1. Introduction
Disputes regarding the change of legal representative arise in the course of business operations and management. These disputes occur when there is disagreement or conflict among the company’s members about who should take on the role of legal representative.
In the course of business activities, companies often face various types of disputes. One of the most common and complex legal issues is the dispute regarding the change of legal representative. This article provides an overview of the procedures for changing the legal representative, relevant legal bases, and common issues encountered.
2. Procedures for Changing the Legal Representative
Changing the legal representative of a company must follow a strict and specific process according to the Law on Enterprises and the company’s charter. Here are the basic steps:
- Convene and organize a Board of Directors (BoD) meeting: According to regulations, the change of legal representative must be approved at a valid BoD meeting. The meeting must have sufficient members present, and the meeting minutes must be fully and clearly recorded.
- BoD decision: After discussion and voting, the BoD must issue an official decision on the dismissal and appointment of the new legal representative.
- Complete legal procedures: The BoD’s decision must be sent to the Department of Planning and Investment to update the information on the change of legal representative in the business registration certificate.
3. Relevant Legal Bases
The change of legal representative is governed by the provisions of the Law on Enterprises and the company’s charter. Some important provisions include:
- Article 153 of the Law on Enterprises: Specifies the powers of the BoD in dismissing and appointing the Director and the legal representative.
- Articles 153 – 160 of the Law on Enterprises: Regulates the procedures for organizing BoD meetings.
Article 12 of the Law on Enterprises: Defines the legal representative of the company.
4. Common Legal Issues
Some common legal issues in disputes regarding the change of legal representative include:
- Violation of BoD meeting procedures: If the convening and organization of the BoD meeting do not comply with the procedures, the decision on dismissal and appointment of the legal representative may be considered invalid.
- Insufficient votes: The BoD’s decision must be approved by a sufficient number of votes according to the company’s charter and the Law on Enterprises.
Incomplete legal procedures: Failure to complete the procedures for changing the legal representative at the Department of Planning and Investment will render the change ineffective.
5. Real-Life Example
A typical example of this type of dispute is the case between Ms. Lê Thị L and Mr. Bùi Thanh TU at Mechanical Construction Joint Stock Company 306 (Judgment 18/2022/KDTM-PT). In this case, Ms. Lê Thị L, the BoD Chairperson, unilaterally decided to dismiss Mr. Bùi Thanh TU without following the correct BoD meeting procedures and legal regulations. The appellate court ruled that this dismissal decision was legally invalid, and Mr. Bùi Thanh TU remained the legal representative of the company.
Court’s Assessment:
- Validity of the Dismissal Decision: The decision 07/2019/QĐ-CT dated 30/12/2019, dismissing Mr. Bùi Thanh TU by Ms. Lê Thị L, did not comply with BoD meeting procedures and the company’s charter.
- Legal Representative Change Procedures: The company 306 had not completed the legal representative change procedures as per Article 12 of the Law on Enterprises; therefore, legally, Mr. Bùi Thanh TU remains the Director and legal representative.
6. Conclusion
Disputes regarding the change of legal representative are complex issues that must be handled carefully according to the correct procedures and legal regulations. Failure to comply with procedures can lead to invalid decisions and numerous legal consequences. Therefore, companies must ensure they follow the correct procedures when changing the legal representative.
To avoid similar disputes, companies should refer to the guidelines HERE (A Comprehensive Guide on Companies in Vietnam in Vietnamese. For the English version, please contact Unilaw)
If you are facing a similar dispute regarding the change of legal representative and need advice, do not hesitate to contact us HERE.
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