Is It Legal to Have a Vietnamese National Act as the Nominee Owner of a Company?

In the process of investing or doing business in Vietnam, many foreigners choose to ask or hire a Vietnamese person to act as the nominee owner of their company. The goal is often to save time, reduce costs, or avoid complex legal procedures. However, this approach carries significant legal risks and should be carefully considered.

1. Common scenario

Due to certain restrictions on foreign ownership in specific industries, many international entrepreneurs choose to register a business under the name of a Vietnamese citizen (as a 100% Vietnamese-owned company). In these cases, foreigners may ask friends, acquaintances, or Vietnamese partners to appear as the legal owner on business registration documents, while they manage, fund, and operate the company behind the scenes.

2. Is nominee ownership legal?

Not legally valid under Vietnamese law

According to the Law on Enterprises and the Law on Investment of Vietnam, the individual named on the business registration certificate is the legal owner of the company. If someone is listed as the owner but does not contribute capital or manage the business, then:

• The foreign investor is not recognized as the legal owner by law.
• Civil agreements between the nominee and the actual investor may be considered invalid in court.
• Foreigners have no legal protection in case of disputes.

Some try to legitimize the arrangement through internal agreements (but still risky), such as:

• Loan agreements
• Power of attorney for business operations
• Commitments to transfer shares in the future

However, these contracts do not have sufficient legal weight to confirm actual ownership. In disputes, the foreign party typically has no lawful control over the business.

3. Risks of using a nominee

• Loss of control: The nominee can unilaterally change business details, withdraw capital, or transfer the company without your consent.
• No legal recognition: Since your name is not on official records, you are not legally entitled to any profits, assets, or shareholder rights.
• Complications in converting to a foreign-owned company: If you later want to "legalize" ownership, it requires share transfers and investment re-registration, which is time-consuming and costly.
• Legal liability: If any legal, tax, or financial issues arise, you could be held responsible without legal protection.

4. Legal alternatives for foreign investors

Instead of hiring a Vietnamese nominee, you should consider one of the following legitimate options:

• Set up a 100% foreign-owned company: Allowed in permitted industries. This involves obtaining an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC).
• Invest in a Vietnamese company: If the industry is not restricted, you can hold legal shares in a local business as a foreign investor.
• Establish a joint venture (Vietnamese–foreign): Ideal for partnering with a Vietnamese individual while ensuring legal rights and protections.

Hiring a Vietnamese nominee to act as a company owner is not legal under Vietnamese law and poses high risks for foreign investors. If you are considering starting a company in Vietnam, it’s crucial to choose a lawful, protected structure. Working with a trusted legal and investment advisory firm can help you save time, avoid legal pitfalls, and ensure a sustainable business in Vietnam. For personalized consultation and assistance in setting up a legal foreign-owned company, you can reach out to Zora Consulting.