Provisions on the 'Beneficial Owner of a Company' in the Draft Amendment to Corporate Law
2025/08/08
- Tran Thanh Phuong Thao
The draft amendment to Corporate Law, which is under consideration by the Ministry of Finance (hereinafter referred to as ‘the Draft Amendment’), is expected to introduce new provisions regarding the beneficial owner of a company. This move is intended to make it easier to accurately understand the realities of corporate management, and is significant for companies from the perspective of preventing fraudulent activities and ensuring a sound business environment. This article organizes the purpose and outline of the proposed amendments, and explains the main points that companies should consider and address.
1. Background and purpose of introducing the regulations
In some companies, the individuals who actually control the company do not appear as shareholders or in the name of stocks, making it difficult for outsiders to understand the true state of management. Such structures, even if not intentional on the part of the company, make it difficult to grasp the actual state of management or the ownership relationship, and as a result, increase risks such as money laundering and tax evasion.
Based on this situation, the amendment proposal establishes a framework in which companies themselves identify their “beneficial owners” and appropriately manage and report this information. As a result, this is expected to improve corporate governance and the accuracy of information management, facilitate smooth interactions with relevant authorities, and prevent misunderstandings or unnecessary inquiries.
2. Definition of Beneficial Owner
In the amendment proposal, a “beneficial owner” with respect to a company possessing corporate status is defined as an individual who falls under any of the following categories. Cases where the business is run as a sole proprietorship, in which the owner and the business assets are not separated, are excluded.
・Individuals who directly or indirectly hold more than 25% of a company’s authorized capital
・Individuals who have the right to receive more than 25% of dividends or profits, either directly or indirectly
・Individuals who ultimately have “control over the company”
The term “control over a company” as used here refers to the substantive management authority to directly or indirectly hold the majority of capital or common shares, and to make decisions regarding the appointment of directors or representatives, changes to the articles of incorporation, and similar matters.
These definitions are intended not merely to cover formal ownership based on registered title, but to accurately capture the realities of corporate decision-making and enjoyment of benefits.
3. Details of the system regarding beneficial owners
3.1. Corporate obligations
Companies will be subject to the following new obligations.
・Collecting, updating, and storing beneficial owner information
・Taking responsibility for the accuracy and integrity of beneficial owner information
・Properly managing records at the place of storage (head office or location specified in the articles of incorporation)
In addition, a new obligation will be imposed on companies to notify the business registration authority of information regarding beneficial owners. First, if the beneficial owner is identified at the time of establishment of the company, that information must be reported to the business registration authority. Even if there is no beneficial owner at the time of establishment, if such a situation arises later, notification must be made promptly within 10 days from the date it occurs.
Next, if there are any changes to the information regarding the beneficial owner, the company is obliged to notify the business registration authority of the details. It should be noted that for companies established before the enforcement of the amended bill, notification of beneficial ownership information is required when making changes to the certificate of company registration or amending the registration details.
These regulations clarify the responsibilities of companies regarding ownership structure transparency and are intended to prevent actions such as disguising the true controlling relationship through name lending, or avoiding legal or financial responsibilities. Furthermore, by continuously maintaining and storing information on the beneficial owner, smooth responses can be made during audits and verifications by government authorities.
3.2 Obligations of legal representatives
The following obligations are also imposed on the legal representative of the company
・Notification to the company when the legal representative or related parties are beneficial owners
・Provision of beneficial owner information upon request from the competent authority
・Retention of beneficial owner information for five years from the date of the competent authority’s decision in the event of the company’s dissolution, bankruptcy, or cessation of business
These obligations are regarded as basic measures for properly managing information on beneficial owners, and it is important for companies to be prepared in order to prevent future misunderstandings or oversights.
3.3. Responsibility of beneficial owners
The individuals identified as beneficial owners also have the following responsibilities.
・To provide accurate information about themselves to the company
・To ensure, based on laws and regulations, the accuracy of information reported by the company
It is important to respond appropriately to confirmations or reports from the company in order to prevent problems caused by incorrect information.
3.4. Confirmation system by national institutions
Information on beneficial owners is recorded in the national information system for corporate registration, allowing relevant authorities to refer to the content as necessary. The corporate registration authority is assigned the following roles.
・The authority may request companies to report on the submission or update status of their beneficial owner information in accordance with the Companies Law (2020 Act). Furthermore, if it is deemed necessary to confirm or verify the information content, additional reports or document submissions may be requested.
・ If a company is dissolved, goes bankrupt, or ceases operations, information regarding the beneficial owner must be retained as a record for at least five years from that point in time.
With such a system in place, it is considered beneficial for companies to consistently organize the integrity and storage of information, as this will help facilitate future procedures.
Conclusion
In the proposed amendment, the frameworks for the definition and management of beneficial owners are clarified, with the aim of enhancing transparency in corporate governance and information disclosure. With the introduction of the new regulations, the roles and responsibilities of companies, legal representatives, and beneficial owners will be clarified.
If the proposed amendments are enacted, it will be important for each concerned party to understand the actions required according to their own position and to prepare accordingly for proper corporate management.
Reference：
・2020 Company Law
・Company Law Amendment Bill
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This article was translated using Yarakuzen.
