Understanding the legal representative’s responsibilities to minimize legal risks for enterprises

In corporate operations, the responsibilities of the legal representative are not only associated with executive authority but also entail various legal risks if not exercised in compliance with the law. A proper understanding of the scope of responsibilities, authorization mechanisms, and related obligations will help enterprises minimize disputes, safeguard their lawful interests, and ensure stable operations in accordance with the Law on Enterprise.

I. Common legal risks related to the responsibilities of the legal representative

The responsibilities of the legal representative are directly connected to the establishment and execution of the enterprise’s rights and obligations. In practice, many legal risks arise from the legal representative’s improper performance or acts beyond the assigned authority, such as establishment of contracts beyond competence, use of corporate assets contrary to the company’s interests, dishonest management and administration, or failing to disclose and update information in accordance with legal requirements.

In addition, violations of tax obligations, reporting obligations, information disclosure obligations, or concealment of conflicts of interest may result in administrative sanctions against the enterprise, civil disputes, and even personal liability of the legal representative.

II. Overview of the responsibilities of the legal representative

1. What are the responsibilities of the legal representative and what are their core contents?

Pursuant to Article 13 of the Law on Enterprise 2020 (as amended by Clause 4, Article 1 of the amended Law 2025), these responsibilities focus on three core elements:

• To execute assigned rights and obligations in an honest and prudent manner and in the best lawful interests of the enterprise;
• To act loyally in the interests of the enterprise, not to abuse position, authority, information, business opportunities, or corporate assets for personal gain or for the benefit of any third party; and
• To fully, promptly, and accurately disclose to the enterprise information on other enterprises in which the legal representative or related persons act as owners or hold shares or capital contributions.

In a case of a breach of these obligations causing damage, the legal representative shall take personal liability in accordance with law.

2. What documents must be submitted regarding the responsibilities of the legal representative upon enterprise registration?

When implementing enterprise registration procedures, information on the legal representative must be stated in the Application for Enterprise Registration as the basis for establishing such person’s legal responsibilities toward the enterprise, under Article 23 of the Law on Enterprise 2020 (as supplemented by Clause 10, Article 1 of the amended Law 2025).

Specifically, the dossier must fully declare the full name, signature, contact address, nationality, and legal identification documents of the legal representative of limited liability companies and joint-stock companies. It serves as the basis for the business registration authority to record legal status and determine the scope of responsibilities and obligations of the legal representative throughout the enterprise’s operation.

3. Does the law require any professional qualifications or certificates for persons assuming the responsibilities of the legal representative?

Pursuant to Article 12 of the Law on Enterprise 2020 (as amended in 2025), the law does not require the legal representative to hold any professional practicing certificate or specific professional qualification. However, the person holding such a position must satisfy legal capacity and legal status conditions, including:

• Having full civil act capacity; not falling into cases of restricted or lost civil act capacity, or having difficulties in cognition and behavioral control.
• Not being subject to prohibitions on holding positions, practicing professions, or performing certain jobs under a Court decision.
• The enterprise must always have at least one legal representative residing in Vietnam; if such person exits Vietnam, a written authorization must be granted to another person residing in Vietnam.
• In cases where the legal representative dies, is missing, is subject to criminal prosecution, is detained, serves a prison sentence, or is subject to administrative measures, the enterprise must promptly appoint a replacement in accordance with its competence.

Accordingly, lawful personal status, full civil act capacity, compliance with residency requirements, and the absence of statutory prohibitions are the legal focus to ensure legal responsibility toward the enterprise and third parties.

4. May the responsibilities of the legal representative be delegated, and what are the limits of such delegation?

The law permits the legal representative to authorize others; however, such authorization only facilitates task performance and does not transfer the legal status or ultimate legal responsibility of the legal representative.

Pursuant to Article 15 of the Law on Enterprise 2020 (as amended in 2025), an authorized person only may exercise rights and obligations within the authorized scope on behalf of the owner, members, or shareholders (such as attending meetings of the Members’ Council or the General Meeting of Shareholders). The authorized person must act honestly and prudently in the lawful interests of the authorizing party and shall be liable to the authorizing party in a case of a breach.

Main limitations to note include:

• Internal restrictions on the scope of authorization are not effective against bona fide third parties.
• Legal liability toward third parties remains with the authorizing principal, including the owner, members, shareholders, or the legal representative.
• The legal representative may not use authorization as a means to exempt or transfer the personal liabilities prescribed under Article 13 of the Law on Enterprise.

In summary, authorization is merely a supporting mechanism for task performance, while ultimate legal responsibility remains with the legal representative or the authorizing principal, particularly in transactions leading to obligations toward third parties.

III. Legal provisions relating to the responsibilities of the legal representative

1. How are the responsibilities of the legal representative determined under current law?

Pursuant to Article 13 of the Law on Enterprise 2020 (as amended in 2025), the responsibilities of the legal representative are determined based on the principles of honesty, prudence, and loyalty to the lawful interests of the enterprise. Specifically, the legal representative must fully exercise assigned rights and obligations in a prudent manner to best protect the enterprise’s interests; must not abuse position or authority for personal gain or for the benefit of other organizations or individuals; and must timely, fully, and accurately declare and disclose information on enterprises in which the legal representative or related persons act as owners or hold capital contributions or shares.

Where the legal representative breaches these obligations and causes damage to the enterprise, personal liability shall be incurred in accordance with law, regardless of whether such acts were conducted in the name of the enterprise or for management and administration purposes.

2. What procedures apply in cases of changes relating to the responsibilities of the legal representative?

If there is any change relating to the legal representative (change of the individual holding the position, personal information, or matters relating to rights and responsibilities affecting enterprise registration), the company must implement procedures for registration of changes with the business registration authority under Article 43 of Decree No. 168/2025/ND-CP. The basic procedures include:

• Submitting the dossier for registration of changes to the Business Registration Office of the province/city where the enterprise’s headquarter is located.
• The dossier comprises:
• An application for registration of change of the legal representative;
• A resolution or decision of the owner, Members’ Council, Board of Directors, or General Meeting of Shareholders, depending on the type of enterprise and the nature of the change.
• The signatory to the dossier is the Chairperson of the Members’ Council, Chairperson of the Board of Directors, Chairperson of the company, or a duly authorized person; special cases (death, missing status, restricted capacity, etc.) shall be handled in accordance with specific provisions of the Law on Enterprise.
• Time for settlement: Within 03 working days from receipt of a complete and valid dossier, the business registration authority shall issue a new Enterprise Registration Certificate; if the dossier is invalid, a written request for amendment and supplementation shall be issued.

Timely registration of changes constitutes an important basis for establishing the legal responsibilities of the legal representative toward the enterprise and third parties.

3. What common violations relating to the responsibilities of the legal representative do enterprises frequently encounter?

In practice, legal representatives often commit violations due to insufficient awareness of the scope of rights and obligations or weak internal governance. Common violations include:

• Exceeding assigned authority: Entering into contracts or transactions beyond the scope of authority under the Charter or internal resolutions, leading to disputes over liability between the enterprise and third parties.
• Lack of honesty and prudence in management and administration: Making investment or transaction decisions causing damage to the enterprise without ensuring the principle of acting in the company’s best interests.
• Conflicts of interest: Abusing position for personal gain, using information, trade secrets, business opportunities, or corporate assets for personal purposes or for third parties.
• Failure to fulfill disclosure and notification obligations: Failing to promptly and fully inform the enterprise of ownership or shareholding in other enterprises by the legal representative or related persons as required by law.
• Violation of representation obligations: Failing to ensure that the enterprise always has a legal representative residing in Vietnam; failing to properly authorize another person when exiting Vietnam.
• Failure to register or notify changes as required: Late or omitted registration of changes relating to the legal representative, leading to legal risks and administrative sanctions. 

Such violations not only trigger the personal liability of the legal representative but also expose the enterprise to disputes, financial losses, and reputational damage if not strictly controlled.

IV. Questions relating to the responsibilities of the legal representative

1. When do the responsibilities of the legal representative commence and terminate?

Pursuant to Article 12 of the Law on Enterprise 2020 (as amended in 2025), the responsibilities of the legal representative are established and terminated in connection with lawful appointment and removal/replacement, specifically:

• Commencement of responsibilities: Responsibilities arise from the time the individual is lawfully appointed in accordance with the company charter and/or resolutions or decisions of the owner, Members’ Council, or Board of Directors, and is recorded in the enterprise registration dossier. From this point, the legal representative represents the enterprise in transactions, participates in proceedings, and takes liability in accordance with law.
• Termination of responsibilities: Responsibilities terminate when the person is removed, replaced, or no longer satisfies conditions for acting as the legal representative according to a lawful decision of the enterprise or as required by law (such as death, missing status, restricted or lost civil act capacity, or prohibition from holding positions by a court). Termination is fully effective for third parties only from the time the enterprise completes the registration of change of the legal representative with the business registration authority.

Note: Where the legal representative authorizes another person when exiting or being absent, the legal representative remains liable for the authorized rights and obligations until a lawful replacement decision is made in accordance with Article 12 of the Law on Enterprise 2020 (as amended in 2025).

2. How does the law handle violations of the legal representative’s responsibilities that cause damage to the company?

Pursuant to Clause 2, Article 13 of the Law on Enterprise 2020 (as amended by Clause 4, Article 1 of the amended Law 2025), if the legal representative breaches obligations of honesty, prudence, loyalty, or other statutory responsibilities and causes damage to the enterprise:

• The legal representative shall take personal liability for the damage caused to the company.
• The enterprise has the right to claim compensation for damages, recovery of illicit benefits, or apply other liability measures in accordance with civil, commercial, and relevant laws.
• If the violation shows signs of administrative or criminal offenses, the legal representative may also be subject to administrative sanctions or criminal liability, depending on the nature and severity of the violation.
• Such liability is personal and may not be transferred to the enterprise, even where the legal representative acted in the name of the company.

3. What risks arise from failure to notify changes or concealment of information relating to the legal representative’s responsibilities?

If an enterprise fails to fully and truthfully notify changes relating to the legal representative or delays notification beyond the statutory time, it may be subject to administrative fines under Clause 5, Article 49 of Decree No. 122/2021/ND-CP. Specifically, failure to notify changes in enterprise registration contents (including information on the legal representative) may result in fines ranging from 20,000,000 VND to 30,000,000 VND.

In addition to monetary fines, the enterprise is required to complete the registration of changes with the business registration authority and may face further risks in transactions with banks, tax authorities, or partners due to discrepancies between legal records and actual operations.

4. How are disputes resolved where the responsibilities of the legal representative are unclear in the charter?

Where the responsibilities of the legal representative are not clearly stipulated in the charter, disputes are commonly resolved by: Directly applying Article 13 of the Law on Enterprise 2020 (as amended in 2025) to determine general responsibilities (the legal representative remains obliged to act honestly and prudently and may bear joint liability); prioritizing internal negotiation and mediation and amending the charter to clarify rights and obligations; and, failing agreement, initiating legal proceedings before a competent court to determine responsibilities and resolve the dispute in accordance with law.

5. If the legal representative violates tax declaration obligations, does the company take joint liability? Why?

The company takes joint liability because the legal representative performs tax declaration obligations in the name of the enterprise. Pursuant to Article 87 of the Civil Code, a juridical person takes civil liability for rights and obligations established and executed by its representative in the name of the juridical person and is liable with its own assets.

Accordingly, where the legal representative violates tax declaration obligations, the tax authority shall directly impose sanctions on the enterprise; thereafter, the enterprise may seek recourse against the legal representative for reimbursement or personal liability if a breach of management, honesty, or prudence obligations under the Law on Enterprise can be established.

V. Are you looking for a reputable legal expert to assist with issues relating to the responsibilities of the legal representative?

If you are facing concerns regarding the responsibilities of the legal representative, from defining obligations and handling violations to preventing dispute risks, NPLaw is a reliable choice. With a team of experienced corporate lawyers, NPLaw provides lawful, focused, and timely advisory solutions to help enterprises protect their interests, standardize charters, and minimize legal liabilities.

The above information is for reference purposes only. For tailored advice on specific cases, please contact Ngoc Phu Law Company Limited for prompt consultation.