Legal regulations on authorization to branches

During the operation of a branch, the company has the right to authorize the branch to perform certain activities on behalf of the company, in accordance with legal regulations, to serve the company's business operations. So what is the current status of authorization to branches? What are the prevailing legal provisions regarding authorization to branches? Are there any legal concerns or issues that need to be clarified related to branch authorization? To address these questions, Ngoc Phu Law Company Limited would like to provide our readers with the following information:

I. Current status of authorization to branches

At present, many enterprises establish multiple branches to expand their scope of operations across the country. However, there remains the situation where branches operate beyond the scope authorized by the enterprise, leading to cases where the branch unilaterally conducts transactions with third parties. Accordingly, when disputes arise, these transactions are declared invalid by the court, causing unnecessary costs and time-consuming dispute resolutions for all parties involved.

II. Legal provisions on authorization to branches

To ensure proper operation of a branch, it is necessary to thoroughly understand the current legal regulations concerning authorization to branches as follows:

1. Definition of authorization to branches

Currently, the law does not provide a specific definition of "authorization to branches." Based on relevant legal provisions in the Law on Enterprise 2020 and the Civil Code 2015, it can be understood that authorization to a branch means the company allows the branch to represent it in implementing certain tasks within the scope of the authorization.

2. What tasks can a company authorize its branch to perform?

A company may authorize its branch to implement part or all of its business activities, including but not limited to:

- Renting a head office, leasing or purchasing necessary equipment and means for the operation of the branch;

- Recruiting Vietnamese or foreign employees to work at the branch in accordance with Vietnamese laws;

- Entering into contracts within Vietnam in accordance with the scope of operation stated in the branch establishment license and pursuant to applicable laws;

- Opening accounts in Vietnamese dong or foreign currency at legally authorized banks operating in Vietnam;

- Remitting profits abroad in accordance with Vietnamese law;

- Engaging in the sale and purchase of goods and other commercial activities permitted by the branch establishment license under Vietnamese law and relevant international treaties to which the Socialist Republic of Vietnam is a party;

- Other tasks authorized by the company in compliance with the law.

(Pursuant to Clause 2, Article 84 of the Civil Code 2015; Article 19 of the Commercial Law 2005)

3. Is it mandatory to execute the authorization in writing?

Authorization to a branch must be made in writing to serve as the basis for determining the content and scope of the authorization.
(Pursuant to Articles 135 and 141 of the Civil Code 2015)

III. Questions regarding authorization to branches

Below are some issues to take note of when it comes to authorization to branches:

1. Does a branch have the function of acting as a legal representative under authorization?

A branch has the function of acting as a representative under authorization of a legal entity (or of the parent enterprise of the branch) to perform part or all of the functions of the legal entity.
(Pursuant to Article 84 of the Civil Code 2015)

2. Is a branch authorized to sign a lease agreement for a head office on behalf of the company?

Yes. A branch may be authorized to sign a lease agreement for a head office on behalf of the company. Additionally, the branch itself has the right to lease necessary premises for its own operation.
(Pursuant to Clause 1, Article 19 of the Commercial Law 2005; Clauses 1 and 2, Article 84 of the Civil Code 2015)

3. Can a branch sub-authorize a representative office?

Not all cases allow a branch to sub-authorize a representative office, as the representative office is only authorized to act within the scope delegated by the legal entity, and only to protect the legal entity’s interests.
(Pursuant to Clause 3, Article 84 of the Civil Code 2015)

Accordingly, a branch can only sub-authorize a representative office if the legal entity consents and ensures that the sub-authorization follows the same form and scope as the initial authorization. The sub-authorization must strictly adhere to the role of acting as a representative to protect the legal entity’s interests and must not exceed the original authorized scope.
(Pursuant to Article 564 of the Civil Code 2015)

4. Can a company authorize a branch to sign commercial contracts with partners?

A company may authorize a branch to sign commercial contracts with business partners.
(Pursuant to Clause 2, Article 84 of the Civil Code 2015)

IV. Legal consulting services regarding authorization to branches

NGOC PHU LAW COMPANY LIMITED is experienced in legal consultancy services related to branch authorization. Our consulting process includes:

- Receiving information related to the client’s needs regarding authorization to branches;

- Providing advice and guiding clients to prepare necessary documents for authorization procedures;

- Drafting relevant documentation for the authorization process and delivering the completed results to the client.

The above information is provided by NPLAW to help clarify concerns regarding branch authorization. Should you have any additional questions or require further assistance, please feel free to contact NPLAW via the contact information below: