Case Study – An example of the risk of using a nominee structure

Mr. Chiang bought a land plot in Svay Rieng province using a nominee structure in 2018 and sold it to a Cambodian in 2021. On the day of the transaction, a neighbor living next to the land said she was doing the agency job for both parties, like providing contacts, and therefore deserved a 4% agency fee. The nominee then paid the fee to the neighbor from the buyer’s initial deposit without agreeing with Mr. Chiang.

Mr. Chiang claimed he never hired an agent. He finished all negotiating jobs alone, so he was unwilling to pay the agency fee and wanted to claim the payment back. However, the nominee wanted Mr. Chiang to pay the fee, not making things difficult. He said he had the right to cancel the transaction and let Mr. Chiang pay the penalty if Mr. Chiang insisted on not paying the fee. Mr. Chiang eventually paid the fee to avoid further difficulties. He applied for a Money Trust from Stronghold Trustee to safeguard the fund until he established his bank account.

The customer used a nominee structure to hold the land title in this case. Therefore, he lost the controlling power of the land and was exposed to risks such as payment without agreement from the owner, threats to cancel transactions, or extra costs. Although he might sign personal contracts with the nominee before, the risk still exists under the condition of severe information asymmetry.

Besides, the Cambodian law system has regulated that only licensed agents possess the right to charge agency fees. However, the regulation is often different from the practice in the real business world. Therefore, investors should use a licensed trustee to invest in properties in Cambodia and register with the Trust Regulator to control the trust asset fully and lower the investing risks.

STRONGHOLD TRUSTEE is a licensed trust company in Cambodia that specializes in trust services, including Collective Investment Scheme and Personal and Commercial trusts tailored to your needs. We provide professionals in various industries and high-quality financial services to fulfill client’s needs and become a trusted financial STRONGHOLD for everyone. Please don’t hesitate to let us know if you have any demands!

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