“Enterprises should pay heed to the authority of Branch Head and Head of Representative Office in signing a number of contracts such as labor and commercial contracts, as well as their capacity to participate in legal proceedings when disputes arise.“
(1) Branch Head
According to the Law on Enterprise, a branch is a subsidiary unit of an enterprise, responsible for performing all or part of the enterprise’s functions. Therefore, the business sectors of the branch must be consistent with those of the enterprise.
As stipulated in the Commercial Law, once authorized by the legal representative of the enterprise to sign labor contracts, the Branch Head has the rights to recruit and enter into labor contracts with Vietnamese or foreign employees who will be working at the branch.
Furthermore, Head of Branch of foreign traders is also entitled to contracting in Viet Nam if the contents of the contracts are consistent with the content of activities prescribed in the Branch establishment license. However, the Branch Head may only enter into agreements with partners in conformity with to the branch’s registered contents of business sectors. In case the contracts signed by the branch are not in correspondence with its registered business sectors, such contracts may be declared invalid by competent Court in the event of disputes.
(2) Head of Representative Office
Representative Office (RO) is a dependent unit of an enterprise. Within its scope of activities, an RO acts as a liaison office, promotes the implementation of collaborative projects, conducts market research, monitors and urges the implementation of signed contracts and other functions as prescribed by laws.
Due to its lack of business functions, an RO is not permitted to sign contracts for business related purposes or for the sale and purchase of goods, as well as other activities directly related to the sale and purchase of goods. However, RO of foreign traders may sign contracts to serve its essential needs, e.g. renting a location for the RO or recruiting employees.
In case where a foreign enterprise wishes to confer authority upon the Head of its RO to enter into contracts or to amend/supplement signed contracts, such enterprise must issue a written authorization each time a new contract is signed or a concluded one amended/supplemented. Hence, only when possessing an authorization contract may the Head of RO represent the enterprise in entering into purchase and sale agreements on behalf of the enterprise.
Particularly in regards to dispute resolution, RO and branches of an enterprise have the right to execute the lawsuits arising from the transactions implemented by the RO and branches. However, since the RO and branches have no legal entity status, the field “Name and address of the petitioner” in the petition form must be filled out with the enterprise name and then the full name and title of the Head of RO or Branch Head, included with a written authorization and title of the legal representative of the authorizing enterprise. Located at the end of the petition form is the field “Plaintiff”, which needs to be filled out with the name of the legal entity and title of Head of RO or Branch Head; afterwards, the signature and full name of Head of RO or Branch Head must be included, along with the enterprise’s seal or one of the RO or branches.
PLF Law Firm