Authorization is a common activity in business management. Ordinarily, in order to unify management and control, the number of entities authorized to manage the enterprise is limited. Nevertheless, this also leads to the inability to ensure comprehensiveness and efficiency in the management process when the enterprise’s scale is large, its activities are diversified and complicated, and many situations arise. In order to aim at efficiency and convenience in business management, authorization is an optimal measure, however, the enterprise does not always perform the authorization in accordance with the provisions of the law. So, when authorizing business management, what should be noted? Let’s find out with TNTP through the article below.
I. Who has the authority to authorize in business management?
Not everyone has the authority to authorize performing tasks in connection with business management. According to the current law, only the legal representative is entitled to do so.
Nevertheless, there is an exception where the attorney may sub-authorize to a third person. According to Clause 1 Article 564 of the Civil Code 2015, the attorney may only sub-authorize its authorization to the third person in any of the following cases:
● With the consent of the principal;
● Due to force majeure events , if the sub-authorization does not apply, the purpose of entering into a civil transaction for the principal’s interests is unachievable.
II. Cases where authorization is required
In principle, the legal representative can authorize another person to perform tasks within his/her jurisdiction at any time. However, there are cases where authorization is required by law. Specifically, Clause 3 Article 12 of the Law on Enterprises 2020 stipulates that the enterprise shall have at least one legal representative residing in Vietnam. Whenever this representative leaves Vietnam, he/she has to authorize another Vietnamese resident, in writing, to act as the legal representative.
III. Cases where authorization is not allowed
Enterprises should note that in cases where the legal representative is not authorized to another person in business management. For instance, if the legal representative is concurrently the chairman or member of the Board of Directors of a credit institution, he or she may not authorize persons who are not members of the Board of Directors to exercise their rights and perform their obligations (Clause 5 Article 81 of the Law on Credit Institutions 2010). Or a depositor must come to a transaction office of a credit institution in person and present his/her identity proof; in case of a joint savings deposit, all depositors must present their identity proof in person. If the savings deposit is going to be made by the legal representative, the legal representative must present his/her representative status proof and identity proof and identity proof of the depositor.
In the aforementioned cases, if the authorization is still established, the authorization may be refused upon implementation or may be invalidated with sanctions as prescribed by law.
IV. How to handle when the authorization document does not specify the time limit?
The duration of the authorization shall be as agreed by the parties or as provided by the law and shall be stated in the authorization document. Such duration can be a specified period or period from the date of authorization until the time the work is completed. In case the authorization period is not recorded in the authorization document, it shall be considered in accordance with civil law. Specifically, according to Article 563 of the Civil Code 2015, if there is no agreement and the duration is not provided by law, the authorization period shall be effective for 01 (one) year from the date on which the authorization is made.
V. Liabilities of the parties after authorization
Kindly note that the establishment of the authorization document does not mean that the principal will no longer have any liability for his or her rights and obligations or that the authorized person will have full decision-making power over the authorized work.
According to the provisions of law, the principal is still liable before the law for the acts performed by the attorney within the scope and duration of the authorization. Meanwhile, the attorney shall be liable before the principal and before the law for the acts that he/she performs. Thus, although authorizing others, the principal still needs to monitor the implementation of the authorization content to be able to intervene when necessary. On the other hand, the attorney also needs to make sure that the work she/he does is lawful and in accordance with the will of the principal.
VI. Consequences of performing work beyond the scope of authorization
According to the provisions of law, the work performed by the authorized person beyond the scope of authorization shall not give rise to the rights and obligations of the principal concerning that part of the transaction which exceeded the scope of representation, except for any of the following cases:
● The principal gives consent;
● The principal knows it without any objection within an appropriate time limit;
● It is the principal’s fault that the other party does not know or is not able to know that the attorney entering into and performing the civil transaction therewith was beyond his/her scope of authorization.
Conclusion: When authorizing in business management, the subjects need to pay attention to the authorized authority (including the principal and the attorney), the cases where authorization is required, the cases where the authorization is not allowed, authorization duration, liabilities of the parties when authorizing and legal consequences when performing tasks beyond the scope of authorization.
Above is the content of the article “Note when authorizing in business management” that TNTP sent to readers. We hope the above sharing is useful for those who are interested in this content.