Publication

The Corporate Seal in Vietnam

In Vietnam, the physical corporate seal has been the traditional mark of authority, consent, and legitimacy, and for generations it has projected the authority of the office. It was carefully guarded and remained under the control of a senior officer. But the role of the physical seal has changed. Today, the physical seal has less significance. Under the Law on Enterprises[1] (“LOE”), both a physical seal and a digital signature are acceptable forms of the corporate seal.

A physical seal can still be used. Some history will be helpful.

Registration and verification of a physical seal has evolved:

  • from July 1, 2006 (Enterprise Law 2005), the physical seal had to be “registered” with the Police Department; a company was issued a seal specimen registration certificate. A counter party could easy verify the company’s physical seal through this certificate.
  • from July 1, 2015 (Enterprise Law 2014), the specimen of a physical seal no longer needed to be registered but had merely to be “notified” to the Department of Planning and Investment. A counter party could verify the physical seal through the National Business Registration Portal (“NBRP”).
  • from January 1, 2021 (Enterprise Law 2020) all of this changed. It is no longer possible either to register or to notify the seal to authorities and to receive a certificate which authenticates the seal. It is difficult for a counter party to verify the seal. Even so, the company’s charter may carry an imprint of the seal. If so, the imprint may be referred to in order to verify the physical seal. If the company’s charter does not have an imprint of the physical seal, there is no way to verify the physical seal of a company formed after January 1, 2021. (Note a company’s charter is not a public document and must be provided by the counterparty).

When a physical seal is stamped on a document it is accompanied by the signature of an authorized person – usually the legal representative. When a physical seal is used together with the signature of the legal representative of the company it continues to demonstrate a commitment by the company.  The Company can continue to use its physical seal accompanied by the “ink” signature of a qualified signatory, on both internal and external documents. Seals previously “registered” or “notified” under prior law may still be verified.

If a company still wants to use a physical seal it may do so. It may decide the type, form, and contents of its seal. The seal may be round, rectangular, triangular as the company chooses. It may be affixed with ink of any color–red, black, green, etc. The point is that a new such seal is not publically registered nor notified and it cannot be verified.

Where physical seals cannot be verified, parties must rely on the authority of the signatories themselves. If the signatory is the company’s legal representative (“LR”), the signatory’s position as legal representative can be verified through the NBRP. If not, a written authorization letter from the LR can be obtained to confirm the signatory’s authority. If there are any limits on the LR’s authority, especially if companies have more than one LR, this limitation is only referred to in the charter. But again, charters are not public documents. The inability easily to verify the limits of the LR’s authority places an added burden on parties who previously could rely on the authority of the physical seal. Because physical seals cannot be verified, the use of the corporate seal will likely continue to diminish. However — the issue of seals apart — the inability to verify the authority of a signatory (if, for example, her authority is limited) will continue to be a problem.

A Digital signature is a type of e-signature and is issued by companies[2] licensed by the Ministry of Information and Communications (“MIC”). In essence, it is exactly the same as a handwritten signature, but it is digitalized. It is used to verify the identity of the signer by providing an encrypted stamp of authenticity. A digital signature can be verified through the website of the National Electronic Authentication Center (NEAC) of MIC at https://neac.gov.vn/en. As electronic documents gradually replace hard copy, paper documents in transactions, the value of a digital signature (which can be verified by a counterparty) becomes obvious. If electronic documents are used in transactions, digital signatures will assure the validity and authenticity of such documents. They will also supplant the current request for a “corporate seal” and a “wet signature”. While the public is generally acquainted with a physical seal, less sophisticated entrepreneurs and foreign investors seem unsure of the effect of digital signatures.

But while Vietnam recognizes digital signatures as one way to show the authenticity of a signature, and while their use is growing, their use has not yet become widespread. A digital signature is a specific type of e-signature that complies with strict legal regulations. It is controlled by the company itself, and as such, it provides the highest level of assurance of a signer’s identity. It employs an encryption technology that renders it difficult to forge or tamper with. A digital signature has the benefit of being expressly recognized as satisfying any legal corporate seal requirement. A digital signature does away with the requirement of a physical seal.

When a signer sends a digitally signed document, she must also send a digital certificate to let the counterparty verify her digital signature. A digital certificate is an electronic certificate granted by the digital signature service provider. Simply put, it is like an identity card or passport. Its role is to confirm the identity of the signatory who uses the digital signature. Thus, a digital certificate is understood to prove the validity and legitimacy of the digital signature of an individual or organization. A digital certificate is usually valid for a certain period, after which, the signer must renew, or get a new, signing certificate to establish her identity.

However, the authority of the person whose digital signature is used can also be limited. Limitations, if they exist, could appear in the charter, which, again, is not a public document. Use of a digital signature does not remove the need of a counterparty to assure itself that the signatory of a document has the necessary authority.

If a legal representative misrepresents her authority, even if stated in a nonpublic charter, the counter party who relies on the signature is protected except (i) where the counter party knew that the LR had exceeded her scope of authority, but still carried out the transaction and (ii) where the counterparty and the unauthorized person deliberately enter into or perform the transaction. If the LR acts beyond the scope of her authority, the counter party has the right to terminate the transaction unilaterally or to rescind any part of it which is beyond the scope (or indeed the whole transaction) and may demand compensation for any loss.

In case an offshore company licensed or approved to operate in Vietnam and wants to use its foreign digital signature in Vietnam, the foreign digital signatures and digital certificates (issued abroad) must be licensed by the MIC. Once foreign digital signatures are authorized and digital certificates are accepted, they are legally valid and as effective as digital signatures and digital certificates provided within Vietnam.

DocuSign is different from a digital signature, and it has no legal value in Vietnam. It is simply an electronic signature. A popular form is provided by DocuSign, Inc. (an American company). Some foreign invested companies in Vietnam use DocuSign for documents which are not intended for filing with the Vietnamese Government (internal meeting minutes, commercial agreements, etc). Very broadly, it is a method to sign a document. Parties can agree to use DocuSign for commercial transactions if they wish. But DocuSign may not be accepted by government authorities when documents are submitted to them. Even as between two companies, it may be difficult to establish that its use by one party is a clear statement of that party’s commitment as it provides no linkage to a qualified signatory.

License or approval may be in the form of an Investment Registration Certificate, Enterprise Registration Certificate, branch license, representative office license or it may be one party of a business cooperation contract or other similar certificate/approval.

Manual “ink” Signatures and the Corporate Seal

Manual “ink” signatures do not replace the corporate seal even if the ink is “wet” – that is, even if it is an original document. If regulations require a corporate seal, requirement of the seal is satisfied only if the document is stamped with a legitimate physical seal or is accompanied by a qualified digital signature. When a corporate seal is not required by law or charter, a document is valid when it is signed by an fresh ink signature of a person who has the actual authority to act in the matter. As discussed above, authority is not always easy to determine. Again, the signer must have the authority actually to execute a document.

The Current Muddle

Requirements regarding the need for a seal on a document are scattered across different specialty regulations (eg, on construction contracts[3], on accounting books[4]). The result is that companies must determine whether a corporate seal is required by statute in particular transactions or filings. If so, a document without a corporate seal may be invalid.

In addition to the law, a company’s charter can provide circumstances in which the corporate seal is required. That is, the LOE allows an enterprise the freedom to regulate the use of its corporate seal. Although perhaps unlikely, a company may specify in its charter or internal rules when use of its corporate seal is required.

Practically, most companies do not provide for the management and use of the corporate seal — physical or digital — in their charter because these matters are not a compulsory part of the charter under the LOE[5]. Moreover, even if they were, as mentioned, a charter is not a public record. Thus, third parties need to be extra cautious on use of a seal or failure to use a seal by a counterparty and on the limits of a signatory’s authority (if limits exit). There are obvious dangers of misuse.

Companies should have a separate and well-articulated policy on seals to guard against improper use by unauthorized persons, and they should have a means to communicate the policy.

Conclusion:

The corporate seal may, but need not, be affixed to a corporate document except in those circumstances when a seal is required by law or by the company’s own charter. In cases where a seal is not required by law in the corporate charter, the corporate seal’s absence has no impact on the validity of the document. However, of course, an authorized signatory must sign.

Old habits die hard. With a long-established habit of using a physical seal, some government authorities continue to ascribe importance to the physical seal and may require having a physical seal even in cases where the law no longer requires it. It may take time for Vietnam to replace the mentality surrounding physical seals and to reorient itself to the concept of digital signatures.

Expect that some companies may continue to use a physical seal alongside a digital signature until use of digital signatures becomes commonplace.

 

[1] Law on Enterprises No. 59/2020/QH14 dated 17 June 2020

[2] A list of companies which are licensed to provide digital signatures services is published on National Electronic Authentication Centre’s website at https://neac.gov.vn/en/ca-public/.

[3] Article 6 of Decree 37/2015/ND-CP dated 22 April 2015 providing detailed regulations on construction contract.

[4] Article 90 of Circular 133/2016/TT-BTC dated 26 August 2016

[5] Article 24 of the Enterprise Law

Tags