Case Study No. 8 | Legal Analysis of Advertising Service Expansion Schemes in Vietnam and a Proposal for the Optimal Model

NEXORA LAWFIRM has in-depth knowledge of licensing, contractual structures, and industry-specific regulations relating to the provision of advertising and marketing services in Vietnam, and supports Japanese-affiliated companies in evaluating and designing the optimal market-entry model. In this case study, we examine the legal issues surrounding the local rollout of an advertising service and present the practical operating models available to foreign-invested companies, based on a real example. For readers interested in topics such as "foreign investment restrictions on advertising services in Vietnam," "obtaining an advertising business license," "contractual structures with advertising agencies," "legal structuring of a SaaS model," and "the law governing ad-delivery operations in Vietnam," this article explains, using a real example, whether a license is available for each type of service and the key points for selecting a lawful business structure.

01 - Overview of the Case

Company XXX is considering expanding an advertising services business (primarily digital advertising) within Vietnam through its Vietnamese local subsidiary, Company YYY (a wholly owned subsidiary of XXX, 100% foreign-invested). Five internal proposals are under consideration regarding the legal structure for this market entry.

Each of these models is premised on Vietnam's WTO commitments, which restrict foreign investment in the advertising sector (in principle, foreign companies must enter through a joint venture with, or a BCC arrangement involving, a Vietnamese entity holding an advertising license). The question is how Company YYY can be involved in the advertising business under each of these structures.

02 - Legal Advice and Evaluation of Each Model

▶ Option ①: BCC Contract

▶ Option 1: A BCC (Business Cooperation Contract) between Company YYY and a Vietnamese company holding an advertising license

Evaluation: △ (Moderate risk)
A BCC structure is theoretically possible, but the procedure is complex and time-consuming, and in practice the advertising business must be conducted entirely in the name of the counterparty (the Vietnamese licensed advertising company, referred to below as "Company A"), which creates challenges around control.
Because this structure leaves Company YYY providing funding and know-how indirectly without holding the lead role in the business, it is not well suited from a risk-management and rights-protection standpoint.

✅Recommendation level: Low (not recommended, in principle)

▶ Option ②: Service Outsourcing Agreement

▶ Option 2: Company YYY provides funding and know-how, while Company A independently carries out the advertising operations

Evaluation: ✕ (High risk)
The relationship between Company YYY and Company A would be no more than an ordinary service-outsourcing arrangement, meaning Company YYY would have no direct control over the advertising operations. While contracts covering capital contribution, trademark use, and technical assistance could be entered into, there would be no guarantee of return on investment or profit distribution.
There is also a risk that this structure could, in appearance, be assessed as a scheme designed to circumvent the regulations.

✅Recommendation level: Very low (legally and practically unstable)

▶ Option ③: Joint Venture

▶ Option 3: Establishing a joint venture (JV) between Company YYY and a Vietnamese licensed advertising company

Evaluation: ◎ (Most appropriate)
Company YYY co-invests with Company A to establish a joint venture (JV) with a transparent governance structure, and this new company acts as the operating entity for the business.
This structure satisfies the WTO requirements and ensures transparency in management, profit distribution, and contractual arrangements.

✅Recommendation level: Highest (legally stable)

▶ Option ④: Nominee Investment

▶ Option 4: A nominee-company scheme

Company XXX establishes a nominal Company B, and Company YYY enters into arrangements for funding, trademark licensing, and personnel secondment.
After Company B is established, Company YYY acquires 99% of Company A.
This is a realistic option as a speed-priority model, but must ultimately be restructured as a joint venture.

✅Recommendation level: Medium to high (effective if premised on a phased transition to a joint venture)

▶ Option ⑤: M&A

▶ Option 5: Company A acquires a 1% interest in XXX (M&A) → Company YYY applies to add advertising as a registered business line

Under this unique structure, Company YYY formally becomes a "joint venture," thereby satisfying the eligibility requirements for the advertising business.
Whether this would be recognized by the authorities as satisfying the substance of the WTO commitments depends on the discretion of the regulator.

✅Recommendation level: Medium (innovative, but carries risk)

◆Conclusion and Recommended Course of Action◆

In light of the current legal framework and administrative practice, we recommend the following strategy for Company XXX (through Company YYY) to develop its advertising services business safely and effectively.

Phase

Recommended Action

Short term (early business launch)

Use the Option 4 nominee scheme to launch the advertising business quickly

Medium to long term (stable operation)

Transition to the Option 3 formal joint-venture scheme, obtain the license, and expand the business

Supplementary actions

Trademark registration, license preparation, and preparation of contract templates