This article would like to discuss the joint liability, or in other words, whether the Legal Representatives (“Representatives”) are jointly liable for any damage to the enterprise which they represent or not, arguing that many enterprises will be baffled by the application of the “An enterprise may have many legal representatives” rule.
Previously, the Law on Enterprises (2014) allowed enterprises to have at least one legal representative, facilitating their objectives to reduce the workload of their current legal representatives or to increase control over essential corporate affairs. The Law on Enterprises (2014) did not further discuss about the liability of each Representative if there is any damage to the enterprise.
The Law on Enterprises (2020) resolves this matter through a requirement for an enterprise having more than one legal representative. To fulfill this requirement, its charter “specifies rights and obligations of each legal representative. In case the division of rights and obligations of each legal representative is not clearly specified in the company’s charter, each legal representative of the company will be the fully authorized representative of the enterprise in front of a third party; all legal representatives are jointly liable for any damage caused to the enterprise in accordance with the civil law and other relevant laws.” (Article 12.2 of the Law on Enterprises, 2020).
Problems arise if the charter does not clearly specify the rights and obligations of each Representative in the aforementioned manner. Then, the decision of one Representative will be construed as the decision of the remaining Representatives and Representatives will implicitly be jointly responsible before the company and the Law even though such content or document is decided by only one Representative. This joint responsibility will not be imposed when the charter clearly specifies the works and authority of each Representative. Accordingly, a Representative is solely responsible for any damage arising from such Representative’s decision, excluding the liability of the remaining Representatives who do not participate in that decision.
