Are business representatives who abuse their positions beyond their authority subject to legal action?

What is the legal representative of an enterprise?

Pursuant to Clauses 1, 2 and 3, Article 12 of the Law on Enterprises 2020, the provisions on the legal representative of an enterprise are as follows: after:

– The legal representative of an enterprise is an individual who represents the enterprise to exercise the rights and obligations arising from the enterprise’s transactions, represents the enterprise as a requester to resolve civil matters, plaintiff, defendant, person with related rights and obligations before the Arbitrator, Court and other rights and obligations according to the provisions of law.

– Limited liability companies and joint stock companies may have one or more legal representatives. The company charter specifies the number, management titles and rights and obligations of the legal representative of the enterprise.

If the company has more than one legal representative, the company charter specifically stipulates the rights and obligations of each legal representative.

In case the division of rights and obligations of each legal representative is not clearly stipulated in the company’s charter, each legal representative of the company is a competent representative of the enterprise before a third party; All legal representatives must be jointly responsible for damages caused to the enterprise according to the provisions of civil law and other relevant laws.

– Enterprises must ensure that they always have at least one legal representative residing in Vietnam.

When there is only one remaining legal representative residing in Vietnam, this person must, when leaving Vietnam, authorize in writing another individual residing in Vietnam to exercise the rights and obligations of the legal representative.

In this case, the legal representative is still responsible for exercising the authorized rights and obligations.

Thus, the legal representative of the enterprise is the representative who exercises the relevant rights and obligations of the enterprise. Enterprises must ensure that there is at least one legal representative.

What is beyond the authority of representation in the enterprise?

Pursuant to Article 13 of the Law on Enterprises 2020, the responsibilities of representatives are as follows:

– Carry out assigned rights and obligations honestly, carefully, and best to ensure the legitimate interests of the business;

– Loyal to the interests of the business; Do not abuse your position or position and use information, know-how, business opportunities, or other assets of the enterprise for personal gain or to serve the interests of other organizations or individuals;

– Notify enterprises promptly, fully and accurately about enterprises in which they, their related persons own or have shares or capital contributions according to the provisions of this Law.

– The legal representative of the enterprise is personally responsible for damage to the enterprise due to breach of responsibility specified in Clause 1 of this Article.

And based on Article 141 of the 2015 Civil Code stipulates on the scope of representation as follows:

– The representative may only establish and perform civil transactions within the scope of representation on the following grounds:

+ Decision of the competent authority;

+ Charter of the legal entity;

+ Authorization content;

+ Other provisions of law.

– In case the scope of representation cannot be specifically determined as prescribed in Clause 1 of this Article, the legal representative has the right to establish and perform all civil transactions for the benefit of the represented person, unless otherwise prescribed by law.

– An individual or legal entity may represent many different individuals or legal entities but may not act in the name of the represented person to establish or perform civil transactions with themselves or with a third party of which they are also the representative, unless otherwise prescribed by law.

– The representative must inform the transaction party about the scope of his/her representation.

Thus, the representative must be responsible when representing the business and must ensure implementation within the committed scope. When the representative does not comply with the above regulations and causes consequences for the business, it is considered to be exceeding the representative authority.

How to handle cases of exceeding representative authority?

Determining the scope of representation will be the basis for measuring the consequences of civil transactions established and performed by the representative beyond the scope of representation in Article 142 of the 2015 Civil Code as follows:

– Civil transactions established and performed by a representative beyond the scope of representation do not give rise to the rights and obligations of the represented person with respect to the transaction performed beyond the scope of representation, except for one of the following cases:

+ Representative agrees;

+ The represented person knows but does not object within a reasonable period of time;

+ The represented person is at fault, leading to the fact that the person who made the transaction did not know or could not know that the person who established and performed the civil transaction with him or her went beyond the scope of representation.

– In case a civil transaction established and performed by a representative beyond the scope of representation does not give rise to the rights and obligations of the represented person with respect to the portion of the transaction established and performed beyond the scope of representation, the representative must perform the obligations towards the person who has transacted with him or her regarding the transaction beyond the scope of representation, except in cases where the person who has transacted knows or should have known about exceeding the scope of representation and still transacts.

– The person who has transacted with the representative has the right to unilaterally terminate or cancel the civil transaction for the portion exceeding the scope of representation or the entire civil transaction and request compensation for damages, except in cases where that person knows or should have known about the exceeding the scope of representation but still transacts or the case specified in Point a, Clause 1 of this Article.

– In case the representative and the person transacting with the representative intentionally establish and perform civil transactions beyond the scope of representation and cause damage to the represented person, they must be jointly liable to compensate for the damage.

Thus, when the representative of your business is in one of the above cases of exceeding his/her authority and you do not know about this excess when the transaction occurs, your cancellation of the transaction for that excess and claiming compensation for damages is correct according to the law.