Author: Vu Mai Trang

By Nguyen Thu Huyen.

Vietnam’s National Assembly passed the new Law on Competition (New Competition Law) on June 12, 2018 and it will be taking effect on July 1, 2019, 14 years after the implementation of the Law on Competition 2004.

The New Competition Law governs (i) the acts in restraint of competition, economic concentrations which have or may have a competition-restraining impact on Vietnam’s market; (ii) unfair competitive acts; (iii) competition legal proceedings; (iv) dealing with breaches of the law on competition; and (v) State administration of competition.

The New Competition Law extends the scope of its applicable entities that consist of “related domestic and foreign agencies, organisations and individuals”, apart from organisations and individuals conducting business and industry and professional associations operating in Vietnam. These broadened regulations aim to create the mechanism to settle anti-competitive acts and/or cases which may be implemented overseas but have or may have a competition-restraining impact on Vietnam’s market and to control acts relating to competition of state authorities. This content is to meet the requirements of economic integration and create a fair competition environment for both domestic and foreign organisation/individuals.

Pursuant to the New Competition Law, there are significant changes in regulating “acts in restraint of competition”, which are defined as actions that cause or may cause a competition-restraining impact, including “practices of agreement in restraint of competition, abuse of dominant market position, and abuse of monopoly position”. Under the 2004 version of Law, the “acts in restraint of competition” apply only to enterprises and consist of “economic concentration”, meanwhile, these matters are now no longer provided.

The approaching method under the 2004 version of the law to control “agreements in restraint of competition” is solely based on “combined market share”. At present, the New Competition Law manages these agreements by its nature or ability to have a significant competition-restraining impact in the market. The term “significant competition-restraining impact” is newly provided and shall be determined by the National Competition Committee according to market share ratio, barriers to market access or expansion, restriction of research, development and renovation of technologies, etc. The New Competition Law further provides three more types of agreements in its list of “agreements in restraint of competition”, including: agreements not to trade with parties not participating in the agreements; agreements to restrain the product sale market or sources of supply of goods and services of parties not participating in the agreements; and other agreements which have or may have a competition-restraining impact. In addition, the New Competition Law provides the new term of “significant market force”, which is a ground to verify “a dominant market position” of an enterprise, apart from the one of “holding of 30 percent or more of the market share in the relevant market”.

The management of economic concentration is another noteworthy change of the New Competition Law. Unlike the 2004 version of the law, which determines the prohibited economic concentration by relevant market share ratio, presently, economic concentration shall be prohibited if it causes the effect or is capable of causing the effect of significantly restricting competition in the market of Vietnam. The “significantly restricting competition effect” shall be also confirmed by the National Competition Committee based on specific elements provided in this New Competition Law. Regarding “the unfair competitive acts”, the New Competition Law does not re-provide and refer to other acts that are governed under other relevant laws, and “illegal multi-level sales” are excluded from unfair competitive acts.

One last remarkable point of the New Competition Law is to strengthen and ensure the independence of the state administration of competition by having new regulation on the National Competition Committee, which is an agency under the Ministry of Industry and Trade, being in charge of advising and assisting the Minister of Industry and Trade in exercising the function of state administration of competition; carrying out competition legal proceedings and to perform other duties in accordance with the laws.

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By Phan Nhat Phuong.

In the middle of the year 2018, the Government of Vietnam issued Decree No. 86/2018/ND-CP (Decree 86) to regulate foreign cooperation and investments in education sector in Vietnam, taking effect as from August 1, 2018 and replacing Decree No. 73/2012/ND-CP (Decree 73) and Decree No. 124/2014/ND-CP (Decree 124).

One of the noteworthy points under Decree 86 is educational association, which is defined as twinning between Vietnamese private kindergartens, Vietnamese private general educational institutions and foreign educational institutions accredited by an education quality assessment organisations or foreign competent authorities in order to implement the integrated education programme; provided however that the educational association and the integrated education programme must be approved by the Vietnamese competent authorities. The period of educational association shall not exceed five years from the date of approval, which can be extended five years for each renewal.

The remarkable regulations to implement the integrated education programme under Decree 86 includes: (i) foreign education programme used in the integrated education programme shall be accredited in the home country or by an educational competent authority of the aforesaid country; (ii) the integrated education programme shall ensure the objectives of the Vietnamese education programme and still satisfy the requirements of the foreign education programme; learners shall not be forced to re-study the same contents, and the integrated programme shall maintain its stability throughout the study level and the interconnection between levels for the interests of the students; and ensuring volunteer participation and not overwhelming the students; (iii) the size of class and the facilities shall adequately meet the requirements of the integrated education programme and shall not affect the teaching activities of the Vietnamese educational institution during the education association process; (iv) the Vietnamese teachers assigned to teach an integrated education programme shall satisfy the training requirements according to the regulations of Vietnamese laws; the foreign teachers assigned to teach an integrated programme is required with a bachelor’s degree corresponding to his/her teaching majors and also a teacher certificate or equivalent.

One more notable point is that the administrative procedure provided under Decree 73 to obtain decision on establishment of foreign invested centres providing short-term training on foreign languages, IT, cultures and specialised skills are repealed under Decree 86. Accordingly, the establishment of such centres is subject only to the following procedures: (i) obtaining Investment Registration Certificate for foreign investors; (ii) obtaining Enterprise Registration Certificate for enterprise operating the centres and (iii) obtaining approval of educational operation and publication on the websites of the licensing competent authority. Under Decree 86, in order to issue Investment Registration Certificate, the licensing competent authority (ie, Department of Planning and Investment) is required to send the official letter to get the appraisal of the corresponding Department of Education and Training; however, in practice, the licensing authority at its discretion may ask for further appraisal from District People’s Committee and Department of Transportation.

In addition, the limitation of Vietnamese students has been raised from 10 percent of primary and 20 percent of secondary students under Decree 73 to a higher percentage of not exceeding 50 percent of the total enrolment of the international school.

Lastly, Decree 86 opens more opportunities for the foreign-invested kindergartens to enrol Vietnamese children under five years old which was previously prohibited under Decree 73.

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By Huynh Hoang Sang.

The number of solar power projects (SPP) in Vietnam has grown quickly in recent years, especially after the Prime Minister promulgated Decision No.11/2017/QD-TTg (Decision 11) on April 11, 2017 providing a mechanism for encouragement of solar power in Vietnam. This Decision took effect from June 01, 2017 and expires on June 30, 2019.

With the expiry date fast approaching, SPP investors are focused on the construction and completion of such SPPs before the benefit of Decision 11 come to an end. There are two main benefits. Firstly, Decision 11 allows SPPs to be eligible for the exemption and/or the reduction of import duties, corporate income tax, land levy, land rent and water surface rent in accordance with application laws of Vietnam (Art 10, Art 11 of Decision 11). Secondly, Decision 11 also provides a compulsory responsibility of Vietnam Electricity (EVN) as an electricity buyer to purchase all of electricity created by SPPs (Art 9.1 of Decision 11).

Following Decision 11, the Ministry of Industry and Trade (MOIT) issued Circular 16/2017/TT-BCT (Circular 16) on September 12, 2017 regarding project development and sample of power purchase agreements (PPA) mandatorily applied to SPPs including rooftop solar power project (rSPP) and grid-connected solar power project (gSPP). One of the noteworthy points of Circular 16 is that the investor shall only be permitted to form a gSPP if it is approved in the provincial or national solar power planning or provincial or national power development planning (Art 10.1 of Circular 16). However, the investor of rSPP shall only need to register the connecting terminal with the electricity company at provincial level for the rSPP having capacity under 1 megawatt (MW) or follow the regulatory procedures for inclusion of rSPP having capacity of 1 MW or over in the solar power development planning (Art 11 of Circular 16).

As of March 11, 2019, the MOIT further issued Circular 05/2019/TT-BCT (Circular 05) to amend and supplement a number of articles of Circular 16, which provides a specific electricity pricing and new template of PPA for rSPP. In particular, the electricity pricing for rSPP prior to January 01, 2018 is unchanged but after January 01, 2018, it shall be adjusted in accordance with the exchange rate between VND/USD as publicly announced by the State Bank of Vietnam (SBV) on the last working day of the previous year (Art 1.1 of Circular 05). The adhesion of exchange rate herein may be an issue for the investor as it may be treated as a violation under Ordinance on Foreign Exchange Control and its guiding regulations. If this was the case, the investor would be subject to a fine up to VND250 million (US$10,700) (Art 24.6 (c) of Circular 32/2013/TT-NHNN).

Further to Circular 05, the new sample of PPA for rSPP replaces two previous templates of PPA of rSPP as attached in Circular 16 and makes it more preferable on the scope of electricity trading, payment method, rights and obligations of the parties (Art 1.2 of Circular 05). This sample is compulsory for purchasing of electricity by and between EVN and electricity seller for a term of 20 years from the commercial operation of rSPP (Art 7.1 of PPA of rSPP attached in Circular 05). The parties are permitted to supplement some new articles without making any change of the principal contents of this agreement (Art 18.3 of Circular 16). During the term of this agreement, any requirement on amendment of the agreement must be notified to other party 15 days in advance (Art 7.2 of PPA of rSPP attached in Circular 05). The SPP investors, especially for rSPP, should place importance to this Circular and the new sample PPA of rSPP before the effective date of Circular 05 (April 25, 2019).

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By Tran Cong Quoc.

In December 2018, the Government of Vietnam issued the Decree 163/2018/ND-CP (Decree 163), effective from February 2019. Decree 163 is said to be a radical reform of regulations on private issuance of corporate bonds in Vietnam, repealing the Decree 90/2011/ND-CP (Decree 90).

One of the most notable points under the Decree 163 is that the requisite conditions for issuing corporate bonds have been significantly liberalized. Specifically, the requirement to be profitable in the year immediately before issuance is now lifted. The condition for one-year test period before issuance shall be counted from the date of initial issuance of issuer’s business registration certificate, rather than the date of official operation as under Decree 90. In this regard, for issuers that have undergone restructuring such as merger, conversion or division, such time period before restructuring shall be taken into account for the purpose of that one-year test. Another noteworthy point is that a form of issuing by direct placement to  bondholders without going through issuing agent or underwriter is now allowed for any issuers. Previously, under Decree 90, it was limited for the credit institution only. With respect to international bonds, conditions requiring a credit rating for the issuer and legal opinion regarding issue have been revoked. Nonetheless, Decree 163 introduces a new condition for bond issues that requires an  issuer has to fulfill any outstanding due principal and interest accrued from those bonds issued in three consecutive years prior to the current issuance. Further, transferring of privately issued bonds upon issuance in the secondary market shall be, within first year of issuance, restricted to the extent of 100 investors, excluding professional investors.

Decree 90 previously mandates an audited financial statement (FS) of issuer for the year immediately preceding the year of issuance as a condition for bond issuance. Should the bonds be issued in first quarter of a year where yearly audited FS has not been prepared, then the unaudited one shall be alternatively allowed, but to this end, that unaudited yearly FS must firstly be approved by the board of directors (for joint stock companies) or members’ council (for liability limited companies) in accordance with the charter of the issuer. However, the charter of companies in Vietnam do not usually regulate such power of board of directors or members’ council to approve unaudited yearly FS for the purpose of bond issuance, leaving a legal uncertainty whether an issuer can use the yearly unaudited FS approved by its board of directors or member’s council for such purpose. Decree 163 now has relieved such uncertainty by stipulating that in such circumstance, an issuer may adopt the quarter or semi-annual audited FS instead, thus no longer requiring the yearly unaudited FS.

Remarkably, Decree 163 introduces a more systematical administration regime for corporate bonds as compared with Decree 90. In particular, the stock exchange shall now be the responsible state authority directly monitoring private corporate bond offerings in Vietnam, instead of Ministry of Finance under Decree 90, which shall receive any statutory pre-issuance report, post-issuance report and regular and irregular information disclosure by the issuer in respect to the bonds issued. In addition, issuer shall be required to deposit issued bonds with depository agent, ie the Vietnam Securities Depository (VSD) or a member of VSD, to manage the registrar and transferring thereof within 10 days from issue, and status of ownership of such bonds shall be updated by depository agent to the stock exchange on semi-annual basis. The stock exchange shall establish and manage a corporate bond website to collect and publicise the information on international and domestic corporate bonds issued by Vietnamese issuers, which shall include, among others, information regarding bond terms & conditions, conversion of the bonds, attached-warrant exercise and regular and irregular information disclosure of the issuers. Investors may log in such website to search for the status of bond issues in accordance with the operation rules of such website which shall be issued by stock exchange down the road. The previously-issued bonds shall also comply with such requirements on depositing and information disclosure under the Decree 163 as from the effective date thereof.

https://www.inhousecommunity.com/article/reform-regulations-private-issuance-corporate-bonds-vietnam/

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