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Rights and obligations of the representative managing the contributed capital

An organization is allowed to appoint a representative for the owners, members, and shareholders of a company and that organization must appoint an individual under written authorization on behalf of and for the benefit of such owner, member, or shareholder to exercise the rights and obligations according to what is expressed in the content of the power of attorney and the provisions of the Enterprise Law. The rights and obligations of such owners, members, and shareholders will be represented and performed through this authorized person. On this article, Viet An Law shares relevant provisions on the rights and obligations of the representative managing the contributed capital.

Legal basis

Law on Enterprise 2020 and guiding documents on the implementation of the Enterprise Law.

Overview of representative managing the contributed capital

According to the provisions of Article 14.1 of the Enterprises Law 2020 regarding authorized representatives of owners, members, and shareholders who are organizations as follows: “The authorized representative of the owner, member or shareholder of the company being an organization must be an individual authorized in writing on behalf of the owner, member, or shareholder to exercise the rights and obligations under the provisions of this Law.”

Thus, it can be understood that: The representative of the management of the contributed capital is an individual authorized by the owner, member, or shareholder being an organization within the scope of the authorized capital contribution to manage on behalf of and for the benefit of the authorizing party to exercise the rights and obligations according to what is expressed in the content of the authorization document and the provisions of the Enterprise Law 2020.

Number of representatives managing the organization’s capital contribution

Organizations are not limited in the number of representatives managing capital contributions to their company, but this must be specifically stated in the company’s charter. Unless otherwise provided in the company’s charter, the appointment of an authorized representative shall comply with Clause 2, Article 14 of the Enterprise Law 2020 as follows:

  • If a multiple-members limited liability company owns at least 35% of the charter capital as a member of that organization, this company can authorize a maximum of 03 representatives;
  • If a joint-stock company owns at least 10% of the total number of ordinary shares as a shareholder of that organization, this company can authorize a maximum of 03 representatives.

In addition to determining the number of representatives managing the organization’s capital contribution, it is necessary to specify the number of contributed capital and shares for each individual managing representative. It can be based on Clause 3, Article 14 of the Enterprise Law in 2020 as follows: “In case the owner, member, or shareholder of the company is an organization that appoints multiple authorized representatives, the capital contribution and number of shares for each representative must be specifically determined. In case the owner, member, or shareholder of the company does not determine the capital contribution, the corresponding number of shares for each authorized representative, the contributed capital, and the number of shares will be divided equally among the number of authorized representatives.”

A document appointing a representative to manage the capital contribution of the organization

The document appointing an authorized representative must be notified to the company and is only effective for the company from the date the company receives the document. According to the provisions of Clause 4, Article 14 of the Enterprise Law 2020, a document appointing an authorized representative must include the following principal contents:

  • Name, business code, head office address of the owner, member, or shareholder;
  • The number of authorized representatives and the proportion of shares and capital contributions of each authorized representative;
  • Surname, name, contact address, nationality, legal document number of individual authorized representative;
  • The corresponding authorization term of each authorized representative; which clearly states the date of commencement of representation;
  • Surname, name, signature of the legal representative of the owner, member, shareholder, and authorized representative.

Criteria and conditions of the representative managing the capital contribution of the organization

The authorized representative must have the following criteria and conditions as prescribed in Clause 5, Article 14 of the Enterprise Law 2020:

  • Be an individual aged 18 years or older, with full civil act capacity;
  • Not falling into the subjects specified in Clause 2, Article 17 of the Enterprise Law in 2020;
  • Members and shareholders being state-owned enterprises as prescribed at Point b, Clause 1, Article 88 of the Enterprises Law in 2020 are not allowed to appoint a person with family relations of the company manager and of the person with authority to appoint the company manager as a representative at another company;
  • Other standards and conditions are prescribed by the company charter.

Rights and obligations of the representative managing the contributed capital

According to the provisions of Article 15 of the Law on Enterprises 2020, the authorized representative of the owner, member, or shareholder of the company is an organization with the following responsibilities:

  • The authorized representative to manage the contributed capital in the name of the owner, member, or shareholder of the company exercise the rights and obligations of owners, members, and shareholders at the Board of Members and General Meeting of Shareholders for the capital contributions allowed to be managed according to the provisions of the Enterprise Law 2020. Any restrictions of owners, members, shareholders, or authorized representatives in exercising the rights and obligations of the respective owners, members, and shareholders of the company at the Members’ Council and the General Meeting of Shareholders are not valid for a third party.
  • The authorized representative to manage the contributed capital is responsible for attending all meetings of the Members’ Council and the General Meeting of Shareholders.
  • The authorized representative managing the capital contribution shall exercise the authorized rights and obligations honestly and carefully to protect the legitimate interests of the owners, members, and shareholders appointing the representative.
  • The authorized representative to manage the contributed capital is responsible to the owner, member, or shareholder who appoints the representative for violating the responsibilities specified in Article 15 of the Enterprise Law 2020. Owners, members, and shareholders appoint representatives to be responsible before third parties for arising liabilities related to rights and obligations performed through authorized representatives.

Viet An Law Firm specializes in consulting in the fields of corporate law, investment, intellectual property, and tax accounting. Please contact us for advice on setting up a company or changing business registration and other business laws.

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