22/09/2026
THE JOINT VENTURE TRAP: WHEN FOREIGN INVESTORS LOSE CONTROL
Three common traps include:
1. The Veto Trap
Even with majority ownership, foreign investors may lose decision-making power if the Company Charter requires a higher voting threshold—such as 75% or 100%—for major corporate decisions.
2. Control Over Management and Corporate Assets
If the Vietnamese partner controls the legal representative position, company seal, banking access, or key management functions, conflicts can result in blocked operations, restricted access to company assets, or potential self-dealing.
3. “Virtual” Land Capital Contribution
A local partner may promise to contribute land but fail to meet the legal conditions for contributing land use rights—for example, because the land is mortgaged, uncleared, or otherwise ineligible. Meanwhile, the foreign investor may have already invested substantial capital into the project.
Potential consequences:
Governance deadlocks can freeze business operations, trigger lengthy disputes, create asset dissipation risks, and put financial pressure on foreign investors to sell their shares under unfavorable conditions.
How Can Foreign Investors Protect Their Control?
Aplus Law recommends establishing strong safeguards before investing, including:
* Comprehensive Shareholders’ Agreement (SHA): Include clear deadlock-resolution mechanisms, buy-out rights, termination rights, and remedies for breaches.
* Dual-Control Mechanisms: Consider multiple legal representatives and require joint approval for significant financial transactions.
* Managerial Accountability: Establish clear fiduciary duties and legal mechanisms to hold managers accountable for abuse of power or self-dealing.
Key takeaway: A joint venture is not protected by trust alone. Foreign investors should carefully structure ownership, voting rights, management powers, financial controls, and land contributions before committing capital.
