What are the roles and obligations of the nominee in Vietnam?

Appointing a local nominee as owner/shareholder of the company can avoid restrictions on foreign investment and shorten the time required to establish the company. 

The nominee or trustee structure also protects the identity of the beneficial owner as only the name of the Vietnamese nominee will be officially registered in the company.

The Vietnamese individual appointed by the foreign investors is registered as owner of the capital or shares of the target company. Further, to ensure administrative compliance as registered owner/shareholder, the nominee can also hold key managerial positions if required by the investors.

Legal services:

  • Selecting and appointing a nominee to represent the investors as Director, Shareholder, Head of Representative Office, Head of branch, etc.
  • Tailoring nominee service agreements to protect the investors’ rights.

How to proceed?

  • Contact us via phone, email or create a CRM account to define your investment requirements and objectives with our lawyers;
  • Whenever possible we will meet in person to define your legal strategy in depth.
  • Our legal services will notably include our advisory on the pros and cons of the nominee structure and how to secure the investment and ensure that dividends, capital gains and other benefits are remitted to the beneficial owner.
  • After drafting the nominee agreement defining the rights and obligations of the nominee and beneficial owner, we will nominate a reputable Vietnamese individual to act as your representative in the target company.
  • At any time, you can access the CRM system to manage and keep a track of your legal services.

Appointing a local nominee as owner/shareholder of the company can allow to avoid restrictions on foreign investment and shorten the time required to establish the company. The nominee or trustee structure also protects the identity of the beneficial owner as only the name of the Vietnamese nominee will be officially registered in the company.

The Vietnamese individual appointed by the foreign investors is registered as owner of the capital or shares of the target company. Further to ensuring administrative compliance as registered owner/shareholder, the nominee can also hold key managerial positions if required by the investors.

A joint venture company involving foreign and Vietnamese partners should be set up by obtaining an Investment Registration Certificate (“IRC”) to register the project of establishing the joint venture company and then by obtaining the Enterprise Registration Certificate (“ERC”).

In some cases, the Vietnamese partner(s) will establish the company without the foreign partner(s) and later transfer part of the ownership to the foreign investor(s).

It is mandatory for all companies to have at least one of its legal representatives in Vietnam at all time; however, the legal representative does not need to be a permanent resident in Vietnam.

Foreign investors consider carrying out investment activities in Vietnam via a Nominee in the following circumstances:

  • To overcome the restrictive measures applicable to foreign investors such as (i) excluding engagement of foreign investors, (ii) putting a threshold on foreign ownership when it comes to certain business sectors.
  • To shorten the time and procedures taken to establish a company in Vietnam. For foreign investors to set up a company in Vietnam, they are required to provide supporting documents on financial capacity, proper legal status, which entail lengthening procedures for translation and consular legalization. Furthermore, the timeline for foreign investors to establish a company usually takes 3 or 4 times longer compared to domestic investors. For that reason, use of nominee services will help to streamline the procedures, to quickly grasp business opportunities.
  • To overcome the requirements of sub-licenses on retail, e-commerce, etc. which are not applicable to 100% Vietnam-owned companies.

Foreign investors can restrict the scope of authority of the legal representative to execute contracts, engage into transactions of the company by stipulating his/her scope of authority in nominee agreement. Instead, the foreign investor or a third party appointed by the foreign investor shall have sole discretion to dictate the legal representative to execute contracts, engage into transactions.

Yes. The foreign investor and the legal representative can sign a nominee agreement in which provides (i) the scope of authority of the legal representative, (ii) the performances that are prohibited to the legal representative, and (iii) other undertakings of the legal representative.

As recorded by the Enterprise Registration Certificate (“ERC”) and/or other legal documents, the legal representative, in many cases, is the company owner or owner of shares, contributing capital may dishonor the nominee agreement, taking the funds invested by the foreign investor and the right to control the company. Therefore, it is important that the foreign investor consider appointing a trustworthy person as legal representative.

To mitigate the risks posed by the legal representative, foreign investors can take the following approaches:

  • Making a nominee agreement signed by parties;
  • Retaining custody of company’s seal(s);
  • Remaining a control regime over Tax – Accounting by employing a third party;

Closely monitoring company bank account and funding.

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