Electronic Identification for FDI Enterprises: Are Two Legal Representatives Necessary?

In the current digital transformation, electronic identification and the use of electronic identification accounts by organizations are becoming important practical conditions for enterprises to access, carry out and monitor various administrative procedures in the electronic environment of Vietnamese state authorities. For foreign-invested enterprises, this requirement is not merely a technical matter of logging into public service systems; it may also directly affect their ability to maintain corporate governance, comply with legal obligations and process necessary procedures with competent state authorities.

One notable difficulty arises where the enterprise has only one legal representative and that person is a foreign national. If such person has not yet satisfied the residence or personal electronic identification requirements in Vietnam, the enterprise may encounter difficulties in registering, managing or using its organizational electronic identification account. From a risk-management perspective, appointing an additional legal representative who is a Vietnamese citizen may be an option worth considering. However, this option also requires strict controls over the scope of representation, access rights and internal responsibilities to prevent risks of abuse of authority or loss of control in the course of the enterprise’s operations.

On that basis, this article analyzes the necessity of appointing a Vietnamese national as the second legal representative (in the capacity of the “Designated Person”) in the context of the digitalization of administrative procedures, while also assessing potential legal risks and proposing appropriate control mechanisms to enable FDIs to ensure continuity, legal security and compliance in their management and operations.

1. Electronic Identification of Organizations in the Digital Transformation Era:

1.1. Requirements for Electronic Identification of Organizations:

Pursuant to Clause 3, Article 3 of Decree No. 69/2024/ND-CP, electronic identification means the registration, verification, creation and association of an electronic identity with an electronic identity subject. This mechanism applies to individuals, agencies and organizations operating in Vietnam, including foreign-invested enterprises (“FDIs“). In essence, electronic identification facilitates identity authentication, connects an organization’s information and reduces the need to repeatedly provide existing data.

Current law imposes requirements for organizations to register for electronic identification based on their date of establishment. Agencies and organizations established before June 30th, 2025 were required to register an electronic identification account by June 30th, 2025, as previously issued accounts ceased to be valid. For agencies and organizations established after June 30th, 2025, the law has not specified a particular registration deadline; however, an organization must still complete this procedure once it satisfies the applicable conditions.

In practice, many FDIs have not yet completed the registration procedure or been issued an electronic identification account. This may directly affect their ability to carry out, submit, monitor and process administrative procedures in the electronic environment.

1.2. Sectors in which electronic identification accounts are used:

Electronic identification accounts help enterprises adapt to the digitalization of administrative procedures. Such accounts are also a practical condition for enterprises to access and use online public services on a stable basis. Public service systems are currently being organized and operated as follows:

For most provincial-level public services and the systems of many authorities: Pursuant to Notice No. 315/TB-VPCP dated June 23rd, 2025, from July 1st, 2025, the interfaces of provincial-level public service portals and the systems of many authorities, departments, boards and sectors have been integrated into the National Public Service Portal. Enterprises may submit applications, monitor their processing and receive results on a single platform. However, an enterprise must have an electronic identification account to log in and perform these operations.
For certain other sectors: Some systems still temporarily permit login using digital signatures, personal VNeID accounts or sector-specific accounts. These may include the National Business Registration Portal, the portal of the Drug Administration of Vietnam and the electronic tax system. Nevertheless, the general trend is to gradually standardize the login mechanism using electronic identification accounts (VNeID). Enterprises should therefore promptly proceed with the registration of an electronic identification account to ensure the continuous and stable use of public service systems.

1.3. Difficulties faced by foreign-invested enterprises:

FDIs are commonly organized under a model with only one (01) legal representative (“LR“), who is a foreign national. Having only one (01) LR may cause the organization considerable difficulty in carrying out administrative procedures generally and registering an organizational electronic identification account in particular.

Under applicable law, a foreign LR must possess valid residence documents, a temporary residence card and a level-2 personal electronic identification account to register an electronic identification account for the organization. Meanwhile, certain residence procedures, including the issuance of a temporary residence card, may need to be carried out online through the organization’s electronic identification account. This interdependence may create a deadlock: the organization does not yet have a VNeID electronic identification account and therefore cannot carry out the procedure for applying for a temporary residence card, while the organization cannot register its electronic identification account because the LR has not completed the residence and personal identification procedures.

As a result, the organization may face difficulties in fulfilling administrative obligations with competent state authorities, including tax obligations and other necessary administrative procedures, thereby creating risks of business disruption and administrative penalties.

1.4. The needs for a second legal representative who is a Vietnamese national:

To mitigate the risk of a procedural deadlock, an enterprise should consider appointing an additional LR who is either a Vietnamese citizen or a foreign national who has already been issued a VNeID account. Such person will generally have completed level-2 electronic identification and, if a Vietnamese citizen, will not be required to complete residence procedures or obtain a temporary residence card as a foreign national would, thereby facilitating the registration of electronic identification for the organization.

In addition, appointing a LR who is a Vietnamese citizen, particularly a person who regularly resides in Vietnam, may assist the enterprise in signing application documents, carrying out procedures and working with state authorities, while avoiding many limitations arising from language barriers. For these reasons, appointing a second LR may reduce the organization’s dependence on a single foreign individual and ensure continuity in its management and operations.

2. Requirements regarding the number and residence of legal representatives, and the allocation of authority and obligations of the enterprise’s second legal representative:5

Vietnamese law does not prescribe a maximum number of LRs or restrict their nationality. An enterprise may appoint one (01) or more LRs, but must at all times ensure that at least one (01) LR resides in Vietnam.

Accordingly, an FDI with only one (01) foreign LR may encounter difficulties in maintaining a presence in Vietnam to sign documents, carry out procedures and work with state authorities when required. To mitigate this risk, the enterprise may appoint an additional LR who is a Vietnamese individual.

Where the Company appoints more than one (01) LR, the Company Charter must clearly specify the number, managerial titles, scope of rights, obligations and authority of each person. If the Company Charter does not specifically and clearly allocate the rights and obligations of each LR, each LR will be deemed a duly authorized representative of the enterprise before third parties, and all LRs will be jointly liable for damage caused to the enterprise in accordance with law.

Based on the above analysis, an FDI may consider operating under a model with two (02) LRs, comprising:

First LR: A key person of the foreign investor, who may be a Vietnamese or foreign national and holds full decision-making authority over management and operations. The organization may appoint such person as the Chairperson/Chairperson of the Members’ Council/Chairperson of the Board of Directors or as the Director/General Director; and/or
Second LR: A Vietnamese national appointed solely to satisfy the statutory residence requirement. The organization may appoint such person as a Deputy Director or to another position, depending on the enterprise’s choice and in accordance with applicable law.

3. Legal risk assessment:

An enterprise may appoint a Vietnamese individual as its second LR to address difficulties relating to administrative procedures and electronic identification during the current digital transition. However, in certain circumstances, this very “key that confers authority” may also unlock legal risks if the enterprise does not establish a rigorous mechanism to control the scope of representation.

3.1. Legal risks where the second legal representative acts beyond the permitted scope of authority

a. Acts Exceeding the Scope of Representative Authority:

As the lawful representative of the enterprise before third parties, this individual may unilaterally carry out the following acts in the absence of appropriate control and restriction mechanisms:

Enter into, execute and perform contracts and commercial transactions that directly prejudice the interests of the Company;
Unilaterally dispose of, transfer or liquidate high-value assets of the Company;
Enter into security transactions, such as pledging or mortgaging the Company’s assets to secure personal financial obligations or the obligations of a third party;
Issue transfer or payment instructions, or otherwise move funds from the Company’s bank accounts, without valid approval from the individuals/bodies holding the highest decision-making authority within the Company;
Carry out administrative procedures within the authority of a LR, such as changing enterprise registration contents or carrying out labor, investment or immigration procedures, without valid approval from the individuals/bodies holding the highest decision-making authority within the Company.

b. Legal Consequences and Risks:

The above acts involving abuse of authority pose relatively high legal risks to the enterprise’s assets and business operations.

(i) First, the risk that a transaction will be recognized as valid:

Under the rules governing the consequences of civil transactions entered into or performed by a representative beyond the scope of representation, together with the principle of protecting good-faith third parties, Vietnamese law tends to prioritize transactional stability and the interests of counterparties.6 Accordingly, a transaction is not automatically invalid merely because the signatory exceeded his or her internal authority. In many cases, the enterprise may still have to bear the consequences of that transaction. Therefore, if a third party to a transaction signed by the second LR can prove that it “did not know and was not required to know” of the internal limitations on the scope of representation, the Court may have grounds to recognize that the transaction is binding on the Company.

In practice, limitations on the authority of LRs, as required under Clause 2, Article 12 of the Law on Enterprises 2020, are generally recorded only as internal matters in the Company Charter. Meanwhile, a third party may reasonably assume that a LR recorded in the Enterprise Registration Certificate has full representative authority. Because the Company Charter is not a publicly available document that third parties are required to access, a Court or arbitral tribunal may tend to presume that the third party has conducted reasonable due diligence (by checking enterprise registration information) and was therefore not required to know of such internal limitations on the allocation of authority.

(ii) Second, the allocation of legal liability:

If the above risk materializes, liability will be allocated across the following two independent aspects:

The Company’s liability to third parties: If the Company has not clearly publicized the limitations on representative authority, a transaction exceeding such authority may nevertheless become directly binding on the Company. In that case, the Company must fully perform the obligations arising from the transaction, including transferring assets, continuing performance of the transaction (including delivery of assets and payment), or compensating the third party for damage as required by law;
The second LR’s internal liability: Internally, the Company is entitled to hold the individual who abused his or her authority personally liable. Pursuant to Clause 4, Article 143 of the Civil Code 2015 and Article 165 of the Law on Enterprises 2020, a LR who exceeds the scope of representation may be required to return benefits received, compensate for damage and be subject to other sanctions under the Company Charter or relevant internal agreements.

It is important to note that these two liability mechanisms are not mutually exclusive. In many cases, the enterprise must first perform its obligations to the third party and may only thereafter seek reimbursement or compensation from the individual in breach through a separate legal relationship.

(iii) Third, risks arising from the “unilateral” performance of administrative procedures: A legal change recorded by a state authority generally gives rise to independent legal consequences and cannot be remedied merely by the enterprise’s internal decisions. If a LR unilaterally carries out procedures relating to enterprise registration, labor, investment, tax or immigration and such procedures are approved by a state authority, the enterprise may incur substantial time and costs to restore its original legal status or may need to lodge a complaint or initiate administrative proceedings seeking annulment of the Enterprise Registration Certificate.

(iv) Judicial practice also demonstrates that limitations of authority under the Company Charter cannot always be relied upon to deny the validity of a transaction vis-a-vis a third party. In one dispute, the Company Charter provided that the General Director could approve only contracts with a value not exceeding VND 15 billion. Nevertheless, the General Director signed a contract exceeding this limit. After the dispute had been resolved by arbitration, the Vietnamese company challenged the arbitral award and argued that the contract was invalid because the signatory had exceeded the authority prescribed in the Charter.7 However, according to the Ho Chi Minh City People’s Court, “in this case, Mr. H, in his capacity as General Director and legal representative of DM Company, signed the aforesaid contract beyond the authority prescribed in the Company Charter. If this caused damage, the General Director must bear liability before the law and compensate the Company for such damage. DM Company’s submission has no basis and is therefore not accepted by the Panel considering the application. Accordingly, the contract has given rise to rights and obligations of both parties.”8 In other words, although the Charter may restrict a LR’s authority in the internal relationship, it is not always sufficient to “invalidate” transactions entered into with third parties. It will, however, provide a basis for the Company to claim corresponding compensation from the LR.

3.2. Risk of losing control of the enterprise’s Electronic Identification Account

One of the Company’s purposes in appointing a Vietnamese individual as its second LR is to complete electronic identification for the enterprise. The individual will then be entitled to manage and use the electronic identification account to perform operations on the VNeID application, including confirming authorization to register the organization’s electronic identification, adding members to the organization, removing members from the organization, changing member information and rights within the organization, confirming withdrawal from the organization, approving membership rights and granting online transaction permissions.

Within the recorded scope of authority, the second LR may change members, adjust access rights or perform other administrative operations that do not accurately reflect the intent of the duly authorized owner, members or shareholders. In addition, if the second LR fails to cooperate in updating the LR information after the first LR, who is a foreign national, has obtained a personal electronic identification account, the Company may encounter difficulties in accessing and using its electronic identification account to carry out necessary administrative procedures and in terminating the second LR’s access to the account.

4. Proposed Measures

First, limit authority in the Company Charter:

The Company Charter should clearly specify the rights and obligations of the second LR (in the capacity of the “Designated Person”). Such person should only be authorized to represent the Company in signing documents or carrying out work in the name of the Company, including performing operations on the electronic identification account and entering into and performing transactions, upon direct instruction or prior written approval from the first LR or the individual/body holding the highest decision-making authority within the Company.

Such written approval must clearly specify the permitted scope of work and remain effective for a definite period or until completion of the specific assigned task.

Second, enter into a Cooperation and Management Entrustment Agreement incorporating an indemnification mechanism:

In addition to the Company Charter, to strengthen controls and minimize risks to the greatest extent possible, the Company/Investor and the Designated Person should enter into a Cooperation and Management Entrustment Agreement (as an independent civil transaction). This agreement should set out in detail the boundaries of management authority, control mechanisms and the Designated Person’s obligation to compensate for any act exceeding the scope of representation.

Third, establish a multi-level approval mechanism for financial transactions/fund transfers at commercial banks, particularly by separating the person initiating an instruction from the person approving it. Where the second LR is appointed solely for electronic identification purposes, the enterprise should also consider not registering such individual as having usage or transaction rights over the bank account.

Fourth, establish information-transparency mechanisms and legal safeguards vis-a-vis third parties:

The core purpose of this approach is to formally establish that third parties “knew or ought to have known” of the limitations on representative authority. Specifically, to maximize the scope of protection, the Company may concurrently implement the following measures:

Formally notify counterparties of the decision-making authority applicable to transactions exceeding specified financial thresholds or involving the disposal of assets.
Develop contractual provisions serving as a binding civil undertaking by which the third party acknowledges the authority of the individual representing the Company in transactions with that third party.
Publicly disclose the allocation of representative authority through the enterprise’s official information channels, thereby creating evidence that the information was provided in the event of a dispute.

In summary, appointing an additional LR who is a Vietnamese individual may be an appropriate solution for FDIs to ensure continuity in carrying out electronic administrative procedures, particularly during the transition to the organizational electronic identification mechanism. This approach helps mitigate the risk of operational disruption where a foreign LR has not yet fully satisfied the residence or personal electronic identification requirements in Vietnam.

However, appointing a second LR also creates corresponding risk-management requirements. The enterprise must clearly specify each LR’s scope of authority, approval mechanisms and internal responsibilities, while establishing procedures to control access to and use of the electronic identification account and transactions with third parties.

Accordingly, the two-LR model should be adopted only following a comprehensive assessment of the enterprise’s operational needs, compliance requirements and internal control mechanisms. If rigorously designed, this model can help the enterprise adapt to the digitalization of administrative procedures while maintaining legal security and effective governance.

(5) Article 12 of the Law on Enterprises 2020

(6) Clauses 1 and 3, Article 143 of the Civil Code 2015

(7) Legal Support Portal for Enterprises, Internal Rules Are Not Binding on Counterparties, https://htpldn.moj.gov.vn/Pages/chi-tiet-tin.aspx?ItemID=3&l=Cacvuviecvuongmacph

(8) Decision No. 177/2014/QĐST-KDTM dated March 5th, 2014 of the Ho Chi Minh City People’s Court

Submission date: 20/7/2026

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Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

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Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.

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