The Law on Investment 2020

 August 10, 2020

The current economic situation in Vietnam has revealed various disadvantages and loopholes in the legal framework, especially under the backbone law on investment. Though, the Law on Investment 2014 (LOI 2014) has been in effect for six years, new regulations are needed to create a more transparent, favourable and sustainable investment environment. On June 17, 2020, the National Assembly of Vietnam adopted the Law on Investment (LOI 2020), which will take effect from January 1, 2021 with the following salient changes:

List of prohibited and conditional business lines

Debt collection services has been added to the list of prohibited business lines as numerous service providers have abused this business activity to extort properties or to manipulate in the black lending market, causing public and security disorder.

For the list of conditional business lines, the LOI 2020 removes 22 business lines that are deemed to have no direct impact on national defence and security, social morality and public health, or which are already controlled by technical regulations and standards. Most popular businesses no longer belonging to the conditional list include franchising, logistics services, commercial arbitration, debt trading services, shipping agency service, medical equipment inspection service and aesthetic plastic surgery services. In contrast, it supplements a number of business activities to the list including insurance auxiliary activities, fishing vessel registry, architectural services, piping water supply service, data centre services, electronic identification and authentication services, provision of payment service without using customers’ payment accounts, among others.

Concretise market access commitment to foreign investors

Market access commitments are now specifically addressed under the LOI 2020. In particular, the government must officially issue a list of business lines not open to foreign investors or which imposed conditions. Accordingly, foreign investors who wish to engage in business lines limited to foreign investors shall meet the conditions of: (i) foreign ownership room, (ii) statutory investment forms, (iii) scope of investment activities; (iv) capacity of foreign investors and business partners participating in investment activities and other regulatory conditions. For all other business activities, foreign investors are equal with domestic investors in all respects. New regulations on detailed list limited to foreign investors under LOI 2020 may improve the transparency and feasibility in applying Vietnam’s market opening commitment under the next-generation FTAs.

Favourable mechanism for innovative start-ups

The definition of innovative start-up investment project is given as a project implementing ideas based on the exploitation of intellectual property, technology, new business models and rapid growth potential. Such projects are entitled to investment incentives. Foreign investors who set up medium- and small-sized innovative start-ups are not required to submit investment project nor obtain an Investment Registration Certificate for the purpose of setting up enterprises.

Deemed foreign investors

Previously, the threshold to consider a foreign-invested economic organisation (EO) as a foreign investor was 51 percent or more of charter capital of target company held by (a) foreign investors; or (b) EO which 51percent or more of its charter capital is owned by foreign investors; or (c) foreign investors and EO stated in (b) jointly. Consequently, such EO must satisfy the investment conditions and comply with investment procedures applicable to foreign investors when participating in incorporation of another EO or acquiring interest in an existing EO or investing in the form of BCC. The LOI 2020 deceases this threshold to 50 percent to comply with controlling ratio under newly adopted revised Law on Enterprise.

Cases where M&A approval is required

The LOI 2020 specifies instances where foreign investors must obtain M&A approval before acquiring an ownership interest in the target company as follows:

  1. an increase of foreign ownership in the target company engaging in business lines included in the lists set limited to foreign investors;
  2. an increase of foreign ownership in the target company from under 50 percent to exceeding 50 percent of the charter capital;
  3. an increase of foreign ownership in the target company which already exceeds 50 percent of the charter capital; or
  4. the target company is using land located at sea-islands, borderlands and coastal areas and other areas having an effect on national security and defence.

The change is expected to overcome ambiguity of the provisions on cases requiring M&A Approval under the LOI 2014.

Mechanism for selecting investors for implementing investment project

To ensure the uniformity and consistency of the legal system, the LOI 2020 clarifies principles, respective conditions applied for each method of selection of investors for implementing land-use project, including: (i) auction for land use rights; (ii) bid for investor selection; (iii) approval of investor.

https://www.inhousecommunity.com/article/law-investment-2020/

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Vietnam: Release of long-awaited guidance on Competition Law

July 10, 2020

The long-waited guidance on the Competition Law — the Decree 35/2020/ND-CP (Decree 35) — was issued on March 24, 2020 with effect from May 15, 2020, and casts light on certain prominent provisions of the Competition Law, such as economic concentration.

Under the Competition Law, economic concentration includes, among other things, acquisition of a company to the extent of controlling or dominating the acquired company or its business line. Decree 35 now further defines “controlling or dominating” as:

  • holding up to 50 percent voting right shares, or 50 percent total assets related to any or all business line, of acquired company; or
  • having right to, directly or indirectly, appoint or remove majority of member(s) or chairman of the board, or chief executive officer, or amend the charter, or decide critical issues, of acquired company.

Under Decree 35, the thresholds that trigger mandatory pre-merger notification include:

  • involved party’s total assets in the Vietnam market exceeding VND3,000 billion in the preceding fiscal year;
  • involved party’s total turnover exceeding VND3,000 billion in the preceding fiscal year;
  • the value of the transaction exceeding VND1,000 billion (not applicable in case of transaction outside the territory of Vietnam); or
  • combined market share exceeding 20 percent in preceding fiscal year.

These thresholds are more stringent for transactions involving credit institutions, securities or insurance companies, in particular:

  • involved parties’ total assets in the Vietnam market exceeding VND15,000 billion;
  • involved credit institutions’ total assets exceeding 20 percent of the whole credit institution system;
  • turnover of involved insurance companies exceeding VND10,000 billion, or of involved securities companies exceeding VND3,000 billion;
  • involved credit institutions’ turnover exceeding 20 percent of the whole credit institution system;
  • value of transaction involving credit institution exceeding VND3,000 billion or 20 percent of credit institution system’s total charter capital in the preceding fiscal year; or
  • the combined market share exceeding 20 percent in preceding fiscal year.

Screenshot 2020-06-10 at 3.53.27 PM

After the 30 days upon the pre-merger notification filling, an economic concentration transaction may be implemented if it falls under either of below cases, among others:

  • the combined market share is below 20 percent;
  • the combined market share exceeds 20 percent but post-merger aggregate of square number of each involved parties’ market shares is less than 1,800;
  • the combined market share exceeds 20 percent, and post-merger aggregate of square number of each involved parties’ market shares exceeds 1,800, but the amplitude increase of the aggregate of square number of each involved parties’ market shares between pre-merger and post-merger is below 100; or
  • involved parties in relevant supply/manufacturing chain have 20 percent combined market share.

Otherwise, an economic concentration shall undergo an official review to determine whether it may cause significant competition-restraining impact and subsequently should be banned. The official review shall base on, among others, market share combination, threat to cause or reinforce market power, ability to increase ability for correlation or collusion, relationship between involved parties in the manufacturing and supply chain, competition advantage, ability to increase price or profit margin ratio.

In addition, Decree 35 also introduces various criteria in determining the significant competition-restraining impact on market of a cartel conduct, including, among others, development of market share of involved parties, barriers to market access or expansion, restriction on research, development and technological innovations, increase of costs and time for customers to purchase goods or services.

In respect of competition dispute settlement, Decree 35 gives further detail on requirements on evidence collection, usage and examination. Decree 35 further provides for procedure on implementing certain interim injunctions during competition investigation.

https://www.inhousecommunity.com/article/vietnam-release-long-awaited-guidance-competition-law/

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LEGAL UPDATE – JUNE 2020 – SUMMARY OF THE DRAFT DECREE ON CONTROLLED TESTING MECHANISM FOR FINANCIAL TECHNOLOGY ACTIVITIES (FINTECH) IN THE BANKING SECTOR

June 23, 2020

Recently, the State Bank of Vietnam (SBV) issued a Decree on Controlled Testing Mechanism for Financial Technology Activities (Fintech) in the banking sector for public opinion. In the context of fast-growing financial technology entailing many potential risks, the draft decree can be considered as one of the first bricks, laying the foundations for building a regulatory framework for Fintech in Vietnam.

1. Definition of Controlled Testing Mechanism for Financial Technology Activities (Fintech)

According to the draft decree, the Fintech Testing Mechanism (hereinafter referred to as the Testing Mechanism) is a legal mechanism established by the Government that allows credit institutions, Fintech solution companies and innovative organization to directly conduct Fintech product and services testing in an environment that is strictly controlled and monitored by the relevant regulatory agencies.

2. Subjects and fields allowed to participate in the Testing Mechanism

Three group of subjects involved in Fintech activities in the banking sector are expected to be allowed to participate in the test include: credit institutions (credit institutions) as prescribed in the Law on Credit Institutions 2010; Fintech company/Fintech solution provider cooperating with banks; Fintech company/independent Fintech solution provider. Fintech fields participating in Fintech testing mechanism includes: payment; credit; peer-to-peer lending (P2P Lending); customer identification support; open application programming interface (Open API); innovative application technology solutions such as Blockchain; other services supporting banking activities (such as credit scoring, savings, capital mobilization, etc.).

To be approved to participate in the Fintech Testing Mechanism, the subjects must meet all the following criteria:

  • Being a solution that does not yet exist or is partially unregulated;
  • Being an innovative Fintech solution applied for the first time in Vietnam or a Fintech solution applied for a new, highly innovative service that contributes to the benefit of service users in Vietnam, especially solutions to support and promote the goal of expanding financial universalization;
  • Being a well-designed risk management solution that does not have or is likely to have a negative impact on financial institutions in particular and the financial system in general; have a plan to handle and overcome risks occurring during the testing process;
  • Being a solution that is implemented by Fintech companies/Fintech solution providers or credit institutions with appropriate and accurate assessment of functions, utilities and usefulness;
  • Being a feasible and commercial solution, with a plan to provide specific markets after the completion of the testing process;
  • Being a solution that contains no potential risk of destabilizing financial markets – banks in particular and the economy in general.

3. Scope of testing

The testing time for Fintech solutions is 1-2 years depending on the specific solutions and fields, counting from the time the Prime Minister approves the trial. Depending on the specific Fintech solutions, the SBV shall discuss with the testing organizations to decide the scope for the operation of the solutions, including at the same time or one of three factors: geography, transaction limit and number of customers participating in the service.

4. Registration for participation in the Testing Mechanism 

Credit institutions, Fintech companies/Fintech solution providers must carry out the registration when participating in the Testing Mechanism, the registration dossier includes: (1) Application for participation in Fintech Testing Mechanism; (2) Establishment license or incorporation registration certificate and not in the process of division, separation, consolidation, merger, conversion, dissolution or bankruptcy under an issued decision; (3) Written description of the organizational structure and executive management of the Fintech Solution registered for testing; (4) Scheme describing Fintech Solution.

The SBV is the focal point to receive, appraise dossiers, advise and submit to the Prime Minister for granting or withdrawal of certificates of participation in the Testing Mechanism.

5. Provisions on risk monitoring, reviewing and certifying test completion for organizations

At the end of the testing period, organizations participating in the test must develop a summary report, including information: test output, test evaluation of success or failure of the solution and test results; incident reports and customer complaints, handling and lessons learned from testing. The SBV shall base on the summary report and monitoring process to submit to the Prime Minister the next solution, including: ceasing the test, certifying the test completion or extending the test period. The issuance of the certificate of testing completion is the basis for organizations to officially deploy the solution to the market. At the same time, the results of service testing are also set the ground for state agencies to develop and complete suitable legal framework to each type of Fintech service and application.

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LEGAL UPDATE – JUNE 2020 – TEMPORARY POLICY ON INDUSTRIAL PROPERTY: Reduce 50% of official fees in the field of Industrial Property

Post on June 02, 2020

In response to the economic impacts arising from the COVID-19 pandemic, the Ministry of Finance of Vietnam has recently promulgated Circular No. 45/2020/TT-BTC dated 26 May 2020 on the reduction of fees for registration of foreign QR codes and some certain official industrial property fees (“Circular 45”) pursuant to Circular No. 263/2016/TT-BTC dated 14 November 2016 regulating on fees and charges for industrial property and the collection, transfer, management and use thereof (“Circular 263”).

Highlights

According to Circular 45, the following fees as previously prescribed in Section A of the schedule enclosed with Circular 263 will be temporarily discounted by half (50%) during the period from 26 May 2020 to 31 December 2020:

  • Fees for filing applications for registration of protection of IPRs (including applications for separation or transfer of ownership);
  • Fees for requesting an extension of time to respond to the notifications of National Office of Intellectual Property of Vietnam (the “NOIP”);
  • Fees for issuance of protection certificates;
  • Fees for issuance of certificates of recordal of IP license agreements;
  • Fees for maintenance, extension, invalidation or annulment of Certificates of IP protection (regarding patents for inventions, utility solutions, trademarks and industrial designs);
  • Fees for issuance of industrial property representation service practice certificates and declaration and registration of industrial property representative.

The captioned fees for which the   incentive policy applied are generally insignificant, which is in the range of VND 50,000 to 200,000 VND (about $2 – $9 as converted into USD), compared to overall costs with regard to the corresponding procedures. Therefore, the amount of money saved for many IP cases is generally not remarkable. However, applicants, in some circumstances, may receive significant discounts for total costs paid to the NOIP in light of these fees are individually charged for each unit such as class, claim or application.

Due to the global spread of the COVID-19 outbreak continues to be at more serious and complex situation, the promulgation of the Circular 45 has expressed the efforts of the government of Vietnam to support and share the difficulties with individuals and enterprises who wish to protect IPRs which is realistic and noteworthy.

Contact

For further information regarding registration and protection of intellectual property rights in Vietnam, kindly contact us at the following contact information:

Mr. Tuan Anh Nguyen
Partner
Mobile +84 90 340 4242
E-mail: tuanna@bizconsult.vn

BIZCONSULT LAW FIRM
Hanoi – Ho Chi Minh City
Vietnam
www.bizconsult.vn

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LEGAL UPDATE – APRIL 2020 – NEW REGULATIONS ON REGISTRATION OF THE MORTGAGE OF LAND USE RIGHT AND ASSET ATTACHED WITH LAND

Post on April 29, 2020

By Nguyen Thi Thu Ha – Assisting Lawyer

On 25 November 2019, Ministry of Justice issued Circular No. 07/2019/TT-BTP guiding some of regulations on registration of the mortgage of land use right and asset attached with land (“Circular 07”). Circular 07 specifically guide a number of provisions of Decree No. 102/2017/ND-CP, and replace Joint Circular No. 09/2016/TTLT-BTP-BTNMT dated June 23, 2016.

Circular 07 supplements one additional circumstance required for registration of mortgage of land use right (“LUR”) and assets thereon that is mortgage of the investment project for construction of residential housing or the investment project for construction of work constructed without residential housing, other investment project for construction as prescribed by law. Procedure of such mortgage registration shall be akin to registration of mortgage of LUR and in-future residential housing and construction work thereon.

In addition, Circular 07 introduces several new regulations on mortgage registration of LUR which are common property with the Land registration authority. The Article 12 of Circular 07 set out several special circumstances in mortgage registration of LUR by the Land Registration Authority as below:

(i) for mortgage of LUR being common property of husband and wife, but ownership certificate thereof names either husband or wife, both information of husband and wife shall be included in mortgage agreement as the mortgagor;

(ii) for mortgage of LUR being common property of the family household but ownership certificate thereof only names head of the family household, both name of the head of and other members commonly holding LUR shall be named in mortgage agreement as the mortgagor. In case a number of members of a family household or group of land users require a mortgage registration for their LUR, such person must carry out the procedures for division of LUR and the procedures for separation of the parcel of land for purpose of issue the LURC before registering the mortgage; and

(iii) for mortgage the LUR having the ownership certificate just names proprietorship, the full name of the owner of the proprietorship or the name of owner of the proprietorship and the his/her spouse shall be included in mortgage agreement as the mortgagor.

Circular 07 also stipulates on two cases of transition of the mortgage registration of property rights connected with residential housing purchase and sale contract as below.

Firstly, the mortgage registration of property rights arising from residential housing purchase and sale contract shall transit into mortgage registration of in-future residential housing. Secondly, the mortgage registration of property rights, which arising from residential housing purchase and sale contract, shall transit into the mortgage registration of formed residential housing (house accepted and put into use). In the latter case, there would be two circumstances (i) deregistration of mortgage of property rights arising from residential housing purchase and sale contract at the registration agency for secured transactions, and then registering the mortgage of land use right and residential house at the Land Registration Authority; or (ii) transiting the registration for mortgage of property rights arising from residential housing purchase and sale contract into the registration for mortgage of formed residential housing.

Circular 07 takes effect from January 10, 2020.

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LEGAL UPDATE – APRIL 2020 – NEW REGULATIONS ON E-WALLET SERVICE

Post on April 28, 2020

By Le Anh Kien – Legal Assistant

E-wallet is considered as an important tool for the development of e-commerce and financial technology industries, especially in the industry revolution 4.0. This is a type of payment intermediary firstly regulated in Decree No. 101/2012/ND-CP promulgated by the Government on November 22, 2012 and Circular No. 39/2014/TT-NHNN promulgated by the State Bank of Vietnam on December 11, 2014 (“Circular 39”), however, these legal documents have not been fully and specifically regulated all aspects related to E-wallet provision activity. Therefore, on November 22, 2019, the State Bank of Vietnam promulgated Circular No. 23/2019/TT-NHNN amending and supplementing a number of articles of Circular 39 (“Circular 23”) in order to complete legal framework of E-wallet provision activity. Circular 23 officially taking effect from January 07, 2020, which supplements a number of noteworthy provisions as follows:

1. Regulating specifically on dossiers and information of subjects opening E-wallets

Circular 23 supplements regulations on dossiers and information of subjects opening E-wallets for individuals and organizations, in which, for E-wallets of individuals, the dossier must contain the personal information and identity documents of this individual. For E-wallets of organizations, the dossier also requires the organization’s information, legal documents and lawful representative.

In case an individual who registers to open an E-wallet has a payment account opened through a guardian or legal representative, in addition to the above-mentioned documents, legal documents of this guardian/legal representative and documents proving the guardian/legal representative status of such person/organization to the E-wallet holder must be provided.

2. Customers must completely link the E-wallets with the bank account before using the E-wallets

According to Circular 23, E-wallet service providers must require their customers to completely link the E-wallets with Vietnamese-dong payment accounts or debit cards (linked to Vietnamese-dong payment accounts) that customers open at affiliate banks before using the E-wallets. Customers are not limited in the number of bank accounts linked with their E-wallets.

3. Top-up methods and top-up limit into E-wallets

Top-up into an E-wallet shall be conducted via payment accounts or debit cards of the E-wallet holders opened at banks or received from other E-wallets opened by the same E-wallet service providers. Customers may use the E-wallets for paying legitimate goods and services; transferring money to other E-wallets opened by the same E-wallet service providers and withdrawing money from the E-wallets to the payment accounts or debit cards of Customers.

Total maximum limit on transactions performed via a personal E-wallet of a customer at an E-wallet service provider shall be VND 100 (one hundred) million per month. This limit shall not be applied to personal E-wallet of persons signing contracts/agreements to become entities accepting payments with E-wallet service providers.

4. E-wallet service providers must ensure its solvency

To ensure the rights and interests of E-wallet holders and related organizations and individuals, Circular 23 stipulates that E-wallet service providers must open payment guarantee accounts in order to ensure the provision of this service and are obligated to maintain the total balance on all payment guarantee accounts for E-wallet services opened at cooperative banks not lower than the total balance of all E-wallets of customers at the same time.

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Vietnam: New regulations on automobile transport business

April 6, 2020

     

After a long time in the drafting stage, the Government issued Decree No. 10/2020/ND-CP (Decree 10) on January 17, 2020, regulating automobile transport business and conditions for conducting automobile transport business, replacing the Decree No. 86/2014/ND-CP dated September 10, 2014 (“Decree 86”). Decree 10 shall officially take effect from April 1, 2020 and put an end to the pilot application of ride-hailing software for passenger transport business with e-contract which has been applied for more than four years. Some notable new features of Decree 10 are as follows:

Discrimination between automobile transport business providers and providers of application software supporting the transport connection

The most important new point of Decree 10 is the definition that “automobile transport business” means conducting one or more main transport activity (to directly coordinate the vehicles, drivers or to decide the transport fee) to transport passengers or goods on the road for profit. This definition helps discriminating automobile transport business providers from providers of application software supporting the transport connection by the factor of directly coordinating the vehicles, drivers or deciding the transport fee or not.

Furthermore, the Decree also defines “Coordinating vehicles, drivers refers to the process where an organisation or individual assigns a passenger or freight transport task to a driver via the application software supporting the transport connection, a transport order or a transport contract”. This shall help to determine whether technology companies providing ride-hailing transport services be considered as transport business providers or not. If yes, such companies shall be required to obtain Automobile Transport Business Licence and are subject to legal regulations binding automobile transport business companies, including the requirement to sign labour contracts, pay kinds of insurances, periodical health check and other benefits for their employees, including drivers and supporters on automobile.

Relaxing taxis from requirement of light boxes fixed on the car roofs

According to previous regulations, taxies were required to have light boxes with the word “TAXI” fixed on the roof. Now, Decree 10 allows passenger transport by taxi businesses the option of either fixing light boxes with the word “TAXI” on car roofs with a minimum size of 12×30 cm or posting (affixed) the phrase “XE TAXI” (“TAXI CAR”) made of reflective material on the front and rear windshields with the minimum size of the phrase “XE TAXI” (“TAXI CAR”) being 6 x 20 cm.

Rented automobiles, tourist automobiles must have signages and all required information affixed on the vehicle’s bodies

To prevent the problem of illegal transport vehicles, illegal temporary station, Decree 10 requires the rented automobiles to have the signage of “XE HỢP ĐỒNG (“RENTED AUTOMOBILE”), the tourist automobiles to have the signage of “XE DU LỊCH” (“TOURIST AUTOMOBILE”) affixed beneath the front windscreen on the right-hand side of the vehicle.

At the same time, rented automobiles and tourist automobiles must be posted (affixed) with the words “XE HỢP ĐỒNG” (“RENTED AUTOMOBILE”), “XE DU LỊCH” (“TOURIST AUTOMOBILE”) made of reflective materials on the front and back windshields of the vehicle.

Mandatory installation of cameras for passenger transport business automobiles of nine seats (including drivers) or more, trucks and tractors

Decree 10 requires passenger transport business automobiles of nine seats (including drivers) or more, trucks and tractors to be equipped with cameras to ensure the recording and archive of images inside the vehicles (including driver and vehicle doors) during the course of traffic before July 1, 2021. Duration of retention of these images is at least 24 hours or 72 hours depending on the operating distance of the vehicle. The image data must be provided to the competent authority upon request.

Requirements for taxis equipped with the ride-hailing software

Taxis using ride-hailing software capable of booking, cancelling and charging rides must be equipped with a device directly connecting with passengers for booking and cancelling rides; the ride is charged based on the distance showed on the digital map and the ride charging software must comply with regulations of laws on electronic transactions.

In particular, when finishing a ride, companies using ride-hailing software must send e-invoices to passenger via the software and send the invoice’s information to its supervisory tax authority pursuant to regulations promulgated by the Ministry of Finance.

Beside above notable points, Decree 10 also provides for several other new regulations to meet with the needs for management of technology companies providing ride-hailing transport services which are expected to create a fair competitive environment for traditional taxi and technology taxi in Vietnam.

https://www.inhousecommunity.com/article/vietnam-new-regulations-automobile-transport-business/ 

Ha Hai
M: (84) 96 371 8558
E: haiht@bizconsult.vn

Phan Minh
M: (84) 90 462 1350
E: minhpt@bizconsult.vn

Vietnam: Sweeping reform to securities market

By Trang Nguyen  – Associate | Attorney at Law

In November 2019, the National Assembly passed the new Law on Securities No. 54/2019/QH14 (“New Law”), effective from 01 January 2021. The New Law will completely replace the current Law on Securities No. 70/2006/QH11 as amended by the Law No. 62/2010/QH12 (“Current Law”). The New Law is said to be a radical improvement to regulations on securities market in Vietnam, and is expected to overcome those shortcomings observed for the past 10 years.

One of the remarkable points of the New Law is the imposition of stricter qualifications to become a public company. In particular, in order to become a public company, the required minimum paid-up charter capital of a company will be VND30 billion, in which at least 10% voting shares must be held by at least 100 shareholders other than major shareholders. The Current Law requires the minimum paid-up charter capital of a public company to be VND10billion and held by 100 shareholders only. The current public company which fails to reach such conditions after the effective date of the New Law shall be reverted to be non-public.  Alternatively, a non-public company may also become a public company after its successful initial public offering (“IPO”).

With respect to public offering, the New Law set out separately conditions for IPO and follow-on public offer, rather than the same conditions for both under the Current Law. For IPO, the conditions on charter capital, profit and accumulated loss before IPO and minimum voting shares to be offered in an IPO are more stringent than those provided in the Current Law. In particular,

  • The company must have paid-up charter capital of at least VND30billion (VND10billion is required under Current Law);
  • There must be profit in two preceding years (one year is required under Current Law), and no accumulated losses till the year of IPO.
  • At least 15% of the company’s voting shares must be sold (or at least 10% with the company having charter capital of VND 1,000 billion or more) to at least 100 investors other than major shareholders; and
  • Major shareholders must commit to hold at least 20% of the company’s charter capital within at least one year from the completion date of the IPO.

The subscription price shall be deposited on an escrow account during IPO process and be released only upon the completion of IPO. Furthermore, the company’s shares are also demanded to be listed on the Stock Exchange after the IPO. For follow-on public offer, it is required below conditions:

  • The company must have paid-up charter capital of at least VND30billion;
  • There must be profit in preceding year, and no accumulated losses till the year of follow-on public offer;
  • The total par value of offered shares shall not exceed the total par value of outstanding shares, excepting the case that the unsold shares are guaranteed to be subscribed by an underwriter.

If a public offering is to raise capital for project, at least 70% of the total offered shares must be issued. The company must prepare a plan to make up the short fall of the capital intended to be raised from such public offering for the project’s implementation.

Regarding private placement, only strategic investors and professional securities investors are allowed to participate in private placement of a public company under the New Law. The lock-up period will be three years for strategic investors, or one year in case of professional securities investors, except for transfers among professional investors or so ruled by the court/arbitration or in case of inheritance. As compared with the Current Law, the scope of professional investors under the New Law covers further, among others, the company with charter capital over VNDN100 billion, the listed company, individual having securities practice certificate, individual having portfolio of listed shares valued at VND2billion, or individual having yearly taxable income of VND1billion or more.

The New Law also introduce certain new regulations on listing and registration for trading, securities depository, registration of securities, securities settlement and clearance, information disclosure, protection of client’s assets, securities investment funds, and sanctions.

https://www.inhousecommunity.com/article/vietnam-sweeping-reform-securities-market/

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New Labour Code taking effect on January 1, 2021

By Nguyen Thu Huyen – Partner, Attorney at law

The participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) poses numerous requirements on the reform of laws, including labour laws.

Specifically, the members of the CPTPP and EVFTA are requested to adopt and maintain the rights as set out in the 1998 International Labour Organisation (ILO) Declaration, however, Vietnam is yet to ratify the remaining two core conventions of the ILO, which are Convention No. 87 regarding freedom of association and protection of the right to organise, and Convention No. 105 regarding abolition of forced labour. On that basis, Vietnam’s National Assembly ratified the new Labour Code on November 20, 2019 to replace the Labour Code 2012 and pave the way for the full implementation of the 1998 ILO Declaration. The new Labour Code will officially take effect from January 1, 2021 with the following notable provisions.

Employee representative organizations

The new Labour Code provides regulations on the establishment of employee’s organisations which are not under the system of Vietnam trade unions. Together with trade unions, these organisations are recognised as representing labour collectives at the grassroots level and have the equal rights and obligations as trade unions. In another way, the new Labour Code now recognises the right of employees to set up their own representative organisations to promote and improve the representative efficiency and protection of the rights and interests of the employees in labour relations, to comply with the core Conventions of the ILO as the new provision shows Vietnam’s effort tend to ILO’s Convention No. 87 which is not ratified by Vietnam’s National Assembly and to facilitate the process of international integration.

Nevertheless, this new regulation may place trade unions at a disadvantage due to a decrease in the number of members, especially in the non-state sector, and the role of trade unions may be limited.

Retirement age

The retirement age was a controversial topic in the process of preparing the draft of the new Labour Code 2019 for the National Assembly to ratify. People in favour of retaining the current retirement age argued that the increase of the retirement age might lead to growth in unemployment. Eventually, the retirement age has been amended to increase gradually.

In particular, age of retirement of employees working in normal working conditions is increased from 60 to 62 for males in 2028 and from 55 to 60 for females in 2035. Starting from 2021, the retirement age of employees working in normal working conditions is at 60 years and three months of age for males and 55 years and four months of age for females, then the retirement age shall increase by three months per year for males and by four months per year for females.

This roadmap for increasing the retirement age is considered reasonable as the current retirement age is still low compared to many countries in the world such as Singapore, Japan, Germany, etc. Moreover, the current retirement age was set more than 60 years ago when the average life expectancy of Vietnamese was 45 while it has now grown to 76.6 years.

Overtime cap

One of the remarkable amendments in the new Labour Code is the adjustment in the overtime cap. It has risen to 40 hours per month as compared to 30 hours per month as stated in the Labour Code 2012.

This amendment is for the purpose of meeting business needs and increasing the competitiveness of Vietnamese employees in the context of Vietnam joining CPTPP and EVFTA. In addition, the Labour Code newly stipulates cases for employees to work overtime for no more than 300 hours per year to ensure long-term benefits for employees.

Other noteworthy regulations

Other than the above-mentioned provisions, some noteworthy regulations of the new Labour Code are as follows: (i) an additional one full paid leave day adjacent to National Day raises the number of public holidays to 11; (ii) employees are allowed to unilaterally terminate labour contracts without reasons by notifying in advance within the timeline specified by law; (iii) employers are allowed to unilaterally terminate labour contracts of employees who are absent from work without permission for a total of five consecutive working days or more without requiring the employers to dismiss the employees for termination of labour contracts; (iv) and instead of conducting dialogue at workplaces every three months, the new Labour Code adjusts this regulation to once a year.

https://www.inhousecommunity.com/article/vietnam-new-labour-code-taking-effect-january-1-2021/

LEGAL UPDATE – DECEMBER 2019 – NEW REGULATION ON ELECTRONIC INVOICES FOR SALE OF GOODS AND PROVISION OF SERVICES

By Ha Tuan Viet
Legal Assistant

On 14 November 2019, Circular No. 68/2019/TT-BTC guiding on implementation of several articles of Decree No. 119/2018/NĐ-CP issued by the Government on 12 September 2018 regarding electronic invoices for sale of goods and provision of services (“Circular No.68”) was officially took effect. This Circular No.68 has guided and clarified the important provisions of Decree No. 119/2018/NĐ-CP which are included several noteworthy points as follows:

1. Regulations regarding the time that the application of electronic invoices must be registed

Pursuant to Clause 3 Article 26 Circular No.68, from 01 November 2020, enterprises, business organizations, other organizations, household businesses and individual businesses shall conduct the registration on application of electronic invoices in accordance with the guidance stated in Circular No.68. Hence, from 1 November 2020, enterprises shall be responsible for conducting the registration on application of electronic invoices instead of paper invoices (self-printed invoices, order-printed invoices or purchased from tax authorities).

2. Contents and issuance time of electronic invoices

Pursuant to regulations stipulated in Article 3 Circular No.68, contents of electronic invoices was amended on invoice code and invoice symbol, simultaneously, contents of electronic invoices was clearly specified on the cases and specifically fields in which electronic invoices are not required to contain the digital or electronic signatures of the buyers and sellers.

In addition, Circular No.68 has also guided and specifically certified on issuance time of electronic invoices regarding difference activities and fields, such as the sale of goods, provision of services, supplication of electricity, water, telecommunications service, television services, IT services, construction and installation, real estate business, infrastructure construction and construction of  house for sales… which are in line with Article 7, Decree 119/2018/NĐ-CP.

3. Condition of organization who provide electronic invoices services

In order to become the organizations which provide electronic invoices services, Article 23 Circular No.68 prescribes that the organizations must satisfied specific conditions regarding subjects, finance, personnel and technology, these are provisions that Decree No. 119/2018/NĐ-CP has not given in details, as follows:

a. Regarding the subjects: Having experience of creating IT solution and electronic data exchange between organizations, specifically as follows:

  • Have been operating in the IT field for at least 05 years.
  • Have deployed IT applications and systems for at least 10 organizations.
  • Have deployed electronic data exchange systems between branches of an enterprise or between organizations.

b. Regarding the finance: Having obtained the guarantee of over VND 5 billion from a credit institution legally operating in Vietnam to resolve risks and compensate damages during the period of providing services.

c. Regarding personnel:

  • There are at least 20 technicians having bachelor’s degrees in IT, of which there are staffs who have practical experience in network administration and database administration.
  • There are technicians who are employed to monitor the electronic data exchange systems and support its users 24/7.

d. Regarding technology:

  • There are processes and equipment for backing up data at the main datacenter according to Clause 1d Article 32 of Decree No. 119/2018/NĐ-CP.
  • There is a backup equipment and technical center which is located at least 20 km away from the main data center and ready to operateonce the main system occurs incident.
  • The connection for exchanging the data of electronic invoice with tax authorities must comply with the technical requirements under the Article 23 Circular No.68.

4. Transition provisions

From 1 November 2018 to 31 October 2020, the units still can apply invoices in accordance with provisions stated in Decree No. 51/2010/NĐ-CP, Decree No. 04/2014/NĐ-CP and guidance documents in case that tax authorities has not issued any notices on switching to application of electronic invoice under Decree 119/2018/NĐ-CP.

From the time of utilizing electronic invoices in accordance with Circular No.68, in case of detecting the issued invoices contains errors, an agreement in written shall be made by sellers, in which clearly states the error, then the sellers shall have to notify to tax authorities under the form No. 04 the Appendixes attached to Decree No. 119/2018/NĐ-CP and issue new invoices for replacing the invoices that contain errors.

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