1. Current situation and reasons for “standing in the name” of others on the business license

Standing in the name of others on the business license arises from various reasons, among which are:

Firstly, simplified procedures: The Enterprise Law 2020 and the Investment Law 2020 have undergone significant changes to facilitate business registration. Notably, the procedure for obtaining a Business Registration Certificate has been transformed from paper documentation to online registration, and the processing time has been reduced to only 03 working days. Although it is a significant step forward in terms of administrative procedures, it still has not established a control mechanism for verification, opening up opportunities for name lending to stand in as a business owner. 

Secondly, individuals who have a need but do not meet the conditions to establish a business: According to Clause 2 of Article 17 of the 2020 Enterprise Law. In this case, they often rely on others to stand in their name to legalize their business activities.

Thirdly, financial motives or social relationships: Being named after them arises from receiving a certain benefit or temporarily accepting a favor from friends or relatives.

2. Legal liability risks 

The person in charge may face serious legal risks, including: 

The possibility of being prosecuted: If the business engages in illegal activities or fraud. According to clause 2, Article 75 of the Priminal Code, the criminal liability of legal entities does not exclude the criminal liability of individuals. Even if there is no direct benefit or if the act is not directly carried out, as a legal representative, the person acting on behalf of another may be held criminally liable, including fines and even imprisonment.

Applicable crimes include: Article 188 (crime of smuggling); Article 189 (crime of illegally transporting goods and currency across the border); Article 200 (crime of tax evasion); Article 203 (crime of illegally printing, issuing, buying and selling invoices and receipts to the state budget); Article 216 (crime of evading payment of social insurance, health insurance, unemployment insurance for employees)…

Legal Responsibility: According to Clause 1, Article 12 of the Law on Enterprises 2020, “The enterprise’s legal representative is the person that, on behalf of the enterprise, exercises and performs the rights and obligations derived from the enterprise’s transactions, acts as the plaintiff, defendant or person with relevant interests and duties before in court, arbitration, and performs other rights and obligations prescribed by law”. He/she will be responsible for the legal responsibilities of the business, including tax obligations, liability for loans and disputes arising from the business. In commercial business cases, the proxy must participate in civil cases before the court or arbitration. When the business violates the law, the legal representative will be prosecuted, even if he/she is not directly involved in the business activities.

Responsibility for administrative sanctions: According to Clause 3, Article 8 of the Law on Enterprise 2020, enterprises are obliged to take responsibility for the accuracy of information in the enterprise registration application and reports; if they discover that the declared or reported information is inaccurate or incomplete, they must promptly amend and supplement such information. The act of hiring another person to act in one’s name, if found to be in violation, can only be handled administratively for dishonest or inaccurate declaration in the business registration dossier. According to Decree No. 122/2021/ND-CP dated December 28, 2021, which stipulates administrative sanctions for violations in the field of planning and investment as prescribed in Article 43, violations in the declaration of business registration dossiers: fines from VND 20,000,000 to VND 30,000,000 for acts of dishonest or inaccurate declaration of business registration dossiers, dossiers of registration of changes in business registration contents to be granted a business registration certificate, certificate of change in business registration contents.

3. Conclusion

Currently, Vietnamese law does not allow someone else to stand in your name when registering a business. Standing in your name on a business license not only poses potential legal and financial risks, but can also lead to serious criminal consequences. Therefore, the person who is asked to stand in your name must be careful not to take risks and legal responsibilities due to their own lack of knowledge.

Duong Nguyen