Due to some restrictions when it comes to certain sectors of the Vietnamese economy that are closed to foreign investment, using a nominee shareholder is a viable option. In essence, it gives a foreign investor access to a sector in Vietnam that is normally closed to foreign investment via nominating a local shareholder, whose name will be on all the necessary certificates. Some of these restricted sectors include mining, oil, media, advertising, forestry ETC. For the full list see below.
Continue reading, and you will understand why starting a business in Vietnam with nominee shareholders might be a good idea for your business plans.
“A nominee shareholder is a local Vietnamese individual/organization (usually individual) that is the one registered as an owner/shareholder on a company license to meet the requirement of the Vietnam law for the benefit of the foreign investor.”
Under the WTO or applicable law in Vietnam, there are restricted/conditional business* lines for foreign investment which will ban/limit the foreign capital in company capital.
Thus, a Nominee shareholder can be an option for foreign investors to enter those businesses in Vietnam by reverting the investment through a local nominee.
In order words, a nominee shareholder is a local Vietnamese individual/organization (usually individual) that is the one registered as an owner/shareholder on a company license to meet the requirement of the Vietnam law for the benefit of the foreign investor. Their funds in the company will be from a foreign investor, but the business license will be in the name of the local nominee.
*For restricted business lines – which means foreign investors will not be allowed to conduct this business in Vietnam.
Is It Safe to Use Nominee Arrangement for Business in Vietnam?
It is safe to use nominee arrangements in Vietnam only if foreigners exercise due diligence and seek assistance from reputable consultants.
Since there are so many unqualified agents on the market, it’s worth the effort to find a trustworthy, reliable consultant to facilitate the entire nominee arrangement process effectively.
A registered owner is the nominee shareholder of a nominee company.
The nominee shareholder is different from the nominee director (the beneficial owner) because even though the nominee shareholder is officially registered under the company, he or she is an unrelated third party who doesn’t own the shares and doesn’t have real control over the company.
The benefits of appointing a nominee shareholder are many folds. Here are some of them:
- Simplify the process when starting a business in Vietnam
- Remain anonymous and secure corporate privacy
- Divert the competitor’s attention
- Own full rights and control over the company
- Avoid legal implications and technical complexities because of its simple structure
- Eligible for tax benefits enjoyed by local companies
Nominee Arrangement Process in Vietnam
A nominee arrangement is one of the simplest forms of company formation when starting a business in Vietnam.
Below is a summarised set of requirements and steps of nominee arrangement.
- A foreign investor, also known as the beneficial owner, is required to make capital contributions to a local company under a local nominee’s name (the registered owner). The nominee must be a Vietnamese entity or a Vietnamese individual.
- Both parties should finalise the nominee agreement through a professional consultant.
- The registered owner or the local nominee is then responsible for performing duties on behalf of the beneficial owner. These tasks include daily business operations and administration, procurement, legal issues, communications, and financial arrangements.
- All duties performed by the local nominee are instructed, directed and supervised under the beneficial owner. The beneficial owner has full control of the nominee company.
For conditional business lines: Depending on each business line, there will be different foreign capital requirements (such as 51%-49%, 99%-1%)
In this case, the investor and the nominee shareholder will be registered for the joint venture company.
For the full law on foreign investment with details on restrictions click below:
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