Answer:
According to Decree 07/2016/ND-CP of the Government providing for the operations of representative offices and branches of foreign traders in Vietnam, the chief of a representative office cannot be the legal representative of an economic organisation established under the law of Vietnam[1]. Therefore, the appointment of a person being chief of a representative office as the director cum the legal representative of a foreign-invested enterprise in Vietnam could be assumed as against the law of Vietnam. From the legal perspective, appointing the chief of the representative office as the director of a subsidiary but not its legal representative shall not be deemed as disregard the law.
Assuming that the appointment of one person to be concurrently the chief of the representative office and the director (not the legal representative) of an enterprise is consistent with Decree 07/2016/ND-CP as analysed above, the scope of benefits for the chief of the representative office and those of the enterprise director must be considered separately.
Article 90 of the Labour Code prescribes that the Employer is obliged to pay the Employee to do jobs agreed upon by the parties. The issue is that this person concurrently holds two different positions, so from the perspective of labour law, the chief of the representative office will enjoy the salary appropriate for this position until the procedure for closing the representative office is completely done, and he or she will also receive the salary for the position of the director of a subsidiary.
If it is stated in writing that the salary for the head of the representative office is VND0 during the time the procedure for closing the representative office is being conducted, the statement may be questioned by the local labour management State agency or the Department of Industry and Trade (the state authority at the provincial level managing the operations of representative offices) and they may take in to account the validity of the statement. In fact, that person is still working as the chief of a running representative office regardless of the number of working hours. Accordingly, the representative office may be subject to an administrative fine of up to VND20,000,000, and forced to pay the chief of the representative in full salary along with the interests arising therefrom at the highest interest rate of demand deposits announced by state-owned commercial banks at the time the fine is imposed[2].
Hence, to avoid the above-mentioned risks, Employer should ensure that the chief of the representative office is reasonably paid during his or her term or office. However, to reduce costs of the representative office during conducting the closing, it is possible to reach an agreement with the chief of the representative office on reducing the salary due to the closure of the office and then time spent working for the office reduce.
[1] Article 33.6(d) of the Decree No. 07/2016/ND-CP dated 25/01/2016.
[2] Articles 5.1, 16.2 and 16.5 of Decree 28/2020/ND-CP dated 01/03/2020.
