VIE structures and nominee arrangements are a route some Chinese investors use to enter market-access-conditional sectors in Vietnam — but under Vietnamese law this is one of the riskiest structures available: the real investor has no lawful shareholder rights, the underlying agreements may be void, and the project can be handled when regulators discover the real party behind the structure. This article explains why it is risky, how Vietnamese law handles discovery, and the lawful alternatives for a foreign-ownership-restricted sector.
Issue-by-Issue Analysis
VIE and nominee structures are regarded as high risk in Vietnam for three structural reasons, not because of regulator attitude. Reason one: Vietnamese investment law operates on the real investor identity — market access conditions in Investment Law 143/2025/QH15 are checked on the actual capital-owning subject recorded in the registration file; a structure concealing the real subject is a structure designed to make the registration file state an untruth, and every project document (the investment registration certificate, the enterprise registration) carries that defect from day one. Reason two: VIE has no foothold in the Vietnamese enterprise law system — unlike some markets where VIE was tolerated in a grey zone, Vietnam has no mechanism recognising control by contract in place of ownership rights in a conditional sector; a Vietnamese court handling a dispute will look at registered ownership and the sham nature of the underlying transaction, not at the parties “economic intent”. Reason three: risk concentrates over time — the longer the structure operates, the larger the value accumulated in the enterprise, and the higher the nominee leverage over the real investor, while the possibility of retroactive regularisation is almost nil because regularisation means confessing the entire violation history.
When regulators discover the real investor behind a nominee, Vietnamese law handles it on three simultaneous fronts. The investment front: the investment registration authority inspects and handles a project operating without meeting market access conditions — requiring termination of the activity in the sector part not qualifying for the real foreign investor, penalties under the planning and investment penalty rules, and possible consequences for the investment registration certificate. The civil front: nominee agreements and related transactions risk being declared void under Article 124 of Civil Code 2015 on sham transactions — assets and capital contributions in the nominee name are handled under voidness consequences, in which the real investor is usually in the weakest position because they designed the concealment transaction. The tax and FX front: money flows between the real investor and the nominee (investment money not through the registered channel, disguised profit sharing through service contracts) are re-examined by their true nature, with recovery and corresponding penalties. The three fronts resonate: an inspection on any front opens the other two.
Lawful alternatives for a foreign-ownership-restricted sector exist and are widely used — their common point is accepting the law limits and optimising within them. Option one: a joint venture at the correct ratio — the foreign investor holds the maximum capital portion the law allows in the conditional sector (for example below the control threshold or exactly at the sector cap), with a substantive Vietnamese partner, and uses a lawful shareholders agreement (veto rights on major matters, the right to appoint financial management, buy-back clauses when the law opens further) to protect the investment within lawful ownership. Option two: business cooperation without ownership — a business cooperation contract (BCC), distribution, franchising, technology and brand licensing, service contracts: the investor enjoys market cash flow without owning capital in the restricted sector. Option three: choose an adjacent sector or segment not yet restricted or already opened under agreement commitments (the EVFTA and CPTPP have opening roadmaps over time) and reposition the model so the value the investor holds sits in the lawful segment. Option four: wait for and anticipate the opening roadmap — structure the project in the lawful segment first, with clauses ready to expand ownership when access conditions change. All four options give real cash flow and rights protectable before a court — what VIE and nominee never give.
For an investor who has already used a nominee structure, the review and restructuring roadmap should follow the fastest risk-reduction order. Step one: assess the entire current structure with independent counsel — determining which of the enterprise business lines actually touch market access conditions, which documents carry defects, and the structure exposure level before regulators, banks and partners. Step two: freeze expansion — inject no more capital, open no more conditional-sector activity through this structure, because every additional amount of capital is an additional amount of risk. Step three: restructure into one of the lawful options — bring real ownership to the exact ratio the law allows with a substantive Vietnamese partner and a lawful shareholders agreement, or convert the model to contractual cooperation (BCC, distribution, licensing) and withdraw the disguised ownership from the restricted-sector enterprise; the conversion must handle tax consequences and the past file simultaneously with advice, rather than signing new papers over old papers. Step four: settle the nominee relationship with a consideration-bearing termination agreement and complete documents during the conversion — the restructuring moment is when nominee leverage is highest, so the sequence and terms must be designed before starting, not negotiated improvisationally midway.
Applicable Legal Framework
- Market access conditions for foreign investors under Investment Law 143/2025/QH15 (applying from 1 March 2026) and the List of sectors with restricted market access: a sector not yet opened means a foreign investor may not invest in any form; a conditional-access sector requires meeting conditions on ownership ratio, investment form, activity scope and other conditions under law and treaties.
- Vietnamese law does not recognise the VIE (variable interest entity) mechanism as an investment form: investor rights in a Vietnamese enterprise are established through capital ownership recorded on the enterprise registration certificate and the shareholder register; contractual arrangements transferring all economic rights and control to a party without lawful ownership status are not protected by regulators and courts as shareholder rights.
- Article 124 of Civil Code 2015 — a sham civil transaction: a transaction established to conceal another transaction or to evade a legal obligation or condition is void; a nominee agreement to circumvent market access conditions falls exactly into this risk model — when void, the parties restore the original state and the real investor loses the legal basis to reclaim capital and assets held in another person name.
- Administrative consequences on discovery: a project and enterprise operating not in accordance with market access conditions are inspected and handled by the investment registration authority under investment law and penalties in the planning and investment field — including requiring termination of the non-qualifying activity part, penalties, and consequences for the project investment registration certificate.
- Counterparty risk in a nominee structure: the nominee is the sole lawful owner before the law — they may transfer or mortgage the capital portion, have it distrained by creditors, or, on dispute, divorce or inheritance, have the capital portion in their name handled as their own assets; the real investor has no reliable legal tool against these risks.
What the Business Should Do
- Do not use a VIE or nominee to enter a conditional sector in Vietnam in any variant (individual name-holding, a shell company, a verbal entrustment agreement) — the risk is structural and cannot be fixed with clever paperwork.
- Design the alternative within the law limits: a correct-ratio joint venture with a protective shareholders agreement, or a contractual model (BCC, distribution, franchising, licensing) without ownership.
- Already using a nominee: independently review the whole structure, freeze expansion, then restructure into a lawful option with advised handling of tax and the past file.
- Every money flow with the nominee must end its disguised forms (fake services, fake loans) in the restructuring — tax and FX are the second handling front when the structure is discovered.
Frequently Asked Questions
Why is a VIE structure or using a nominee to invest in a conditional sector in Vietnam regarded as high risk?
For three structural reasons. One, market access conditions under Investment Law 143/2025/QH15 are checked on the investor actually owning the capital — a nominee structure makes the project registration file not reflect the real subject from the start. Two, Vietnamese law does not recognise a VIE as an investment form and does not protect control by contract in place of lawful ownership in a conditional sector; a nominee agreement to circumvent conditions risks voidness under Article 124 of Civil Code 2015 on sham transactions. Three, the nominee is the sole lawful owner before the law and may transfer, mortgage or let the capital portion be handled as their own assets — the real investor has no reliable tool against this.
How does Vietnamese law handle the discovery of the real investor behind a nominee?
On three fronts. The investment front: the investment registration authority inspects and handles a project operating not in accordance with market access conditions — requiring termination of the non-qualifying activity part, penalties under the planning and investment penalty rules and applying consequences to the investment registration certificate. The civil front: nominee agreements and related transactions risk being declared void under Article 124 of Civil Code 2015, with original-state restoration consequences unfavourable to the party designing the concealment transaction. The tax and FX front: disguised money flows between the real investor and the nominee are re-examined by their nature, with recovery and corresponding penalties.
What are the lawful alternatives to VIE and nominee for a foreign-ownership-restricted sector?
Four widely used options. A joint venture at the ratio the law allows with a substantive Vietnamese partner, protecting the investment with a lawful shareholders agreement (veto rights on major matters, financial management appointment, buy-back clauses when the law opens further). Cooperation without ownership: a business cooperation contract (BCC), distribution, franchising, technology and brand licensing to enjoy market cash flow without owning capital in the restricted sector. Repositioning the model to an adjacent segment not yet restricted or already opened under EVFTA and CPTPP commitments. And structuring ready to expand ownership when the sector opening roadmap changes under international commitments.
How should an investor who has used a nominee structure review and restructure to reduce risk?
In this order: assess the entire structure with independent counsel (which lines touch access conditions, which documents carry defects, the current exposure level); freeze expansion — inject no more capital or new activity through this structure; restructure into a lawful option — bring ownership to the exact ratio the law allows with a lawful shareholders agreement, or convert to a contractual cooperation model and withdraw the disguised ownership — while handling tax consequences and the past file with advice; and terminate the nominee relationship with a consideration-bearing agreement and complete documents, with the sequence designed before starting the conversion because this is when nominee leverage is highest.