Beneficial Owner under the 2025 Law on Enterprises

The concept of the Beneficial Owner is no longer unfamiliar globally and is becoming increasingly important in Vietnam. In particular, with the introduction of the 2025 amended Law on Enterprises, the definition and related regulations of this subject have been clarified further.

So, who is considered a Beneficial Owner, and why is their identification necessary?

1. What is a Beneficial Owner?

According to the new provisions of the 2025 Law on Enterprises, a Beneficial Owner is defined as an individual who truly owns or controls a business, even if their name does not appear directly in the official legal documents. Identification is generally based on two core criteria:

• Actual ownership of charter capital: The individual directly or indirectly owns a significant proportion of the company’s capital.
• Control over company operations: The individual has actual power to manage, appoint/dismiss senior leaders, or make important strategic and financial decisions, in line with international definitions of control.
• Important note: Representatives of state capital in wholly state-owned enterprises or enterprises with multiple state capital contributors are not considered Beneficial Owners of those businesses.

2. Criteria for Identifying Beneficial Owners in Vietnam

The identification of Beneficial Owners in Vietnam is detailed under both the 2025 Law on Enterprises and the 2022 Anti-Money Laundering Law. Common criteria include:

• An individual who directly or indirectly owns at least 25% of the company’s charter capital.
• An individual who is entitled to at least 25% of the company’s profits.
• An individual who controls the company through special agreements, complex ownership structures (e.g. via intermediary companies), or nominee arrangements.
• An individual with actual authority to appoint or dismiss key executives or make strategic and financial decisions for the company.

3. Comparison with International Standards and Banking Regulations

The concept of Beneficial Ownership is a global standard aimed at enhancing transparency. Vietnam is aligning with these standards:

a) Banks in Vietnam

When a business opens a bank account, financial institutions are required to verify and record the Beneficial Owner information in compliance with Anti-Money Laundering (AML) regulations. If the legal representative differs from the actual controlling individual, banks must request transparent documentation to identify the true Beneficial Owner.

Example: ABC LLC is registered under Ms. A on the Business Registration Certificate, but the actual source of capital and operational control belongs entirely to Mr. B under a private agreement. When opening a bank account, the bank must identify and record Mr. B as the Beneficial Owner of ABC LLC.

b) United States – Corporate Transparency Act (CTA)

In the U.S., the Corporate Transparency Act (CTA), effective from January 1, 2024, requires businesses to report Beneficial Owner information to the Financial Crimes Enforcement Network (FinCEN). The criteria are similar:

• Direct or indirect ownership of at least 25% of the company’s shares; or
• Significant control over the company (e.g. authority to appoint senior executives, decision-making power over key matters).

Example: A U.S.-based company has three shareholders, each contributing 33.3%. However, only Mr. X is authorized to sign major contracts and appoint the CEO. Despite owning less than 25%, Mr. X is still considered the Beneficial Owner due to his significant control.

c) Singapore – Through ACRA

In Singapore, companies are required to maintain a Register of Registrable Controllers. Individuals listed in this register are equivalent to Beneficial Owners, determined based on owning at least 25% of shares or having significant control over the company.

4. Practical Examples in Vietnam

To better understand, consider the following scenarios:

• Simple case: A single-member LLC wholly owned by Mr. A, who is also the Director and legal representative. In this case, Mr. A is the Beneficial Owner.
• Complex case: An LLC has three listed capital contributors: Ms. A (20%), Mr. B (30%), and Ms. C (50%). In reality, 50% of Ms. C’s capital is held in trust for Ms. A. Additionally, Mr. B is the person managing all business operations and making key decisions, while Ms. A and Ms. C are only nominal holders. Based on evidence and the nature of control, Mr. B (actual control) and/or Ms. A (real ownership) may be considered the Beneficial Owners, depending on clarification of transactions and control structure.

Illustration of complex ownership structures for identifying Beneficial Owners under the 2025 Law on Enterprises.

5. Purpose of Beneficial Ownership Regulations

Requiring transparency in Beneficial Ownership serves several critical objectives:

• Ownership transparency: Helps authorities and stakeholders identify who truly controls a business.
• Prevent financial crimes: Protects against the misuse of legal entities for money laundering, terrorist financing, tax evasion, or other illicit activities.
• Enhance accountability: Strengthens the legal responsibility of individuals who genuinely control a business.
• Improve national reputation: Helps Vietnam comply with the recommendations of the Financial Action Task Force (FATF), particularly in its efforts to exit the “grey list” and enhance credibility in the global business environment.

6. Compliance Notes for Businesses in Vietnam

Businesses should take note of the following to comply with the new regulations:

• For enterprises established before July 1, 2025, Beneficial Owner information must be updated upon changes in business registration or proactively submitted if required by state agencies.
• Businesses are responsible for establishing internal procedures and maintaining accurate and complete Beneficial Owner records.
• They must be ready to provide this information to competent authorities upon request, including the Business Registration Office, banks (during KYC/AML procedures), tax authorities, and other legal bodies.

Conclusion

The concept of Beneficial Ownership is a cornerstone in global efforts to enhance transparency and combat financial crimes. Under the 2025 Law on Enterprises, identification is based on actual capital ownership and operational control.

Vietnam is actively aligning with international standards such as FATF recommendations, the U.S. CTA, and Singapore’s ACRA regulations through its 2025 Enterprise Law and 2022 Anti-Money Laundering Law. The new rules, effective from July 1, 2025, contribute to a more transparent business environment, enhance anti-money laundering capacity, and build investor trust.

Businesses are encouraged to proactively understand and strictly comply with new Beneficial Ownership regulations to avoid unnecessary legal risks.

Need in-depth legal advice on Beneficial Owners and the 2025 Law on Enterprises? Contact our legal experts today!