The company must ensure that there is always a representative to carry out civil transactions. If the legal representative is arrested, a replacement must be found.

Legal grounds:

• Enterprise Law 2020.

We get the following questions:

I have a question, a limited company has two members, what if one member is a director cum legal representative who is arrested and cannot run the company?

In principle, any enterprise must ensure that there is always at least one legal representative residing in Vietnam to represent the company in exercising the rights and obligations arising from the enterprise’s transactions, or to represent the enterprise in cases at the people’s court.

Therefore, if the enterprise’s legal representative is arrested or sentenced to prison, the enterprise must appoint a new legal representative.

1. Handling replacement of legal representatives

Pursuant to Clause 6, Article 12 of the Enterprise Law 2020, the legal representative of a two-member limited liability company is as follows:

Article 12. Legal representative of enterprises

6. For a limited liability company with two members, if any member is an individual who acts as the legal representative of the company, dies, is missing, is being examined for criminal liability, is detained, is serving a prison sentence, is serving administrative handling measures at a compulsory detoxification establishment, a compulsory education institution, has escaped from his/her residence, has been restricted or has been banned from performing certain duties, or has lost his/her civil act capacity, …, the remaining member will automatically act as the legal representative of the company until there is a new decision of the Members’ Council on the legal representative of the company.

According to the above provisions, when the legal representative is arrested, the enterprise shall handle as follows:

• The remaining member automatically acts as the legal representative of the company until there is a new decision of the Members’ Council on the legal representative of the company.
• The Company shall carry out the procedures for changing the legal representative at the business registration agency within 10 days from the date of change.

2. Handling capital contributions of members who are detained

According to the provisions of Clause 6, Article 12 of the Enterprise Law 2020, the member’s council of a limited company may issue a new decision to appoint the legal representative.

However, one member was taken into custody. Therefore, this member’s capital contribution will also need to be resolved for the company’s members’ council to operate normally.

Pursuant to Clause 8, Article 53 of the Enterprise Law 2020 as follows:

Article 53. Handling of contributed capital in some special cases

8. In case a company member being an individual is held in temporary detention, is serving a prison sentence, is serving an administrative handling measure at a compulsory detoxification establishment or compulsory education institution, such member shall authorize another person to perform some or all of his or her rights and obligations at the company.

According to the above provisions, when a member is detained, that member authorizes another person to perform his/her rights and obligations at the company.

After authorization, the authorized representative of the member (cum the legal representative) is arrested and other members of the company will hold a meeting of the members’ council to appoint a new legal representative.