Lê Thị Dung - Junior Associate

Lê Hữu Tiến - Paralegal

Contributing capital to establish company is becoming a popular trend in business today. However, this demand also leads to many complicated problems and internal conflicts when there are incidents related to business operations with legal responsibilities, especially when there are no clear solutions to divide responsibilities among members/shareholders holding equal capital contribution in the company.

Accordingly, ensuring the equality of responsibilities of members/shareholders with equal capital contributions in the company plays a very important role in ensuring that business operations run smoothly without creating responsibility shifting or risk avoidance among these members/shareholders. The following advice will propose solutions to ensure the principle of equality of responsibilities of members/shareholders in the company.

i. Model 1: Employing a person who is not member/shareholder to be the legal representative of the Company

This model helps members/shareholders not to sign relevant documents on behalf of the company or work with third parties or state authorities. Accordingly, the person employed as a legal representative will be the one to directly sign documents and contracts as well as be legally responsible to the competent authority when legal issues arise. However, members/shareholders need a mechanism to supervise the business operations of the company under the management of this hired legal representative.

ii. Model 2: legal representative is rotated from members/shareholders for an agreed period of time

This model ensures equality in the rights and responsibilities of members/shareholders as each person will assume the position of legal representative for an equal period of time.

However, this change leads to having to carry out multiple change procedures with relevant agencies, causing inconvenience in business operations and affecting professionalism when working with customers and partners due to continuous changes in legal representatives. In addition, continuous changes can lead to difficulties in determining responsibilities and handling legal issues, especially in emergency situations or disputes.

iii. Model 3: members/shareholders are recognized as legal representatives at the same time

According to the provisions of the Law on Enterprises, a company may have one or more legal representatives and the rights and obligations of each legal representative shall be specifically stipulated in the Charter. In case the division of rights and obligations is not clearly stipulated in the Charter, each legal representative of the company shall be the authorized representative of the company before a third party, all legal representatives shall be jointly liable for damages caused to the enterprise according to the provisions of the civil law and other relevant provisions of law.

Accordingly, this model ensures fairness, protects the equality of rights and responsibilities among members/shareholders, specifically, members/shareholders can directly participate in business management and operations, and this division of rights and responsibilities is specified in the Charter. Furthermore, this model has an advantage over Model 2 above because the legal representatives will be equally responsible at any time.

In addition, if members/shareholders do not want to be bound by responsibilities and bear risks related to issues such as fire prevention and fighting, security and order, food hygiene and safety, environmental protection commitments in operating business activities with specific conditions such as motels, hotels, resorts, etc., the company can lease all assets to another experienced enterprises to operate the business independently. Accordingly, the risks and responsibilities related to this conditional business will be borne by the asset operating company.

For each selected model, we recommend that members/shareholders should discuss and sign a members/shareholders agreement, which divides the rights and responsibilities of members/shareholders according to the principle of fairness and equality to ensure the rights of members/shareholders and serve as a basis for resolving conflicts and disputes later.

If your company is facing similar problems, please contact us so we can advise and propose an operating model that best suits the wishes and purposes of members/shareholders in order to best protect the rights and legitimate interests of members/shareholders based on the principles of fairness and equal responsibility.

Here is our advice on corporate model ensures equal responsibilities between members/shareholders with the same capital ownership. As a professional corporate lawyer team in the field of investment, we are always ready to provide our clients with optimal solutions in terms of efficiency, cost, and simplified legal procedures. Please visit our DIMAC Website and other News Category to get the latest updates on legal advice and market experience sharing.