What is a beneficial owner ? Legal risks of nominee shareholding in Vietnam

In investment and business activities in Vietnam, the individuals whose names appear in corporate records are not always the ones who ultimately control or benefit from the enterprise. In practice, many investment structures involve nominee arrangements, where a person holds shares or acts as the legal representative on behalf of the actual investor.

However, with the global trend toward greater transparency in corporate governance and anti-money laundering (AML) compliance, the concept of the “Beneficial Owner” (BO) has become increasingly significant under Vietnamese law. Identifying the individual who ultimately owns or controls a company is no longer merely a matter of internal governance; it may also give rise to legal responsibilities and financial obligations for that individual.

 This article analyzes the concept of beneficial ownership, the legal risks associated with nominee arrangements in Vietnam, and recent regulatory trends that investors should take into consideration.

1. Beneficial Ownership under Vietnamese Law

The concept of beneficial ownership is addressed in the Law on Anti-Money Laundering 2022 and its guiding regulations. Under these regulations, a beneficial owner refers to an individual who ultimately owns assets in practice, has the authority to control a client in conducting transactions related to such assets, or exercises control over a legal entity or legal arrangement.

Currently, the Vietnamese Government identifies a beneficial owner based on the following criteria:

1. An individual who directly or indirectly owns 25% or more of the charter capital or 25% or more of the total voting shares of an enterprise; 

2. An individual who has the authority to influence or control the approval of at least one of the following matters:

• Appointment, dismissal, or removal of the majority or all members of the Board of Directors, the Chairperson of the Board of Directors, the Chairperson of the Members’ Council; 

• The legal representative, Director, or General Director of the enterprise; 

• Amendments or supplements to the company charter; 

• Changes to the company’s management structure; 

• Corporate restructuring or dissolution.

It is important to note that a beneficial owner is not necessarily the person whose name appears on the Enterprise Registration Certificate or in the shareholder/member register. In many investment structures, particularly multi-layer ownership structures, the ultimate controlling individual may be positioned behind intermediary companies or internal contractual arrangements. 

For this reason, during Know Your Customer (KYC) procedures conducted by banks or financial institutions, companies are often required to disclose information about the ultimate beneficial owner rather than merely providing the shareholder or member lists recorded in corporate documents. 

2. Why Do Businesses Use Nominee Arrangements?

The use of nominee shareholders or nominee representatives in a company does not always arise from an intention to conceal information. In business practice, several common reasons may explain why such arrangements are used.

2.1. Legal restrictions on foreign investors

Certain business sectors in Vietnam are subject to market access conditions for foreign investors or require relatively complex investment procedures. In some cases, investors may adopt a nominee structure during the initial stage of a project.

2.2. Temporary investment structures 

During the investment preparation phase, or when certain legal procedures have not yet been completed, a nominee arrangement may be used as a temporary solution until the intended ownership structure can be formally implemented.

2.3. Internal arrangements among founders 

In startups or family-owned businesses, shares are sometimes registered under the name of one individual, while in reality they may represent the joint interests of several parties based on internal agreements.

Although such arrangements may exist in practice, the use of nominee structures, if not carefully designed and properly documented, can give rise to significant legal risks.

3. Legal Risks of Nominee Arrangements in Vietnam

3.1. Risk of Legal Liability and Financial Obligations

Individuals whose names appear in the company’s official records may be held responsible for certain legal obligations of the enterprise. These may include tax liabilities, financial obligations to business partners, or responsibilities arising from administrative violations.

In cases where the company becomes involved in a dispute or violates legal regulations, the individual whose name appears in the corporate records may be required to provide explanations to regulatory authorities or may become subject to enforcement measures in accordance with applicable laws.

3.2. Risk of Losing Control over Shares

Conversely, for the person who actually contributes capital but does not hold shares under their own name, the most significant risk is the loss of control over the investment.

If there is no clear legal agreement governing the arrangement, the nominee shareholder may:

• refuse to transfer the shares back to the actual investor;

• exercise voting rights based on their own interests;

• transfer the shares to a third party.

In practice, disputes related to nominee shareholding arrangements have occurred in Vietnam and are often difficult to resolve, particularly when there is insufficient legal documentation evidencing the original agreement between the parties. 

3.3. Risks Related to Anti-Money Laundering Regulations

Under anti-money laundering (AML) regulations, banks and financial institutions are required to identify and verify the ultimate beneficial owner of corporate clients.

As a result, companies may be required to provide:

• information on the ownership structure;

• documents evidencing the source of funds;

• information about the individual who ultimately controls the enterprise.

If the ownership structure lacks transparency or appears to conceal the actual controlling individual, banks may refuse to open bank accounts or restrict certain transactions of the company.

3.4. Risk of Exit Restrictions Due to Outstanding Tax Obligations (Effective from 2026)

A notable development in recent legal policy is the regulation allowing exit restrictions for certain individuals associated with enterprises that have not fulfilled their tax obligations. 

Under the amended Law on Tax Administration, effective from 1 July 2026, tax authorities may impose temporary exit bans on individuals related to a company’s tax liabilities, including:

• the legal representative;

• the business owner;

• the beneficial owner of the enterprise.

This regulation aims to prevent situations where companies use nominee representatives to avoid tax obligations or legal responsibilities of the individuals who actually control the enterprise.

Accordingly, the fact that an individual’s name does not appear in the company’s official records will no longer guarantee that such individual can completely separate themselves from the company’s legal responsibilities, particularly where regulatory authorities determine that the individual is the actual beneficial owner. 

The regulation also serves as a deterrent, aiming to limit the use of nominee arrangements or nominal ownership structures designed to conceal the true beneficial owners of enterprises.

4. Practical Perspective: What Should Businesses Consider?

From a legal advisory perspective, the use of nominee structures is not always the most suitable solution if it is not carefully designed and properly documented. To mitigate potential legal risks, businesses should consider several measures:

• Establish a clear nominee agreement between the relevant parties; 

• Implement mechanisms to protect share ownership, for example through call options, share pledges, or loan agreements;
• Maintain and update information on the beneficial owner to meet disclosure requirements of banks and regulatory authorities; 

• Consult legal counsel when structuring corporate ownership or investment structures involving foreign elements.

In many cases, designing a transparent ownership structure from the outset can help businesses avoid significant legal risks in the future. 

5. Conclusion

Current legal trends in Vietnam and globally are increasingly focused on enhancing transparency in corporate ownership structures and clearly identifying the ultimate beneficial owners of enterprises. In this context, the use of nominee arrangements or indirect ownership structures should be carefully considered from a legal perspective.

For investors and businesses, understanding the role of beneficial owners and the related legal obligations not only helps mitigate potential legal risks, but also contributes to building a transparent and sustainable governance framework for business operations.

If your business requires advice on corporate ownership structures, nominee arrangements, or compliance with beneficial ownership regulations in Vietnam, the legal team at Lexsol is ready to assist with tailored legal solutions suitable for each investment structure.