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LEGAL UPDATE – AUGUST 2024 – New regulation on ESOP in Vietnam: Looser control?

08/09/2024

Issue August 2024

Hai Ha
Partner

Phan Thi Minh
Senior Associate

Preface:

With effectiveness from 12 August 2024, implementation of the Employee Stock Ownership Plan in Vietnam shall no longer be required to register with the State Bank of Vietnam

Employee Stock Ownership Plan (ESOP) is a benefit policy for key employees working in multinational companies, in which employees will have a chance to become shareholders of holding companies by way of receiving bonus shares or purchasing shares with preferential terms. In Vietnam, ESOP issued by foreign companies to Vietnamese employees is regulated as a form of indirect foreign investment and subject to the foreign exchange control of the State Bank of Vietnam (SBV).

Implementation of ESOP issued by foreign companies to Vietnamese employees is currently governed by the Decree No. 135/2015/ND-CP of the Government and Circular No. 10/2016/TT-NHNN of the SBV (“Circular 10”). On 28 June 2024, the SBV issued the Circular No. 23/2024/TT-NHNN (“Circular 23”) to amend some provisions of the Circular 10 with respect to the ESOP implementation, which will be in force from 12 August 2024 and aims to release administrative burdens for local entities while maintaining strict foreign exchange management.

Release of registration requirement

The most significant change introduced by the Circular 23 is the removal of the requirement for registration of ESOP implementation with the SBV. Accordingly, ESOP-implementing local entities that implement the ESOP issued by foreign companies to Vietnamese employees will no longer be required to obtain SBV’s approval prior to ESOP implementation. However, the management of ESOP implementation will be mainly vested in local merchant banks where the ESOP-implementing accounts are opened. Pursuant to the Circular 23, banks may request the ESOP-implementing local entity to submit documents related to ESOP for their examination, including: (i) documents evidencing relations between the foreign company and the ESOP-implementing local entity; (ii) documents describing features of ESOP such as the share awarding form, vesting period, and list of Vietnamese participants; and (iii) other relevant documents. Thus, local banks may challenge the legality of ESOP and, at their sole discretion, refuse transactions to be conducted through ESOP-implementing accounts.

Tighten reporting obligation

The Circular 23 imposes a new requirement for local employers to file monthly reports on ESOP implementation status to the SBV, replacing the previous quarterly reporting requirement outlined in the Circular 10. These reports must be made in regulatory form, containing foreign currency amounts of dividends or proceeds from the sale of shares remitted to Vietnam for paying the local employees, and enclosed with the local banks’ acknowledgement. The deadline for filing reports is the 12^th day of the month immediately following the reported month. Reports must be sent both electronically via email to the SBV’s designated email address (i.e., [email protected]) and in hard copy to the SBV’s office.

Restriction of transferring ESOP funds out of Vietnam

This restriction is not explicitly addressed in the existing provisions of the Circular 10. However, in practice, it is very difficult to get approval from the SBV for the awarding form of “stock option with preferential terms” as the remittance of money out of Vietnamese territory is strictly controlled by the SBV. Many ESOPs were refused or took a long time to explain, demonstrate to obtain SBV’s acceptance due to a viewpoint that ESOP may be considered as a method of mobilizing capital from Vietnamese employees.

Under the Circular 23, the transfer of ESOP funds out of Vietnam is clearly restricted. The Circular 23 clearly provides for two forms of share awarding, which are:

Directly awarding shares to the employees: The employees are awarded and own shares without any payment;
Other forms of awarding overseas shares without any cash outflows from Vietnam.

Accordingly, an employer may implement ESOP as long as no foreign currency is remitted out of Vietnam.

Outlook

With the restriction of transferring ESOP funds out of Vietnam, the State Bank of Vietnam loosens their control over ESOP implementation by removing the registration requirement as a precedent condition for launching ESOP for Vietnamese employees. The form of directly awarding stocks to the employees has become more straightforward, while the form of selling stocks to Vietnamese employees with payment originated from Vietnam is restricted.

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LEGAL UPDATE – AUGUST 2024 – LAW ON ELECTRONIC TRANSACTIONS 2023

08/09/2024

Issue August 2024

Le Hong Phong
Partner

Nguyen Hoang Quan
Senior Associate

With the rapid growth of the digital economy, electronic transactions are becoming more common and increasingly important. This has presented the need for a sound legal framework to safeguard the legal rights and interests of parties in electronic transactions. Therefore, the Law on Electronic Transactions 2023 was promulgated on June 22, 2023 and took effect on July 01, 2024 with many new regulations and major adjustments that not only enlarge the current legal framework but also create more favorable and safer conditions for parties participating in electronic transactions. With an emphasis on personal data protection, authentication of electronic signatures and detailed regulations on electronic contracts, the new law promises many positive changes. This article aims to list out the key changes in the Law on Electronic Transactions 2023 along with its impacts and legal considerations for businesses and individuals.

A. NEW KEY HIGHLIGHTS OF THE LAW ON ELECTRONIC TRANSACTIONS 2023

1. Electronic Signatures

One of the highlights of the Law on Electronic Transactions 2023 is the provision on electronic signatures. To ensure its legality and security, electronic signatures must meet certain technical standards such as: security standards, authentication standards, traceability standards, and legal standards. Compared to past regulations, these new points are better oriented to improved security standards, specifically stipulating the implementation of two-factor authentication and strong encryption algorithms that will bolster the security of electronic signatures. This regulation also contributes to stricter identity verification, by mandating that electronic signatures be authenticated only by licensed authentication service providers after rigorous identity verification processes. Furthermore, the provisions of the Law on Electronic Transactions 2023 also improve the traceability of electronic signatures, by requiring that every electronic signing system keeps a record and stores signing history for transparency and verifiability. Finally, the new regulations clearly affirm that an electronic signature has equal legal status to a handwritten signature and shall thus be admissible in court. In addition to new regulations on electronic signatures, the Law on Electronic Transactions 2023 also clearly stipulates that organizations providing electronic signature services must be licensed by a competent authority, and electronic signatures must be authenticated by these organizations to enjoy the same legal validity as hand-written signatures.

2. Data Protection and Privacy Rights

a. Data Management

The Law on Electronic Transactions 2023 sets out strict regulations on the collection, storage and processing of personal data to protect user privacy:

Data Collection: Organizations and businesses may only collect personal data with the user’s express consent, unless provided otherwise by the law.
Data Storage: Personal data must be stored securely, using encryption and security measures to prevent unauthorized access, loss or leakage of data.
Data Processing: The processing of personal data must comply with security principles, and may only be carried out for purposes that have been consented to by the user.

b. User Rights

Users have the right to access, modify and request the deletion of their personal data. Businesses must provide clear and convenient mechanisms for users to exercise these rights, ensuring personal data is thoroughly managed and protected.

3. Electronic Contracts

While regulations on electronic contracts have been in place since the Law on Electronic Transactions 2005, the formation of electronic contracts currently remains quite limited. This is partly due to a lack of specific guidelines for the formation of electronic contracts. Moreover, the formation of electronic contracts was previously based on mutual agreement between the parties, making it difficult to ensure the integrity of the contracts that were entered into. Compared to the provisions of the Law on Electronic Transactions 2005, which focused on establishing the legal basis for recognizing electronic contracts as having the same legal status as paper contracts, including regulations on the content and form of electronic contracts, the Law on Electronic Transactions 2023 expands and fleshes out the regulations on electronic contracts. This includes requirements for recording and storing transaction history, protecting data integrity, and mechanisms for dispute resolution.

a. Form and Content

An electronic contract must be in the form of an electronic document and must meet the same content requirements as a traditional paper contract. This includes basic terms, rights and obligations of parties and dispute resolution terms.

b. Legal Evidence

An electronic contract has the same legal status as a paper contract and can be admissible in court. This demands that every party strictly follow the signing and storage procedures of electronic contracts in order to preserve their legality.

B. IMPACT OF THE LAW ON ELECTRONIC TRANSACTIONS AND LEGAL CONSIDERATIONS FOR INDIVIDUALS AND ORGANIZATIONS

As the Law on Electronic Transactions 2023 takes effect amid continuous development in the digital economy, businesses should focus on investing in technological security solutions, including two-factor authentication, data encryption and management systems for electronic signatures. This not only helps businesses comply with legal regulations but also protects them from cybersecurity risks. Additionally, businesses should establish and maintain data protection policies to ensure compliance with security regulations and customer privacy. This includes educating staff on new regulations and developing necessary security measures.

For individuals, it is necessary to raise awareness on the protection of personal information online. This includes using security measures such as two-factor authentication, taking care to not share personal data via unsecured channels and regularly assessing access rights to personal data. Users should be clearly informed of their rights to access, modify and delete personal data, as well as their rights to demand enterprises to exercise these rights. This contributes to the protection of individual rights and ensures that personal data is managed securely.

CONCLUSION

The Law on Electronic Transactions 2023 provides clear and detailed regulations about the protection of the rights and interests of parties participating in electronic transactions, and creates a safe and transparent digital business environment. New provisions on identity authentication, data protection and privacy rights, electronic signatures, and electronic contracts not only guarantee the legitimacy of transactions but also enhance trust among users in online activities. Businesses and individuals should fully comply with and implement these regulations to ensure the safety and efficiency of electronic transactions, thereby contributing to the sustained development of the digital economy of Vietnam.

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LEGAL UPDATE – AUGUST 2024 – NEW REGULATIONS OF 2023 HOUSING LAW ON THE MANAGEMENT AND USE OF APARTMENT BUILDINGS

08/09/2024

Issue August 2024

Hai Ha
Partner

Nguyen T.Lien Lien
Associate

On June 29, 2024, the National Assembly adopted the Law No. 43/2024/QH15 on amendment and supplementation of a number of articles of the Land Law No. 31/2024/QH15, the Residential Housing Law No. 27/2023/QH15, the Law on Real Estate Business No. 29/2023/QH15, the Law on Credit Institutions No. 32/2024/QH15, among these, it notably highlights that the Residential Housing Law No. 27/2023/QH15 dated November 27, 2023 (the “2023 Housing Law”) comes into effect on August 01, 2024, five months earlier than its previous effective date. With the expectations and directives of the National Assembly to address the backlog of issues of the Residential Housing Law No. 65/2014/QH13 dated November 25, 2014 (the “2014 Housing Law”), the 2023 Housing Law codifies certain provisions from guidance documents and introduced numerous clearer regulations for the management of residential house construction investment projects. Regarding the management and use of apartment buildings, the 2023 Housing Law introduces the following new provisions:

Firstly, while the 2014 Housing Law only prohibits improper use of apartment buildings and encroachment upon common space, the 2023 Housing Law specifically categorizes prohibited acts in the management and use of apartment buildings, with several new prohibitions added.

Compared to the 2014 Housing Law, the 2023 Housing Law introduces numerous new prohibitions, aimed at enhancing the management and protection of the living environment of residents; specifically, the 2023 Housing Law acknowledges that failure to pay maintenance fees and misuse of operational management and maintenance fees are strictly prohibited acts. This provision ensures that the financial funds for the maintenance and operation of the apartment buildings are collected and used for the right purposes, thereby maintaining the quality and safety of the construction works, and protecting the interests of other apartment building owners who comply with regulations. The 2023 Housing Law also prohibits acts that affect the order and landscape of the apartment buildings, including painting, decorating the exterior in contravention of regulations on design, architecture, and keeping or releasing livestock or poultry, and slaughtering livestock within the apartment area, contributing to protecting the common living environment, ensuring order and aesthetic harmony, creating a civilized, clean and beautiful living environment for all apartment owners.

In addition, the 2023 Housing Law also strictly prohibits the division of apartments without the permission of competent state authorities (“State Authority”). This prohibition helps to ensure the structural safety of the apartment buildings, maintain consistency in the planning, prevent infrastructure overload, and address other safety issues during the use of apartment buildings.

Secondly, the Housing Law 2023 introduces a number of specific regulations in construction of parking spaces of apartment buildings, as well as codified a number of provisions in the Regulations on management and use of apartment buildings to ensure the legality in practical application and implementation.

Design of apartment buildings must allocate the area for each type of vehicle: While the 2014 Housing Law generally requires ensuring the construction of parking spaces in accordance with approved design and construction standards, the 2023 Housing Law codifies the provisions in the Regulations on management and use of apartment buildings, specifically detailing that parking spaces can be arranged in the basement levels or other areas inside or outside the apartment buildings. Additionally, the 2023 Housing Law requires the developers of investment projects of apartment building construction (referred to as the “Developer”) to allocate the area for each type of vehicle in the design of the apartment buildings. These specific requirements aim that the State Authority shall have a more comprehensive and accurate assessment of the quality and safety of the construction works, evaluate the impact of the apartment building project on the transportation system in the surrounding area, prevent Developer from changing the use purpose of designated parking areas contrary to the approved design, and ensure the common ownership and use of the apartment owners for parking space (aside from car parking space).

Regulations on charging area: In addition to the regulations on the allocation of separate parking spaces for each type of vehicle, the addition of requirements on charging area for electric motor vehicles to be arranged in compliance with the construction standards is a notable new point, demonstrating the preparation of the 2023 Housing Law for the development of new technologies, meeting the increasing social demand and trend for electric vehicles. However, this provision of the 2023 Housing Law is not yet sufficiently specific on whether all apartment buildings’ designs must include electric charging areas as a mandatory requirement or not. Given the current situation where residents charge electric vehicles haphazardly without ensuring fire safety and considering recent incidents of fires caused by explosions during charging, it is very urgent to provide explicit guidance and standards for designing electric charging areas in apartment buildings. Currently, the Ministry of Science and Technology has developed and issued 11 Vietnamese standards for electric vehicle charging stations (including 9 standards for charging stations and 2 standards for electric vehicle battery exchange); additionally, the Ministry is in the process of revising legal regulations and proposing additional 18 standards related to electric vehicle charging stations and associated electric equipment (as mentioned in Official Letter No. 149/BKHCN-TDC dated January 18, 2024 of the Ministry of Science and Technology). These standards provide clear guidelines and frameworks for Developer to implement and adhere to when constructing and designing electric charging areas within apartment buildings, ensuring the safety of property and lives of residents in these areas.

Developer is required to publicly disclose the investment costs for the construction of car parking spaces: The 2023 Housing Law clearly stipulates that in cases where apartment buyers do not purchase or rent a car parking space, this car parking space is under the management of the Developer and the investment cost for construction of these parking spaces shall not be included in the apartment selling price. Also, the 2023 Housing Law requires the Developer to publicly disclose the investment cost for constructing car parking spaces, to help the apartment buyers understand whether the composition of the apartment selling price paid includes the cost for the construction of car parking spaces. This regulation aims to address the practical issue where Developer of some residential housing projects designate car parking spaces as their private property without clearly specifying whether the investment costs for constructing these spaces are allocated into the apartment sale price for apartment buyers. However, there is a need for more specific guidelines on the timing and method for the Developer to publicly disclose the cost of construction of car parking spaces so that buyers can be informed before deciding to sign the apartment sale and purchase contract.

Thirdly, the 2023 Housing Law introduces a method to determine the area of loggia when determining the use area of apartments and other areas in the apartment buildings.

Accordingly, the area of the loggia is measured as the entire floor area from the inner edge of the common wall or the apartment partition walls. This specific regulation helps determine the accurate calculation method for the loggia area within apartments in the apartment, and reduces the Developer’s ambiguity in the calculation method to increase the area of the apartment when determining the selling or leasing price of apartments.

Simultaneously, under this provision, the 2023 Housing Law clearly stipulates the ownership right of equipment and components attached to the balcony and loggia of the apartment. In the event of equipment and components attached to balconies and loggias but are the parts of the vertical surface of the construction works according to the design documents, such equipment and components shall be determined as under the common ownership of the apartment buildings. This regulation facilitates both Developer and buyers in clearly distinguishing between private ownership and common ownership when equipment and components are attached to the parts under private ownership, addressing the ambiguity under the 2014 Housing Law where the definition of private ownership includes technical equipment systems exclusively used or attached to the apartment or to other areas of private ownership.

Fourthly, the 2023 Housing Law removes some additional costs from the service fee for management and operation of apartment building compared to the 2014 Housing Law.

The 2023 Housing Law additionally excludes two types of fees from the service fee for management and operation of apartment building including (i) fee for purchasing fire and explosion insurance, and (ii) remuneration to the apartment building Management committee. This new provision aims at clearly separating the service fee for management and operation of apartment building from expenses related to the operations of the Management committee, whereby the Management Board’s remuneration will be decided by the apartment building general meeting and be separately contributed, to avoid affecting the decision-making, contribution, and use of the service fee for management and operation, and potential disputes related to the service fee for management and operation of apartment building.

The 2023 Housing Law also supplements the responsibility of the provincial-level People’s Committee in promulgating a framework for the service fee for management and operation of apartment buildings to serve as a reference for parties involved and in cases where an agreement on service fees cannot be reached, the service fee under such framework promulgated by the provincial-level People’s Committee will be applied.

Fifthly, the 2023 Housing Law adds specific regulations on the handover of infrastructure works in the apartment buildings area.

The 2014 Housing Law lacks of regulations on the handover of infrastructure works, and the timing and method for handing over infrastructure works from the Developer to the State Authority. The 2023 Housing Law adds specific regulations on this issue. Accordingly, in case of handing over infrastructure works according to the approved design/project policy, the infrastructure works must be handed over to the State Authority after the acceptance of the construction works and upon the request of the Developer. The handover process must be recorded in writing between the Developer and the State Authority. The provisions of Articles 157 and 158 of the 2023 Housing Law also clearly define the responsibility for the maintenance of technical infrastructure works; accordingly, in case the technical infrastructure works have not yet been handed over to the State Authority, the Developer remains obligated to maintain, manage and operate it according to the approved project specifications, ensuring that the works do not adversely affect the community and living environment of the apartment building residents.

The above contents represent notable new points introduced by the 2023 Housing Law concerning the management and use of apartment buildings, contributing to enhance clarity and transparency in the management of apartment buildings, increasing the responsibilities of involved parties, and contributing to a good, safe, and sustainable living environment for residents, and aligning with the National Assembly’s direction when enacting and promulgating the 2023 Housing Law. However, for these new regulations to be effectively implemented in practice and aligned with the realities in Vietnam, it is required to have specific implementation guidelines from the Government and relevant Ministries and agencies in the coming time.

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LEGAL UPDATE – MARCH 2024 – Vietnam – Key compliance requirements on personal data protection

04/08/2024

Issue March 2024

Nguyen Anh Tuan
Managing Partner

Phan Thi Minh
Senior Associate

Preface:

“With effectiveness from 01 July 2023 for compliance, acts related to personal data in the territory of Vietnam, acts of using cyberspace, electronic devices, equipment, or other forms to transfer personal data of a Vietnamese citizen to a location outside the territory of Vietnam or using a location outside the territory of Vietnam to process personal data of a Vietnamese citizens are subject to compliance with regulations on personal data protection set forth in Government’s Decree 13”

One of the latest and most fundamental legal instruments in place governing the protection of personal data in Vietnam is Decree No. 13/2023/ND-CP (“Decree 13”). This long-awaited Decree 13 was issued by the Government on 17 April 2023.

Decree 13 introduces, inter alia, new requirements with respect to the protection of personal data, which apply to any domestic or foreign organizations or individuals that directly participate in or are involved in processing personal data in Vietnam. Those requirements under Decree 13 take effect on 01 July 2023, save small and medium-sized enterprises are afforded a grace period of two years with regard to the obligation of appointing a data protection officer and/or department. As such, it is highly recommended for businesses to review their internal privacy policies and compliance practice to identify the incompatibilities with Decree 13 and take immediately actions to ensure compliance with Decree 13.

Key compliance requirements in Decree 13 are outlined hereunder.

1. Identifying role in processing personal data

Decree 13 clearly distinguishes between the different roles of parties involves in the processing of data and provides respective responsibilities for each role. Specifically:

Data Controller refers to an organization or individual that decides the purpose and means of processing personal data. The Data Controller has the highest responsibility to comply with data protection requirements, including obtainment of the data subject’s prior consent for all processing activities, receipt of the data subject requirements and carrying out notification of any personal data breach to the Ministry of Public Security (“MPS”).

Data Processor refers to an organization or individual that process personal data on behalf of the Data Controller through a contract with the Data Controller. Data Processor is responsible for notifying the Data Controller of any personal data breaches and process personal data in accordance with a contract entered into with the Data Controller.

Data Controlling and Processing Party is a hybrid role of both Data Controller and Data Processor.

Third Party refers to individuals or entities other than the data subject, Data Controller, Data Processor or Data Controlling and Processing Party that are allowed to process personal data. The Third Party is responsible to archive personal data in forms in conformity with its operation and adopt measures for protecting the personal data as prescribed by law.

Accordingly, it is crucial for businesses to identify their exact roles in processing personal data to determine their responsibilities in the course of processing personal data.

2. Obtainment of the data subject’s consents

Decree 13 requires the obtainment of the individual’s prior consent in all activities of data processing, save for a few exceptions. The consent by a data subject will be valid only when (i) it is freely given, and (ii) the data subject fully knows information about the type of personal data, purpose of data processing, parties processing the data, and the data subject’s rights and obligations. Noted that, the consent must be expressed by written instrument, by voice, by ticking the consent box, in the syntax of consents through text messages, by selecting technical settings to consent, or by another action that expresses the same.

A silence or non-response from the data subject shall not be deemed as their consent. In case of dispute, Data Controller and Data Controlling and Processing Party bears the burden of proving the data subject’s consent.

3. Assessment of the impact of personal data processing

All Data Controller and Data Controlling and Processing Party must form and store their personal data processing impact assessment dossier (“Impact Assessment Dossier”) since the commencement of processing personal data. Impact Assessment Dossier must be submitted to A05 within 60 days from the date of processing of personal data for A05’s review and made available at all times for the inspection and evaluation by the MPS.

The Impact Assessment Dossier must include:

Information on Data Controller, Data Controlling and Processing Party and their internal data protect officer;
Purposes and types of personal data processed;
Recipients of personal data, including overseas entities;
Cases of cross-border transfer of personal data;
Retention period; expected time for deletion or disposition of personal data (if any);
Description on measures of personal data protection applied;
Assessment of the impact of personal data processing; potential and unwanted consequences and/or damage, and measures for minimization or elimination thereof.

Data Processor also may be subject to the requirement of conducting and maintaining Impact Assessment Dossier if so required by a contract signed with Data Controller.

4. Cross border data transfer requirements

Decree 13 however allows the transferor (including Data Controller, Data Controlling and Processing Party, Data Processor and the Third Party) to transfer the personal data of the Vietnamese citizens to a third country, subject to the following requirements:

The transferor must prepare a cross-border personal data transfer processing impact assessment dossier. The dossier must include mandatory contents such as a description of types of personal data transferred overseas, descriptions and explanations of the objectives of the personal data processing of Vietnamese citizens, a document showing the binding and responsibilities between the transferor and the recipient of transferred personal data of Vietnamese citizens.
The impact assessment dossier must be available at any time for review and inspection by MPS. The transferor must submit an original of the impact assessment dossier in prescribed form to MPS within 60 days from the date of processing of personal data. MPS may require the transferor to complete the impact assessment dossier in the event of improper dossier;
Upon the successfully transfer of data, the transferor must submit a written notification on the data transfer and contact detail of person in-charge to MPS.

MPS retains the discretion to suspend any cross-border transfer if the transferor fails to satisfy such above requirements or violates interests and national security of Vietnam or has Vietnamese citizen’s personal data leaked or lost.

5. Personal data breach notification requirement

In the event of inspecting any personal data breaches, (i) Data Processor is required to notify the Data Controller immediately of a breach occurring, and (ii) Data Controller and the Data Controlling and Processing Party are required to notify MPS (Department of Cybersecurity and Hi-tech Crime Prevention) within 72 hours of the breach occurring. Notification must be made in a prescribed form with compulsory contents. In case of notifying after 72 hours, Data Controller and Data Controlling and Processing Party is required to provide reasons for delay or late notification.

A comprehensive administrative penalty on violations against personal data protection regulations may not be available at the effectiveness of Decree 13. However, there are certain sanctions imposed on violations against regulations on collection, use, updating, alteration and removal of personal information and the assurance of security of personal information in cyberspace, with administrative fines ranging from VND 10 million to VND 70 million or be prosecuted under Penal Code for serious cases of violations.

Outlook

Requirements set forth in Decree 13 place significant burdens to parties involved in the personal data processing, especially multi-national businesses. Given such requirements are broadly worded, it is expected that MPS would issue further guidance on interpretation and enforcement of provisions stipulated in Decree 13.

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LEGAL UPDATE – FEBRUARY 2024 – GUIDANCE ON THE PRIVATE PLACEMENT OF CORPORATE BONDS IN DOMESTIC MARKET

02/28/2024

Issue February 2024

Nguyen Thu Huyen
Partner

Nguyen T. Thu Ha
Senior Associate

Corporate bonds are currently governed by the Decree No. 153/2020/ND-CP dated 31 December 2020 on the private placement of corporate bonds and trading of privately placed corporate bonds in the domestic market and offering of corporate bonds to the international market, as amended and supplemented by the Decree No. 65/2022/NĐ-CP and the Decree No. 08/2023/ND-CP (“Decree 153”).

On 17 May 2023, the Ministry of Finance issued Circular No. 30/2023/TT-BTC guiding a number of the regulations on registration, depository, exercise of rights, transfer of ownership rights, transaction payment, and organization of the market for trading privately placed corporate bonds in the domestic market (“Circular 30”). Circular 30 specifically guides the privately placed corporate bonds (the “Bonds”) issued from 01 January 2021 in accordance with Decrees 153. Regarding Bonds issued prior to 01 January 2021 with the outstanding principle, the bond depository and transaction will continue to be conducted in accordance with the approved bond issuance plan.

1. General Principles

Circular 30 sets out 08 general principles when implementing the registration, depository, exercises of rights, transfer of rights of the Bonds. Some notable principles are as follows:

The Bonds must be registered and deposited in concentration at the Vietnam Securities Depository and Clearing Corporation – VSDC (Tổng công ty Lưu ký và Bù trừ chứng khoán Việt Nam, in Vietnamese).
The Issuer, the VSDC, and the depository members shall be responsible for exercising the rights for the bondholders in accordance with the Law on Securities and other relevant laws.
The Issuer shall have to register the trading of issued Bonds in the bond trading system.
The payment for transactions in the bonds trading system shall be made via the bonds payment system according to the instant payment method for each transaction, the central clearing partner mechanism shall not be applied.

2. Trading account for trading of the privately placed corporate bonds

This is a new regulation that requires the investors to open a trading account at the trading members for the implementation of transactions.

In case the investor has already had the securities trading account opened at the trading member, the investor is entitled to use such account to trade Bonds. Before the purchase of Bonds, the investors must be a professional investor and have signed a letter of confirmation in accordance with the laws on securities. The Securities enterprises being the trading members are responsible for identifying the professional investor qualification and ensuring that the investors are eligible for bonds purchase before entering commands into the bonds trading system.

3. Trading the corporate bonds via the bond trading system opened at Hanoi Stock Exchange

Circular 30 particularly releases a “life jacket” for the bondholders under the current circumstances where there are several issuers being unable to repay both principal bond and interests under the Bonds. The investors may directly offer their Bonds through the corporate bond trading system opened at the Hanoi Stock Exchange to recover their investment costs. So what are the conditions for investors to be able to offer their Bonds?

First, the issuer must register the Bonds at the VSDC. Secondly, before being traded or transferred to others, the Bonds must be deposited in concentration at the VSDC through a securities enterprise. Thirdly, and being the most crucial factor, is to find investor willing to purchase the Bonds.

In such cases, the Bonds shall be transferred and traded on the bond trading system via the mutual agreement of the parties. Such transaction is established when the buyer or seller enters a trading command into the bond trading system and the reciprocal party confirms that trading command.

4. Transfer of bond ownership rights

The VSDC shall transfer the Bonds that have been registered and deposited at its corporation via the bonds trading system. However, Circular 30 further guides some special circumstances where the transfer of Bonds ownership rights is not subject to bond trading system, such as donation, inheritance; division, separation, consolidation, merging, dissolution of enterprises; exercises of courts’ judgment, decisions of arbitration court or the judgment enforcement; etc.

5. Payment settlement of bonds transaction

Circular 30 sets forth more detailed instructions on bond transaction payment. Accordingly, individuals and organizations eligible for Bonds transactions on the depository account system of the VSDC includes: (i) the depository members settling payment for their own Bonds transactions or their clients’ and (ii) the organizations opening accounts for the direct payment of their own Bonds transactions (the “Permitted Bond Transfer Organization”). The Permitted Bond Transfer Organization must open a deposit account under its name at the bank for the payment settlement of bond transactions.

The payment of bond transactions shall be made at the settlement bank based on the payment obligation announced by the VSDC. The transfer of bond payments, on the other hand, shall be made via the system of VSDC on the principle of Bond transfer between accounts of investors at the Permitted Bond Transfer Organization, simultaneously with the payment settlement at the bank. The depository members at which the investors open their accounts are responsible for the distribution of money and Bonds to the investors’ accounts immediately upon the completion of payment transfer by VSDC and payment settlement of transactions by the bank.

In addition, Circular 30 also prescribes instructions for processing some circumstances of insolvency for bond transactions, for instance, where the Permitted Bond Transfer Organization is temporarily insolvent, the bank shall lend money for the payment settlement of bonds transactions by virtue of the financial support agreement signed between the parties. In the event such agreement prescribes the use of deposited securities at VSDC as collaterals for the loan amount, VSDC shall freeze such securities under the suggestion of the bank. Furthermore, in case the payment deadline arrives and the Permitted Bond Transfer Organization does not have available funds for such payment, VSDC shall remove the transaction payment.

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[AWARDS AND ACCOLADES] The A-list: Vietnam’s Top 100 Lawyers 2023

02/21/2024

bizconsult Law Firm is proud to announce that 2023 is the fourth consecutive year that three of its Partners: Mr. Tuan Nguyen, Mr. Viet Nguyen, and Mr. Phong Le have been listed in the A-list of 100 lawyers notable for their adherence to best practices in Vietnam by the Asia Business Law Journal.

This list is forged from extensive research and nominations from in-house counsel primarily in Vietnam, but also Vietnam-focused partners with international law firms. Comments submitted to Asia Business Law Journal by the clients underscore their preference for seasoned lawyers who consistently uphold the highest ethical standards and maintain professionalism and enthusiasm in their interactions.

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For more information, please refer to http://www.bizconsult.vn/

LEGAL UPDATE – FEBRUARY 2024 – LAW ON PRICE 2023

02/07/2024

Issue February 2024

Trinh Hoang Lien
Partner

Ha T. Thu Trang
Legal Assistant

The Law on Price No. 16/2023/QH15 (“Law on Price 2023“) was adopted by the National Assembly on June 19, 2023 to overcome limitations under the Law on Price 2012 to adapt with drastical changes in reality. The law will take effect on July 01, 2024 except for the provisions on the expertise of the Valuer Council, which will be delayed until January 01, 2026. Below are some notable new points of the Law on Price 2023.

1. Principles of applying the Law on Price and other related laws

Application of the Law on Price on issues concurrently regulated by other effective laws is guided in more detail under the Law on Price 2023. Specifically, in case there are inconsistancies between the Law on Price and other laws issued before the effective date of the Law on Price, the Law on Price shall be applied, except for pricing by the State of some commodities required to implemented in accordance with the lining laws, including laws on land, housing, electricity, medical examination, treatment, education, university education, vocational education and intellectual property.

2. Price declaration

The Law on Price 2023 expands numerous cases subject to price declaration besides the mandatory case of declaring prices for goods and services in the price stabilisation list as regulated under the Law on Price 2012. Goods and services subject to price declaration include goods and services in the price stabilisation list; goods and services that the State determines the price range, maximum price, minimum price for organisations to determine specific prices to sell to consumers; goods and services that traders agree to follow the reference price; and other essential goods and services determined by the Government.

It is concerned that expansion of the subjects of price declaration can become a form of “sub-license” for traders of goods and services. The list of organisations providing goods and services that must perform price declaration is unclear. Price declaration shall be implemented at two levels, the Ministrial level and equivalent agency and the provincial level (Provincial People’s Committee) according to the list issued by these agencies. The questions whether the price declaration procedure is complicated or not, the list of organisations subject to price declaration is long or not and if there will be overlap in the list of goods and services subject to price declaration issued by these two levels of implementation or not only be answered upon the promulgation of Decree guiding in detail by the Government.

3. Business conditions for valuation services of valuation enterprises

The conditions for valuation services of valuation enterprises are regulated more strictly to ensure the stability of human resources of valuation enterprises and limit violations in the implementation process. The new regulation increases the requirement for the minimum number of valuers at enterprises from 3 to 5 valuers.

Furthermore, additional requirements are set for each form of valuation enterprise. Specifically, for partnership company, general partners of the partnership must be persons who obtains valuer card registered for the valuing profession at the enterprise. For limited liability company with two or more members and joint stock company, it is further required that the total contributed capital of the members or shareholders who have an valuer card registered for the valuing profession at the enterprise must account for more than 50% of the charter capital of the enterprise.

For the branch of the valuing enterprise, the new regulation requires to increase the number of valuers at the branch of the valuing enterprise from at least 2 to at least 3 valuers who meet all conditions for registering for the valuing profession and registering for the valuing profession at the branch.

4. Conditions for valuers

The Law on Price 2023 reduces the working experience time required before register for the valuing profession for those who gain university degree or higher in the field of price or valuation according to the application-oriented program as prescribed by law. For these persons, the minimum total actual working time at the valuation enterprises, state management agencies on price and valuation is 24 months compared to the general level of total actual working time at the valuation enterprises, state management agencies on price and valuation for those with a general university degree or higher of 36 months.

5. List of goods and services subject to price stabilisation

The Law on Price 2023 removes electricity, table salt and table sugar (including granulated sugar and refined sugar) from the list of goods and services subject to price stabilization regulated by the Law on Price 2012 and adds DAP fertilizer, animal feed and aquatic feed. Consequently, the list of goods and services subject to price stabilisation according to the Law on Price 2023 includes 9 goods and services: Gasoline, oil products; Liquefied petroleum gas (LPG); Milk for children under 6 years old; Ordinary paddy and rice; Nitrogen fertilizer, DAP fertilizer, NPK fertilizer; Animal feed, aquatic feed; Vaccines for disease prevention for livestock, poultry; Pesticides; Drugs in the list of essential drugs used at medical examination and treatment facilities. The regulation of this list in the law ensures transparency, clarity, avoids abuse to expand the scope of goods subject to price stabilisation, ensures legal certainty, stability, helps businesses and people who are doing business in goods subject to price stabilisation have a suitable business plan.

6. List of goods and services subject to price determination by the State

The Law on Price 2023 supplements a criterion for goods and services subject to price determination by the State, essential goods and services of monopoly nature in buying and selling or have a limited competitive market and affect the economy – society, people’s lives, production and business activities. Additionally, in order to get rid of inconsistancy, overlap between the Law on Price and other lining laws in related to goods and services subject to price determination by the State, the Law on Price 2023 also updated the list of goods and services subject to price determination by the State in line with the regulations of lining laws such as adding station entry and exit services; auction services, … to the list.

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LEGAL UPDATE – JANUARY 2024 – WHAT ARE THE IMPACTS OF NEW LAND LAW 2024 ON PROPERTY/ REAL ESTATE DEVELOPERS IN LAND PRICE EVALUATION?

01/19/2024

Special Issue Jan, 2024

Nguyen Dang Viet
Partner

We take a snapshot on amendments and supplements under the new Land Law 2024 related to land pricing and evaluation, a very important issue concerned by all real estate developing investors to find out whether there are significant impacts on land costs leading to changes in real estate selling prices or not.