Although foreign investments keep pouring into Vietnam, some business fields remain “conditional” or restricted for foreign investors. In other words, full or partial foreign ownership is not allowed for certain lines of business or the conditions are more demanding compared to the locally owned companies. Because of the aforementioned legal barrier, a handy way for foreign entrepreneurs to satisfy the legal requirements is through a local nominee company set up. Even though local nominee is still a relatively new concept under the legal system in Vietnam, many foreign entrepreneurs have recognised and used this investment mechanism to be able to run their chosen business lines.
What is Local Nominee Company in Vietnam?
In short, a local nominee company is a local party in Vietnam (can be a Vietnamese entity or a Vietnamese national) that will act as a party who will make it possible for a foreign entrepreneur to run a business in Vietnam without limitation of ownership.
A local nominee company is also known as a custodian (registered owner) that has been selected and trusted to hold, carry out and manage securities and other assets on behalf of the foreign entrepreneur (actual or beneficial owner). Together, the two parties sign a custodian agreement that is also known as a nominee arrangement.
In addition to the ownership restriction, sometimes foreign entrepreneurs choose to set up a local nominee company instead of a foreign company because it is much faster to establish a local company. While a foreign company establishment takes several weeks to complete, a local company only needs one week. With that consideration, a local nominee company is seen as a convenient option to enter the Vietnamese market quickly.
Furthermore, in certain cases a local company is not required to obtain licenses or permits. For example, it is not necessary for a local trading company to apply for a trading license whose application process can take up to 12 weeks. What is more, by setting up a local nominee company, you are not required to fulfill the charter capital injection.
There are numerous benefits offered by using a nominee structure in Vietnam. Some of the most noteworthy benefits are:
- The rights of foreign investors are protected and the rights of the shareholder, on behalf of the investors, are effectively enforced.
- While foreign companies must always transfer the charter capital in the full amount to the company bank account, local-owned companies do not need to.
- Simpler foreign investments in Vietnam as through a nominee structure, foreign entrepreneurs can take part in business sectors that are partially or entirely close to foreign investments.
- Company registration process and related business tasks such as bank account opening and settlement of publicly traded shares are facilitated and made easy. Moreover, a local nominee company can help overcome the complexity of legal and technical matters in Vietnam on your behalf.
- Locally owned companies do not need to be audited every year.
- The beneficial owner’s identity is kept confidential to prevent direct competitors from finding out.
- As in many emerging markets, the foreign invested companies are more likely to be subject to the visit of a government institutions.
Set up Your Local Nominee Company in Vietnam with Cekindo
Established on the grounds of trust and cooperation, carefully choosing a local party to act as your nominee is, thus, extremely important. You need to take into account that some of the agencies in Vietnam may be crooked or unreliable. An untrustworthy agency, for example, may offer you an invalid agreement.
Cekindo’s team consists of experienced consultants and legal specialists that can provide you with the best advice and solutions that satisfy your business needs. Our proactive approach is designed to protect foreign investors from risks of having an unreliable nominee arrangement.
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