In corporate practice, nominee shareholding arrangements are not uncommon, particularly in cases involving “silent” investments, restrictions on eligibility to be named as a shareholder, or attempts to conceal the beneficial owner. However, such arrangements entail significant legal and financial risks and frequently give rise to disputes when the rights and obligations of the parties are not properly and fully recorded in accordance with law. This article clarifies the legal nature of nominee shareholding, common risks, relevant legal provisions, and key considerations to protect the lawful interests of the parties involved.

I. Common legal risks associated with nominee shareholding

Nominee shareholding involves substantial legal risks because ownership rights are legally established based on the name recorded in the company’s register of shareholding. Common risks include:

  • Loss of control over shares: The nominee is legally recognized as the lawful shareholder, while the beneficial owner may lose voting rights and dividend entitlements.
  • Risk of misappropriation or unauthorized transfer: The nominee may unilaterally sell or pledge the shares absent binding safeguards.
  • Difficulty proving beneficial ownership in disputes: Lack of clear evidence of capital contribution places the beneficial owner at a disadvantage.
  • Tax and financial liability risks: Disputes may arise regarding tax obligations and potential joint financial liabilities.
  • Risk of legal violations: Where nominee arrangements conceal the true owner, parties may be subject to legal sanctions.

Nominee shareholding must therefore be carefully assessed and supported by clear legal mechanisms to mitigate risks.

II. Understanding Nominee Shareholding

Nominee shareholding occurs when a person contributes capital but does not directly hold shares in their own name, instead having another person listed as the shareholder in the company’s legal records.

The Law on Enterprises 2020 (as amended and supplemented in 2025) does not specifically regulate nominee shareholding, making such arrangements legally risky and prone to disputes over shareholder rights.

1. What is nominee shareholding and when does it commonly occur?

Nominee shareholding refers to an arrangement in which an individual or organizations is named as a shareholding in corporate documents (such as the register of shareholders and the company charter), while another party is the actual beneficial owner who contributed capital and enjoys economic benefits.

Such arrangements commonly arise where:

  • The beneficial owner does not meet legal conditions to be named as a shareholder (e.g., investment restrictions, ownership caps);
  • The investment is “silent,” and the beneficial owner wishes to conceal identity or ownership ratio;
  • A trusted relative or partner is asked to hold shares for convenience;
  • Share transfer procedures have not yet been completed;
  • Parties attempt to avoid certain legal or financial obligations (with potential legal violations).

Current enterprise law recognizes only duly registered shareholders; without clear agreement and evidence, nominee arrangements carry significant dispute risks.

2. Common purposes of nominee shareholding

Typical motivations include:

  • Concealing the beneficial owner’s identity or ownership percentage;
  • Circumventing legal requirements on shareholder eligibility or ownership limits;
  • Facilitating management in early-stage corporate structuring;
  • Avoiding legal or financial exposure associated with shareholder status;
  • Relying on personal trust without formal legal documentation.

While intended for flexibility, these purposes often lead to disputes and liabilities if not tightly controlled.

3. Legal rights and obligations of the nominee shareholder

Under the Law on Enterprises, being recorded as a shareholder gives rise to full shareholder rights and obligations, regardless of any private nominee agreement.

  • Rights of the nominee shareholder: Pursuant to Articles 115 and 122 of the Law on Enterprises 2020 (as amended 2025), the nominee recorded in the register of shareholders is the lawful shareholder and is entitled to:
    + Attend, speak, and vote at the General Meeting of Shareholders;
    + Receive dividends and economic benefits from the shares;
    + Exercise pre-emptive rights to newly issued shares;
    + Freely transfer shares (subject to legal or charter restrictions);
    + Inspect corporate records and financial statements;
    + Receive remaining assets upon dissolution or bankruptcy.

These rights are legally protected irrespective of who contributed the capital

  • Obligations of the nominee shareholder: Under Articles 113 and 119 of the Law on Enterprises 2020 (as amended 2025), the nominee must:
    + Fully and timely pay for subscribed shares;
    + Bear liability for company obligations within the scope of contributed capital;
    + Comply with the company charter and shareholder resolutions;
    + Refrain from unlawful capital withdrawal;
    + Fulfill tax obligations related to dividends and share transfers.

All legal, tax and third-party risks attach directly to the nominee

4. Distinguish nominee shareholding from authorization to manage shares

In practice, many individuals confuse nominee shareholding with authorization to manage shares. However, pursuant to the Law on Enterprises 2020 (as amended and supplemented in 2025) and the Civil Code 2015, these two arrangements are fundamentally different in legal nature.

Criteria

Nominee Shareholding

Authorization to manage shares

Person recognized as shareholder

The nominee is recorded as the shareholder in the company’s Register of Shareholders

The authorizing shareholder remains the lawful shareholder and is recorded in the Register of Shareholders

Legal basis for shareholder status

Shareholder status is determined based on information recorded in the Register of Shareholders pursuant to Article 122 of the Law on Enterprises 2020 (as amended 2025)

Shareholder rights remain unchanged; only an agency relationship arises pursuant to Article 138 of the Civil Code 2015

Legal nature

A private civil agreement outside the company’s official records, carrying significant risks in the event of disputes

A lawful agency relationship recognized and protected by law

Voting rights and participation in the General Meeting of Shareholders

The nominee directly exercises shareholder rights (Article 115 of the Law on Enterprises 2020)

The authorized person exercises rights only within the scope of authorization (Point a, Clause 1, Article 115 of the Law on Enterprises 2020)

Right to receive dividends and transfer shares

Legally belongs to the nominee; the beneficial owner faces difficulty protecting rights in the event of disputes

Belongs to the actual shareholder; the authorized person has no right of disposition unless expressly agreed

Legal risks

Very high; risk of misappropriation of shares, disputes and difficulty proving beneficial ownership

Lower, due to a clear authorization agreement and transparent allocation of responsibilities

Risk of invalidity/disputes

High if deemed to conceal ownership, evade tax, or circumvent investment conditions (Article 124 of the Civil Code 2015)

Low, provided the authorization is lawful and not contrary to statutory prohibitions

Liability toward the company and third parties

The nominee bears direct liability toward the company and third parties

Liability remains with the actual shareholder, within the limits of law and the authorization agreement

According to the Law on Enterprises 2020 (as amended and supplemented in 2025), only the person whose name is recorded in the Register of Shareholders is recognized as the lawful shareholder and must bear all corresponding rights and obligations. By contrast, authorization to manage shares merely constitutes an agency relationship and does not alter ownership of the shares, making it a legally safer and more transparent arrangement.

III. Relevant legal provisions on nominee shareholding

1. Legal regulations on nominee shareholding

Vietnamese law does not recognize nominee shareholding as a legal status. Pursuant to Article 122 of the Law on Enterprises 2020 (as amended 2025), only persons recorded in the register of shareholders are recognized as shareholders.

Private nominee agreements do not confer shareholder status on beneficial owners and may be deemed sham transactions under Article 124 of the Civil Code 2015 if used to conceal ownership or evade legal obligations.

2. Lawful procedures to mitigate risks

Where nominee arrangements are unavoidable, parties should:

  • Execute a civil agreement or authorization specifying ownership, rights, and restrictions (Articles 385 and 138, Civil Code 2015), preferably notarized.
  • Properly record the nominee as shareholder in company records (Article 122, Law on Enterprises).
  • Conduct formal share transfer procedures when returning shares to the beneficial owner (Article 127).
  • Maintain complete internal documentation.
  • Monitor compliance and promptly rectify ownership when conditions permit.

Even with these steps, legal risks remain.

3. Common violations

Common violations include misrecording ownership, misappropriation of shares by nominees, sham transactions, tax evasion, and breaches of investment conditions—potentially resulting in civil, administrative, or criminal liability.

IV. Questions on nominee shareholding

1. What risks does the nominee face?

The nominee bears full shareholder liabilities, potential tax exposure, third-party claims, and risks of agreements being voided.

2. Tax implications for nominee and beneficial owner

Tax authorities prioritize official records. Income from dividends or transfers may be assessed against the nominee unless beneficial ownership is clearly substantiated, with risks of reassessment and penalties.

3. Are there administrative or criminal sanctions?

Misrepresentation or nominee arrangements used to evade obligations may result in administrative fines or criminal liability (e.g., tax evasion).

4. How does enterprise law address unlawful nominee arrangements?

Unlawful arrangements are not protected; shareholder records may be corrected pursuant to court decisions, and void agreements may trigger liabilities.

5. If a nominee sells shares without consent, what liability arises?

While the transfer may be formally valid, the nominee may incur civil liability for breach and, in serious cases, criminal liability for misappropriation.

V. Seeking legal support from NPLaw

Nominee shareholding involves complex intersections of enterprise, tax, and civil law. NPLaw’s lawyers provide focused advice, risk assessment, tax compliance guidance, and dispute resolution support to safeguard clients’ lawful interests.

This information is for reference only. For case-specific advice, please contact NPLaw.