Vietnam has taken drastic measures in 2020 to limit the exposure and spread of Covid-19, limiting immigration and travel rights for foreign individuals entering the country, in order to maintain control.
This however poses significant statutory compliance risks for foreign investors who are currently operating in country, and where their designated Legal Representatives of the Vietnamese entities are not currently in country or are not able to enter the country.
What is a legal representative? Do I have to reside in Vietnam if I am a legal representative?
A Legal Representative of an enterprise in Vietnam is an individual who can exercise the rights and obligations for and on behalf of that enterprise. Generally, a Legal Representative is the key party to sign contracts for the company with other parties, although Power of Attorney’s can be issued to delegate certain powers to others in the organisation.
A Legal Representative is a key statutory position and is appointed as the primary individual to represent the company, having the responsibility to deal with regulatory or company structural matters.
From 1 July 2015 the Enterprise and Investment Laws requirements for Legal Representatives are:
- Companies can have more than one Legal Representative. This provides more flexibility for those Legal Representatives that travel regularly, but this does come with a few other stipulations. Firstly, each company must have at least one Legal Representative and the Law requires that at least one Legal Representative resides in Vietnam. Further, if all Legal Representatives are travelling outside of Vietnam then they must appoint another person to exercise the Legal Representatives obligations.
- If all Legal Representatives are outside of Vietnam for more than 30 days without appointing another person to exercise their powers, then the company members or directors must appoint a new Legal Representative.
Is your legal representative out of the country for more than 30 days?
The residency prerequisites of the Legal Representatives of Vietnamese enterprises may create statutory non-compliance exposures, and foreign investors have to be aware of the risks involved if these requirements are not met. It is advised that companies operating in Vietnam analyse the status of their Legal Representatives and if the conditions are not sufficient to comply with the Law of Investment and the Enterprise Law, they should consider appointing an additional Legal Representative and mitigate this risk.
What should I do?
Review your legal documentation (primarily, your Enterprise Registration Certificate – ERC) to determine your current status for Legal Representative appointments, and if they are outside the Vietnam at present, you should look at appointing another individual to the role to stay compliant.
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