What is a Nominee Director? Roles, duties, and legal responsibilities

Foreign investors who want to set up a company in Vietnam are always required to appoint their staff to be a director(s) of their Vietnam companies. In many circumstances, for various reasons, they can’t find a candidate eligible to be the director of their Vietnam companies. In such a case, foreign investors often use Nominee Directors to meet the laws. So, what is a Nominee Director? What roles, duties, and responsibilities does this position play in a company? Join LTS LAW to find out the relevant information in this article!

What is a nominee director?

Nominee Director is not an official legal term, often used in corporate governance. Nominee Directors are the duly registered directors of companies, but they will never manage companies’ daily business operations. Using a Nominee Director is usually intended to meet the 2020 Enterprise Law. In case foreign investors want to run their companies directly but remain anonymous on the enterprise registration certificate (like a certificate of incorporation), they also often use the nominee director service.

A Nominee Director is a duly registered Director (General Director) of a company. The difference between a Director (General Director) and a Nominee Director lies in the actual role of running and making decisions in the company. The Nominee Director is only a Director (General Director) legally registered to meet the conditions for establishing and operating a company in accordance with the law, not directly involved in managing the company’s daily business activities. The Director (General Director) will actually manage the company’s day-to-day business operations.

Why do foreign-invested companies need a Nominee Director in Viet Nam?

Under the 2020 Enterprise Law, a company must have at least one resident legal representative. Therefore, in most cases, the appointment of Nominee Directors is to meet this requirement.

If foreign investors build a business system and remotely manage their business from overseas, they can hire a Nominee Director to save costs.

For those investing in conditional sectors such as tour operating and labor outsourcing services requiring a director to hold a Bachelor’s or higher degree in the specific specialty, it is also a must to have a Nominee Director to meet this requirement.

Sometimes, foreign investors want their names to remain anonymous on the enterprise registration certificates.

Conditions to appoint a Nominee Director

To become a Nominee Director, a person must meet all requirements of a Director (General Director) under the 2020 Enterprise Law and relevant laws.

• Individuals residing in Vietnam or Vietnamese citizens.
• Not holding the position of director or general director of a state-owned enterprise.
• Having the full capacity for civil acts and not be prohibited from managing an enterprise under the 2020 Enterprise Law.
• Those who are in the process of judgment enforcement, waiting for the court’s ruling.
• Must have professional qualifications and experience in corporate governance.

If companies carry out conditional business activities requiring a director to meet additional conditions, a Nominee Director must also meet those conditions.

Roles and responsibilities of a Nominee Director

Legally speaking, a Nominee Director is a company’s director duly registered under the laws. It has all the rights and obligations of a director as prescribed by law and the company’s charter.

Nominee Directors must sign an authorization letter to authorize another person to manage their companies’ daily operations. Nominee Directors shall still be liable before the laws for the director’s rights exercised by their authorized representatives.

Clients’ responsibilities when using Nominee Director Service

In Nominee Director Service Contracts, clients must always commit to absolute compliance with Vietnamese laws during their business operations. They must ensure no damage or loss is caused to the service providers and Nominee Directors and indemnify them in the event of loss or damage caused by the clients’ fault.

Clients must also promptly report information about situations that may lead to risks to service providers and Nominee Directors.

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Why should you use the Nominee Director service?

Most foreign investors choose to use the Nominee Director service because of the convenience that the service brings. Only a handful of consulting firms in Vietnam provides Nominee Director service, including LTS LAW. Investors only need to pay a reasonable fee for the Nominee Director service to save time and simplify the company formation process.

It is very risky if a business owner hires a Nominee Director on its own. Because a Nominee Director is still legally a company director, they can abuse that position to misappropriate company assets or cause damage to the company. To avoid these risks, business owners should seek the support of a reputable Nominee Director service provider, where Nominee Directors are carefully selected. When a Nominee Director becomes unsuitable for the appointed position at any time and any reason, the service provider can easily replace that Nominee Director with someone else.

Service providers are responsible for monitoring and ensuring compliance with the obligations of Nominee Directors in the course of serving as a Director (General Director) in a company. The service providers shall be liable to their clients and the law for any abuse or non-compliance with their Nominee Directors’ obligations under the Nominee Director Service Contracts between the service providers and the clients. Accordingly, the clients do not have to worry too much about whether the Nominee Director will comply with his obligations because this is the service provider’s responsibility.

LTS LAW to provide Nominee Director services to foreign-invested companies

Are you a foreign investor planning to set up a company in Vietnam? However, do you not know the company registration process and procedures? Please get in touch with LTS LAW immediately for advice and support from A to Z. LTS LAW is the leading provider of services for establishing foreign-invested companies in Vietnam.

LTS LAW, with many years of experience advising foreign investors and FDI companies in Vietnam, has a team of reputable lawyers knowledgeable about the legal system in Vietnam. We are committed to helping foreign investors complete the procedures for establishing a company in a short time with the most optimal cost.

We hope that the information in this article about regulations, conditions, and the role of Nominee Directors is helpful to you. If you have questions about the company establishment service or the Nominee Director service, please get in touch with LTS LAW via the hotline. We are always available to assist you most comprehensively.

Immediately contact LTS LAW for the most detailed advice:

LTS LAW FIRM    

Address: Room 602, 6th Floor, Cach Mang Thang Tam Street, Ward 11, District 3, Ho Chi Minh City, Vietnam

Email: contact@lts.com.vn

Hotline: (+84) 902 798 066