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LAWYER IN VIETNAM DR. OLIVER MASSMANN LEGAL UPDATE MAY 2018 – SOLAR ENERGY ROOFTOP TAX BENEFITS – SOLAR POWER MASTER PLAN – PUBLIC PRIVATE PARTNERSHIPS – LATEST ON INDUSTRIAL AND ECONOMIC ZONES

1. Official No. 5111/VPCP-KTTH issued by the Government Office in response to Official Letter No. 5400/BTC-CST of the Ministry of Finance in relation to tax preferences applicable to solar roof projects of 50 kW or less.
Issuance date: 31 May 2018
Effective date: 31 June 2018
The Government in-principle approves the request from the Ministry of Finance on tax advantages applicable to solar roof projects of 50 kW or less. The Government also assigned the Ministry of Finance to issue relevant legal documents to implement this policy. Currently, request of the Ministry of Finance and draft future regulations on this topic have not yet been published.

2. Legal news: Solar power master plan – rumor on delay
The Ministry of Industry and Trade (“MOIT”) must report the list of approved solar power plants to the Prime Minister before 15 July 2018. The MOIT must also promptly finalize the national solar power development master plan for the Prime Minister’s consideration.
Currently, the number of solar power projects submitted by investors to the MOIT is significant. According to Vietnamnews, the MOIT has approved more than 70 solar power projects, with a total capacity of over 3,000MW, to come into operation before June 2019. The capacity is much larger than the combined capacity of projects by 2020 (i.e., 850 MW for solar power projects) as approved by the Prime Minister in the current power master plan VII.

Unconfirmed rumor: the MOIT (and other authorities) would likely not review and approve any application for addition of new solar power projects to the power development master plans / solar power development master plans from now until 30 June 2019. In addition, the MOIT would issue an official letter to confirm this temporary suspension.

3. Decree No. 63/2018/ND-CP issued by the Government on Investment in Form of Public-Private Partnerships (“PPP”) (“Decree 63”) replacing the old PPP Decree 15/2015/ND-CP (“Decree 15”)
Issuance date: 4 May 2018
Effective date: 19 June 2018
Decree 15, when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP laws and regulations in Vietnam move closer towards bankable projects. However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects.
We provide below key notes on Decree 63:

Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s equity capital in total project investment capital is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.

Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

Conversion of existing public projects
Decree 63 contains procedures on converting existing public projects to PPP projects aside from other revised provisions. Those who are engaged in infrastructure projects in Vietnam may want to review how to implement such conversion in practice.

4. Decree No. 82/2018/ND-CP issued by the Government on the management of industrial zones and economic zones (“Decree 82”)
Issuance date: 22 May 2018
Effective date: 10 July 2018
Decree 82 regulates the planning, establishment, operation, policies and state management of industrial zones (IZ) and economic zones (EZ). It governs state management agencies, organizations and individuals related to investment, production and business activities in industrial zones and economic zones.
IZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with difficult socio-economic conditions under the investment law.
EZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with special difficult socio-economic conditions under the investment law.

Capital for investment on infrastructure of IZs
Investment projects on infrastructure development in IZs in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions shall be supported with capital from the central budget for the infrastructure investment.
Provincial People’s Committees shall balance local budgets to support investors in developing technical infrastructure systems inside and outside the IZs.

Capital for investment on technical infrastructure and social-economic infrastructure of EZ
EZ’s technical infrastructures, social infrastructure facilities and important environmental protection and treatment works shall be allocated capital from development investment sources of local budgets and support capital sources.
Large-scale infrastructure investment projects which play a key role in the development of EZs, may mobilize capital from bonds issuance. The technical and social infrastructure facilities, service works and public facilities of the economic zone may be financed by official development assistance (ODA) capital, preferential credit capital and supports other techniques.
Investment projects on construction and business of infrastructure in functional zones in EZ may mobilize capital by allowing investors to lease a part or whole of the land area in EZ for their investment or sub-lease business activities.
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Please do not hesitate to contact Dr. Oliver Massmann and Tran Minh Thanh 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 and Tran Minh Thanh is the Vietnamese lawyer of Duane Morris Vietnam LLC.
THANK YOU !

Lawyer in Vietnam Dr. Oliver Massmann – Public Private Partnerships – Enhancing Functionality – Making use of the Comprehensive and Progressive Trans-Pacific Partnership and the EU – Vietnam Free Trade Agreement for Better Functionality of the New PPP Decree

Decree No. 15/2015/ND-CP on public-private partnership (“PPP”) (“Decree 15”) when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP Laws in Vietnam move closer towards bankable projects.

However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. For example, Decree 15 made a progress in other previous PPP regulations in clearly allowing project contracts to be governed by foreign law, namely contracts involving a foreign party and government agency guarantee contracts. The issue only arises when it comes to real-estate related matters, which are not yet finally decided under the Land Law which law will be the governing law.

Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects. According to a real story shared by an officer at VCCI, after the Government signed a PPP contract with an investor, due to changes in policies, the Government amended its determination of the contract value. As a result, the land price increased by 14 times as much as previously agreed, leading to substantial loss for the investor.

According to the Ministry of Planning and Investment, during 2016-2020, it is expected that there will be 598 registered PPP projects with total investment amount of VND 250,000 billion. Given the shortcomings of Decree 15, it would be hard to achieve these numbers without its replacement by another Decree. In that context, Decree No. 63/2018/ND-CP (“Decree 63”) was issued on 04 May 2018 and takes effect from 19 June 2018 to eliminate bottlenecks in PPP implementation.
Decree 63 – What is new?

Capital contribution responsibility

The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s capital in the owner’s equity is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.

There is no capital contribution requirement from the Government side.

Project approval authority

Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects

Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

How to take advantage of the CPTPP and the EU-Vietnam FTA (EVFTA) in PPP projects to enhance the functionality of PPP projects in Vietnam

Covered government entities and agencies

According to Decree 63, tenders for the selection of PPP investors will follow the Law on Public Procurement. While the Vietnam’s Law on Public Procurement still shows some shortcomings, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA both make a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. While the CPTPP only allows expansion of the list within 5 years upon the entry into force of the agreement, the EVFTA allows a longer period (i.e., 15 years).
Covered procurement

Government procurement of goods or services or any combination thereof that satisfy the following criteria falls within the scope of the EVFTA and CPTPP Government Procurement rules:

Criteria

How to appeal Government tender decision?

The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.

Enforcement of arbitral awards

The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

Conclusion

It is crucial that foreign investors take advantage of the requirements under the CPTPP and the EVFTA to enhance functionality of their PPP projects in Vietnam. Under these agreements, specific Vietnam Government entities and agencies when procuring goods/ services above certain thresholds must conduct public tender. In case these entities make wrongful tender decisions, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.

***
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 – Public Private Partnerships – Enhancing Functionality – Making use of the Comprehensive and Progressive Trans-Pacific Partnership and the EU – Vietnam Free Trade Agreement for Better Functionality of the New PPP Decree

Decree No. 15/2015/ND-CP on public-private partnership (“PPP”) (“Decree 15”) when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP Laws in Vietnam move closer towards bankable projects.
However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. For example, Decree 15 made a progress in other previous PPP regulations in clearly allowing project contracts to be governed by foreign law, namely contracts involving a foreign party and government agency guarantee contracts. The issue only arises when it comes to real-estate related matters, which are not yet finally decided under the Land Law which law will be the governing law.
Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects. According to a real story shared by an officer at VCCI, after the Government signed a PPP contract with an investor, due to changes in policies, the Government amended its determination of the contract value. As a result, the land price increased by 14 times as much as previously agreed, leading to substantial loss for the investor.
According to the Ministry of Planning and Investment, during 2016-2020, it is expected that there will be 598 registered PPP projects with total investment amount of VND 250,000 billion. Given the shortcomings of Decree 15, it would be hard to achieve these numbers without its replacement by another Decree. In that context, Decree No. 63/2018/ND-CP (“Decree 63”) was issued on 04 May 2018 and takes effect from 19 June 2018 to eliminate bottlenecks in PPP implementation.
Decree 63 – What is new?
Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s capital in the owner’s equity is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.
Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.
Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.
How to take advantage of the CPTPP and the EU-Vietnam FTA (EVFTA) in PPP projects to enhance the functionality of PPP projects in Vietnam
Covered government entities and agencies
According to Decree 63, tenders for the selection of PPP investors will follow the Law on Public Procurement. While the Vietnam’s Law on Public Procurement still shows some shortcomings, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA both make a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. While the CPTPP only allows expansion of the list within 5 years upon the entry into force of the agreement, the EVFTA allows a longer period (i.e., 15 years).
Covered procurement
Government procurement of goods or services or any combination thereof that satisfy the following criteria falls within the scope of the EVFTA and CPTPP Government Procurement rules:
Criteria EVFTA CPTPP
Monetary values that determine whether procurement by central government is covered under an agreement 130,000 Special Drawing Rights (SDRs) (US$191,000) from 15 years since the entry into force of the agreement

Initial transitional threshold: 1.5 million SDRs 130,000 Special Drawing Rights (SDRs) (US$191,000) from 25 years since the entry into force of the agreement

Initial transitional threshold: 2 million SDRs
Procurement of construction services by central government entities Initial threshold: 65.2 million SDRs

After 15 years, 8.5 million SDRs Initial threshold: 40 million SDRs

After 15 years, 5 million SDRs
Entities covered 22 central government bodies (added the Ministry of Public Security)

42 other entities: added two state-owned enterprises (Vietnam Electricity and Vietnam Railways) and two universities (Vietnam National University – Hanoi and Vietnam National University – Ho Chi Minh City)

Sub-central government coverage: Adds 2 cities: Hanoi and Ho Chi Minh – expansion of the list within 15 years since the entry into force of the agreement 21 central government bodies

38 other entities

No sub-central government coverage – expansion of the list within 5 years since the entry into force of the agreement
Exclusion of preferences for SMEs Broad exclusion applies only to procurement of goods and services whose value is estimated at 260,000 SDRs or less and may not be applied to SMEs with more than 500 permanent full-time employees.
Application of offsets Based on value of a contract Based on the total value of covered procurement
How to appeal Government tender decision?
The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.
Enforcement of arbitral awards
The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.
Conclusion
It is crucial that foreign investors take advantage of the requirements under the CPTPP and the EVFTA to enhance functionality of their PPP projects in Vietnam. Under these agreements, specific Vietnam Government entities and agencies when procuring goods/ services above certain thresholds must conduct public tender. In case these entities make wrongful tender decisions, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.
***
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 !

VIETNAM- MARRIAGE AND PROPERTY/REAL ESTATE

Foreigners are better off if they do NOT marry Vietnamese nationals – what you must know:
By: Dr. Oliver Massmann and Pham Ngoc Ha

In Vietnam, there is no private ownership of land. Land is owned by the people and administered exclusively by the State. The State grants land use rights to land users being domestic organizations, domestic family households/individuals, communities of Vietnamese citizens, religious establishments, foreign organizations with diplomatic functions, Vietnamese residing overseas, foreign invested enterprises. Land users are entitled to obtain the title certificate for land use rights, so called Certificate of Land Use Rights and Ownership of Houses and Other Assets Attached to Land (LURC) or Sổ Đỏ in Vietnamese. Foreign individuals are not allowed to have land use rights, i.e., no LURC.

Whether a foreign individual married to a Vietnamese citizen can own land use rights
Given such strict prohibition in the Land Law, foreign individuals who want to have their own land plots in Vietnam, especially in Da Nang or Nha Trang with beautiful beaches, would think that marriage to Vietnamese could solve the problems.

It is a common understanding that every married couple, regardless of any nationalities, would like to make their investments, particularly in real estates, in such a manner that both spouses can be legally recognized as co-owners of the property. Vietnam Family Law has the same approach. It is provided in the law that: Common property of husband and wife includes property created by a spouse, incomes generated from labor, production and business activities, yields and profits arising from separate property and other lawful incomes in the marriage period. The land use rights obtained by a spouse after marriage shall be common property of husband and wife, unless they are separately inherited by, or given to a spouse or are obtained through transactions made with separate property. For a common property which is required by law to be registered for ownership or use, both spouses shall be named in the title certificate, unless otherwise agreed by the couple (Articles 33 and 34 of the Family Law).

One could figure that if he/she marries a Vietnamese, they could together purchase land and hence, jointly own the land. This is well backed-up by the above Family Law provision. However, there’s no such ideal scenario in Vietnam.

Family Law vs. Land Law
When the married couple finally found a perfect land plot, they would likely need to enter into a land use right transfer agreement/sale and purchase agreement and such agreement would need to be notarized to be complied with the law and ultimately for the issuance of an LURC. Here comes the issue: the Land Law will prevail the Family Law.

Even though it is provided that the land use rights obtained after marriage will be common property, it is not right in the case of marriage between a foreigner and a Vietnamese. No matter how much you contribute to buy the land, even you agree not to be a party to the transfer agreement, not to be named in the LURC, you risk losing all your money invested to buy the land.

How so?
The Land Registration Office would explain that Land Law applies in this case. Since foreign individuals are not allowed to have land use rights in Vietnam, the land purchased by the married couple could only be recognized as property of the Vietnamese spouse. In order to name only the Vietnamese spouse on the LURC, it must be the separate property.

“Separate property” in Vietnam is, among other things, property formed by the husband or wife’s separate funds. The Land Registration Office will then require a so called “Acknowledgement of Separate Property” (i.e., a Waiver of Rights) from the non-Vietnamese spouse, which generally says that the non-Vietnamese spouse acknowledges that this is his/her Vietnamese spouse’s own property which was obtained by his/her Vietnamese spouse separate funds and that the non-Vietnamese spouse will waive all rights whatsoever to such property. If you don’t agree to this Waiver, you and your Vietnamese spouse cannot get the LURC. It’s the worst case if you have paid all or most of the purchase price to the land transferor already! Take it or leave it. If you don’t agree, you will lose all; if you agree, you will lose your money but at least your Vietnamese spouse still can get the LURC. In any case, your money invested in the land is totally lost because you don’t get any consideration, legally!

Lessons Learnt
Foreign individuals should not marry Vietnamese with the main purpose to have land use rights. Do NOT marry to secure real estate – It works the other way: it’s better if you are NOT married to protect your money and rights to real estate in Vietnam. Or go the simple way: buy a condominium because foreigners can own condominiums in Vietnam on their name if they have a tourist visa. That is the golden simple way!

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!

Lawyer in Vietnam Dr. Oliver Massmann PUBLIC MERGERS AND ACQUISITIONS

Vietnam has remained an attractive destination for foreign investors. In 2017, the total FDI capital to Vietnam is USD35.88 billion, an increase of 44.4% compared to last year. Out of USD35.88 billion FDI, USD6.19 billion came from 5,002 M&A deals, up 45.1% against last year.
Real estate continues being a very attractive sector, with USD1.5 billion being poured into the market via M&A, setting the record this year. Residential remains one of the most attractive segments and more interest is also put on commercial segment, especially Grade A offices. Main investors still come from Japan, Korea, Singapore, and China. The retail, consumer goods, and industrial goods are also very active, and investors tend to focus on leading companies as they have a big market share and strong brand value.
Main drivers of Vietnam’s M&A market are:
• Privatization of state-owned enterprises. It is forecast that there will be around 8-10 big privatization deals in 2018, including the sale of 24.86% shares of Petrolimex, 20% shares of Aviation Corporation of Vietnam, 53.48% state shares in Vietnam Textile Group, 57.92% state shares in Vietnam Steel Corporation and 49% of PV Oil. Hanel, Viglacera, Lilama are also in the list for privatization.
• Trade liberalization as a result of CPTPP, EU- Vietnam FTA, etc.
• Resolution No. 42 on pilot program of handling bad debts of credit institutions is also the main driving force of M&A in real estate sector as bad debts in real estate sectors accounts for a high percentage of the total bad debts in Vietnam’s market.
Notable deals in 2017 include the following:
• The market in 2017 sees several M&A deals in state-owned enterprises where the privatization is pushed hard by the Government. Vietnam Beverage – a company of a Thai billionaire managing ThaiBev buying more than 53% shares in Sabeco – a company owned by the Ministry of Industry and Trade at USD 5 billion, is the most notable and successful privatization deal this year.
• In December 2017, Shinhan Bank Vietnam Ltd. (“Shinhan Bank Vietnam”) acquired ANZ Bank (Vietnam) Limited’s retail business. This successful transaction has been considered as a big step for Shinhan Bank Vietnam’s development in Vietnam market, as well as a rapid growth for Vietnam retail banking in the upcoming time.
• In mid- November 2017, Jardine Cycle & Carriage Limited (JC&C), via Platinum Victory Pte. Ltd bought 5.53% shares of Vinamilk at USD616.6 million.
• In June 2017, Alibaba Group additionally bought shares of Lazada at USD1 billion, thus increasing its shares in Lazada to 83%
• In July 2017, Sea Limited (Singapore) bought 82% shares of Foody Corporation at USD64 million
• In November 2017, JD.com bought shares in Tiki JSC at USD 44 million
• In January 2018, Creador (a private Kula Lumpur-based investment fund) bought 35% shares of Mobile World Investment JSC at USD43 million.
• Synnex Technology International bought 30% shares of FPT Retail and 47% shares of FPT Trading from FPT Corporation at around USD 41 million.
• Shinhan cooperated with Vinacapital to invest USD100 million in Novaland.
How to obtain control of a public company
The most common means of obtaining control over a public company are as follows:
o The acquisition of shares/charter capital through:
o buying shares/charter capital from the existing shareholders of the company;
o buying shares/charter capital of a listed company on the stock exchange; and
o public share purchase offer.
o 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.
o 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:
o the shareholders’ general meeting approval of de-listing of the stock;
o the board of directors’ approval of de-listing of bonds; and
o 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:
o stays in Vietnam for 183 days or longer within a calendar year;
o stays in Vietnam for a period of 12 consecutive months from his arrival in Vietnam;
o has a registered permanent residence in Vietnam; or
o 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.

Lawyer in Vietnam Dr. Oliver Massmann Public Mergers and Acquisitions: market analysis overview 2018

Largest / most noteworthy public M&A transactions in the past 12 months
Oil gas and 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).
In December 2017, Shinhan Bank Vietnam Ltd. (“Shinhan Bank Vietnam”) acquired ANZ Bank (Vietnam) Limited’s retail business. This successful transaction has been considered as a big step for Shinhan Bank Vietnam’s development in Vietnam market, as well as a rapid growth for Vietnam retail banking in the upcoming time.
Other
Retail. Noteworthy public M&A deals include the following:
• In January 2018, Creador (a private Kula Lumpur-based investment fund) bought 35% shares of Mobile World Investment JSC at USD43 million.
• ThaiBev buying more than 53% shares in Sabeco – a company owned by the Ministry of Industry and Trade at USD 5 billion.
• In November 2017, JD.com bought shares in Tiki JSC at USD 44 million.
• In June 2017, Alibaba Group additionally bought shares of Lazada at USD1 billion, thus increasing its shares in Lazada to 83%.
• In July 2017, Sea Limited (Singapore) bought 82% shares of Foody Corporatio at USD64 million.
• 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.
• Synnex Technology International bought 30% shares of FPT Retail and 47% shares of FPT Trading from FPT Corporation at around USD 41 million.
Food. Noteworthy deals include the following:
• In mid- November 2017, Jardine Cycle & Carriage Limited (JC&C), via Platinum Victory Pte. Ltd bought 5.53% shares of Vinamilk at USD616.6 million.
• 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. Noteworthy deals include the following:
• Warburg Pincus in joint venture with VinaCapital bought 50% shares in Sofitel Legend Metropole Hanoi at about USD100 million.
• Warburg also established a joint venture with Becamex Industrial Development Corporation to invest in industrial real estate and logistics services with a capital of USD200 million.
• In May 2017, Elite Capital Resources Limited bought 100% shares of VinaLand Fund (VinaCapital) in Thang Long Limited Company (project owner of Times Square Hanoi) at USD41 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 March 2017, Keppel Corporation increased its shares in Saigon Centre project ato 16% at USD37 million.
• In January 2017, CapitaLand announced the purchase of 90% stake in CapitaLand Thanh Nien.
• Shinhan cooperated with Vinacapital to invest USD100 million in Novaland
Insurance. Noteworthy deals include the following:
• 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.
In recent Grab buying Uber case in South East Asia, the VCA has started its investigation of possible violation of Vietnam’s Competition Law. The case is still at the examination stage.
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.
• ASEAN Economic Community single market and production base.
• The conclusion of free trade agreements (FTAs), including the EU – Vietnam FTA and The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
• 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, Resolution No. 42 on handling bad debts 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 WORLD BANK/IFC IS UPGRADING VIETNAM ON OECD INVESTOR PROTECTION RULES, SECURITIES LAWS AND ACCOUNTING STANDARDS

The Law on Enterprise in 1999 introduced the first legal framework on corporate governance in Vietnam. Since then, a number of other legal regulations have been issued, including the Law on Securities in 2006, the Corporate Governance Code in 2007, as amended in 2012, and Disclosure Rules in 2012, 2015 (for listed companies). Most recently, Law on Enterprise 2014, Decree No.71/2017/ND-CP providing guidelines on corporate governance of public companies and Circular 95/2017/TT-BTC, issued in order to further improve the legal framework for corporate governance and requirements on disclosure of information and transparency of securities markets to satisfy requirements for the development of capital markets and international integration. New Securities Law are expected to be submitted and discussed in the National Assembly of Vietnam at 6th Session, XIV by October 2018.
We outline below certain key progress and upcoming changes in corporate governance and accounting rules of Vietnam:
Corporate Governance encouraging investments
Good corporate governance reduces emerging market such as Vietnam vulnerability to financial crises, protects property rights, reduces transaction costs and the cost of capital, and promotes capital market development. Other words, weak corporate governance reduces investor confidence and discourages outside investment.
I. 2016, International Finance Corporation (IFC) published a research named Corporate Governance Success Stories in Vietnam, which expressly praised Vietnam’s improvements on corporate governance. Based on the latest corporate governance assessment conducted by Asian Development Bank in 2013, the corporate governance score for Vietnam in 2013 has risen 19.2%, compared to that scored in 2012.
I. confirmed its ongoing effort to raise greater awareness of merits of corporate governance through several programs working and coordinating with Ministry of Finance of Vietnam, State Securities Commission of Vietnam (“SSC”) and other state authorities to improve corporate governance (especially for public companies) in Vietnam.
New Decree 71 and Circular 95 continuously promoting good Corporate Governance for Public Companies
On 6 June 2017, the Government issued Decree No. 71/2017/ND-CP providing guidelines on corporate governance applicable to public companies (“Decree 71”). Decree 71 became effective on 1 August 2017 and replaced Circular No. 121/2012/TT-BTC issued by the Ministry of Finance on 26 July 2012 (“Circular 121”).
On 22 September 2017, the Ministry of Finance issued Circular No. 95/2017/TT-BTC (“Circular 95”) guiding the implementation of some articles of Decree 71 on corporate administration of public companies.
We highlight the key provisions of Decree 71 as follows:
1. it clarifies and provides detail restriction on intercompany loans and guarantees from the public company to the company’s shareholders and shareholders’ related persons;
2. it provides 2 options for organization of the public companies: (x) General Meeting of Shareholders, Board of Management, Board of Controllers, and General Directors, or (y) General Meeting of Shareholders, Board of Management and General Directors;
3. it provides new conditions and qualification of an independent member of the Board of Management;
4. it provides stricter qualifications and conditions to prevent conflict of interest in public companies such as (x) chairman of Board of Management cannot be the General Director (effective 1 August 2020), (y) members of Board of Management of a public company cannot be member of board of management of more than other 5 companies (effective 1 August 2019), and (z) transactions between a public company and its controllers, any management personnel and their related persons to be approved by the General Meeting of Shareholders or the Board of Management;
5. it provides more detail disclosure requirements: for example, salary of general director and other management members are required to be separately stated on annual financial statements of the company and reported to the General Meetings of Shareholders at the annual meeting; and
6. it and Circular 95 provide a new template of charter for public companies. It is not expressly compulsory for public companies to use the sample charter or the sample internal regulations but they are encouraged to use them for the purpose of ensuring compliance with the corporate governance requirements provided for under Decree 71, the Law on Securities and the Law on Enterprises.
Draft New Securities Law on Restructuring Securities Market
On 11 January 2017, the Ministry of Finance of Vietnam published a draft new Securities Law for collecting public opinions and comments (“Draft Law”). The Draft Law is expected to be finalized, submitted and discussed in the National Assembly of Vietnam at 6th Session, NA XIV by October 2018.
The Draft Law aims at (i) creating more efficient framework for regulating securities and securities market, (ii) developing Vietnamese securities market in line with international regulations, practice and norms in order to promote Vietnam’s securities market from a frontier to an emerging market, and (iii) diversifying securities products and reforming procedures for attracting investors.
We highlight the key changes of the new Draft Law as follows:
1. Increasing powers for State Securities Commission of Vietnam to effectively govern the securities market and address promptly the wrongdoings: for example, SSC will be authorized to require persons to provide information / documents in relation to wrongdoings; require the credit institutions to provide relevant information about transactions made via banks; and summon the relevant parties to meet and work with the SSC;
2. Enabling more qualified goods to be available for the securities market: for example, qualifications for determining public companies will be improved to target medium and large size enterprises (not including small size enterprises), more securities products such as derivatives will be available for trading in the securities market, OTC regulations will be adopted, etc.;
3. Restructuring the securities market: for example, Hanoi Securities Stock Exchange and Ho Chi Minh Securities Stock Exchange will be merged to establish the national securities stock exchange in the form of a single member state-owned limited liability company to control and regulate the whole national securities market;
4. Restructuring the Vietnam Securities Depository: for example, increasing the powers and activities of Vietnam Securities Depository such as registration of securities offsetting, mortgage and pledge, etc.;
5. Revising current policy to attract foreign investments in securities market: for example, removing restriction of maximum ratio of 49% foreign invested capital applicable to conditional sectors (not committed under WTO services schedule of Vietnam); and
6. Improving the quality and time of information disclosure obligations, increasing the transparency of the securities market.
Notable comments on Vietnam’s adoption of international accounting rules
Currently, 93 per cent (133 of 143 jurisdictions) around the world have publicly confirmed International Financial Reporting Standards (IFRS) adoption and implementation, and 83 per cent (119 of 143 jurisdictions) require all or most domestic public companies to comply with IFRS. Adopting IFRS standards in a comprehensive way often takes 5 to 10 years depending on the conditions and ability of each country.
Vietnamese Ministry of Finance representative reported the latest changes in accounting standards as contained in Circular 200/2014/TT-BTC (as amended), which was mostly up-to-date, practical and in increased accordance with international standards.
Regarding the roadmap for Vietnam, it is planned by the state authorities that during 2018 – 2020, 10 to 20 simple IFRS standards will be selected to be put into practice, and officially applied for all the firms listed on the stock market from 2020.
All other businesses that have sufficient conditions and wish to apply IFRS are also encouraged to. But from 2023 to 2025, all firms within the country will have to complete their conversion process.
Conclusion
Although corporate governance in Vietnam has made a certain progress, however, it remains lower than the good regional and international standards and practices. We strongly believe that our long-term cooperation and coordination with international organizations and State authorities on reforming and developing corporate governance and other investment and compliance rules will help investors to understand and plan properly their strategy in Vietnam’s securities market.
***
Please do not hesitate to contact Dr. Oliver Massmann and Tran Minh Thanh 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 and Tran Minh Thanh is Vietnamese lawyer of Duane Morris Vietnam LLC.
THANK YOU !

Rechtsanwalt in Vietnam Dr. Oliver Massmann BANKENSEKTOR

Vietnam – Bankensektor – Aktuelle Probleme und Lösungen für Banking und Aussicht auf die Veränderungen durch die wichtigen Handelsabkommen TPP11 und EUVNFTA

Einleitung
Vietnam hat ein beeindruckendes ökonomisches Wachstum von 6,7% BIP im letzten Jahr erlebt und gehört damit zu den am schnellsten wachsenden Volkswirtschaften. Beigetragen hat dazu eine stabile Währungs- und Kreditpolitik, sowie eine stabile Quote an ausländischen Investitionen und zinslosen Krediten. Mit einer hohen Entschlossenheit haben die Regierung, die Staatsbank und diverse Ministerien an dem Beschluss für zinslose Kredite gearbeitet um diesen Eckpfeiler der Wirtschaft abzusichern und Kapital für den privaten Sektor zu ermöglichen.
B. Probleme
Ein wichtiges Thema ist die Digitalisierung jedes Sektors innerhalb der vietnamesischen Wirtschaft. In diesem Bereich zeigt die Regierung Bemühungen, die kommenden Schwierigkeiten zu bewältigen. Die Regierung sollte sich in diesem Zusammenhang auf die industrielle Revolution 4.0 konzentrieren, die in naher Zukunft zu großen Veränderungen führen wird. Um die bevorstehenden Änderungen richtig zu bewältigen, muss die Regierung die Staatsbank von Vietnam unterstützen. Sie Staatsbank hat hier auch schon proaktiv Maßnahmen ergriffen, um notwendige Änderungen der Politik Vietnams zu empfehlen.
Außerdem muss der Strategieplan für bargeldlose Zahlungen implementiert werden, um die Zahlungsmöglichkeiten zu. Die Regierung sollte erwägen, Pilotprogramme zuzulassen, die dem von vielen Regierungen effektiv verwendeten Sandbox-Tool ähneln, wofür im übrigen Singapur ein hervorragendes Beispiel ist.
Die Regierung und die zuständigen Ministerien haben momentan nicht richtig auf die Herausforderungen, im Zuge von FDI und die Notwendigkeit eines besseren Liquiditätsmanagements, reagieren. Es gibt jedoch noch eine Regelung, die eine erweiterte Kontenstruktur wie das Pooling in Vietnam ermöglicht. Das BWG begrüßt SBV-Workshops für internationale Experten zum Austausch von Best Practices auf diesem Gebiet.
2. Vereinfachung der Bankdokumentation
Ein Problem im Bankensektor ist auch die Regulierung des Devisenmanagements. Dies liegt an unterschiedlicher Interpretationen der Banken und Strafverfolgungsbehörden über die Regeln zur Unterstützung der Dokumentationsprüfung.
Die Staatsbank und die Regierung müssen Anstrengungen unternehmen, um die Dokumentation zu vereinfachen.
3. Bankkonten von Unternehmen, die keine juristischen Personen gemäß dem vietnamesischen Zivilgesetzbuch sind.
Unternehmen, die keine juristischen Personen im Sinne des Vietnam Cicil Code (VCC) sind, dürfen keine unabhängigen Unternehmen sein, die zivilrechtliche Transaktionen abschließen (einschließlich der Eröffnung und Nutzung von Bankkonten). Dies ist ein ungelöstes Problem, das von den vietnamesischen Gesetzgebern so schnell wie möglich behandelt werden sollte.
C Ausblick auf die Handelsabkommen TPP 11 und EUVNFTA
Nach dem Zurückziehen der USA aus dem TPP im Januar 2017, einigten sich die verbleibenden TPP-Mitglieder im November 2017 auf einen Verbund ohne die USA. Dieser trägt den Namen CPTPP (TPP 11). Dieses Abkommen soll von allen Mitgliedsstaaten im ersten Quartal 2018 unterzeichnet werden. Danach muesste es in allen Mitgliedsstaaten ratifiziert werden, um Wirksamkeit zu entfalten. Das TPP 11 verspricht große Vorteile für Vietnams Bankensektor. Das Abkommen zielt auf die Aufhebung von Zöllen zwischen den Mitgliedsstaaten für gewisse Waren und Güter ab. Dies wird der vietnamesischen Wirtschaft als Ganzes und gerade auch dem Bankensekor Aufschub verleihen.

Ebenfalls interessant ist in diesem Hinblick das Handelsabkommen zwischen der EU und Vietnam, das sog. EUVNFTA. Das EUVNFTA bietet die Möglichkeit, sowohl für die EU als auch für Vietnam, neue Märkte zu erschließen. Aufgrund des leichteren Zugangs und der Abschaffung von 99% aller Zölle, wird Vietnam mehr Kapital anziehen.
Es kann von einer allgemeinen Stärkung von Vietnams Wirtschaft infolge des EUVNFTA ausgegangen werden. Außerdem gilt der Gleichbehandlungsgrundsatz für Unternehmen. Aufgrund der neuen Möglichkeiten Geschäfte zu machen, wird eine nachhaltige Entwicklung hin zu einer noch dynamischeren Wirtschaft mit besseren Investitionsmöglichkeiten sichergestellt.
Außerdem wird die Möglichkeit zur Streitbeilegung zwischen Anleger und Staat (Investor State Dispute Settlement [ISDS]) den höchsten Standards der Rechtssicherheit und -durchsetzung genügen. Anlegerschutz wird so gewährt.
Wir raten Ihnen, diese Standards für 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 Möglichkeit, 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) gewährleistet, das ebenso Teil beider Handelsabkommen sein wird. Das GPA stellt vor allem sicher, dass ausländische Investoren zu vietnamesischen Investoren gleichbehandelt werden, wenn die Regierung Waren oder Dienstleistungen über einen gewissen Grenzwert kauft. Vietnam verpflichtet sich zur Veröffentlichung von Information zur Ausschreibung, sowie den Bietern ausreichend Zeit zur Vorbereitung und Abgabe von Angeboten zu gewähren und die Vertraulichkeit der Angebote zu wahren. Zudem verlangt das GPA von den Parteien die Bewertung der Angebote auf Grundlage der Fairness und Objektivität. 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 Qualitätssicherung gewährleisten.
Falls weitere Fragen zum Thema bestehen, würden wir uns über Ihren Kontakt freuen. Melden Sie sich hierzu bitte an Dr. Oliver Massmann (omassmann@duanemorris.com).
Vielen Dank.

Vietnam – Power/Energy Sector – Current Issues and Solutions for Investment and Outlook on Major Trade Deals TPP 11 and EUVNFTA

A. OVERVIEW
Vietnam contains huge potential regarding the production of clean energy. It has best conditions for developing solar power due to being one of the countries with the most sun hours during the year and best conditions for creating wind power due to 3000km coastline. As a result, Vietnam in general, is able to attract much FDI for developing clean energy projects.
Furthermore, the new Solar PPA was issued this year to solve the lack of regulation on solar power projects. Moreover, the issuance of the Circular 16/2017/TT-BCT on the power distribution of rooftop solar plants and the alleviation of the Operating License for power plants (lmw capacity) are notable developments in the power/energy industry in Vietnam. Moreover, the implementation of the Direct Power Purchase Agreement could step into pilot phase in the next time, thus, it is estimated to create better access to clean energy and increase of investment up to USD 2 billion in clean energy.
Another notable fact is the increase of the wind tariff in early August 2017. Now, Vietnam has implemented a wind power project with a capacity of 160 MW. The new tariff shall attract new and more foreign investments in the wind power industry in Vietnam.
B. ISSUES
1. Environment
The government is implementing more and more measures on protection of the environment. Vietnam plays a proactive role on reduction of emission and CO2 but the penalties for violation are very low. Furthermore, new regulations have to be issued to ensure more environmental protection, especially in terms of fossil power projects known to be a great danger for environment regarding to huge amounts of emissions and pollution. The project developers should be obliged to develop projects using highest environmental standards.
2. Solar PPA Policy
There are issues in the solar power policy necessary to be addressed.
In general, the goals on producing clean energy in large scale and the attraction of FDI cannot be reached sufficiently yet due to issues regarding electricity pricing and the content of the final power purchase agreement. These issues lead to restraining investments and delayed development of the clean energy industry in Vietnam.
Further, there are continuing concerns about lack of transparency regarding to solar power prices and due to lack of a published Roadmap for the retail sector. This leads to uncertainty of foreign investors regarding to stability of prices. Price transparency measures should be included in the Energy Plan and a Roadmap for the retail sector should be published. The issuance of a pricing framework can also lead to more investments in off-grid projects causing relieve of EVN’s pressure on power transmission, thus, the transmission system does not have to run near overstressing at daily peak hours. Moreover, the final template of the Solar PPA contains concerning provisions for investors such as (i) lack of EVN’s payment obligations in cases of transmission problems; (ii) lack of transparent possibilities for international arbitration; (iii) the lack of PPAs’ bankability. The final PPA needs to be amended to grant more security to investors and to attract more FDI. Moreover, the administrative regulations must be simplified for more efficiency in solar power project development as well as for easier market access, especially with regard on major trade agreements like TPP 11 and the EUVNFTA.
3. Power Storage
The Solar Battery is the most common way of storing energy but the technology is not well-developed yet in Vietnam. However, the country has the possibility to become leader in the new storage technologies in the eastern part of the world. This is another reason for the necessity of development of the solar industry and extremely important as power storage solution on remote islands in order with power production in those areas.
4. Project Applications
Currently, there is a very large number of applications for solar plants existing. This leads to concerns regarding to create a ,,bubble effect” which is causing gridlocks in project developing an delays in investment as well as uncertainty among investors.
For investors, to improve the chance on winning tendered biddings, it is important to provide conditions like (i) ensured safety for wildlife, people, environment or households; (ii) maintained grid connection, (iii) enough financial solvency regarding feasibility of the project; (iv) successful projects in energy or infrastructure areas in the past.
On the other hand, the Ministry of Industry and Trade (MOIT) guarantees that all investors of power projects will be able to connect the plants to the national grid. According to the MOIT, the total reserved capacity of all planned projects is only 30% of the whole capacity, so that, there is no reason for concerns regarding to finalized projects not able to start power producing because of missing opportunity on generating turnover.
C. OUTLOOK ON MAJOR TRADE AGREEMENTS TPP 11 AND EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The agreement shall be signed by all member states by the first quarter of 2018. After that, it has to be ratified in each member state before taking effect.
The effects of the TPP 11 promising great benefits for the energy sector in Vietnam. The TPP 11 is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive due to technology advances, reduction of production costs and because of the high demand on renewable energy.
One another notable major trade agreement is the EUVNFTA between the European Union and Vietnam. The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers which is a key aspect in terms of working at power plants. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Moreover, the EUVNFTA will provide certain tax reductions to 0% for clean technology equipment as well as equal treatment for companies. Due to easier opportunity on making business, trade and sustainable development will be a good consequence for an even more dynamic economy and even better investment environment in Vietnam in general and especially in the power/energy industry.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA) which is going to be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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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!

Rechtsanwalt in Vietnam Dr. Oliver Massmann SOLARANLAGEN – Was Sie wissen sollten:

Photovoltaikanlagen mit einer Leistung von weniger als einem Megawatt unterliegen nicht dem Verfahren zur Aenderung des Energiebebauungsplans. Der Investor muss lediglich die Anschlussklemme bei einem kommunalen Stromversorgungsunternehmen registrieren lassen. Darueber hinaus soll er allgemeine Informationen zur erwarteten Leistung der Anlage, Angaben zu den Solarmodulen und dem Wechselrichter bereitstellen.
Dagegen muessen Photovoltaikanlagen mit einer Leistung von mindestens einem Megawatt in den Bebauungsplan bzw. dem kommunalen Energiebebauungsplan aufgenommen werden. Zusaetzlich beduerfen sie einer Lizenz zur Stromerzeugung.
Das Rundschreiben 16/2017/TT-BCT des MOIT beinhaltet ein einheitliches Vertragsmuster fuer die Kaufpreisallokation (PPA) zwischen Verkaeufer und der EVN.
Obwohl kein Verbot der direkten PPA im Investitionrecht existiert, steht eine direkte netzwerkunabhaengige PPA zwischen Investor and Kaeufer (ausser der EVN) zurzeit noch aus, damit das weitere Vorgehen durch die Elektrizitaetsregulierungsbehoerde von Vietnam (ERAV) geplant werden kann. Die neuen Regularien koennten laut unserer Kontakte bereits im dritten Quartal des Jahres 2018 in Kraft treten.
Photovoltaikanlagen muessen den Net-Metering-Mechanismus unter Verwendung des Zweirichtungszaehlers anwenden. Wenn in einem Abrechnungszyklus die erzeugte Menge Strom die verbrauchte Menge ueberschreitet, wird der ueberschuessige Beitrag in den naechsten Abrechnungszyklus uebertragen. Nach dem “FiT” wird der gesamte erzeugte Reststrom am Jahresende bzw. bei Beendigung der PPA am Ort der Stromlieferung an die EVN zu einem Preis von 2.086 VND / kWh (entspricht 9,35 US Cent) verkauft.
Der Strompreis des Folgejahres wird anhand des Wechselkurses von VND zu USD, festgesetzt durch die Staatsbank Vietnams, am letzten Tag des Vorjahres bemessen.
Das bereits erwaehnte “FiT” gilt nur fuer solche Photovoltaikanlagen, deren Betriebsdatum vor dem 30. Juni 2019 liegt und gilt ab dem Zeitpunkt der Inbetriebnahme fuer 20 Jahre.
Um die knappe Frist einzuhalten, empfehlen wir, die Gruendung der Projektgesellschaft moeglichst rasch in Gang zu setzen, da der gesamte Vorgang einige Monate dauern kann.
Industrieparks – und gebiete sind passende Orte zum Bau von Solaranlagen, da sie bereits ueber grosse Daecher und starke Stromanschluesse verfuegen. Der Provincial Competitive Index, der Industriegebiete beinhaltet, hilft Ihnen bei der Planung Ihrer Photovoltaikprojekte.
Bei Interesse koennen Sie sich gern bei uns melden, damit wir Ihnen den Provincial Competitive Index Vietnams und das Vertragsmuster fuer die PPA zusenden koennen.
Falls Fragen rund ums Thema Photovoltaik in Vietnam bestehen, wuerden wir uns freuen, Ihnen helfen zu koennen.
Bitte melden Sie sich hierzu bei Dr. Oliver Massmann (omassmann@duanemorris.com). Dr. Oliver Massmann ist Generaldirektor von Duane Morris LLC Vietnam.

VIELEN DANK!