A branch representative is an individual authorized by the enterprise to manage, administer, and conduct transactions on behalf of the branch. Their role is not merely limited to signing documents or contracts but also entails ensuring legal compliance and safeguarding the lawful rights and interests of the enterprise within the authorized scope of operations.
I. The role of a branch representative
The branch representative plays a central role in ensuring that the branch operates effectively and in compliance with the law. They are authorized by the enterprise to act on behalf of the branch in conducting transactions, executing contracts, liaising with state authorities as well as with other organizations and individuals, while also serving as the legal authority of the branch.
In addition to their representative capacity, the branch representative directly manages and supervises all day-to-day operations, including task organization, personnel management, asset administration, and resource utilization, thereby ensuring that operations align with the company’s strategic direction.
More importantly, they are responsible for ensuring that all operations comply with applicable laws and internal regulations, minimizing legal risks for the enterprise.
In the event of violations, the branch representative may bear personal or joint liability with the enterprise, depending on the nature and extent of the violation.
II. Legal provisions governing branch representatives
To ensure that the appointment and operation of branch representatives are in line with legal requirements, enterprises must understand the relevant provisions under Vietnamese law.
1. Who is a branch representative?
Currently, the law does not expressly define who shall be the head of a company’s branch. However, pursuant to Clause 5 Article 84 of the Civil Code 2015, the head of a branch or representative office shall perform tasks under the authorization of the enterprise within the scope and term of authorization.
Accordingly, the head of a branch acts as the authorized representative of the company with respect to that branch.
It should be noted that the head of a branch is not the legal representative of the branch but only an authorized representative, performing tasks within the scope delegated by the company’s legal representative.
2. Rights and obligations of a branch representative
Pursuant to Clause 5 Article 84 of the Civil Code 2015, the head of a branch shall perform tasks under the authorization of the enterprise within the scope and duration of such authorization.
Therefore, the current Law on Enterprises does not provide detailed regulations concerning the title, role, rights, or obligations of the head/representative of a branch.
With respect to title, the Certificate of Branch Operation Registration only specifies head of branch without stating any specific designation.
In practice, however, the head/representative of a branch is often referred to as the Branch Director. A Branch Director is not necessarily required to be a member of the company.
Regarding role and authority, under Clause 5 Article 84 of the Civil Code 2015, the Branch Director or branch representative exercises powers of the company within the scope of the authorization.
3. Can a branch representative also be the legal representative of the company?
A branch representative may simultaneously serve as the company’s legal representative, provided that the company charter and internal regulations do not impose restrictions. Current enterprise law (Clauses 1 and 2 Article 12 of the Law on Enterprise 2020) does not prohibit one individual from holding both positions.
Nevertheless, in cases of dual capacity, attention should be paid to:
- Scope of authority and responsibility: The legal representative of the company has the authority over the entire enterprise, whereas the branch representative is limited to the scope of authorization for the branch.
- Conflict of interest avoidance: Decisions must align with the overall interests of the company and not undermine branch operations.
- Workload management: Holding dual positions may cause excessive pressure, especially if the company and the branch are located in different geographical places.
III. Questions regarding branch representatives
1. Who has the authority to appoint and dismiss a branch representative?
The authority to appoint and dismiss a branch representative depends on the type of enterprise and the relevant provisions of the Law on Enterprise 2020 as well as the company charter.
Generally, such authority lies with the company’s legal representative unless otherwise stipulated in the charter. Commonly, the Board of Directors (for a joint-stock company) or the Members’ Council (for a limited liability company) exercises this power, which may be delegated to the General Director/Director.
2. If a branch representative causes damage to a third party, who is liable for compensation?
Pursuant to Article 13 of the Law on Enterprise 2020, the legal representative of an enterprise must:
- Exercise assigned rights and obligations honestly, prudently, and in the best interest of the enterprise;
- Remain loyal to the enterprise’s interests; refrain from abusing position or using information, know-how, or business opportunities for personal gain or for the benefit of others;
- Timely, fully, and accurately disclose to the enterprise information regarding entities in which they or related persons hold ownership or capital contribution as prescribed.
The legal representative of the enterprise is personally liable for damages caused to the enterprise due to breaches of these responsibilities.
Accordingly, liability for compensation when a branch representative causes damage to a third party depends on the scope of their authority and conduct. As branches do not have legal personhood under the Law on Enterprise 2020, all branch activities are attributable to the parent company. If the branch representative causes damage within their authorized duties, the parent company is liable to compensate third parties.
Conversely, if the branch representative acts ultra vires or unlawfully, they bear direct liability for the damages.
Where the parent company compensates a third party for losses caused by the branch representative’s fault, the company has the right to claim reimbursement from such representative under the labor contract, power of attorney, or by law.
3. Can a branch representative be a foreigner?
Pursuant to Article 12 and Article 28 of the Law on Enterprise 2020, nationality of the enterprise’s legal representative must be specified in the Enterprise Registration Certificate.
Based on these provisions, it can be seen that one of the mandatory details to be stated on the Enterprise Registration Certificate is the nationality of the legal representative of the enterprise.
However, the law does not impose any nationality restriction. Thus, the company’s legal representative and by extension, a branch representative may be a foreign national.
4. Does a branch representative have authority to decide on personnel recruitment at the branch?
Article 19 of the Law on Commerce 2005 stipulates the rights of branches, including:
- Leasing offices and procuring equipment necessary for branch operations;
- Recruiting Vietnamese and foreign employees to work at the branch in accordance with Vietnamese law;
- Entering into contracts in Vietnam consistent with branch establishment licenses and applicable law;
- Opening bank accounts in VND and foreign currency at licensed banks in Vietnam;
- Remitting profits abroad in accordance with Vietnamese law;
- Using a branch seal as prescribed;
- Conducting trading and other commercial activities consistent with the establishment license and treaties to which Vietnam is a party;
- Exercising other rights provided by law.
Further, Clause 5 Article 84 of the Civil Code 2015 specifies that the head of a branch shall perform tasks authorized by the enterprise within the scope and term of authorization.
Therefore, branches are entitled to recruit employees, including foreigners, to work directly at the branch in compliance with Vietnamese law. However, recruitment of foreigners to work at the parent company remains the responsibility of the company unless explicitly authorized to the branch.
5. Are the powers of branch representatives restricted in financial matters?
Vietnamese law imposes restrictions on branch representatives in financial matters to ensure branches do not exceed authorized limits and to mitigate legal risks for the parent company.
Pursuant to Clause 5 Article 84 of the Civil Code 2015, branch representatives may only perform financial transactions within the scope authorized by the parent company. As a branch does not have independent legal personality, all financial transactions conducted by the branch are, in substance, transactions of the parent company.
Significant transactions such as opening bank accounts, obtaining loans, executing credit contracts, or issuing valuable papers require approval from the parent company or its legal representative.
These restrictions safeguard the parent company’s interests, ensure transparency and compliance with accounting, taxation, and financial regulations, and prevent the parent company from incurring liability for unauthorized acts of the branch representative.
IV. Legal advisory services concerning branch representatives
NGOC PHU LAW COMPANY LIMITED provides legal consultancy services concerning branch representatives, including appointment, dismissal, determination of authority and scope of power, legal responsibilities, as well as assistance in drafting resolutions, powers of attorney, and handling related disputes.
These services help enterprises ensure transparency, compliance, and mitigate legal risks in branch operations.
