regulation – Duane Morris Vietnam

April 27, 2021 by Dr. Oliver Massmann

VIETNAM – NEW REGULATIONS ON SECURED TRANSACTIONS COMING INTO FORCE

The new decree No. 21/2021/ND-CP (“Decree 21”) guiding the implementation of the Civil Code on securing the performance of obligations will come into force on 15 May 2021, replacing the current Decree No. 163/2006/ND-CP (amended by Decree No. 12/2012/ND-CP).

Notable new provisions in Decree 21

1. The definition of securing party now include the obligor in a duplex contract for the measure of lien.

2. Security property to be formed in the future:
The secured party establishes the right to part or all of the security property being a future property from the time part or all of such security property is formed. Previously, this right is only formed when the securing party formed rights over such property.
In addition, under Decree 163, if the secured party fails to register the security property, the secured party still has the right to dispose the property when it is due. However, Decree 21 sets out that the collateral only gave antagonistic effect against third parties when (i) the contract for secured transaction acquired legal validity and (ii) the secured asset is registered as required by law or the secured party takes control over the asset. Control means the direct management, control or domination of the security property by the secured party or the management of the security property by another person as agreed or as prescribed by law, but the secured party still controls and dominates this property.

3. Effect of the contract for secured transaction: takes effect upon parties’ conclusion or after it is notarized or authenticated as required by the Civil Code or relevant laws or upon request. Where the collateral is withdrawn as agreed, the content of the security contract related to the withdrawn property shall no longer be effective. If the security property is supplemented or replaced, such changes must comply with the provisions of the Civil Code and other relevant laws.

4. Collateral being the right to claim debts, receivables, and other right to request payment: To secure the right to collect debts, receivables or other right to demand payment does not require the consent of the obligor but the secured party must notify them prior to the performance of the obligations under the agreement or in accordance with law.

5. Investments in collateral: Where the securing party exercises the right to invest in order to increase the value of the collateral, the additional investment value portion belongs to the collateral. The secured party must approve investment in a collateral if (i) a third party invests in collateral or (b) the securing party invests in the collateral giving rise to new assets that are not collateral as agreed in the contract.

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For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

April 15, 2021May 29, 2021 by Dr. Oliver Massmann

VIETNAM – INTERNATIONAL AGREEMENTS RESULT IN NEW DOMESTIC REGULATION ON MARKET ACCESS FOR FOREIGN INVESTORS

The new Law on Investment took effect on 1 January 2021 (“Investment Law”) has been praised to play an important role in attracting foreign capital as it sets out clearly the rights and obligations of investors, reduce administrative procedures as well as sets forth more investment incentives compared to its precedents. Recently, at the end of March 2021, the Government’s issuance of Decree No. 31/2021/ND-CP guiding the implementation of Investment Law has been an event of interest (“Decree 31”). With its emphasis on transparent Market Access conditions for foreign investors, Decree 31 can be seen as an effort by Vietnam in implementing its commitments under international agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVFTA).

Important provisions foreign investors should note

1/ Business investment conditions will be published on the National Business Registration Portal.

At the date of writing, the Ministry of Planning and Investment is working on the review and collection of conditions for publication on the Portal. Conditions for business investment to be announced include:

– The sectors and business lines that are subject to conditional business investment;
– The basis for application of business investment conditions; and
– Specific requirements that entities must fulfill in order to conduct business activities.

Before this, there has been no centralized system where investors could learn the requirements for conducting business activities in Vietnam. The publication of such conditions will help investors save time and costs, and is a sign of the Vietnamese Government going digital.

2/ Market access principles take into account Vietnam’s commitment under international agreements.

– Foreign investors belonging to countries or territories that are not WTO members conducting investment activities in Vietnam are entitled to the same market access conditions prescribed for investors from WTO member countries, unless otherwise provided for by Vietnamese law or international treaties between Vietnam and that country or territory.

– A foreign investor subject to an international treaty on investment that provides more favorable market access conditions compared to Vietnam laws can apply the market access conditions under that treaty.

– A foreign investor subject to the application of numerous international treaties on investment with different provisions on market access conditions may pick and choose a treaty applicable to themselves and exercise their rights and obligations in accordance with the entire treaty, even if the treaty is newly signed or amended or supplemented after the date of entry into force.

3/ Restrictions on foreign investors’ ownership ratio are in par with international treaties on investment.

– Where various foreign investors contribute capital, buy shares, buy capital contributions to economic organizations and are subject to application of one or more international treaties on investment, the total ownership ratio of all foreign investors in that economic organization must not exceed the maximum rate provided for by an international treaty that provides for the ownership ratio of foreign investors for a specific sector or for such investors

– In case an economic organization has many business lines that are subject to different provisions under international on the foreign investor’s ownership rate, the foreign investor’s ownership rate of such economic organizations must not exceed the lowest foreign ownership limit of all treaties.

4/ Decree 31 introduces new projects allowed for investment incentives.

Projects with investment capital of VND 6,000 billion or more can apply for investment incentives when the following conditions are fully satisfied:

a) Make a minimum disbursement of VND 6,000 billion within 3 years from the date of issuance of the Investment Registration Certificate, Decision on approval of investment policy and Decision on approval of investor (for projects not subject to issuance of Investment Registration Certificate); and

b) Having minimum total revenue of VND 10,000 billion per year within 03 years since the year of first revenue or employing 3,000 regular employees on average annually within 03 years from the year of first revenue.

November 26, 2018 by Dr. Oliver Massmann

VIETNAM – SECURITIES AND BANKING GUIDE UPDATE 2018

The State Bank of Vietnam (Ngan hang Nha nuoc Viet Nam, SBV) is the central bank of Vietnam. It is a ministry-level body under the administration of the government. The SBV governor is a member of the cabinet. The prime minister and the parliament of Vietnam (National Assembly) act jointly to nominate the governor of the SBV. The governor is in charge for five years. The SBV’s principal roles are to:

• Support monetary stability and implement monetary policies.
• Support institutions’ stability and supervise financial institutions.
• Support banking facilities and recommend economic policies to the government.
• Support banking facilities for financial institutions.
• Manage the country’s foreign exchange reserves.
• Manage foreign exchange and gold trading activities.
• Manage the borrowing and repayment of foreign loans, the provision of loans to foreign parties and recovery of foreign debts.
• Print and issue bank notes.
• Supervise all commercial banks’ activities in Vietnam.
• Lend State money to commercial banks.
• Join the Ministry of Finance in issuing government bonds and government-guaranteed bonds.
• Act as an agent for the State Treasury in organising bids and in issuing, depositing and making payment for treasury bonds and bills.
• Be in charge of other roles in monetary management and foreign exchange rates.

In 1990 the bank system was reorganised. This process led to a separation of the SBV from other commercial banks and was the start of the establishment of the private banking sector. A small number of major state-owned commercial banks still dominate Vietnam’s banking sector. However, today a process of privatisation is underway and the goal is to reduce the State’s share of ownership step-by-step to at least 65% during 2018 – 2020, and 51 percent during 2021 – 2025 under Decision No. 986/QĐ-TTg dated August 8, 2018 of the Prime Minister approving the plan for development of Vietnamese banks up to 2025, vision to 2030. Until June 30, 2018, the State’s ownership ratios in 4 largest state-owned commercial banks are as follows: (i) 95.28% in BIDV, (ii) 77.1% in Vietcombank, (iii) 64.46% in Vietinbank, and (iv) 100% in Agribank.

Foreign ownership restrictions for Vietnamese Credit Institutions

On January 3, 2014, the government-adopted Decree 01/2014/ND-CP on purchase by foreign investors of shareholding in Vietnamese credit institutions. Decree 01 became effective on February 20, 2014 and replaced Decree 69/2007/ND-CP on purchase by foreign investors of shareholding in Vietnamese commercial banks.

In Decree 01, Vietnamese credit institutions, which may offer shares, include:

1. shareholding credit institutions (i.e., a credit institution established and organised in the form of a shareholding company and include shareholding commercial banks, shareholding finance companies and shareholding finance leasing companies); and
2. credit institution currently converting its legal form from a credit institution operating in the form of a limited liability company to become a credit institution operating in the form of a shareholding company.

Foreign investor includes foreign organisations [institutions] and foreign individuals. Foreign organisations include:

1. organisations established and operating under the laws of a foreign country and any branch of such institutions overseas or in Vietnam; and
2. an organisation, closed-ended fund, members’ fund or securities investment company established and operating in Vietnam with foreign capital contribution ratio above 49 percent. Foreign individual means any person who does not hold Vietnamese nationality.

Decree 01 defines that shareholding ownership [shareholding] includes direct and indirect ownership. However, Decree 01 does not explain clearly the scope of direct and indirect ownership.

In a case of purchase of shareholding by a foreign investor in a Vietnamese credit institution resulting in such foreign investor’s ownership of shares below 5 percent charter capital of the Vietnamese credit institution, a prior approval of the SBV is not required. In other cases, any acquisition by foreign investors of shareholdings in a Vietnamese credit institution requires the prior approval of the SBV.

The shareholding ratio of any one foreign individual must not exceed 5 percent of the charter capital of one Vietnamese credit institution. The shareholding ratio of any one foreign organisation must not exceed 15 percent of the charter capital of one Vietnamese credit institution.

Any foreign investor being an organisation owning 10 percent or more of the charter capital of any one Vietnamese credit institution is not permitted to assign the shareholding it owns to any other organisation or individual within a minimum three year period as from the date of ownership of 10 percent or more of the charter capital in such credit institution.

The shareholding ratio of any one strategic foreign investor must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The investor may not transfer its shares in the Vietnamese credit institution within five years after becoming the foreign strategic investor in the Vietnamese credit institution.

A strategic investor is defined as a foreign organisation with financial capacity and whose authorised person provides a written undertaking to have a close connection regarding long-term interests with the Vietnamese credit institution and to assist the latter to transfer to modern technology, to develop banking products and services, and to raise its financial, managerial and operational capacity.

The shareholding ratio of any one foreign investor and its affiliates must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The total shareholding ownership of [all] foreign investors must not exceed 30 percent of the charter capital of any one Vietnamese commercial bank.

The total shareholding ownership of [all] foreign investors in any one Vietnamese non-banking credit institution shall be implemented in accordance with the law applicable to public companies and listed companies (i.e., 49 percent of charter capital of such institution).

In a special case in order to implement restructuring of a credit institution which is weak [and/or] facing difficulties, in order to ensure safety of the credit institution system, the Prime Minister may, on a case-by-case basis, make a decision on the total shareholding ratio of any one foreign organisation [or] any one foreign strategic investor, and the total level of shareholding of foreign investors in any weak shareholding credit institution which is restructured, in excess of the limits described above.

Under the Government’s instruction in 2018, the MoF is drafting a Government’s decree to allow foreign ownership ratio in commercial banks in Vietnam up to 50%. However, this decree would only be finalized and adopted in the fourth quarter of 2019.

Foreign exchange regulations

The Ordinance on Foreign Exchange, which was enacted by the Standing Committee of the National Assembly in December 2005 and became effective in June 2006, and amended on March 18, 2013, regulates currency exchange activities in Vietnam. The government has promulgated Decree No. 70/2014/ND-CP to provide guidelines for both the Ordinance on Foreign Exchange and its amendments on March 18, 2013.

Decree 70 became effective on September 5, 2014 and replaced Decree No. 160/2006/ND-CP dated December 28, 2006 to provide detailed implementation of the ordinance.

Decree 70 governs the foreign exchange activities of residents and non-residents in current transactions, capital transactions, foreign loan borrowing, use of foreign currency and provision of foreign exchange services, the foreign currency market and rates of exchange, and the management of import and export of gold in Vietnam.

With regards to foreign loan borrowing, the government has also promulgated Decree No. 219/2013/ND-CP dated December 26, 2013 on the management and repayment of offshore loans that are not guaranteed by the government. Decree 219 became effective on February 15, 2014 and replaced Decree 134/2005/ND-CP on the same subject.

Decree 219 governs all businesses that are incorporated under the Enterprises Law, credit institution and foreign bank branches under the Law on Credit Institution, and cooperatives and unions of cooperatives established and operating under the Law on Cooperatives.

Offshore loans under Decree 219 include loans from non-residents under loan agreements, deferred payment commodities sale and purchase agreements, entrusted loan agreements and debt instruments issuance agreements that are not guaranteed by the government. In general, foreign borrowing must comply with the regulations of, and is subject to, registration with the SBV.

However, Decree 219 does not state clearly that requirements and types of loans should be registered, or any licensing/registration procedures. These issues have been addressed by the SBV’s guidelines i.e., Circular 03/2016/TT-NHNN dated February 26, 2016 providing certain guidelines on foreign exchange control in relation to foreign borrowing activities (as amended by Circular 05/2016/TT-NHNN dated April 15, 2014 and Circular No. 05/2017/TT-NHNN dated 30 June 2017). Circular 03 is expected to improve the legal framework for management of the borrowing and repayment of enterprises in general and enterprises not guaranteed by the government. Some highlights of the Circular 03 are as follows:

• Loans made in the form of deferred payment for import of goods no longer requires registration with the SBV. However, the opening and use of bank accounts and remittance activities must comply with the requirements of Circular 03.

• Loans subject to registration with the State Bank include: (i) mid-term and long-term foreign loans, (ii) short-term foreign loans which are renewed to have loan terms to be more than 01 (one) year; and (iii) short-term foreign loans which are not renewed but loans’ outstanding principal amounts have not been fully repaid prior to or within 10 days after 1 year from the date of first loan withdrawal.

• A borrower which is not a foreign invested enterprise must open a bank account for the purposes of the foreign loan at the authorized banks in Vietnam. For foreign invested enterprises, their direct investment capital bank accounts may be used for this purpose.

• If the schedule of loan disbursement, repayment or interest payment changes by less than 10 days from the schedule already registered with the SBV, the borrower must only notify its bank, and does not need to register the changes with the SBV. However, if the schedule changes by more than 10 days, then reregistration with the SBV is required.

• Circular 03 also allows notification to SBV (instead of change registration) with regards to certain corporate changes of information that has been registered with SBV such as change of address of the borrower within the province/city where it has head quarter, or change of trade names of the relevant banks who provide account services, etc.

The government issued Decree No. 96/2014/ND-CP on October 17, 2014 on sanctions of administrative violations in the field of monetary and banking operations. Decree 96 became effective on December 12, 2014 and replaced (i) Decree No. 95/2011/ND-CP dated December 20, 2011, and (ii) Decree No. 202/2004/ND-CP dated December 10, 2004 on sanctions of administrative violations in the field of monetary and banking operations.

This decree was said to tighten up forex and gold trading and relevant activities in Vietnam. According to this decree, monetary penalties in relation to gold and forex trading, price listing/payment/advertising in forex/gold, etc. were significantly increased i.e., from VND 5 million ($240) to VND 600 million ($29,000). For instance, the possible penalty for violations re: trading on gold bars without license may be up to VND 500 million ($24,000) or a possible penalty for violations re: forex activities conducted by credit organizations without licenses may be up to VND 600 million ($29,000). In addition, forex/gold relevant to trading violations may be confiscated and certificate of registration for forex agent and business operation license of gold of relevant parties may be also suspended or revoked.

Recent developments of securities regulation

In early 2007 the first Securities Law of Vietnam (No. 70/2006/QH11, 2007) came into effect, which consisted of 11 chapters and 136 articles (as amended on November 24, 2010). The Securities Law primarily covers domestic issues of Vietnam dong-denominated securities and is, therefore, limited to public issues of securities and does not apply to the private placement of unlisted securities. The term “securities” covers a wide range of valuable instruments, including:

• Stocks.
• Bonds.
• Warrants.
• Certificates.
• Put and call options.
• Futures contracts, irrespective of their form.
• Investment capital contribution contracts.

Specifically, the Securities Law governs:

• Public offerings of securities.
• Listings.
• Dealing.
• Trading.
• Investment in securities.
• Securities services.

The establishment and regulation of securities companies and investment funds.

The Securities Law’s area of application considers two types of domestic securities trading market — the Securities Trading Centre and the Stock Exchange. The local regulator, the State Securities Commission, controls and supervises both markets; however, they are independent legal entities. The SSC is a State body that the Ministry of Finance oversees. The government and the MoF have issued several decrees, decisions and circulars to implement the Securities Law. Under the Securities Law, publicly offered securities in Vietnam have to be denominated in VND. The par value of a listed share is VND 10,000; however, the minimum par value of a publicly offered loan is VND 100,000.

On January 10, 2012, the MoF issued Decision No. 62/QD-BTC re: approval of project plan for restructuring of securities companies. This decision was known as a key in the master plan to renovate the stock market/sector, insurance market and securities companies which have been submitted to the Party Politburo by the MoF. According to this decision, securities companies shall be evaluated based on available capital/risk/accumulated losses index and categorised into three groups (normal, control and special control).

The decision does not provide any clear restructuring plan but promulgates certain controlling methods and penalties applicable to securities companies not satisfying the required available capital/risk index such as disclosure/report requirements, supervising or license withdrawal. On August 2018, the Deputy Prime Minister Vuong Dinh Hue instructed the MoF to do research and issue a new plan for restructuring the securities market up to 2020, vision to 2025. The detail project plan is expected to be promulgated and implemented early next year 2019.

Dated July 20, 2012, Decree No. 58/2012/ND-CP was issued to provide guidelines for the Securities Law and the Law amending certain articles of the Securities Laws on offers for sale of securities, listing, trading, business and investment in securities, and services in relation to securities and securities market. This decree abolished Decree No. 14/2007/ND-CP dated January 19, 2007, Decree 84/2010/ND-CP dated August 2, 2010 and Decree 01/2010/ND-CP dated January 4, 2010 and Decree No. 58/2012/ND-CP.

On June 26, 2015, the government promulgated Decree No. 60/2015/ND-CP amending certain articles of Decree 58 and providing guidelines for Securities Laws. Decree 60 became effective on September 1, 2015 and abolish Decision No. 55/QD-TTg dated April 15, 2009 of the Prime Minister on foreign ownership ratio in Vietnamese stock exchanges.

Decree 60 does not limit foreign ownership applicable to companies engaging in non-conditional businesses in Vietnam, and allow foreign companies to invest in government’s and companies’ bonds in Vietnam.

The draft amended Law on Securities is underway and expected to be promulgated in the fourth quarter of 2019. This draft is aimed at restructuring the stock markets, re-organizing and improving securities and fund companies, and lifting further outstanding limitation on foreign ownership of public companies in Vietnam.

Public offerings

With the promulgation of the Securities Law and its amendments, guidelines, rules, procedures and restrictions were set down for the issuance of public shares and bonds. According to Article 12.1 of the Securities Law and its amendments, an issuer must have already deposited nominal capital amounting to at least VND10 billion at the time of registration of the offer. In addition, an applicant for quotation has to prove profit was made in the year before the offering.

The establishment of a fund stipulates a minimum capital of VND50 billion. Other types of enterprise may have to apply to additional conditions e.g., a public company registering a public offer of securities must provide an undertaking, passed by its general meeting of shareholders, to place the shares for trading on an organised trading market within one year from the date of completion of the offer tranche (Law amending certain articles of the Securities Law dated November 24, 2010 and Decree No. 58/2012/ND-CP dated July 20, 2012 guiding Securities Law and Law amending certain Article of the Securities Law).

To open the procedure for public offering it is necessary to file an application in the form of a registration statement, which includes:

• The prospectus.
• The audited financial statements for the preceding two fiscal years.
• The issuer’s constitutional documents and relevant corporate resolutions.

The main contents of a prospectus are prescribed in Circular No. 29/2017/TT-BTC dated April 12, 2017 of the MoF providing guidance on listing of securities on stock exchanges. Foreign investors should be aware of the lack of fixed standards for financial statements and accounting in Vietnam, which can result in inconsistencies in financial reporting and quality levels.

Private placements

A private placement is defined in the Securities Law and its amendment as an arrangement for offering securities to less than one hundred investors, not professional securities investors, without using mass media or the internet. Decree 58/2012/ND-CP dated July 20, 2012 (as amended by Decree 60/2015/ND-CP dated June 26, 2015) and Securities Law provide conditions for a private placement made by public companies as follows:
o Resolution of the general meeting of shareholders approving the plan for a private placement of shares / convertible bonds and utilisation of proceeds earned from the offer tranche; and this plan must specify the objective, target investors and criteria for selection of target investors, the number of investors and proposed offering scale;

o The lock-up period on transfer of the private placed shares or convertible bonds is a minimum one year from the date of completion of the offer trance, except for certain cases such as a private placement pursuant to a plan selecting employees, etc.;

o The issuing company is not the parent company of the company which purchasing private placed shares; or neither of companies are subsidiary companies of a parent company;

o There must be a minimum interval of six months between tranches of private placements of shares or convertible loans; and

o Other conditions set out by the applicable law.

If an application file is incomplete and invalid, the competent State authority shall, within five days from the date of receipt of the application file for registration of a private placement of shares, provide its opinion in writing requesting the issuing organisation to amend the file. The date of receipt of the valid and complete file shall be the date on which the issuing organisation completes amendment and addition to the file.

Within 15 days from the date of receipt of the valid and compete file for registration, the State authority provides notification to the registering organisation and publish on its website the private placement of shares of the registering organisation. The issuing organisation shall, within 10 days from the selling tranche completion date, submit a report on the results of the private placement to the competent State authority on the standard form annexed to Decree 58 (as amended).

Listing

Ho Chi Minh Stock Exchange (HOSE)

Decree 58/2012/ND-CP provides conditions for listing shares in HOSE as follows, among other things:
• The company has its paid-up charter capital of one hundred and 120 billion dong or more at the time of registration for listing;

• The company has operated for at least two years in the form of a shareholding company calculated up to the time of registration for listing; the ratio of equity over after-tax profit (ROE) in the most recent year was a minimum five percent and the business operation in the two consecutive years immediately preceding the year of registration for listing must have been profitable; it does not have debts payable which are overdue for more than one year; it does not have accumulated losses calculated to the year of registration for listing; and it complies with the provisions of law on accounting and financial statements;

• Any member of the board of management or board of controllers, the director (general director), deputy director (deputy general director), chief accountant, a major shareholder and affiliated persons must make public disclosure of any debts they owe to the company;

• At least 20 percent of the voting shares in the company must be held by at least 300 shareholders who are not major shareholders; and

• Certain shareholders such as members of the board of management or board of controllers, etc. must undertake to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months.

Hanoi Stock Exchange (HNX)

Decree 58/2012/ND-CP provides conditions for listing shares in HNX as follows, among other things:

• The company has its paid-up charter capital of 30 billion dong or more at the time of registration for listing;

• The company has operated for at least one year in the form of a shareholding company calculated up to the time of registration for listing; the ratio of equity over after-tax profit (ROE) in the most recent year was a minimum five percent; it does not have debts payable which are overdue for more than one year; it does not have accumulated losses calculated to the year of registration for listing; and it complies with the provisions of law on accounting and financial statements;

• At least 15 percent of the voting shares in the company must be held by at least 100 shareholders who are not major shareholders; and

Registration at HOSE and HNX

Companies wishing to register to list securities must lodge an application file for registration for listing with the HOSE/HNX. An application file for registration to list shares shall comprise the following key documents, among other things:

• General meeting of shareholders’ approval;

• Register of shareholders, as entered one month prior to the date of lodging the application;

• Prospectus;

• Undertaking of certain shareholders such as members of the board of management or board of controllers, the director (general director), deputy director (deputy general director) and the chief accountant of the company, etc. to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months;

• Certificate from the Securities Depository Centre confirming registration by the institution and deposit of the shares at such Centre; and

• Written consent from the State Bank in the case of a shareholding credit institution.

The HOSE/HNX shall approve or refuse to approve an application for registration for listing within 30 days from the date of receipt of a complete and valid application file, and in a case of refusal shall specify its reasons in writing.

Decree No. 60/2015/ND-CP dated September 1, 2015 on foreign ownership in stock market

In April 2009, the Prime Minister issued Decision 55/2009/QD-TTg governing the purchase and sale of “securities in Vietnam’s stock market”. It stipulates the difference between local investors and foreign investors, in accordance with foreign-invested local investment funds. It also states the 49 percent rule. This means that local investment funds and local securities investment companies are considered foreign investors if foreigners hold more than 49 percent of the interest of a corporation.

The above limitation of 49 percent was removed on September 1, 2015 under Decree No. 60/2015/ND-CP, i.e., generally there is no limitation on foreign ownership ratio except for “conditional” sectors. In particular, the new limitation will now be subject to the WTO commitments or other specific domestic law (e.g., the 30 percent cap in the banking sector).

If there is a conditional business that specific foreign ownership restriction under domestic law has yet to be specified, then the limitation is 49 percent. If there is no restriction and the sector is not a conditional business under domestic law (e.g., distribution companies), then there is no limit for the foreign shareholding ratio.

This rule also applies to equitized state-owned enterprises in order to attract more foreign investments. Decree 60 also removes all restrictions to foreign investors to invest in bonds. With respect to securities investment certificates or derivative products of stocks of public companies, the restriction will be also removed.

Circular 123/2015/BTC

At the end of 2008, two years after the first Securities Law, the SSC and the MoF enacted Decision 121/2008/QD-BTC to make the market more interesting for foreign investment as well as to penalise those who disobey the Securities Law. Decision 121 governed the activities of foreign investors in the Vietnamese securities market.

On December 6, 2012, the MoF adopted Circular 213/2012/TT-BTC governing foreign investors’ activities in Vietnamese securities market. Circular 213 became effective on February 15, 2013 and replaced Decision 121.

On August 18, 2015, the MoF issued Circular 123/2015/TT-BTC governing foreign investment activities in Vietnamese securities market (became effective on October 1, 2015), to guide Decree 60 and replace Circular 213.

Circular 123 provides detailed documents and procedure for foreign investors to operate in the Vietnam’s stock exchanges. The circular streamlines the procedures for market participation of foreign investors in the Vietnam’s stock market by reducing the amount of necessary documentation and simplify the procedure. For example, the circular removes the need to translate documents into Vietnamese by allowing them to be submitted in English.

The circular sets out that domestic business organizations with foreign ownership of 51 percent or more, are required to apply for the Securities Trading Code (STC) before trading shares, bonds or other types of securities under the securities market regulations.

Notification procedure on foreign ownership limits (FOL).

Circular 123 requires that public companies are responsible for determining the applicable FOL. Following the determination of the FOL which is applicable to them, companies not subject to any limit are obliged to file a notification dossier with the State Securities Commission (SSC). This dossier includes: (i) extracted information on business lines as uploaded on the National Business Registration Portal and the electronic address linking to such information; and (ii) Minutes of Meeting and the Resolution of the Board of Management approving the unrestricted FOL (if the company does not wish to maintain an FOL) or Minutes of Meeting and the Resolution of the General Shareholders’ Meeting approving and the charter providing for the specific FOL (if the company wishes to maintain FOL).

The SSC will have 10 working days to acknowledge in writing the notification on FOL. Within one working day of the receipt of SSC’s acknowledgment on the applicable FOL, public companies are required to publish this information on their website, which gives effect to the published FOL.

Circular 123 provides that foreign ownership in securities companies is unlimited. However, foreign investors must satisfy certain qualification and conditions provided by the applicable law. A qualified foreign investor who wishes to own more than 51 percent in a securities company must obtain the SSC’s prior approval, which may be issued within 15 days from the date when the SSC receives the application and the transaction resulting in the change of ownership must occur within six months from the date of SSC approval. If this does not occur then SSC approval will be revoked automatically.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office listing 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.

November 10, 2017 by Dr. Oliver Massmann

CASINO BUSINESS UNDER STRICT REGULATIONS

On 20 January 2017, the Government issued a long-awaiting casino business decree No. 03/2017/ND-CP (Casino Decree). Although the issuance of the Casino Decree after almost 10 years of waiting opens a promising market to casino industry, foreign investors have been very hesitant and in the waiting mode for further clarification documents from competent authorities. Finally after more than six months since the Casino Decree’s effective date, on 05 October 2017, the Ministry of Finance issues Circular No. 102/2007/TT-BTC (Casino Circular) guiding the Casino Decree. The Casino Circular helps complete the regulatory framework for casino business in Vietnam and put the young industry in momentum growth.

Local Vietnamese eligible for gambling

Local Vietnamese will be permitted to gamble at specific casinos approved by competent authority on a 3-year trial basis (i.e. – calculating from the first day opening of the authorized integrated resorts). According to the public media, only 02 casinos are open to Vietnamese individuals on a 3-year piloting scheme, which are located within complex resorts in Phu Quoc District, Kien Giang Province (South Vietnam) and Van Don District, Quang Ninh Province (North Vietnam). A small likelihood that Ho Tram Resort would join the list.

Local players are permitted to enter casinos if they essentially satisfy the following conditions: (i) 21 years old or above; (ii) monthly salary of VND10 million or more (equivalent to approximately US$440); (iii) paying entrance fee of VND1 million (US$44)/24 hours/ person or VND25 million (USD1,100)/ month/ person; and (iv) not being objected in writing by siblings, spouses and/or biological and adopted parents to play at casinos. However, these conditions, especially the monthly income requirement, are complicated to prove and were not previously dealt with in the Casino Decree. The Casino Circular then substantiates this requirement as below:

– Having documents (tax declarations/ confirmation by tax authorities) proving taxable income at level 3 or above pursuant to the Law on Personal Income Tax;

– Notarized house/ assets lease contract, where the total monthly rent is VND 10 million or above;

– Notarized bank savings book or bank statement of savings with a term of one year or more and having monthly interest from VND10 million or above;

– Other documents proving that the usual monthly income of players being VND 10 million or above; or

– In case a single document mentioned above is not sufficient to prove the VND10 million monthly income, players can submit several documents to prove such total monthly income.

Casinos under strict supervision of tax authorities

Casino-operating enterprises must arrange a place in the casino with necessary means and equipment for state authorities to perform the casino management and surveillance directly or via electronic equipment and camera system. Transactions under supervision are monetary transactions and/ or tokens related ones. These transactions must also be recorded ad reported to the tax authorities.

In addition, state authorities also supervise, either directly or via electronic and camera system, the inventorying and calculation of transactions performed at cashier area and/ or areas for counting and storing cash and tokens.

Foreign currency control in casino business

Casino-operating enterprises must exchange Vietnamese Dong or other currencies for tokens and vice versa for players.

The exchange rates for Vietnamese Dong or other currencies to tokens and vice versa must be based on the purchasing rates on the transaction date announced by the licensed bank where the casino-operating enterprise’s specialized foreign currency account is opened. In case the transaction date falls on days off or public holidays, the exchange rates must be based on the rates announced on the previous transaction date.

A casino-operating enterprise may accept bank cards of players to exchange for tokens when they play in the casino. The transaction must be in Vietnamese Dong.

In case the Vietnamese players win the prizes, they are only allowed to receive the prize in Vietnamese Dong (whether in cash or by bank transfer). This is not the case for foreign players where they can also receive the prize in foreign currency.

Conclusion

The issuance of the Casino Decree and the Casino Circular timely open Vietnam’s young casino industry to attract foreign investment and limit foreign currency loss to other neighbouring countries. According to recent statistics, Vietnam loses about USD800 million in tax revenue annually from gamblers who cross the border to Cambodia. This is even more critical as many countries in the region already allows casino business such as Macau, Singapore, Philippines, Korea and recently Japan. In such scenario, the Vietnam Government still has a lot to do in order to not only retain Vietnamese players in the market but also attract foreign players who are already familiar with other casinos in the region.

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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!

January 22, 2016 by Dr. Oliver Massmann

Vietnam Economic Times interviewing lawyer in Vietnam Oliver Massmann on impact of new laws for foreigners in Vietnam

1. In your opinion, which are the important regulations taking effect in the year of 2016 that foreigners may care about and the reasons for those?
Answer:
Note: The below answer will only address regulations that have direct impact on foreigners in Vietnam. Other regulations which do not regulate foreigners specifically in their governing scope will then be excluded.
Foreigners should be aware of the following legal documents will be in effect from January 2016 as these new laws will significantly impact their rights and obligations:
– Law on Social Insurance:
o Foreign employees with work permit or practicing certificate or practicing license issued by Vietnam’s competent authorities are now subject to compulsory social insurance.
o Accordingly, foreign employees are entitled to insurance on their sickness, maternity, labor accidents, occupational diseases, retirement and death. These entitlements are the same as what local employees currently enjoy.
o From 01 January 2016, male employees (including foreign ones) are entitled to paternity leave if the wife is on maternity.
In particular, male employees are entitled to 5 working day leave if his wife is on normal maternity. In case of operation or giving birth to an under 32-week baby, a 7-working-day leave will apply. In case of giving birth to a twin, paternity leave is 10 working days, with additional 3 working day leave for each further baby. In case the wife gives birth to a twin or more babies by operation, 14-day paternity leave applies. Please note that this paternity leave only applies within 30 days from the birth date of the baby.
o Male employees when adopting a child under 6 month old are also entitled to the same paternity treatment as in the case of female employees adopting such child.
– Decree No. 122/2015/ND-CP: in relation with the social insurance participation, foreigners should also note the following minimum regional salary, which serves as the basis to calculate payment amount of social insurance, health insurance and unemployment insurance; o Region I: 3.500.000 VND/month (increasing by 400.000 VND/month) o Region II: 3.100.000 VND/month (increasing by 350.000 VND/month) o Region III: 2.700.000 VND/month (increasing by 300.000 VND/month) o Region IV: 2.400.000 VND/month (increasing by 250.000 VND/month)
– Law on Civil Status:
o Foreigners permanently reside in Vietnam must register their civil status with the People’s Committee at ward level instead of the provincial level as previously.
o Children of foreigners born in Vietnam are allowed to register their birth with the People’s Committee at ward level where the mother or father lives.
o Foreigners residing in Vietnam wishing to register their marriage in Vietnam can do so at the People’s Committee at ward level where the wife/ husband lives. Interview is no longer required so that the total time to register a marriage is reduced by half to 15 days (compared with 25 days previously) o Foreigners wishing to apply for a Confirmation on marital status can do so at the People’s Committee at ward level where they register their permanent or temporary residence. The Confirmation on marital status is issued within 3 working days from the receipt of a valid dossier and will be valid for 6 months from the issuance date.

2. Starting January 1st, special consumption tax on cigarette, beer, wine will be raised. How will this affect the economy of Vietnam in the long-term? Also, with this, how do we expect the change in Vietnamese’s consumption habit of these commodities?
Answer: For alcohols of 20oC and above, from 01 January 2016 to 31 December 2016, the tax rate is 55%. This rate will be 60% for the whole 2017 year and 65% from 01 January 2018 onwards. The schedule for increase in special consumption tax rate for beer is the same. Meanwhile, this rate for cigarettes is higher (70% from 01 January 2016 to end of 2018 and 75% from 01 January 2019 onwards).
In my opinion, the increase of such tax rate will on its face increase the State budget. It will somehow reduce the number of people smoking and drinking alcohol, thereby protect public health and prevent negative social issues related to social orders, traffic safety and crimes related to smoking and drinking alcohol.
However, given the fact that the increase is not very high (compared with the increase in minimum regional salary), the retail price of these goods will not be much affected, leading to stagnant change in purchasing power of the products. Adults may still continue to consume these goods. Moreover, the tax increase may create more chances for smuggling which is already very complicated and hard to control in Vietnam.
Thus, together with policies of increasing special consumption tax, the Government should adopt regulations on strict control of smuggling, educate young people’s awareness on serious effects resulting from consumption of alcohols and cigarettes.

3. Starting July 1st, individuals, organizations are not permitted to send commercial information to e-addresses (including email, mobile number, personal sites and other similar means) in the cases the recipient does not accept that. How is your view on this regulation?
Answer: The spread of spam emails and text messages with advertising nature has created strong disturbance for internet and network users. While previous regulations such as the Decree and Circular on preventing spam emails and messages or Circular on managing prepaid subscribers seem to have limited impact, this new regulation is another effort of the Government to fight against the more serious and much more complicated forms of advertisment. I really doubt about whether this new regulation could bring significant positive improvement to the current situation, but highly hope that with cooperation from network operators, strong sanctioning measures from the state authorities, the situation will improve gradually.

Please do not hesitate to contact 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.