Shareholder Agreement: Indirect Recognition Through Beneficial Ownership Mechanisms

Shareholders’ Agreements (SHA) have long been a familiar tool in the business landscape of Vietnam. Despite not being mentioned in any official legal documents, SHAs are present in almost all capital contribution transactions, from small startups to large corporations with foreign investment.

At its core, an SHA is a “contract among owners” designed to establish a power structure within a company: who holds veto power, who appoints key personnel, who controls cash flow, and who can block transfers or amendments to the charter.

Operating in a Legal Gray Area?

Interestingly, despite its critical role in corporate governance, SHAs are not addressed in the Enterprise Law. There are no provisions outlining their content, scope, legal value, or enforcement mechanisms.

No government agency requires companies to submit or disclose SHAs, and administrative procedures for business registration make no mention of their existence. This legal vacuum renders SHAs a “phantom” entity: crucial for internal power dynamics but entirely outside the formal legal framework.

For years, investors and businesses have had to accept that SHAs are merely civil contracts, nothing more. The law’s failure to “acknowledge” SHAs creates uncertainty: what is their legal weight, will state agencies consider them, and will courts prioritize them in disputes?

Beneficial Ownership – An Indirect Recognition of SHAs

Starting in 2025, a notable shift occurred. With the implementation of the beneficial ownership identification mechanism, the role of SHAs began to change. In internal guidance issued to business registration offices, the Ministry of Finance introduced a significant perspective: control over a company can stem not only from capital ownership but also from private agreements among shareholders.

This guidance explains that control includes situations where a company cannot make critical decisions without the approval of a specific individual. Notably, it acknowledges that such control can be established through shareholders’ agreements, membership agreements, or even informal commitments like the influence of a founding shareholder or the market reputation of a strategic advisor.

This recognition, though internal, will have positive implications for corporate governance and dispute resolution. For the first time, SHAs are considered a basis for determining who controls a company—a key factor in identifying beneficial owners. When declaring the controlling person, companies can no longer rely solely on the shareholder registry; they must also consider the content of SHAs and related agreements.

Legal Implications and New Requirements for Businesses

This indirect recognition is more than symbolic. It imposes new responsibilities on businesses: clauses in SHAs, once considered internal or confidential, may now serve as grounds for determining beneficial ownership.

If an SHA and/or other internal agreements grant control to an individual without the company disclosing this information, the company may be deemed to have provided incomplete or inaccurate information—a violation in today’s tightened corporate transparency environment.

Future Trends: From Indirect Recognition to Legalization?

Broadly speaking, this development aligns with the practical needs of modern corporate governance in Vietnam. The law cannot effectively govern a company by focusing solely on share ownership, as real power often lies elsewhere—particularly in internal agreements among shareholders.

SHAs remain unlegislated and absent from the Enterprise Law, but their inclusion in the process of determining beneficial ownership shows that the law is beginning to “acknowledge” them. Perhaps in the future, when the Enterprise Law is revised, lawmakers will consider formally recognizing SHAs within the legal framework of corporate governance.