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Rechtsanwalt in Vietnam Dr. Oliver Massmann IMMOBILIEN Vietnams Immobiliensektor – Aktuelle Probleme und Loesungen fuer Anleger mit Ausblick auf die Handelsabkommen TPP 11 und EUVNFTA

A. Einleitung
Der gesetzliche Rahmen fuer den Immobilienbereich wird seit dem 01.07.2015 durch das Immobiliengeschaeftsgesetz (LREB) und das Wohnhausgesetz (LRH) vorgegeben.

Das LREB wurde durch das Dekret Nr. 76/2015/nd-CP eingefuehrt, das LRH durch das Dekret Nr. 99/2015/nd-CP. Darueber hinaus wurde mit dem lang ersehnten Dekret Nr. 01/2017/ND-CP vom 06.01.2017 drei Verordnungen, die das Grundbesitzgesetz betreffen, geaendert. Durch diese Aenderung konnte der Immobilienmarkt neue Investitionen verzeichnen.

B. Fragen
Allerdings bleiben weitere Fragen offen:

1. Verzoegerungen bei der Erteilung von Flaechennutzungsrechten (LURC)
Die Erteilung von Flaechennutzungsrechten an Auslaender ist eine wesentliche Voraussetzung fuer die Durchfuehrung von Immobilienprojekten. Artikel 75 des Dekrets 95/2015 verpflichtet das Bauamt zum Erlass einer “Liste von verbotenen Bauprojekten fuer Auslaender”. Eine solche Liste wurde bisher jedoch noch nicht veroeffentlicht. Aus diesem Grund verzichtet das Amt fuer Natur und Umwelt auf die Erteilung der LURCs an Auslaender.
Deshalb sollte diese Liste sobald wie moeglich veroeffentlicht werden. So koennten Auslaender, die in Vietnam Land kaufen, die LURC erhalten und ihre Bauprojekte verwirklichen.

2. Was sind “auslandsfinanzierte Unternehmen”?
Das LREB, das Grundbesitzgesetz und das Investmentgesetz 2014 (LOI) nennen das “auslandsfinanzierte Unternehmen”. Dennoch bleiben Unklarheiten bestehen. Das LREB nennt keinerlei Definition. Das Grundbesitzrecht besagt, dass Joint-Ventures, zu 100% auslandsfinanzierte Unternehmen und vietnamesische Unternehmen, an denen Auslander Anteile halten, miteinander fusionieren koennen oder untereinander Anteile voneinander erwerben koennen ohne Anteile zu nennen. Laut des LOI soll eine Gesellschaft mit auslaendischem Investor ein auslandsfinanziertes Unternehmen darstellen, wenn der Auslaender 51% oder mehr der Anteile haelt. Auf der anderen Seite werden Gesellschaften mit weniger als 51% nicht als inlaendische Unternehmen klassifiziert. Dieser Unterschied ist jedoch aufgrund der unterschiedlichen Behandlung inlaendischer und auslaendischer Unternehmen entscheidend. So sind z.B. inlaendische Unternehmen in der Lage, Fleachennutzungsrechte in Form von Teilen einer Flaeche zu erwerben, waehrend dies den auslandsfinanzierten Unternehmen versagt ist. Dies entspricht auch dem Inhalt des Dokuments Nr. 386/BXD-Qin vom 28.02.2017 des Bauministeriums, indem festgestellt wird, dass das LREB keine Bestimmungen ueber auslaendisch finanzierte Unternehmen erbringen muss, wie es das LOI bereits getan hat. Das Dokument 286 sagt jedoch nicht aus, dass das LREB dieselbe Definiton uebernehmen kann.

3. Beschraenkungen der Kapitalquellen
Aufgrund der Beschraenkung der Kapitalquellen bei Wohnhaeusern durch das LRH koennen auslaendische Bauunternehmer keine Kredite von Offshore-Kreditinstituten mehr erhalten. Diese Massnahme verringert die Moeglichkeit zur effektiven Kapitalerhoehung und letztendlich auch die Wettbewerbsfaehigkeit der auslaendischen Bauunternehmer. Dies gilt, obwohl keine Notwendigkeit dazu besteht.

4. Aenderung der Rechte des Grundbesitzers im Falle des Erwerbs von Anteilen/Kapitaleinlage
Artikel 2.27 des Dekrets 01/2017 verpflichtet ein Unternehmen zur Abaenderung von Grundbesitzrechten oder zur Registrierung von solcher Aenderungen am Land selbst oder an Zubehoer des Grundbesitzes, sobald eine Aenderung der Eigentumsverhaeltnisse eintritt. Im Falle des Erwerbs von Grund bleibt dieser solang beim alten Eigentuemer. Ausserdem kann der Uebertragungsprozess zu finanziellen Verpflichtungen fuehren. Dies kann fuer Investoren zu Schwierigkeiten fuehren, wenn Aktien erworben wurden oder Kapital ins Unternehmen eingebracht wurde.

5. Investitionsgenehmigung
Bei der Hauptgenehmigung fuer Wohnsiedlungen handelt es sich entweder um eine Entscheidung als “in-principle decision (IID)” oder um ein “in-principle approval (IAA)”.
Darueber hinaus benoetigt ein Investor, der in Vietnam ein Unternehmen gruenden will, ein Investitionsregistrierungszertifikat (IRC).

a) Wann es einer IID bedarf
Gemaess Artikel 32 des LOI bedarf es der IID nur, wenn Bauunternehmer Fleachennutzungsrechte direkt vom Staat durch Zuteilung oder Pacht erhalten. Ausgenommen sind Versteigerung, Ausschreibung und Uebertragung des Eigentums. Die einzige Moeglichkeit Grund und Boden zu erhalten, ist gemaess des Grundbesitzrechts, durch Uebertragung oder Pacht. Es ist unklar, wie Bauunternehmer Grund uebertragen bekommen koennen.

b) Investitionsgenehmigung fuer Kapitaleinlagen im Wege der Flaechennutzungsrechte
Im Rahmen eines Joint Ventures zwischen inlaendischem und auslaendischem Investor zur Entwicklung von Wohnsiedlungen traegt der Inlaender durch Einbringen der Landnutzungsrechte bei. Der IID bedarf es in diesem Fall nur bei Zuteilung oder Pacht von Grundstuecken vom Staat, mit Ausnahme der Versteigerung, Ausschreibung oder Uebertragung. Unklar ist, ob eine IIA bei Ausschreibungen oder Eigentumsuebertragungen notwendig sein wird.
Nach dem Baugesetz 2014 bedarf es der Baugenehmigung vor dem Beginn des Baus. Ob die IIA die Genehmigung erhalten muss, ist nicht geklaert.

c) Die verschiedenen Investitionsgenehmigungen
Das LOI stellt die Anforderungen der IRC, abgesehen von der IID und der IIA. Fuer Projekte, die die IID benoetigen, wird die IRC automatisch fuenf Tage nach Erteilung der IID ebenfalls erteilt. Inhaltlich aehneln sich IID und IRC, sodass keine zusaetzlichen Dokumente erforderlich sind. Infolgedessen braucht es keiner IRC, wenn die IID erteilt wurde.
Sollte es der IIA beduerfen, muss man sich zuerst um die IRC kuemmern, ehe das Unternehmen eingerichtet werden.

6. Kapitalbeitrag in Form der Flaechennutzungsrechte
Das Grundbesitzgesetz und das Gesellschaftsrecht von 2014 bieten fuer natuerliche Personen die Moeglichkeit der zeitweisen Beiteiligung ueber Landnutzungsrechte an. Gemaess Artikel 80 des Dekrets 43/2014/nd-CP vom 15. Mai 2014 erlischt die Kapitalbeteiligung in Form des Landnutzungsrechts, wenn der Anleger verstirbt. Im Ergebnis wuerde die Kapitalbeteiligung beendet und die LURC des Unternehmens inklusive seines Flaechennutzungsrechts versagt. Auf der anderen Seite schreibt das Gesellschaftsrecht 2014 vor, dass ein Unternehmen das Recht ueber eine Flaeche hat, wenn es von einer naturlichen Person als Kapitaleinlage eingebracht wurde. Deshalb hat Artikel 80 des Dekrets Nr. 43/2014/nd-CP Verwirrung und Unsicherheit unter den Bauunternehmern gestreut.

7. Durchfuehrung eines Immobiliengeschaefts mittels Flaechennutzungsrecht als Kapitaleinlage
Unter dem Grundbesitzgesetz koennen in- und auslaendische Unternehmen Kapitalbeteilungen in Form von Flaechennutzungsrechten erhalten. Jedoch ergibt sich aus dem LREB keine gesetzliche Bestimmung fuer Verbaende und natuerliche Personen. Demzufolge sind Verbaende nicht berechtigt Kapitaleinlagen in Form von Flaechennutzungsrechte zu erhalten. Dies stellt eine Ungleichbehandlung im Immobiliensektor dar.

C. Ausblick auf die Handelsabkommen TPP 11 und EUVNFTA
Nach dem Zurueckziehen der USA aus dem TPP im Januar 2017, einigten sich die verbleibenden TPP-Mitglieder im November 2017 auf einen Verbund ohne die USA. Dieser traegt den Namen CPTPP (TPP 11). Dieses Abkommen soll von allen Mitgliedern im ersten Quartal 2018 unterzeichnet werden. Danach muesste es in allen Mitgliedsstaaten ratifiziert werden, um Wirksamkeit zu entfalten. Das TPP 11 verspricht grosse Vorteile fuer Vietnams immobiliensektor. Das Abkommen zielt auf die Aufhebung von Zoellen zwischen den Mitgliedsstaaten fuer gewisse Waren und Gueter ab. Dies wird der vietnamesischen Wirtschaft als Ganzes fuer auslaendische Investoren interessanter machen und koennte dazu fuehren, dass sich auslaendische Bauunternehmen aufgrund der neuen Dynamik des Markts zum Bau von Kaufhaeusern oder Bueros entscheiden bzw. sich anderweitig am Immobilienmarkt beteiligen.

Ebenfalls interessant ist in diesem Hinblick das Handelsabkommen zwischen der EU und Vietnam, das sog. EUVNFTA. Das EUVNFTA bietet die Moeglichkeit, sowohl fuer die EU als auch fuer Vietnam, neue Maerkte zu erschliessen. Aufgrund des leichteren Zugangs und der Abschaffung von 99% aller Zoelle, wird Vietnam mehr Kapital anziehen. Von dem erwarteten Wachstum in den Bereichen Gesundheitswesen, Technologie und Bildung wird auch der Immobilienmarkt profitieren.

Es kann von einer allgemeinen Staerkung von Vietnams Wirtschaft infolge des EUVNFTA ausgegangen werden. Ausserdem gilt der Gleichbehandlungsgrundsatz fuer Unternehmen. Aufgrund der neuen Moeglichkeiten Geschaefte zu machen, wird eine nachhaltige Entwicklung hin zu einer noch dynamerischeren Wirtschaft mit besseren Investitionsmoeglichkeiten sichergestellt.
Ausserdem wird die Moeglichkeit zur Streitbeilegung zwischen Anleger und Staat (Investor State Dispute Settlement [ISDS]) den hoechsten Standards der Rechtssicherheit –und durchsetzung genuegen. Anlegerschutz wird so gewaehrt.

Wir raten Ihnen, diese Standards fuer sich zu nutzen. Gerne beraten wir Sie hierbei.

Dieser Standard wird unter dem TPP 11 und der EUVNFTA Anwendung finden. Hiernach haben Anleger bei Rechtsstreitigkeiten die Moeglichkeit, die Klage im Gastland nach den Standards der internationalen Schiedsgerichtsbarkeit zu erheben. Um Transparenz sicherzustellen, wird das Schiedsverfahren oeffentlich gehalten. Im Zusammenhang mit der Diskussion um die Zukunft des TPP wurde im November 2017 der Anwendungsbereich der ISDS um die Kapitel “Investitionsvereinbarungen” und “Investitionsbewilligung” verringert.
Weitere Sicherheit wird durch das Government Procurement Agreement (GPA) gewaehrleistet, das ebenso Teil beider Handelsabkommen sein wird. Das GPA stellt vor allem sicher, dass auslaendische Investoren zu vietnamesischen Investoren gleichbehandelt werden, wenn die Regierung Waren oder Dienstleistungen ueber einen gewissen Grenzwert kauft. Vietnam verpflichtet sich zur Veroeffentlichung von Information zur Ausschreibung, sowie den Bietern ausreichend Zeit zur Vorbereitung und Abgabe von Angeboten zu gewaehren und die Vertraulichkeit der Angebote zu wahren. Zudem verlangt das GPA von den Parteien die Bewertung der Angebote auf Grundlage der Fairness und Objektivitaet. Angebote sind nach Massstab von Bekanntmachungen und Ausschreibungsunterlagen zu bewerten und zu vergeben, die wirksame Regelungen fuer Beschwerden und Streitbeilegung inne haben.
Dieses Instrument wird fairen Wettbewerb und Qualitaetssicherung gewaehrleisten.

D. Fazit
Die genannten Probleme beeinflussen die Wettbewerbsfaehigkeit des Immobiliensektors. Die bestehenden Beschraenkungen, zusaetzliche Verpflichtungen fuer auslaendische Investoren und das Fehler klarer Richtlinien zur Implementierung der Durchfuehrungsbestimmungen sind alles Huerden fuer Investoren, die gern in diesem Markt investieren wuerden.
Angesichts des Engagements der Regierung fuer Wachstum zu sorgen, wird es notwendig sein, diese Probleme zu beseitigen. Zwar werden die Handelsabkommen grossen Einfluss auf die Entwicklung des Marktes nehmen. Dennoch muss die Regierung weitere Massnahmen zur Umsetzung der rechtlichen Vorgaben des Abkommens gewaehrleisten.

Falls weitere Fragen zum Thema bestehen, wuerden wir uns ueber Ihren Kontakt freuen. Melden Sie sich hierzu bitte an Dr. Oliver Massmann (omassmann@duanemorris.com).

Vielen Dank.

VIETNAM – BOOM TIME – The Trans Pacific Partnership Agreement now becomes the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership – What is next?

 

Overview on the Trans Pacific Partnership Agreement (TPP) – now the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP)

The TPP was originally known as the Trans- Pacific Strategic Economic Partnership concluded in 2006 among Singapore, New Zealand, Chile and Brunei (P-4 agreement) as a means to promote trade liberalization in the Asia- Pacific Region. As its name indicates, the original purpose of the agreement was only to address economic issues. As the number of participating countries in the P-4 agreement increased, starting with the United States in September 2008 and other countries to follow being Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan until July 2013, the agreement is agreed to be “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century challenges” by TPP Trade ministers. In June 2015, the United States approved the trade promotion authority for President Obama. The Agreement finally becomes as it is today through tough negotiation rounds, while the last round in Atlanta in September 2015 was considered the most intensive one. The TPP was already concluded on 06 October 2015. However, in January 2017, right after President Trump took his office, the United States formally expressed its withdrawal from the agreement, leaving other 11 parties with the decision to continue the agreement without the United States or not. In November 2017, during APEC meeting in Da Nang, Vietnam, ministers from 11 countries decided to push ahead with the TPP with its new name – CPTPP with only 20 items suspended out of an around 5000-page document, mainly in the Intellectual Property chapter.

CPTTP will help Vietnam make good use of international cooperation opportunities, balance relationships with key markets, approach larger markets including Japan and Canada, boost import-export, reduce import deficit, and attract foreign investment. In addition, CPTTP will also help Vietnam’s economy allocate its resources more effectively, enabling active supports to the processes of restructuring, innovation and improving regulations, and improve administrative reforms.

What makes CPTPP the template for next-generations trade agreements – What are beyond the WTO?

Freer trade zone

Commitments in Trade in goods

Tariff and non-tariff barriers are reduced and removed substantially across all trade in services and goods under the CPTPP. Import tariffs are reduced for 100% goods traded among member states, with more than 90% being eliminated immediately when the Agreement takes effect. The CPTPP also covers issues which have never been addressed in the WTO, including export duties, import duties for re-manufactured goods, market access for re-furbished goods, stricter regulations on import and export licensing, monopolies and goods in transit.

Lower tariff barriers from the CPTPP will give Vietnam greater access to large consumer markets in Japan, Canada and Australia. The potential positive effect on trade could be transformative, with estimates that the CPTPP will boost Vietnam’s exports by over 37% until 2025.

Commitments in Trade in services and Investment

All 11 member states give consent to a liberalized trade in this area. More sectors are opened in the CPTPP compared with the WTO, such as telecommunications, distribution and manufacturing sectors.

In addition, besides incorporating basic WTO principles (national treatment (NT), most-favored nation treatment (MFN), market access, and local presence), the CPTPP takes a negative approach, meaning that their markets are fully open to service suppliers from other CPTPP Parties, except otherwise indicated in their commitments (i.e, non-conforming measures). In order to make such reservations, the member state must prove the necessity of such preservation and negotiate with other member states. If approved, the non-conforming measures are only limited to such list, except for measures in certain sensitive sectors which are included in a separate list. Member states are only allowed to adopt policies that are better than what they commit (ratchet principle). The CPTPP also includes obligations on removal of performance requirements (i.e., no conditions on local content requirements, export conditions, use of certain technology, location of the investment project, etc.) and reasonable requirements on senior management and board of directors. Notably, the CPTPP Chapter on Investment for the first time makes it very clear and transparent concerning the MFN principle, that countries operating in multi-state regime must give foreign investors the best investment conditions of all states, regardless of the state where the investment takes place. Investors are also allowed to petition against the Government from the investment registration stage.

Textiles

Textiles are among Vietnam’s core negotiating sectors. According to suggestions by the United States, negotiations on textiles were conducted separately from negotiations on market access for other goods. To be qualified for CPTPP preferential tariff treatment, the CPTPP applies the yarn-forward principle, meaning textile products must be produced in CPTPP countries from yarn forward. However, the CPTPP includes exceptions that allow (i) certain materials to be sourced from outside CPTPP (“Short supply list”), (ii) certain manufacturing phases (for example, dying, weaving, etc.) to be conducted outside CPTPP; and (iii) one country to be able to use non-CPTPP materials in exchange for its export of certain textile goods to another country.

Government procurement

The CPTPP makes a list of government entities and agencies whose procurement of a particular̉ goods and services at a particular amount must be subject to public tender. This chapter includes NT and MFN principles, removes tender conditions favoring local tenders such as using local goods or local suppliers, conditions on technology transfer or two-way trade and investment, etc. These rules require all parties, especially Vietnam, in the context of China’s bidders predominantly win the bids with cheap offer price but low-quality services, to reform their bidding procedures and protect their own interests by disqualifying tenders with poor performance and low capacity.

Investor-State Dispute Settlement

The CPTPP aims at protecting investors and their investment in the host country by introducing requirements on non-discrimination; fair and equitable treatment; full protection and security; the prohibition of expropriation that is not for public purpose, without due process, or without compensation; the free transfer of funds related to investments; and the freedom to appoint senior management positions regardless of nationality. For the first time investors may sue the Government for its violation of investment-related commitments.

CPTPP also includes procedures for arbitration as means of settling disputes between investors and the host state. It covers new provisions compared with existing agreements such as transparency in arbitral proceedings, disclosure of filings and arbitral awards, and participation of interested non-disputing parties to make amicus curiae submissions to a tribunal. Arbitral awards are final, binding and fully enforceable in CPTPP countries.

Application of the CPTPP and older/ existing agreements

Member states of the CPTPP acknowledge existing rights and obligations of each member under existing international agreements to which all CPTPP member states are parties (for example, the WTO Agreement, NAFTA, or bilateral agreements) or at least two member states are parties. In case there is any consistency between a provision of the CPTPP and a provision of another agreement to which at least two CPTPP member states are parties, these parties will consult with each other to reach a mutually satisfactory solution. Please note that the case where an agreement provides more favourable treatment of goods, services, investments or persons than that provided for under the CPTPP is not considered as an inconsistency.

Implementation deadline of the CPTPP

Brunei, Canada, Malaysia and Vietnam still have some outstanding issues, so further negotiations are necessary. Canada and Japan will also have to agree on auto rules in the CPTPP. However, negotiators have set the goal of signing the CPTPP in the first quarter of 2018. After that, all 11 countries will have to ratify it before it can come into effect.

***

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

 

THANK YOU !

 

 

Lawyer in Vietnam Dr. Oliver Massmann – Solar Power – Payment mechanism from Vietnam Electricity (former Electricity of Vietnam, EVN) to Solar IPP – What you must know:

1. The periodicity of payment for energy sales by client (EVN) to IPP

The IPP and EVN will together read the metering result on a monthly basis on a mutually agreed date to determine the power delivered and received in a month. The IPP will record the result in writing and send it together with the invoice to EVN within 10 working days from the result reading date. The payment deadline for EVN is within 15 working days from the receipt of the IPP’s invoice.

2. Frequency of price adjustment such that payment in VND reflects equivalent USD value

It is not clear in both Decision 11 and Circular 16, but we understand that the adjustment will be made at the time of payment for grid connected projects. For on-grid rooftop projects, the adjustment is made annually. Provision have been included in previous power project documents.

3. Mechanism for price adjustment (e.g. is applicable price adjustment is weighted average of adjustment period such that seller is not exposed to changes to VND/USD exchange rate).

For on-grid projects, the adjustment is made at the time of payment. For on-grid rooftop projects, the adjustment is made annually. It means that the FiT for on-grid rooftop projects remains the same in a year. The FiT for on-grid rooftop projects for the next year will be adjusted based on the announced VND/USD exchange rate on the last working day of the preceding year.

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above.

THANK YOU !

 

 

 

 

VIETNAM SOLAR POWER – THE FIRST OFFICIAL PPA – VIETNAM INVESTMENT REVIEW INTERVIEWING DR. OLIVER MASSMANN

1. Could you point out for me the good point of this solar PPA?

While the previous draft solar PPA does not require the Feed-in-Tariff (FiT) conversion between USD and VND be according to the exchange rate at the time of payment, this newly issued solar PPA repeats the language in Decision No. 11/2017/QD-TTg (Decision 11) that the FiT will be adjusted according to the fluctuation in the VND/USD exchange rate. This is consistent with what is stipulated in Decision 11.
In addition, I note that while the FiT for power output from on-grid projects is adjusted according to the fluctuation in the VND/USD exchange rate, meaning at any time during the year, it is not the same for rooftop projects. Instead, the mentioned FiT for excessive power output generated from rooftop projects remains the same throughout the first year of operation, and the new FiT for the next year will be adjusted based on the announced VND/ USD exchange rate of the last working day of the previous year.

2. Are there any concerns of investors that the solar PPA has not solved?

The rights of the investors are not fully protected in the following cases:
– when EVN is in the process of installing equipment, or making repairs, replacement, inspection or examination of the grid connection of the seller’s power plant;
– when the transmission grid or the distribution grid connected to EVN’s grid has a problem or grid equipment directly connected to EVN’s transmission grid or the distribution grid has a problem; and
– when EVN’s grid needs support to recover after the incident in accordance with the provisions of operation of the national power system and the standards, technical regulations of the electric industry.
– allocation of feeding points into the grid
It is quite risky for the producer if the output is ready to be fed to the grid but the connection is not available to do so. Absent a clear indication of whether the Solar PPA is a ‘take or pay” agreement, investors will find it difficult to secure and ensure the profits and revenue of their projects.
• No international arbitration dispute resolution clause
• No Government guarantee to enhance the credit of EVN as the sole off-taker;
• No provision addressing the risks of changes in applicable laws; and
• The Solar PPA is required to follow a specific template, which is not bankable.

3. Is this PPA solar bankable or not?

This PPA is not bankable due to reasons specified in 2).

4. In your opinion, how Vietnam government should do in order to reach their target for solar power capacity in the coming to time?

There is an increasing interest of foreign investors in the sector, proven by the fact that there are many solar projects with total capacity of 10,000 MW registered with the MOIT. However, not many of them have submitted the pre-feasibility study to the MOIT for consideration. There are many reasons behind this, but the most important ones are the lack of Government guarantee of EVN’s payment obligation in the PPA and currency hedging. Thus, the Government should consider a mechanism where EVN has to fulfil its payment obligation and the investors are ensured that they will be able to remit their profits abroad in foreign currency.

***
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you!

Vietnam – Solar Power Taking Off –  PPA Breaking News- The text of the PPA is issued – How to work with it:

Following the issuance of Decision No. 11/2017/QD-TTg of the Prime Minister on mechanism for encouragement of development of solar power in Vietnam (Decision 11), on 12 September 2017, the Ministry of Industry and Trade officially released Circular No. 16/2017/TT-BCT guiding Decision 11 (Circular 16). Circular 16 is aimed at providing regulations on formulation, approval and amendment of the national as well as provincial power master plan. In addition, the solar Power Purchase Agreement (Solar PPA), which is of great interest for many foreign investors, is also provided in Circular 16 as a mandatory template for future on-grid and rooftop solar power projects with only minor changes expected to be permitted during the contract negotiations.

In essence, the Solar PPA is almost the same as current applicable PPAs for renewable projects. This creates bankable issues for solar projects and a hindrance to foreign investors planning an investment in the sector.

Feed-in-Tariff (FiT)

Circular 16 repeats the solar FiT for power output from on-grid projects and excessive power output generated from rooftop projects specified in Decision 11 to be VND2,086/kWh or US 9.35 cents/kWh. This FiT only applies to on-grid projects and rooftop projects coming into commercial operation before 30 June 2019 and will remain within 20 years from the commercial operation date. We note that while the FiT for power output from on-grid projects is adjusted according to the fluctuation in the VND/USD exchange rate, meaning at any time during the year, it is not the same for rooftop projects. Instead, the mentioned FiT for excessive power output generated from rooftop projects remains the same throughout the first year of operation, and the new FiT for the next year will be adjusted based on the announced VND/ USD exchange rate of the last working day of the previous year.

EVN’s rights and obligations as the sole off-taker

EVN is delegated to purchase all power output generated from solar power projects pursuant to terms and conditions of the Solar PPA within 20 years.

It is noteworthy that the Circular 16 and the Solar PPA list out certain circumstances where EVN is not obliged to purchase power as negotiated with the seller, for example:

  1. when EVN is in the process of installing equipment, or making repairs, replacement, inspection or examination of the grid connection of the seller’s power plant;
  2. when the transmission grid or the distribution grid connected to EVN’s grid has a problem or grid equipment directly connected to EVN’s transmission grid or the distribution grid has a problem; and
  3. when EVN’s grid needs support to recover after the incident in accordance with the provisions of operation of the national power system and the standards, technical regulations of the electric industry.

Unfortunately, the current Solar PPA does not include provisions protecting the interests of the seller in the abovementioned circumstances. It is quite risky for the producer if the output is ready to be fed to the grid but the connection is not available to do so. Absent a clear indication of whether the Solar PPA is a ‘take or pay” agreement, investors will find it difficult to secure and ensure the profits and revenue of their projects.

Dispute resolution

The Solar PPA allows either party to the agreement to bring the dispute to local courts for litigation and other energy-related state bodies of Vietnam (General Directorate of Energy and the Electricity Regulatory Authority of Vietnam) for mediation and resolution.

The Solar PPA does not provide for international arbitration to be an option to resolve the dispute. This could be a great concern for foreign investors, especially those of large utility scale projects.

Other key issues of concern

  • No Government guarantee to enhance the credit of EVN as the sole off-taker;
  • No provision addressing the risks of changes in applicable laws; and
  • The Solar PPA is required to follow a specific template, which is not bankable.

Conclusion

Although these abovementioned bankability issues remain in the Solar PPA as the same for other renewable energy PPAs, we have assisted our clients on different large scale power projects, also in the Renewable Energy sector  and managed to win bankable PPAs with EVN. We strongly believe that our track record experience will help investors and the same will be done for the Solar PPA.

***

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

 

 

 

 

Vietnam Wind Power is taking off – The new Feed in Tariff – what you must know:

Decision No. 37 of the Prime Minister on supporting regime for wind power projects provides an FIT of 7.8 UScent/ kWh. This FIT applies to two current projects in operation in Binh Thuan, namely Phu Lac and Binh Thuan No. 1. For Bac Lieu near shore wind project, the FIT follows a special financial regime, being 9.8 UScent/kWh. However, with the current FIT, the Ministry of Industry and Trade (MOIT) opines that it will be difficult for these plants to recover their investment capital.

Thus, the MOIT has recently proposed the Government to increase wind FIT for inland wind power plants to 8.77 UScent/ kWh and to 9.97 UScent/kWh for near shore wind projects. This proposal is expected to attract more investors in the market as well as create incentive for current projects whose pre-feasibility reports have been approved by the MOIT to come into real operation.

***

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

 

 

Lawyer in Vietnam Dr. Oliver Massmann – Solar Power Development in Vietnam – what you must know:

 

  1. What can you tell me about the policies Vietnam now has in place to support solar development?

The legal framework is almost complete. I expect the solar PPA template will be issued within this year so that the investors have full guidance to develop projects in Vietnam. However, as I see from the recent draft solar PPA, it repeats the same mistakes in other renewable PPAs that make projects not bankable. This issue needs to be sorted out soon so that solar development will be on fast track in near future.

  1. Total PV installations in Vietnam are still quite low — what has been holding back development?

Because the latest Prime Minister’s Decision promulgating solar FIT was only issued on 11 April 2017. In addition, solar energy is still expensive and less stable throughout the year compared with other sources of energy. Bankability of the PPA is also a worth-noting issue.

Bankability of PPAs has been achieved for other power projects in the past in Vietnam. We are now working on solutions for the solar power sector. It can be done.

  1. How do you see the solar market evolving through the end of this decade, both in terms of manufacturing and project development?

I foresee a rapid development in the sector. This is due to the Government’s change of focus on clean energy and environment protection policies. I can see many foreign investors visiting Vietnam recently to look for investment opportunities and many of them have managed to reach a deal with local partners.

  1. Where are the opportunities in Vietnamese PV and how should prospective investors and developers approach the market?

Vietnam is an untapped market for solar. The Government offers many good incentives to attract foreign investment, for example, exemption of land rental within 3 years from the operation date, CIT 10%, etc. Investors and developers should first establish close contact with local authorities and conduct careful due diligence on local partners. BOT is the most recommended investment form. In addition, investors and developers may consider taking part in different segments such as equipment supply, solar panels manufacturing, or assembling, etc.

  1. What can you tell me about the availability of financing?

IFC and ADB are the most active financiers. Local banks are also more and more interested in lending to renewable projects in general and solar projects in particular. However, due to poor performance and credit of EVN, the financing resources are still limited. We recommend MIGA (Multilateral Investment Guarantee Agency) support for on-grid utility scale solar power projects (above 50 MW).

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com, Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

 

 

 

Lawyer in Vietnam Dr. Oliver Massmann UNNECESSARY TAX AND CUSTOMS RELATED BURDENS ON INVESTORS

The Government has implemented principles and measures in order to create favorable economic environment for enterprises through the issuance of Resolution 35/2016/NQ-CP dated 16 May 2016. These principles include, among others:

  • The State shall ensure the stability, consistency and predictability of relevant policies.
  • Regulations on business shall be clear, transparent and achievable, and the State shall issue reasonable route maps for removal of unreasonable sub-licenses, fees and charges.
  • Competent authorities shall be in charge of examining regulations on tax, tax administration and customs and proposing adjustments to simplify process and save time and business costs.

Continue reading Lawyer in Vietnam Dr. Oliver Massmann UNNECESSARY TAX AND CUSTOMS RELATED BURDENS ON INVESTORS

Lawyer in Vietnam Dr. Oliver Massmann Public Mergers and Acquisitions: Market Analysis Overview

Largest / most noteworthy public M&A transactions in the past 12 months

Oil gas & Chemicals

In May 2017, Earth Chemical bought 100% stake in A My Gia Joint Stock Company at about USD79.2 million.

Financial

In July 2017, Vietnam International Joint Stock Commercial Bank bought 100% business of Commonwealth Bank of Australia (Ho Chi Minh Branch).

Other

Retail

  • Thai group Singha bought 25% and 33% stake in Masan Consumer Holdings and Masan Brewery respectively at a total of USD1.1 billion.
  • VinGroup bought Maximark at an undisclosed value.
  • In April 2017, Shinhan Vietnam Bank bought the retail business of ANZ at an undisclosed value.
  • In May 2017, Bien Hoa Sugar Company and Thanh Thanh Cong Tay Ninh Sugar Company bought 100% charter capital of HAGL Sugar at about USD58.52 million.

Food

  • In December 2016, Fraser & Neave (a Singaporean beverage company) bought 5.4% of Vinamilk’s shares at USD500 million.
  • In late 2016, Deasang Corp bought 99.99% stake in Duc Viet Food Joint Stock Company.
  • In November 2016, Kido Corporation bought 65% stake in Tuong An Vegetable Oil Company at about USD44.52.
  • In late March 2017, CJ Cheiljedang Corporation bought 20% stake in Saigon Trading Corporation at USD8.2 million, bringing its total ownership in Cau Tre Export Products Processing Joint Stock Company to 71.6%.
  • In May 2017, Kido Corporation bought 27% stake in Vietnam Vegetable Oil Industry Corporation, bringing its total ownership in the company to 51%.

Real estate

  • In June 2016, Mapletree Investments acquired Kumho Asiana Plaza project through the joint venture between Kumho Industrial and Asiana Airlines at USD215 million.
  • In July 2016, Mitsubishi bought the Manor Central Park project from Bitexco Group at an undisclosed deal value.
  • Also in July 2016, VinaCapital bought International Centre Building from Keppel Land Ltd. At USD13.8 million.
  • In September 2016, CapitalLand Vietnam bought Ho Chi Minh Cau Kho Land Plot project from River View Company Limited at USD51.9 million.
  • In the first quarter of 2017, Sulyna Hospitality bought 70% stake in a 4-start resort in Phu Quoc from Berjaya Land at USD14.65 million.
  • In the first quarter of 2017, An Gia Investment Corporation and its partner Creed Group bought 5 apartment blocks of La Casa Project of Van Phat Hung Corporation at about USD40 million.
  • In the same period, CapitaLand announced the purchase of 90% stake in CapitaLand Thanh Nien.

Insurance

  • In June 2016, FWD insurance company, a branch of Pacific Century, started the process of acquiring Great Eastern Vietnam after receiving the licence for this acquisition.
  • In June 2016, New Life RE bought Duxton Hotel from Low Keng Huat at USD49.2 million.
  • In April 2017, Aviva Insurance Corporation bought 50% stake of VietinBank Aviva Joint Venture Company from Vietnam Joint Stock Commercial Bank for Industry and Trade.

The major trends in the structuring of public M&A transactions

In Vietnam, M&A transactions usually take the form of either share or asset acquisitions, with share acquisition transactions outnumbering asset acquisition transactions.

Share acquisitions by foreign purchasers are commonly structured as offshore direct investments. The new investor can:

  • Acquire shares or capital contributions from an existing shareholder in the target (for example, a joint stock company, limited liability company, and so on).
  • Subscribe for newly issued shares of the target (for a joint stock company).
  • Make further capital contributions to the target (for a limited liability company).

In the case of an asset deal, a foreign purchaser must generally establish a new subsidiary in Vietnam.

In addition, M&A transactions can also take the form of a merger. One or more companies of the same type can be merged into another company by transferring all assets, rights, obligations and interests to the merged company, terminating the existence of the merging company.

The 2014 Enterprise Law sets out the types of business structuring that can be used by investors as a result of M&A transactions. In addition, the 2014 Investment Law is the first law that regulates M&A transactions and clearly provides that such transactions do not require an investment registration certificate. Now, the foreign investors must seek approval from the local Department of Planning and Investment of the transaction if the:

  • Target company operates in conditional business sectors applicable for foreign investors.
  • Investment leading to foreign ownership of the target company is 51% or more (in particular, from below 51% to more than 51% and from 51% to above 51%).

In other cases, the target company only needs to register a change of membership/shareholding at the Business Registration Division. This change has ended years of uncertainty and frustration faced by foreign investors seeking entry into the Vietnam market or expansion through M&A transactions.

The level/extent of private equity-backed bids in the past 12 months

Investment in the form of M&A transactions is still the most popular form compared with private equity investment. In recent months, private equity funds have been following the securities market in Vietnam, especially companies carrying out value chain operations. Consumer goods and infrastructure are the sectors that attract the most attention. However, due to limited publicly available information, it is not possible to fully assess the level of private equity-backed bids.

The approach of the competition regulator(s) in the past 12 months

The Vietnam Competition Authority under the Ministry of Industry and Trade (VCA) must be notified of the transaction if participating companies have a combined market share in the relevant market of 30% up to 50%. The VCA will then examine whether the calculation of the combined market share is correct and whether the transaction is prohibited (that is, whether the combined market share exceeds 50%, except in certain cases). The transaction can be conducted when the VCA issues a written confirmation that the transaction is not prohibited under competition law.

For more information on the VCA, see www.vca.gov.vn/Default.aspx?lg=2.

Main factors affecting the public M&A market over the next 12 months

The country’s deeper and wider integration into the world’s economy is offering new opportunities for M&A activities.

Another factor includes the high pressure faced by the government to privatise state-owned enterprises to meet requirements under signed trade pacts, especially the EU – Vietnam Free Trade Agreement, which is expected to come into force in 2019.

Encouraging signs for foreign investment include:

  • Reformed policies to allow wider access to foreign investors.
  • Formation of the ASEAN Economic Community at the end of 2015.
  • The conclusion of free trade agreements (FTAs).
  • Vietnam’s super rich population is growing faster than anywhere else and is on track to continue leading the growth in the next decade.
  • Equitization of state-owned enterprises will speed up.

The introduction of the new Investment Law, Enterprise Law and other laws and policies are creating an improved legal environment for investment and trade in general, and the M&A market in particular. However, the following factors also affect M&A transactions:

  • Divergent interpretations and implementations by local licensing authorities of international treaties such as Vietnam’s WTO Commitments.
  • Different licensing procedures applied to different types of transactions (for example, for foreign invested companies and domestic companies, public companies and private companies, and for buying state-owned shares or private shares).

Although legal and governance barriers, along with macro instability and the lack of market transparency are still the greatest concerns for investors, M&A deals in Vietnam are still expected to be one of the key, effective channels for market entry.

The major expected trends in the Vietnam M&A market include:

  • Bank restructurings.
  • Acquisitions and anti-acquisitions, particularly in the real estate sector.
  • Growing Japanese and Thai investment in Vietnam through M&A transactions.
  • Reform of SoEs.

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Please do contact the author Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam.

 

Lawyer in Vietnam Dr. Oliver Massmann PUBLIC MERGERS AND ACQUISITIONS

FDI capital has been rising in the past few years. In the first 6 months of 2017, the total FDI capital to Vietnam is USD19.2 billion, an increase of 54.8% compared to the same period last year. Vietnam’s M&A market continues to be active in 2017 after reaching a record-breaking deal value of USD5.8 billion in 2016. The number of M&A deals amounts to 2,062 deals worth USD1.8 billion from January – May 2017, up 116.2% compared with the statistics last year.

Real estate continues to be the most attractive sector, with hundreds of millions of USD waiting to be poured into the market via M&A, especially in residential, offices, retail, hotel and industrial park segments. Main investors still come from Japan, Korea, Singapore, and particularly a rising number of investors from China recently. The retail, consumer goods, and industrial goods are also very active, with M&A deals accounting for 53% of total deals in 2016. This is partly due to an attractive market of about 93 million people with high purchasing power.

Notable deals in 2016 and first half of 2017 include the following:

  • Central Group (Thai Group) bought BigC Vietnam at USD1.1 billion
  • TTC Holdings (Thailand) bought Metro Vietnam at USD710 million
  • In March 2017, Siam City Centre bought 65% of Holcim Vietnam from LafargeHolcim at USD524 million
  • In April 2016, Mirae Asset (a Korean securities company) together with AON BGN Investment Company (an UK company) bought Keangnam Hanoi Landmark Tower at USD350 million
  • In December 2016, Fraser & Neave ( a Singaporean beverage company) bought 5.4% of Vinamilk’s shares at USD500 million

Note: Owner of Fraser & Neave is also owner of TTC Holdings

  • In January 2016, Mobifone bought 95% of AVG’s shares at USD400 million

Leading companies in the sectors are main target of foreign investors. They have the advantage of holding strong brands, strong market share or controlling significant natural resources.

We hope that the M&A will continue its trend when the Government speeds up the equitization of many state-owned enterprises, especially in power, infrastructure and telecommunication sectors. Experts forecast the total value of M&A deals in 2017 will reach up to USD6.2 -6.5 billion.

How to obtain control of a public company

The most common means of obtaining control over a public company are as follows:

  • The acquisition of shares/charter capital through:
  • buying shares/charter capital from the existing shareholders of the company;
  • buying shares/charter capital of a listed company on the stock exchange; and
  • public share purchase offer.
  • Through a merger. The 2014 Law on Enterprises sets out the procedures for company mergers by way of a transfer of all lawful assets, rights, obligations and interests to the merged company, and for the simultaneous termination of the merging companies.
  • Through the acquisition of assets.

There are restrictions on the purchase of shares/charter capital of local companies by foreign investors in certain sensitive sectors. In addition, the law is silent on merger or assets acquisition (e.g., business spin-off) transactions where a foreign investor is a party. Regarding other assets acquisition transactions, if the asset is a real property, foreign ownership right will be restricted according to real estate laws.

Securities of public companies must be registered and deposited at the Vietnam Securities Depository Centre before being traded.

Depending on the numbers of shares purchased, an investor can become a controlling shareholder. Under the Vietnam Law on Securities, a shareholder that directly or indirectly owns 5% or more of the voting shares of an issuing organization is a major shareholder. Any transactions that result in more than 10% ownership of the paid-up charter capital of the securities company must seek approval of the State Securities Commission (SSC).

What a bidder generally questions before making a bid

Before officially contacting the potential target, the bidder conducts a preliminary assessment based on publicly available information. The bidder then contacts the target, expresses its intention of buying shares/subscribing for its shares and the parties sign a confidentiality agreement before the due diligence process. The confidentiality agreement basically includes confidentiality obligations in performing the transaction. The enforcement of confidentiality agreements by courts in Vietnam remains untested.

A bidder’s legal due diligence usually covers the following matters:

  • Corporate details of the target and its subsidiaries, affiliates and other companies that form part of the target.
  • Contingent liabilities (from past or pending litigation).
  • Employment matters.
  • Contractual agreements of the target.
  • Statutory approvals and permits regarding the business activities of the target.
  • Insurance, tax, intellectual property, debts, and land-related issues.
  • Anti-trust, corruption and other regulatory issues.

Restrictions on shares transfer of key shareholders

Founding shareholders can only transfer their shares to other founding shareholders of the company within three years from the issuance of the Enterprise Registration Certificate. After then, the shares can be transferred freely. An internal approval of the general meeting of shareholders is always required if:

  • The company increases its capital by issuing new shares.
  • There is any share transfer of the founding shareholders within the above three-year period.

If the sale and purchase is a direct agreement between the company and the seller in relation to an issuance of shares, the selling price must be lower than the market price at the time of selling, or in the absence of a market price, the book value of the shares at the time of the approval plan to sell the shares. In addition, the selling price to foreign and domestic buyers must be the same.

When a tender offer is required

A tender offer is required in the following cases:

  • Purchase of a company’s circulating shares that results in a purchaser, with no shareholding or less than a 25% shareholding, acquiring a 25% shareholding or more.
  • Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
  • Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of a previous offer.

There is no guidance on building a stake by using derivatives. In addition, the bidder cannot purchase shares or share purchase rights outside the offer process during the tender offer period.

The bidder must publicly announce the tender offer in three consecutive editions of one electronic newspaper or one written newspaper and (for a listed company only) on the relevant stock exchange within seven days from the receipt of the State Securities Commission’s (SSC’s) opinion regarding the registration of the tender offer. The tender offer can only be implemented after the SSC has provided its opinion, and following the public announcement by the bidder.

Making the bid public

The offer timetable is as follows:

  • The bidder prepares registration documents for its public bid to purchase shares.
  • The bidder sends the bid registration documents to the SSC for approval and, at the same time, sends the registration documents to the target.
  • The SSC reviews the tender documents within seven days.
  • The board of the target must send its opinions regarding the offer to the SSC and the shareholders of the target within 14 days from receipt of the tender documents.
  • The bid is announced in the mass media (although this is not a legal requirement).
  • The length of the offer period is between 30 and 60 days.
  • The bidder reports the results of the tender to the SSC within 10 days of completion.

Companies operating in specific sectors (such as banking, insurance, and so on) can be subject to a different timetable.

Offer conditions

A takeover offer usually contains the following conditions:

  • The terms and conditions of the offer apply equally to all shareholders of the target.
  • The relevant parties are allowed full access to the tender information.
  • The shareholders have full rights to sell the shares.
  • Applicable laws are fully respected.

An offer can also be subject to conditions precedent. Conditions precedent are set out in the share sale and purchase agreement or the capital contribution transfer agreement. There is no specific restriction on conditions precedent other than the requirement that they cannot be contrary to law and conflict with social ethics (although the legal definition of social ethics is unclear). The most common conditions precedent are:

  • Amendments to the charter/relevant licence of the target.
  • Obtaining necessary approvals to conduct the transaction.
  • Changes to the target’s management body.

Payment of the contract price will only be made after the conditions precedent are met.

Employee consultation

There is no requirement under Vietnamese law that the employees must be consulted about the offer. However, if a layoff is to be conducted, the employer must:

  • Prepare a labour usage plan.
  • Consult with the employee representative.
  • Notify the competent labour authority on the implementation of the labour usage plan.

When a tender offer is required?

A tender offer is required in the following cases:

  • Purchase of a company’s circulating shares that results in a purchaser, with no shareholding, or less than a 25% shareholding, acquiring a 25% shareholding.
  • Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
  • Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of the previous offer.

Form of consideration and minimum level of consideration

Under Vietnamese law, shares can be purchased by offering cash, gold, land use rights, intellectual property rights, technology, technical know-how or other assets. In practice, acquisitions are most commonly made for cash consideration.

In cases of full acquisition of state-owned enterprises, the first payment for the share purchase must not be less than 70% of the value of such shares, with the remaining amount being paid within 12 months.

In transactions involving auctions of shares by state-owned enterprises, the purchaser must make a deposit of 10% of the value of the shares registered for subscription based on the reserve price at least five working days before the auction date included in the target company’s rule. Additionally, the purchaser must transfer the entire consideration for the shares into the bank account of the body conducting the auction within ten working days of the announcement of the auction results.

In the case of a public tender offer, the payment and transfer of shares via a securities agent company appointed to act as an agent for the public tender offer must comply with Decree 58/2012/ND-CP.

Delisting a company

If a company seeks voluntarily de-listing, it must submit an application for de-listing that includes the following documents:

  • A request for de-listing.
  • For a joint stock company:
    • the shareholders’ general meeting approval of de-listing of the stock;
    • the board of directors’ approval of de-listing of bonds; and
    • the shareholders’ general meeting approval of de-listing of convertible bonds.
  • The members’ council (for a multi-member limited liability company) or the company’s owner (for a single member limited liability company) approval of de-listing of bonds.
  • For a securities investment fund, the investors’ congress approval of de-listing of the fund’s certificate.
  • For a public securities investment company, the shareholders’ general meeting approval of stock de-listing.

A listed company can only de-list its securities if de-listing is approved by a decision of the general meeting of shareholders passed by more than 50% of the voting shareholders who are not major shareholders.

If a company voluntarily de-lists from the Hanoi Stock Exchange or Ho Chi Minh Stock Exchange, the application for de-listing must also include a plan to deal with the interests of shareholders and investors. The Hanoi Stock Exchange or Ho Chi Minh Stock Exchange must consider the request for de-listing within ten and 15 days from the receipt of a valid application, respectively.

Transfer duties payable on the sale of shares in a company

Depending on whether the seller is an individual or a corporate entity, the following taxes will apply:

  • Capital gains tax. Capital gains tax is a form of income tax that is payable on any premium on the original investor’s actual contribution to capital or its costs to purchase such capital. Foreign companies and local corporate entities are subject to a corporate income tax of 20%. However, if the assets transferred are securities, a foreign corporate seller is subject to corporate income tax of 0.1% on the gross transfer price.
  • Personal income tax. If the seller is an individual resident, personal income tax will be imposed at the rate of 20% of the gains made, and 0.1% on the sales price if the transferred assets are securities. An individual tax resident is defined as a person who:
    • stays in Vietnam for 183 days or longer within a calendar year;
    • stays in Vietnam for a period of 12 consecutive months from his arrival in Vietnam;
    • has a registered permanent residence in Vietnam; or
    • rents a house in Vietnam under a lease contract of a term of at least 90 days in a tax year.

If the seller is an individual non-resident, he is subject to personal income tax at 0.1% on the gross transfer price, regardless of whether there is any capital gain.

Payment of the above transfer taxes is mandatory in Vietnam.

Regulatory approvals

The investor will need to register the capital contribution and purchase of shares if either:

  • The target is operating in one of the 267 conditional sectors referred to in the 2015 Investment Law.
  • The capital contribution and purchase of shares results in foreign investors owning 51% or more of the target’s charter capital (in particular, from below 51% to more than 51% and from 51% to above 51%).

The local Department of Planning and Investment where the target is located must issue its final approval within 15 days from the receipt of a valid registration application. However, in practice, this procedure can take several months due to the workload of certain central authorities and the lack of clear guidance documents. Therefore, the registration requirement can cause substantial delays to the whole M&A process.

In other cases, the target company only needs to register change of membership / shareholders at the Business Registration Division.

Restrictions on repatriation of profits and/ or foreign exchange rules for foreign companies

If the target company in Vietnam already has an investment registration certificate, it must open a direct investment capital account at a licensed bank in Vietnam. Payment for a share purchase by a foreign investor must be conducted through this account. The account can be denominated in Vietnamese dong or a foreign currency. In addition, if the foreign investor is an offshore investor, it will also need to open a capital account at a commercial bank operating in Vietnam to carry out the payment on the seller’s account and receive profits.

If the target company in Vietnam does not have an investment registration certificate, the foreign investor will need to open an indirect investment capital account for payment to the seller and remittance of profits.

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Please do contact the author Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.