Question:
Under the Law on Enterprises 2020, is an individual permitted to concurrently act as the legal representative of multiple joint stock companies?
In cases where holding multiple positions may potentially violate competition regulations or create conflicts of interest, what conditions must an enterprise satisfy (e.g., approval of shareholders or provisions in the company charter) to ensure legality?
Answer:
Regarding this matter, based on the current provisions of the Law on Enterprises 2020 and relevant guiding regulations, our advice is as follows:
1.Right to concurrently hold the position of legal representative: At present, the Law on Enterprises 2020 does not prohibit an individual from acting as the legal representative of multiple enterprises simultaneously. In practice, the business registration authorities continue to accept and grant licenses in cases where one individual is registered as the legal representative of multiple legal entities at the same time.
2.Special restrictions and key considerations. Although there is no general statutory prohibition, enterprises should pay attention to the following constraints in order to avoid legal risks:
Restrictions in specialized business sectors: For certain conditional business lines, specialized laws may impose stricter requirements.
Example: Pursuant to Article 10 of Circular No. 121/2020/TT-BTC, a General Director (if concurrently acting as the legal representative) of a securities company is not allowed to concurrently work for another securities company, a fund management company, or other enterprises.
It is necessary to carefully review the charter of each company for which the individual is expected to act as legal representative. The charter may stipulate specific restrictions, such as prohibiting the company’s legal representative from concurrently acting as the legal representative of another enterprise in the same business sector, in order to protect business secrets.
3.Disclosure of interests and fiduciary duties of managers. To control conflicts of interest and ensure compliance with competition regulations, the individual must strictly comply with the following obligations:
Disclosure of related interests (pursuant to Article 164 of the Law on Enterprises 2020): The legal representative must promptly, fully, and accurately disclose to the company the enterprises in which he/she owns or holds controlling shares or capital contributions.
Duty of loyalty and due care: The legal representative must exercise his/her rights and perform assigned obligations honestly and in the best legitimate interests of the company. If concurrent positions give rise to conflicts of interest without proper disclosure or without obtaining approval from the Board of Directors / General Meeting of Shareholders (subject to the company charter), the individual may be liable to compensate the company for any damages incurred.
Reference consultation: Business Law services
