I – INTRODUCTION

This paper provides opinion on the case of whether Mr. Kakazu who is the vice president
and general director of STT Joint stock company violates the law on enterprises 2020
about his action on signing the office rental agreement. In this scenario, Mr. Kakazu
signed the document to lease the office of NLQ Limited Liability company at 11bis,
Nguyen Gia Thieu, Ward 6, District 3, Ho Chi Minh city before asking approval from the
Board of Directors or the general meeting of shareholders, this temporary moving office
was subsequently approved by the the General Meeting of shareholders. To conclude that
Mr. Kakazu does not have the right to sign the contract and must pay compensation as
alleged by Mr. Hung, the following section will focus on discussing the competence to
sign the contract of Mr. Kakazu by the criteria (1) being the legal representative of the
company and (2) signing authority in accordance with the value of business contract
being signed.

II – BODY

(1) Legal representative

According to article 12, clause 1, LOE 2020 “The enterprise’s legal representative is the
person that, on behalf of the enterprise, exercises and performs the rights and obligations
derived from the enterprise’s transactions” and article 14, clause 1 for rights and
obligations of authorized representative, whereby the legal representative or his/her
authorized representative of the company is the person who has the right to sign the
contract on behalf of the company. Considering the following cases:

If the company has more than one legal representative, the company's charter will
specify the rights and obligations of each legal representative. (Article 12, Clause 2). In
this case, the Chairman of the Board of Directors and the general director automatically
become representative in law of the company. Mr. Kakazu is the general director of the
company therefore he is the legal representative of the company and has competence to
sign the contract with NLQ company on behalf of the STT Joint Stock Company without
approval in advance from the Board of Directors.

If the company has only one legal representative, according to Clause 2, Article 137
LOE 2020, “the Chairman of the Board of Directors or the Director or General Director
is the legal representative of the company”. In case the company's charter does not
provide, then Mr. Kakazu is not the legal representative of the company, so he must be
authorized by the Chairman of the Board of Directors, Mr. Quang to sign the contract for
that lease to take effect. On the other hand, if the company’s charter stated specifically
that the general director is the legal representative then Mr. Kakazu has the right to sign
the leasing contract on behalf of STT company.

Therefore, if Mr. Kakazu does not fall under above cases to be legal representative of
STT JSC then he must need approval from the Board of Directors according to director’s
rights and obligations at article 162, clause 3 to sign the contract. In this case, Mr.
Kakazu violates the LOE and must be compensated for any damage caused by the
decision of Board of Directors.

(2) The value of the contract

Given that Mr. Kakazu is the legal representative of the company, it still does not mean
he has competence on signing the agreement. There are some cases that need to be
approved by the Board of Directors or general meetings of shareholders before launching
to the transaction. Transfering the transaction office to PSG building does not affect the
company’s charter as it is a temporary move in time the company’s registered office was
in construction, therefore the following part only mentions the approval of the Board of
Directors instead of the general meeting of shareholders.

The Board of Directors has the right and obligation to approve purchase, sale, loan and
loan contracts and other contracts and transactions with a value of 35% or more of the
total assets recorded in the most recent financial statements of the company (article 153,
clause 2). Accordingly, if the value of the office lease contract at the PSG building is
worth from 35% of the total assets of the company, Mr. Kakazu must pass the decision of
the Board of Directors before signing the contract despite his legal representative
position. Therefore, in this case Mr. Kakazu violates the law and the contract is invalid
and then he must take responsibility before the Board of Directors.

In case the value of the contract is under 35% of the total asset in the latest financial
statement of the company then he has the competence to sign the contract without
approval from the Board of Directors except for transaction between the company and
related persons at article 167, clause 1.

III- CONCLUSION

In conclusion, whether Mr. Kakazu violates the LOE 2020 depends on his competence to
sign the contract. In case he is the legal representative or authorized representative of the
company and the value of the contract is less than 35% of the company’s total asset, then
he does not violate LOE as Mr. Hung’s words. In the general meeting of shareholders
given the company approved the decision to move the company to 11bis, therefore the
company takes responsibility for the renting and furnish cost. However, if Mr. Kakazu is
not the law representative or the value of the contract is greater than 35% of total assets,
in this time the contract is not valid and Mr. Kakazu will take responsibility and may
compensate for his action by the Board of Director’s decision.