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July 25, 2025

Navigating Key Updates of Vietnam’s Amended Law on Enterprises

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On June 17, 2025, the National Assembly of Vietnam adopted Law No. 76/2025/QH15 (Amended LOE) amending and supplementing the 2020 Law on Enterprises, which aims to reshape the legal framework to enhance transparency and alignment with international standards. The Amended LOE took effect from July 1, 2025.

Below are key notes on the Amended LOE.

Recognition of Beneficial Owners

The beneficial owner (BO) concept was previously addressed under Vietnam’s anti-money laundering framework. However, the formal recognition of a BO in the Amended LOE marks a pivotal advancement in embedding ownership transparency into corporate governance, in line with the G7 Financial Action Task Force’s standards on anti-money laundering and counter-terrorism financing.

Under the Amended LOE and Decree No. 168/2025/ND-CP of the government dated June 30, 2025, on enterprise registration (Decree 168), a BO is identified through either equity ownership or control rights.

  • Equity ownership: Individuals holding 25% or more of a company’s charter capital or voting shares, either directly or indirectly, qualify as BOs. Indirect ownership is further defined as ownership of at least 25% of charter capital or voting shares through an intermediary organization.
  • Control rights: Individuals with the authority to make or influence major decisions are considered BOs. The actual control over a company includes the power (i) to appoint or remove most or all members of the board of directors or the members’ council or the general director of a company; (ii) to amend the charter; or (iii) to decide other key matters specified in the company’s charter. Notably, individuals representing state ownership in state-owned enterprises are excluded from the scope of the BO concept.

Companies are responsible for collecting, updating, and retaining information about BOs and cooperating with authorities when requested to identify BOs, among other obligations. Additionally, any companies registered before July 1, 2025, must submit a list of their BOs when updating or registering changes to their enterprise registration contents, unless they opt to provide an earlier notification.

Companies and their founders are required to declare BO information when (i) individuals or entities hold 25% or more of the voting shares in a joint-stock company, (ii) individuals own 25% or more capital contribution, or (iii) individuals have control rights. Decree 168’s guidance on “control rights” creates uncertainty, as determining who qualifies as a BO depends heavily on each company’s charter and specific decision-making powers. Additionally, control exercised indirectly makes it difficult to trace the actual individual behind corporate decisions. Therefore, the BO declaration will need further guidance from the competent authorities.

Re-definition of Market Price

The Amended LOE amended the definition of “market price” to provide clearer guidelines for listed shares, specifying a new method based on the average trading price over 30 days before valuation. The existing methods of determination of the market price under the 2020 Law on Enterprises remain unchanged.

These updates aim to standardize the valuation of shares and capital contributions and strengthen the credibility of registered capital figures.

Debt-to-Equity Cap for Private Bond Placement

To address regulatory gaps and heightened concerns over investor protection and financial stability in the bond market, the Amended LOE adds a new financial condition for private placements of bonds by non-publicly listed companies. The bond issuers’ total liabilities (including the bonds to be issued) must not exceed five times the equity as reflected in the latest audited financial statements. Importantly, this leverage cap applies exclusively to corporate bonds and does not extend to other privately issued debt instruments (such as debentures or promissory notes).

This new requirement does not apply to (i) state-owned enterprises, entities issuing bonds to fund real estate projects, credit institutions, insurers, reinsurers, insurance brokers, securities firms, and fund managers; and (ii) bond issuances disclosed to the stock exchange before July 1, 2025.

These reforms reflect a broader effort of lawmakers to restore investors’ trust, promote responsible capital raising, and safeguard the integrity of Vietnam’s financial markets.

Redemption of Redeemable Preference Shares

Previously, given the lack of specific legal procedures, licensing authorities were reluctant to approve capital reduction in cases where joint stock companies redeem redeemable preference shares (RPS). To solve this practical obstacle, the Amended LOE explicitly specifies the procedures for joint stock companies to decrease their charter capital after redeeming the RPS and returning capital to RPS holders

This amendment aims to streamline the licensing procedures in case of RPS redemption and promote operational flexibility. This is likely beneficial for investors seeking liquidity or exit rights tied to specific share classes, as it reinforces the viability of redeemable instruments within Vietnam’s corporate framework.

False Declaration of Charter Capital

False declaration of charter capital is prohibited, but is not explicitly defined, under the 2020 Law on Enterprises, resulting in inconsistent interpretations and enforcement by the competent authorities in practice. The Amended LOE provides a clear definition of “false declaration of charter capital” to clarify as either (i) failure to fully contribute the registered charter capital by the statutory deadline without registering a decrease in the declared amount; or (ii) intentional mis-valuation of assets contributed as capital in kind.

The reform aims to provide a clear legal basis to identify and penalize prohibited actions (such as false declaration of charter capital), prevent the formation of shell companies, and reduce risks of fraud and money laundering.

Outlook

The Amended LOE enhances transparency and regulatory oversight, aiming to boost foreign investor confidence, streamline compliance for businesses, and strengthen enforcement capabilities for regulators.

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Practices

Banking and Finance

Corporate/M&A

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