Foreign investors often face challenges when establishing a company in Vietnam, particularly in appointing a legal representative. Vietnamese law requires at least one individual who resides in Vietnam to serve in this role. As a result, many investors consider using a Nominee Director Vietnam – a person who appears on official documents but does not actively participate in day-to-day management.
However, significant changes took effect in 2025-2026. The amended Law on Enterprises 2025 and Decree 168/2025 introduced strict requirements for disclosing Ultimate Beneficial Owners (UBO). A Nominee Director is no longer a simple way to maintain anonymity. Attempting to conceal the true owner can lead to heavy administrative fines, legal disputes, and even loss of control over the company.
This article explains the concept, reasons for use, legal requirements, and major risks of using a Nominee Director in Vietnam. It also presents safer, more transparent alternatives for FDI enterprises.
1. What is a Nominee Director Vietnam?
A Nominee Director in Vietnam is an individual appointed as the legal representative on official company registration documents, mainly to satisfy the legal requirement that at least one legal representative must reside in Vietnam. In most cases, this person does not participate in the company’s actual management.
To understand clearly, it is important to distinguish three key concepts:
- Legal Representative: Under the Law on Enterprises 2025, every company in Vietnam must have at least one legal representative who resides in Vietnam. This person bears full legal responsibility for signing contracts, representing the company before state authorities, banks, and partners, and ensuring compliance with tax and labor obligations.
- Nominee Director: This is a method of appointing a legal representative where the individual is named on paper to satisfy legal requirements but does not participate in actual management. Real control remains with the foreign investor through internal agreements.
- Nominee Shareholder: This relates to ownership of shares or capital contributions. The nominee holds the shares on paper but is not necessarily the legal representative. These are two entirely different roles.
Even with internal agreements, Vietnamese law still holds the appointed legal representative fully accountable. Therefore, a Nominee Director Vietnam is only a temporary solution and carries significant risks – especially after mandatory transparent UBO disclosure began in 2025.
2. Why do foreign investors consider using a Nominee Director Vietnam?
Although the risks are increasing, many foreign investors still consider using a Nominee Director in Vietnam during the early stages of starting a business in Vietnam. Here are the most common reasons:
- They do not yet reside permanently in Vietnam or lack a TRC and work permit: Most foreign investors are not ready or able to relocate to Vietnam immediately. Obtaining a Temporary Residence Card (TRC) and work permit requires time and separate procedures. While waiting, they need a legally residing representative to allow the company to operate. A Nominee Director serves as a temporary solution to meet the legal requirement of having a representative who resides in Vietnam.
- They want to speed up the company incorporation process: The IRC/ERC registration process can sometimes be delayed due to project approval or document preparation. Appointing a Nominee Director allows the company to complete registration faster, open bank accounts, and begin certain operations without waiting for the main investor to be physically present in Vietnam.
- Certain business sectors require clear “local presence”: Even though the Law on Investment 2025 has opened the market further, some conditional or restricted sectors – such as logistics, education, advertising, and tourism – still exist. In these cases, having a Vietnamese-named legal representative on paper can make the application smoother and create a stronger impression of “local presence” when dealing with partners and government authorities.
- To reduce the initial administrative and management burden on the parent company: When establishing a subsidiary or branch in Vietnam, headquarters often prefer to focus on high-level strategy rather than daily administrative tasks. Using a Nominee Director helps reduce the workload related to legal procedures, signing minor contracts, and dealing with state agencies in the early phase – saving time and internal resources for the parent company.
Important Note: While these reasons may seem practical in the initial stage, using a Nominee Director should only be a temporary solution. With the mandatory Ultimate Beneficial Owner (UBO) disclosure requirements effective from 2025, long-term use of a Nominee Director has become increasingly risky and is no longer aligned with Vietnam’s push toward greater transparency in the investment environment.
3. Legal requirements for Directors and Legal Representatives in Vietnam
According to the Law on Enterprises and related regulations, a legal representative must meet these conditions:
- Be an individual (Vietnamese or foreign) residing in Vietnam.
- Be at least 18 years old and have full legal capacity.
- Be responsible for signing contracts, representing the company before authorities, and ensuring overall compliance.
- Have no prohibitions on establishing or managing enterprises in Vietnam (including no bankruptcy declarations).
Companies must always maintain at least one legal representative residing in Vietnam. If this person leaves the country, they must provide a written power of attorney to another resident. They remain fully responsible for the actions of the authorized person.
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4. Major legal risks of using a Nominee Director Vietnam
This is the highest-risk area for foreign investors, especially after the UBO regulations took effect:
- Loss of company control: The Nominee Director has actual legal authority to sign contracts, borrow money, transfer assets, or even dissolve the company. In disputes, courts typically recognize the nominee as the legitimate representative.
- UBO disclosure risks: Hiding or misdeclaring the ultimate beneficial owner violates Decree 168/2025. This can result in heavy administrative fines or even revocation of the investment project if considered a “sham transaction.”
- Civil and criminal liability: Both the nominee and the real beneficial owner may be jointly liable for tax debts, labor violations, or economic crimes. Cases where the nominee “disappears” or demands extra benefits often lead to prolonged litigation.
- Internal agreements are often unenforceable: Powers of attorney or indemnity agreements can be declared invalid by courts if they are seen as attempts to conceal the true purpose.
- Risks to FDI projects: Authorities may revoke the Investment Registration Certificate (IRC) or Enterprise Registration Certificate (ERC) if a nominee structure is found to circumvent foreign ownership restrictions.
In practice, many disputes have resulted in asset loss, operational disruption, and significant financial damage for foreign investors.
5. Are there safer alternatives to a Nominee Director Vietnam?
Yes. Foreign investors can choose more transparent and secure options that still meet the legal representative requirement while maintaining control and complying with UBO disclosure rules.
Recommended alternatives include:
- Appointing the foreign investor directly as director combined with obtaining a TRC Vietnam
- Using a Qualified Chief Accountant service (a licensed professional who can serve as legal representative)
- Implementing a dual legal representative mechanism (one local and one foreign)
- Engaging a professional legal representative service
These solutions prioritize transparency, reduce risks, and support long-term sustainable operations. However, in certain transitional situations, such as when the investor is still abroad or has not yet completed legal requirements, a Nominee Director may still be used temporarily with strong safeguards.
6. How to choose a reliable Nominee Director Vietnam service (If Needed)
If you still need a nominee director during the transition period, pay close attention to these factors to minimize risks:
- Clear and robust contracts: The agreement must clearly define responsibilities, indemnity clauses, scope of power of attorney, and control mechanisms to ensure real control remains with the investor.
- Reputable service provider: Choose a provider with a clear legal entity, proven experience, and the ability to support UBO compliance under Decree 168/2025.
- Independent legal review: Have an independent legal advisor review all contracts to avoid gaps and ensure balanced rights between parties.
- Avoid choosing based solely on price: Low-cost services that lack transparency or proper control processes often carry hidden long-term risks.
A Nominee Director should only be used when truly necessary and for a short period. Combine it with strong internal controls to limit future disputes or legal liability.
How Vina TPT supports foreign investors with company setup & compliance
With more than 20 years of experience assisting FDI enterprises, Vina TPT understands the challenges foreign investors face during company incorporation — especially when considering a Nominee Director to meet legal requirements.
Instead of relying on high-risk solutions, Vina TPT offers comprehensive and transparent alternatives, including:
- Advice on capital structuring and FDI company establishment (IRC/ERC)
- Support for appointing a suitable legal representative, including Qualified Chief Accountant services
- Outsourced finance and accounting, tax compliance, and payroll services
- Assistance with TRC Vietnam applications and work permit exemptions for investors
- Guidance on UBO disclosure and compliance under Decree 168/2025
In an environment where UBO regulations are increasingly strict, using a Nominee Director is no longer a safe long-term option. Non-transparent structures can lead to legal, financial, and operational risks.
Choosing a transparent structure, working with professional services, and ensuring full legal compliance not only minimizes risks but also enhances credibility and supports sustainable growth for your FDI business in Vietnam.
Contact Vina TPT today for expert advice on company establishment, capital structuring, legal representative appointment, and tailored finance & accounting solutions for your investment model.