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Are limited liability firms abusing authorised representative rules?

Update: June, 27/2012 - 10:04

By Le Trung Nghia, Legal Assistant, Indochine Law Firm

The Members Council is the governing body of a limited liability company, and some confusion has arisen as to how the council's membership is constituted.

Under Article 4.14 of the Law on Enterprises, participants in a meeting of the Members Council must be either: (i) an individual member of the MC or (ii) the authorised representative of a member which is an organisation. This is contrary to the frequent interpretation of the phrase "authorised representative of a member" in Article 51.4, which is often interpreted without reference to Article 4.14 and given to mean that the authorised representative can also represent members who are individuals.

This problem is exacerbated by the fact that many limited liability companies use template charters that incorporate language along the lines of "Members or the authorised representative of Members may authorise other Members in writing to attend the meeting of the Members Council in their stead." This gives a great deal of power to the authorised representative.

Under this template language, the authorised representative, without the consent of or even notification to the organisation for which he or she acts, can further authorise another member of the council to act in his or her stead. That puts a double remove between the actual owner of the company and management. Luckily, this action may be declared invalid under the Civil Code as beyond the scope of authorisation granted by the member to the authorised representative.—VNS

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