Nominee Shareholder Arrangements in Vietnam: Legal Restrictions and Compliant Alternatives
Considering a nominee shareholder service in Vietnam? Learn the legal restrictions, key risks and compliant investment alternatives available to foreign investors.
Foreign investors searching for a nominee shareholder service in Vietnam may be considering an arrangement under which a Vietnamese individual or organisation appears as the registered shareholder or member of a company while another person provides the capital, receives the economic benefits or exercises actual control over the investment.
Such arrangements require particular caution.
Vietnamese law requires company owners, shareholders and members to comply with the rules governing capital contributions and prohibits them from holding their names out on behalf of another person for the purpose of contributing capital to an enterprise. Enterprise registration information must also be lawful, truthful and accurate.
Accordingly, a conventional nominee arrangement under which one person merely lends their name to conceal the identity, capital contribution or ownership of another person may violate Vietnamese law.
ASL LAW does not provide, arrange or facilitate any unlawful nominee shareholding structure. Instead, we advise foreign investors on the legal risks associated with such arrangements and assist them in developing transparent, commercially workable and legally compliant investment structures in Vietnam.
What Is a Nominee Shareholder in Vietnam?
The expression nominee shareholder in Vietnam is commonly used to describe a person or organisation registered as the legal shareholder or member of a Vietnamese company on behalf of another person, who is often referred to as the beneficial owner.
In a typical nominee arrangement:
the beneficial owner provides all or part of the investment capital;
the nominee is recorded in the enterprise registration records as the shareholder or company member;
the nominee may agree to exercise voting or ownership rights according to the beneficial owner’s instructions;
the beneficial owner receives the economic benefits associated with the shares or capital contribution; and
a side agreement, power of attorney, trust declaration or transfer undertaking may be used to regulate the relationship between the parties.
The commercial terminology used by the parties does not determine whether the structure is lawful. Vietnamese authorities may examine the actual source of capital, the allocation of economic benefits, the exercise of control and the true nature of the relationship between the registered shareholder and the person behind the arrangement.
Is a Nominee Shareholder Service in Vietnam Legal?
Vietnamese law now expressly requires company owners, shareholders and members to comply fully with the regulations on capital contributions and not to stand in another person’s name when contributing capital to an enterprise.
This rule must be considered together with the requirements concerning:
truthful and accurate enterprise registration;
identification and disclosure of beneficial owners;
foreign investment and market-access conditions;
foreign ownership limitations;
investment approval procedures;
anti-money laundering compliance;
source-of-funds verification;
foreign exchange control;
tax compliance; and
sector-specific licensing requirements.
A Vietnam nominee shareholder service cannot lawfully be used to conceal the real investor, misrepresent the source or ownership of capital, avoid foreign investment procedures or circumvent restrictions that would otherwise apply to a foreign investor.
Adding a nominee agreement, power of attorney or undertaking to transfer the shares in the future does not automatically make the structure lawful. The legality of the arrangement will depend on its substance rather than the title of the documents used.
Arrangements That ASL LAW Does Not Provide
ASL LAW does not provide or facilitate any arrangement under which:
An individual or organisation merely lends its name to act as a shareholder or company member for another person.
One person supplies the investment capital while another person is falsely recorded as the owner of the relevant shares or capital contribution.
The real investor, beneficial owner, source of funds or person exercising actual control is concealed from the competent authorities.
A foreign investor uses a Vietnamese nominee to circumvent:
market-access conditions;
foreign ownership restrictions;
investment registration procedures;
regulatory approvals;
conditional business requirements;
land-related restrictions;
tax obligations;
foreign exchange regulations; or
beneficial ownership disclosure requirements.
Enterprise registration documents contain inaccurate, incomplete or misleading information concerning:
the capital contributor;
the source of investment capital;
the owner of the shares or capital contribution;
the beneficial owner;
the person exercising actual control; or
the rights and benefits attached to the investment.
A nominee shareholder agreement, declaration of trust, power of attorney, option agreement or side agreement is used to disguise a sham ownership arrangement.
A registered shareholder is required to transfer all dividends, voting rights, proceeds or economic benefits to an undisclosed person in a manner inconsistent with the registered ownership structure.
The structure is intended to conceal assets, evade taxes, launder funds or avoid any applicable legal or regulatory obligation.
ASL LAW reserves the right to refuse or terminate any engagement where the proposed arrangement may violate Vietnamese law, professional ethics or compliance obligations.
Lawful Alternatives to a Vietnam Nominee Shareholder Service
Foreign investors do not necessarily need a Vietnam nominee shareholder to establish or operate a business in Vietnam. Depending on the proposed sector, ownership structure and commercial objectives, lawful alternatives may include the following.
1. A wholly foreign-owned company
Where the relevant business sector is open to foreign investment, the investor may establish a company with 100% foreign ownership.
This structure normally provides the clearest legal recognition of the investor’s ownership, capital contribution and economic rights.
The investor may need to complete investment registration, enterprise registration and sector-specific licensing procedures, depending on the nature of the project.
2. A genuine joint venture
Where local participation is legally required or commercially desirable, the foreign investor may establish a genuine joint venture with a Vietnamese partner.
The Vietnamese partner must be a real investor that:
makes an actual capital contribution;
assumes genuine commercial risks;
enjoys corresponding economic rights;
participates in governance where agreed; and
is not merely lending its name to the foreign investor.
The parties may regulate their relationship through a shareholders’ agreement or joint venture agreement covering governance, reserved matters, funding, profit distribution, transfer restrictions, deadlock resolution and exit mechanisms.
3. Acquisition of shares or capital contributions
A foreign investor may acquire shares in a Vietnamese joint-stock company or capital contributions in a limited liability company, subject to applicable market-access conditions and approval requirements.
This route may be suitable where the investor wishes to acquire an existing business rather than establish a new entity.
4. Business cooperation arrangements
In appropriate cases, the parties may consider a business cooperation contract, distribution agreement, franchise agreement, licence agreement, management agreement or other commercial arrangement that does not require the foreign party to conceal ownership through a nominee shareholder.
The suitability of such a structure depends on the investor’s intended level of control, revenue model, tax treatment and regulatory requirements.
5. Corporate governance protections
A minority foreign investor may protect its legitimate interests through properly drafted governance mechanisms, including:
board appointment rights;
veto rights over reserved matters;
information and inspection rights;
pre-emptive rights;
anti-dilution protections;
transfer restrictions;
tag-along and drag-along rights;
dividend policies;
deadlock procedures; and
lawful exit mechanisms.
These protections should not be used to disguise an unlawful ownership arrangement. They must remain consistent with the company’s registered ownership and the applicable investment regulations.
6. Authorised representatives
Where an institutional shareholder owns shares or a capital contribution, it may appoint an authorised representative to exercise its shareholder or member rights.
An authorised representative is not the same as a nominee shareholder. The institutional investor remains the actual and disclosed owner, while the representative performs authorised functions on its behalf.
7. Resident management and legal representative support
Foreign-invested companies may require support in appointing a director, manager or legal representative who satisfies applicable residence and corporate governance requirements.
A legal representative or manager must genuinely perform the relevant statutory and managerial functions. Such an appointment must not be used to disguise the ownership of shares or capital contributions.
Review of Existing Nominee Shareholder Arrangements
Foreign investors who previously entered into a nominee arrangement should consider conducting a legal review of the existing structure.
An existing nominee shareholder in Vietnam arrangement may create risks relating to:
the enforceability of the nominee agreement;
ownership of the shares or capital contribution;
entitlement to dividends and sale proceeds;
voting and management rights;
enterprise registration accuracy;
beneficial ownership disclosure;
foreign investment compliance;
tax and foreign exchange obligations;
unauthorised use of corporate assets;
disputes with the registered shareholder; and
potential administrative, civil or criminal exposure.
The fact that an arrangement was established before the latest regulatory change does not mean that it can safely continue without review.
Restructuring a Vietnam Nominee Shareholder Arrangement
Depending on the circumstances, ASL LAW may assist with bringing an existing structure into compliance through one or more of the following measures:
conducting legal due diligence on the existing shareholding arrangement;
identifying the actual investor, beneficial owner and source of funds;
assessing applicable foreign ownership and market-access conditions;
registering the actual foreign investor where legally permitted;
transferring shares or capital contributions to the lawful owner;
applying for required investment or M&A approvals;
converting the company into a lawful foreign-invested enterprise;
restructuring the relationship as a genuine joint venture;
updating beneficial ownership and enterprise registration information;
amending the charter and shareholders’ agreement;
reviewing tax and foreign exchange consequences;
regularising historical capital contributions;
terminating unlawful nominee agreements; and
designing a compliant governance and exit structure.
ASL LAW’s role in such matters is to assist with legal compliance and restructuring. We do not validate, maintain, conceal or extend an unlawful nominee arrangement.
How ASL LAW Can Assist Foreign Investors
Rather than providing a conventional Vietnam nominee shareholder service, ASL LAW advises investors on lawful, transparent and commercially appropriate investment structures.
Our services may include:
foreign investment and market-access assessment;
advice on foreign ownership limitations;
investment structure planning;
establishment of wholly foreign-owned companies;
establishment of genuine joint ventures;
M&A and share acquisition advice;
preparation of shareholders’ and joint venture agreements;
corporate governance structuring;
advice on capital contributions and funding;
beneficial ownership compliance;
source-of-funds and KYC review;
enterprise and investment registration;
appointment of legal representatives and authorised representatives;
corporate secretarial and compliance services;
tax and foreign exchange coordination; and
review and restructuring of existing nominee arrangements.
Each proposed structure must be reviewed on a case-by-case basis. The appropriate solution will depend on the investor’s nationality, proposed business activities, investment amount, ownership objectives, sector-specific conditions and intended level of operational control.
Information Required for a Preliminary Assessment
To assess the appropriate investment structure, ASL LAW may request:
the investor’s identity and nationality;
the identity of the ultimate beneficial owner;
the investor’s corporate structure;
the proposed business activities;
the expected investment capital;
the proposed source of funds;
the preferred ownership percentage;
the identity and role of any Vietnamese partner;
the proposed governance arrangements;
relevant licences or regulatory approvals;
the proposed location of the business; and
any existing nominee, loan, trust, option or side agreements.
ASL LAW may also conduct conflict checks, client identification, sanctions screening and other compliance procedures before accepting an engagement.
Frequently Asked Questions
Can a Vietnamese individual hold shares on behalf of a foreign investor?
An arrangement under which a Vietnamese individual merely stands in the foreign investor’s name for the purpose of contributing capital is not permissible. The actual structure, source of funds, economic benefits and exercise of control must be reviewed rather than relying solely on the name appearing in the enterprise registration records.
Can a nominee agreement protect the foreign investor?
A nominee agreement does not eliminate regulatory risks and may be unenforceable where its purpose or substance violates Vietnamese law. It may also expose the foreign investor to the risk that the registered shareholder refuses to transfer the shares, misuses shareholder rights or disposes of the investment.
Can the parties use a loan agreement instead?
A genuine loan may be lawful if it complies with applicable civil, corporate, tax and foreign exchange regulations. However, a loan agreement should not be used to disguise an equity investment or nominee shareholding arrangement.
Is a call option permitted?
A call option may be used in an appropriate commercial transaction, subject to Vietnamese law and any applicable foreign investment approval. It must not be used to conceal present ownership, create a sham shareholder or guarantee a future transfer that would violate market-access or foreign ownership conditions.
Can ASL LAW introduce a local shareholder?
ASL LAW does not introduce individuals or organisations whose sole function is to lend their names as shareholders on behalf of undisclosed investors. We may assist with structuring and documenting a genuine joint venture with an independently selected and commercially participating Vietnamese partner.
What should an investor do with an existing nominee structure?
The investor should obtain a confidential legal assessment and avoid making further transfers, declarations or amendments before understanding the legal consequences. A restructuring plan may then be developed based on the company’s activities, existing licences, ownership history and applicable investment restrictions.
Important Legal Notice
The expressions “nominee shareholder service in Vietnam”, “Vietnam nominee shareholder service”, “nominee shareholder in Vietnam” and “Vietnam nominee shareholder” are used in this article solely to describe commonly searched ownership arrangements and explain their legal implications.
Their use does not mean that ASL LAW offers, endorses or facilitates any person or organisation standing in another person’s name to contribute capital to an enterprise.
ASL LAW does not assist clients in:
concealing beneficial ownership;
circumventing foreign investment restrictions;
misrepresenting the source or ownership of capital;
avoiding tax, foreign exchange, anti-money laundering or other regulatory obligations.
Any engagement is subject to a case-specific legal assessment, conflict checks, client identification, beneficial ownership disclosure and source-of-funds review.
This article is provided for general information only and does not constitute legal advice. Specific advice should be obtained before establishing, maintaining, transferring or restructuring any investment or shareholding arrangement in Vietnam.
Contact ASL LAW
Foreign investors considering a nominee shareholder service in Vietnam, or seeking to review an existing Vietnam nominee shareholder arrangement, may contact ASL LAW for advice on compliant investment structuring and corporate restructuring.
ASL LAW can assist investors in identifying lawful alternatives that protect their commercial interests while complying with Vietnamese investment, enterprise, tax, foreign exchange and beneficial ownership regulations.
Job descriptions of corporate services in Vietnam (Vietnam company secretarial services)
1
Register insurance for Viet name staff
1.1
From 01 to unlimited employees
1.2
Establish Trading Union
1.3
Software (For submitting Insurance report via internet)
1.4
– Submitting all documents to authorities when the company changes labor- Closing insurance book when employee leaves the job- Applying PIT code for employees– Advice on labor regulations– Payroll– PIT calculation
2
Accounting services (with our partners)
2.1
Monthly tax report (in case has no revenue)
2.2
Financial Report (CIT finalization and PIT finalization) (in case has no revenue)
2.3
Monthly Tax Report (in case has revenue)
2.4
Financial Report (CIT finalization and PIT finalization)
Under the scope of work of our corporate services in Vietnam, we also provide the virtual office for our clients to save their budget of business operation.
WHAT OTHER SERVICES DOES ASL LAW PROVIDE?
It is proud that ASL Law Firm has successfully gathered the leading lawyers and legal experts in comprehensive legal fields. Therefore, in addition to the corporate services in Vietnam (Vietnam company secretarial services), ASL Law Firm could provide all in one legal services to our clients. Our legal services include:
“ASL LAW’s success proves that there are more than a few Vietnamese law firms that are strong enough to cover complicated multinational legal cases. This also harangues the end of the times when Vietnamese law firms were sidekicks to more established international counterparts due to foreign language limitation, lack of standard legal drafting skills, lack of knowledge about international legal systems, or limited connectivity.”
“Pham Duy Khuong is the Managing Partner of ASL Law, a Vietnam law firm that has expertise in regional business transactions. He has been recognised as one of the top lawyers in Vietnam, and has also been awarded with fellowships and scholarships by the Australian, Japanese, and US governments.”
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