In Defense Of Seals
The article “The Real Deal With Seals” by Nguyen Tan has stirred up controversy among many readers of the Weekly. A number of them agree that seals have bred problems regarding economic management and corporate governance. However, jurist Vu Xuan Tien begs to differ as follows.
Prevailing regulations in Vietnam hold that seals are used by several organizations, including State agencies and foreign institutions operating in the country, and give legal weight to a vast array of documents (Article 1, Decree 58/2001/ND-CP). This means a document issued on behalf of an enterprise must be affixed with the seal of this firm. Such an insight is crucial for nurturing transparency and safeguarding the interests of a firm’s shareholders and partners.
Consider, for example, the case of A, the chairman and legal representative of X, a joint stock company. If the contract he signs to borrow money from B is affixed with the seal of X — most likely after thorough consideration by the key personnel of this company — then X is responsible for repaying the debt. Without the seal, X is free from repayment obligations as the contract will involve A and B only. The same applies to transaction agreements and disciplinary actions against employees. Without the corporate seal, the line between documents signed on behalf of an enterprise and those representing the voice of an authorized person only would vanish, and trouble comes.
Corporate governance flaws
Internal wrangles revolving around the use of seals have plagued such enterprises as Huu Nghi Hanoi Joint Stock Co., Haiphong Shipping Co. and Hung Vuong University. However, it is unfair to push the blame to corporate seals. In essence, these cases reflect power struggles within enterprises and will erupt, whether corporate seals are used legitimately or not.
In fact, conflicts regarding the use of corporate seals indicate shortcomings in corporate governance. If all businesses strictly conform to Clause 1, Article 36 of the Enterprise Law, which holds that corporate seals must be kept at the headquarters of firms, then nobody, however powerful, can bring such properties home or abuse them.
To be fair, most firms manage to comply with this clause and misuse, if any, is not confined within the business circle. In 2008, an association of small and medium enterprises in Hanoi suffered the same problem, with a leader refusing to pass over the seal after leaving his position. The case was settled only when the police stepped in. Consequently, it is arguably hasty to obliterate corporate seals just because of a few incidents in the business community.
Regulatory loopholes
Doubt must be cast on why corporate seals are treated in the same way as those of State agencies, with attributes like sizes clearly prescribed, and must include such details as the districts and cities where enterprises are situated. Once relocated to, say, another district, a company has to change its seal. The process is extremely problematic and has haunted a host of small and medium enterprises. Businesses that accidentally lose their seals — their own properties — are also punished severely. These regulations have imposed enormous administrative costs.
Unfortunately, it is precisely these requirements that led Vietnamese officials to refuse to accept the legal value of a Japanese enterprise’s small and intricately patterned seal, as jurist Cao Ba Khoat recalls.
How to change
To begin with, corporate seals should not be eradicated immediately, especially since Vietnam’s market economy is still in its nascent stage and corporate credibility is not the norm yet. In addition, the Government needs to allow enterprises to determine the shapes, sizes and uses of corporate seals, which should, of course, be registered with State agencies.