, head office address of the owner/member/shareholder;
- Number of authorized representatives and the ownership ratio of each one;
- Full name, contact address, nationality, and identification documents of each representative;
- Term of authorization, clearly stating the start date;
- Names and signatures of the legal representative of the owner/member/shareholder and of the authorized representatives.
5. What rights and obligations does the authorized representative of a foreign organization have in managing and operating the company compared to Vietnamese individual or organizational shareholders?
Under Article 15 of the Law on Enterprise 2020, the authorized representative of a foreign organization has similar rights and obligations in managing and operating the company as Vietnamese individual or organizational shareholders, but with particular characteristics:
- The authorized representative exercises the rights and obligations of the owner/member/shareholder at the Members’ Council or General Meeting of Shareholders in accordance with the law.
- They must do so honestly, prudently, and in a way that protects the legitimate interests of the shareholder they represent, and are responsible for fully attending meetings.
- Restrictions imposed by the owner/member/shareholder on the representative’s exercise of rights and obligations are not effective against third parties, meaning the representative may fully exercise their authority in managing the company.
- The authorized representative is liable to the owner/member/shareholder for breaches related to their rights and obligations. Meanwhile, the owner/member/shareholder takes responsibility toward third parties for acts of the representative.
Thus, while the authorized representative of a foreign organization may manage and operate the company similarly to Vietnamese shareholders, their responsibilities and scope of authority are ultimately determined by the authorization from the owner/member/shareholder.
IV. Legal advisory services on authorized representatives of foreign organizational shareholders
The above is an article by NPLaw on authorized representatives of foreign organizational shareholders. With our team of experienced lawyers and legal specialists, NPLaw is always ready to accompany, advise, and support clients on all legal issues concerning authorized representatives of foreign organizational shareholders.
