SOME ISSUES RELATING TO THE ENTERPRISE PHYSICAL SEAL

Nguyen Huy Hoang, Partner, BROSS & Partners

Email:  hoang@bross.vn

Doan Thanh Binh, Associate, BROSS & Partners

Email:  binh.dt@bross.vn

According to the Law on Enterprises 2020, the seal of an enterprise[1] can be a physical seal or a digital signature. The use of digital signatures will almost certainly ensure the authenticity of documents issued by the enterprise, but perhaps businesses will still have to keep the habit of using physical seals in the near future, when not all transactions can be concluded by electronic means. This article will present some issues relating to the enterprise physical seal under the current law that many businesses are interested in.

1. Enterprises may agree that the contract only takes effect after being sealed

Article 43.3 of the Law on Enterprises 2020 has adjusted the provision stating that “Seals are [shall be] used in cases as prescribed by law or in transactions where the parties have agreement on the use of seals” under the Law on Enterprises 2014 into “Enterprises [shall] use seals in transactions in accordance with the law”. However, the above provision of the Law on Enterprises 2020 does not revoke the freedom of agreement of enterprises on the time of a contract entering into force, according to Article 3.2 and Article 401.1 of the Civil Code 2015. Accordingly, an enterprise is entitled to have an agreement with its business partner that their contract only takes effect after it has been fully sealed by the parties, and such agreement must be respected by the parties. In the case the parties do not have an agreement on such sealing, the contract shall take effect from the moment it is signed by the last party.

2. An enterprise’s internal regulations on seals shall not automatically bind its business partners and third parties

Also under Article 43.3 of the Law on Enterprises 2020, the management and retention of an enterprise’s seals shall comply with the provisions of its charter or internal regulations either issued by the enterprise itself, or its branches, representative offices, or other units under the enterprise which employ the relevant seals. Therefore, the enterprise may stipulate in its charter or internal regulations that the enterprise’s contract shall be effective only when it is sealed.

However, the internal regulations of an enterprise, in principle, are effective only for the determination of the responsibilities of its individuals and departments when performing their assigned tasks, without automatically bind third parties. According to Articles 400 and 401.1 of the Civil Code 2015, the time a written contract enters into force is when the last partial signs the contract or accepts the conclusion of the contract in other forms shown in writing, unless otherwise agreed by the parties. Therefore, the enterprise’s contract, despite not being sealed, will still take effect from the time of the signatures of the parties, unless the enterprise can prove that between the parties there has been an agreement (at least an implied one) or a habit[2] of mandatory sealing, in particular, at the time of contract signing, (i) the business partner knew or must know about the the enterprise’s said internal regulations without objections, or (ii) the business partner agreed with that provision, or (iii) the sealing of the contract between the parties and the parties only performing the contract once it is sealed had been practiced many times for a long time. 

3. Some comments relating to the forged seal

Criminal law clearly stipulates the acts of forging seals, documents and using forged seals and documents as criminal offences with a penalty of up to 07 years of imprisonment[3]. However, from a civil law perspective, some businesses have made the question that, if the competent individuals of the parties have signed the contract, but the business partner uses a forged seal (a seal that is not in accordance with that business partner’s internal regulations) to affix on the contract, then whether the business partner can rely on the forged seal to deny the validity of the contract. It can be seen that, if the parties do not have an agreement or habit that the contract only takes effect after being sealed, then the contract shall remain in force, because the signatures of the competent persons are sufficient to conclude the contract[4]. However, where the parties have an agreement or habit of the contract only taking effect after being sealed, the issue of whether the contract is effective or not may be disputed. In this case, though, we are of the opinion that the contract between the parties shall not be invalidated due to the forged seal, because:

- The competent person of the business partner having signed the contract means that the business partner knows and must know about the signing of the contract, as well as the partner’s true will here is to conclude and be bound by the contract; and

- The other party of the contract, as well as third parties, are under no obligations to check whether the business partner’s seal is authentic or not, since the management and use of the seal is the responsibility of the business partner. In addition, according to the principle of good faith (bona fides) and honesty in civil relations[5], the business partner is obliged to ensure that the seal affixed is the authentic seal and using the forged seal to deny the validity of the contract is contrary to such principle.

Above is our opinion on some issues of the enterprise physical seal under the Law on Enterprises 2020. Please note that this article does not constitute any comprehensive legal opinion for any particular case. Please take expert advice should you encounter related legal issues.

BROSS & Partners is a Vietnamese law firm proposed by Legal 500 Asia Pacific, Chamber Asia Pacific, AsiaLaw, IFLR1000, Benchmark Litigation, with experience and capacity to advise and resolve disputes related to Investment, Enterprises and Commerce, Mergers & Acquisitions, Labor & Employment, Real Estate & Construction, Finance – Banking, Securities, Capital Markets, and Intellectual Property.

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