Category: MONTHLY LEGAL UPDATE

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: [email protected]

Phan Minh
M: (84) 90 462 1350
E: [email protected]

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/

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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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LEGAL UPDATE – DECEMBER 2019 – NEW REGULATION ON PENALTIES FOR LAND-RELATED ADMINISTRATIVE VIOLATIONS


By Pham Quoc Kien
Legal Assistant

On 19 November 2019, the Government has promulgated Decree No. 91/2019/ND-CP on the penalties for land-related administrative violations (“Decree 91”). This decree shall come into effect on 05 January 2020 and replace Decree No. 102/2014/ND-CP dated 10 November 2014 (“Decree 102”). Decree 91 not only instructs in more detail than Decree 102 but also supplement some notable features as follows:

1. Adding definition and penalties with respect to the act of “land destruction”

The term “land destruction” is defined in Law on Land 2013, however such term is not mentioned in Decree 102 and thus causing difficulties in applying penalties on the violation of land destruction. Acknowledging this limitation, Decree 91 has clearly defined the term “land destruction” and corresponding penalties for this violation.

Specifically, Clause 1 Article 15 Decree 91 regulates the action of deforming the land or reducing land quality, the monetary penalties are ranged from VND 2,000,000 to VND 150,000,000 based on the deformed area. The monetary penalties amount is applicable to individuals and shall be double in case the violation is committed by organizations. Furthermore, violating individual/organization is obliged to restore the land to condition prior the violation and the land shall be revoked in case such violator fails to abide the penalties.

2. Supplementing the remedial measures:

In Decree 102, the remedial measures are regulated scatteredly throughout the documents and mainly consisted of 03 (three) measures: obliged to restore the land condition prior to the violations; obliged to return the unlawful gain; and obliged to return the received land. However, Decree 91 has elaborated in detail the remedial measures, specifically there are 17 (seventeen) remedial measures mentioned in Clause 3 Article 5 of this Decree (e.g. obliged to implement land-related administrative procedures, obliged to fulfil land-related financial duty, obliged to complete the construction investment according to the prevail regulation). Furthermore, Article 7 of Decree 91 has also specified the corresponding methods to calculate the amount of unlawful gain for each violation.

3. Supplementing the statute of limitation

Currently, the statute of limitation on land-related administrative violation is in accordance with regulations of Laws on administrative violation 2012. Decree 91 has clearly regulated that the statute of limitation on land-related administrative violation is 02 years, and also specified the method to determine the beginning and ending of each violation.

4. Supplementing the violation of organization investing in real-estate trading project (“Investor”) for not implementing the application procedure for Certificate of Land use rights, Ownership of house and other properties associated with land

Previously, this violation and its penalties is regulated in Decree 139/2017/ND-CP dated 27 November 2017 (“Decree 139”). This regulation is replaced by Article 31 Decree 91, consequently, with respect to the Investor’s violation for not implementing the application procedure for Certificate of Land use rights, Ownership of house and other properties associated with land for the purchaser and/or lessee of house, construction works, the assignee of land use rights, or not provide or insufficiently provide documents to the before-mentioned individuals for self-implementation, depend on the violation duration (from 50 days to more than 12 months) and violation degree (from under 30 to more than 100 apartments, construction works, land lots), the monetary penalty maybe up to 1,000,000,000 per project.

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Legal issues on peer-to-peer lending business In Vietnam

By Ha Thi Hai.

Peer-to-peer (P2P) lending has been growing rapidly in Vietnam, along with the develop­ment of financial technology. There are a number of such enterprises using online platforms to con­nect borrowers and lenders, including Tima.vn, Vaymuon.vn, Fungo.vn and Lendbiz.

What is the principal legal framework of Vietnam for P2P lending business?

As a general principle under the Law on Investment of Vietnam, P2P lending is neither a prohibited nor a conditional business line. This is probably the most favourable legal basis for P2P lending to be conducted in Vietnam in the current context.

With no specific regulation promulgating P2P lending, it may be considered as an e-commerce trading platform, with the “buyer, seller” being the borrower and lender, and “goods, services” being lending activity. However, continuous lending for profit is deemed banking activity and is restricted to credit institutions pursuant to Vietnamese laws. On the other hand, it is prohibited by law to take advantage of the name of e-commerce business activities for illegal capital raising from other traders, organisations and individuals. This is probably the reason why almost all P2P lending businesses fail to register as an e-commerce trading platform in Vietnam.

In practice, because P2P lending companies and all other companies in Vietnam have to register their business activities, P2P lending companies in Vietnam mostly register as investment consultancy, information search services via contracts, financial consultancy supporting services, brokerage activities, etc.

In the current context, what legal issues may a P2P lending company in Vietnam be faced with?

First of all, regarding business activities that are not governed by laws and imply potential risks to the society that may not be managed by state agencies, there is a possibility that the Vietnamese state agencies will consider risk-mitigating measures or enact a regulatory framework for the purpose of management. In fact, the State Bank of Vietnam is currently developing a plan to allow a number of companies that have good financial capacity to pilot P2P lending businesses. After that, the State Bank of Vietnam may add P2P lending to the group of conditional business lines to tighten its management.

The second issue relates to loan interest. As there is no governing regulation, the lending interest rate in civil transactions through P2P lending under the Civil Code 2015 shall be agreed by the parties, but must not exceed 20 percent per year of the loan. It is noted that if the interest rate in a civil transaction is five times higher than the maximum interest rate specified in the Civil Code, earns an illegal profit of from VND30 million to under VND100 million or recommits this offence despite the fact that he/she has incurred an administrative penalty or has an unspent conviction for the same offence, it may constitute a crime of usury in civil transactions under the Criminal Code.

The third matter is responsibilities of P2P lending business to the loan. Due to the absence of legal provisions governing the P2P lending business and responsibilities of P2P lending companies, in the current context, the responsibilities of P2P lending company in case the borrower fails to pay the debt based on the civil laws and the agreements signed between the parties, as well as the rules and regulations of the P2P lending platform which are developed and published on their websites. Therefore, if the agreements, rules and regulations are not well prepared, loans are not well managed, KYC appraisal procedure is absent or not reliable enough, it shall easily lead to an increase of bad debts and complaints about the responsibilities of P2P lending companies when bad debts arise.

The fourth is the issue of payment. A number of P2P lending businesses act as payment intermediaries between borrower and lender for the purpose of controlling information of the loan and fee collection. This activity may face the risk of being considered as a payment intermediary business, which must be licensed by the State Bank of Vietnam. The provision of payment intermediary services without a licence of the State Bank of Vietnam may be subject to administrative fines and confiscation of proceeds.

Fifth, regarding anti-money laundering, organisations conducting financial activities are currently required to comply with very strict anti-money laundering regulations by the Law on Anti- Money Laundering. P2P lending activities that have not been governed by anti-money laundering regulations may lead to the risk that the P2P lending business is unable to control money laundering activities that may arise in loan transactions and potential risks from these money laundering activities.

Learning from the lesson of the explosion of uncontrolled P2P lending in China, leading to the collapse of hundreds of P2P platforms in 2018 and the recent trend of redirection of some P2P lending platforms to Vietnam, the Government will issue legal regulations in the coming time to manage, control, prevent risks and other forms of corruption from P2P lending in Vietnam. Therefore, during this time, P2P lending investors need to do research on relevant Vietnamese regulations carefully to orient their business activities and to avoid the risks of violating the laws. Investors may also consider proactively submitting their business plans to the SBV for consideration and approval to legally pilot this business activity.

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LEGAL UPDATE – NOVEMBER 2019 – INSURANCE BUSINESS LAWS

NEW REGULATIONS ON INSURANCE BUSINESS LAWS

By Nguyen Thu Trang

Legal Assistant

Law on Insurance Business, after nearly 20 years of implementation, has brought positive effects to the development of economy and society in Vietnam. In order to meet the commitments in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Law No. 42/2019/QH14 dated 14 June 2019 on amendment and supplement of a number of articles of Law on Insurance Business and Law on Intellectual Property (“Law No. 42”) was ratified by the National Assembly. Law No. 42 will officially take effect from 1 November 2019, in which some notable provisions on insurance business are as follows:

1. Supplement of regulations on insurance auxiliary service

This type of insurance business is newly stated by laws, in particular, insurance auxiliary service is an integral part of insurance business activities, implemented by insurance enterprise, insurance brokerage enterprise, other organizations and individuals for profit purpose. This service consists of 5 activities: insurance consultancy, insurance risk assessment, actuarial analysis, insurance loss assessment and insurance claim assistance.

According to Clause 2, Article 3 of Law No. 42, insurance auxiliary service is supplemented to List of conditional business lines specified in Annex 4 of the amended Law on Investment.

2. Supplement of regulations on provision of insurance auxiliary service

Insurance consultancy as an independent insurance auxiliary service is different from insurance products sale consultancy implemented by insurance agents and insurance brokerage enterprise under current Law on Insurance business, therefore, Law No. 42 supplements definition and provides conditions for qualifications of individual who provides insurance consultancy service in of Clause 4, Article 1 Law No. 42 (Clause 1, Article 93b). Accordingly, in addition to conditions for legal capacity, individual who provides insurance auxiliary service is required to have bachelor’s degree or higher majoring in insurance or bachelor’s degree or higher in another major and a certificate of training in insurance consultancy.

Moreover, organization providing insurance auxiliary services is required to fulfill the conditions for legal status of entity and conditions for individual providing insurance auxiliary service as stated in of Clause 4, Article 1 Law No. 42 (Clause 2, Article 93b) above.

In order to create conditions for organizations and individuals currently engaging in insurance auxiliary service to have time to fulfill the conditions for provision of that service and to ensure the sanctions, Clause 1, Article 4 of Law No. 42 states that such organizations and individuals shall have 1 year to meet the above conditions.

3. Professional liability insurance to be mandatory when providing insurance auxiliary service

Clause 4, Article 1 Law No. 42 (Clause 3, Article 93a) states that individuals providing insurance consultancy service is obliged to purchase professional liability insurance for provision of insurance consultancy service; insurance auxiliary service providers shall also purchase professional liability insurance in accordance with each type of insurance auxiliary service.

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MONTHLY LEGAL UPDATE – NOVEMBER 2019 – DECREE 75/2019

NEW REGULATIONS ON THE PENALTIES FOR ADMINISTRATIVE VIOLATIONS AGAINST COMPETITION LAWS

By Nguyen Tu Oanh
Legal Assistant

On 26 September 2019, the Government has promulgated the Decree No. 75/2019/ND-CP (the “Decree 75/2019”) on the penalties for administrative violations against regulations on competition which shall take effect from 01 December 2019 and replace the Decree No. 71/2014/NĐ-CP dated 21 July 2014 (the “Decree 71/2014”).

In general, the Decree 75/2019 has met the demand on and been consistent with the changes and new points in the Law on competition 2018 as follows:

The applicable subject of the Decree 75/2019 is similar to that one in the Law on competition 2018. Accordingly, Decree 75/2019 is applied for any relevant domestic and foreign authorities, organizations and individuals. It means that if a foreign organization violates the Law on competition 2018, the organization may be imposed a penalty under the Decree 75/2019.

The provisions in Decree 75/2019 on administrative violations against regulations of the competition law are more detailed than the same in Decree 71/2014. Particularly, the administrative violations against regulations of the competition law under the Decree 75/2019 including: (i) Violations against regulations on anti-competitive agreements; (ii) Violations against regulations on the abuse of dominant position or exclusive position; (iii) Violations against regulations on economic concentrations; (iv) Violations against regulations on unfair competition; (v) Violations against other provisions in the competition law.

Besides detailing violations against regulations of the competition law, Decree 75/2019 also sets forth the mitigating and aggravating circumstances into particulars (as stipulated previously in Article 85 of the Decree No. 116/2005/ND-CP). In which the mitigating circumstances mainly come from the voluntary in declaration, remedy for violations, the violations due to coercion or dependence on others, first-time violations. In contrary, the aggravating circumstances are applied for the organized violations, violation which has been committed for more than once or repeated, the deliberate concealment of violations…

The Decree 75/2019 has amended, supplemented the regulations on fines which are consistent with the changed provisions in the Law on competition 2018. Particularly, Decree 75/2019 stipulates separate maximum fines for each violation against regulations on anti-competitive agreements; regulations on the abuse of dominant position or exclusive position; and regulations on economic concentrations and the fine is calculated based on total turnover of the violating enterprise earned from the relevant market in the preceding fiscal year in which the violations are made. This provision helps competent authorities to define the fine amount to each violation accurately on its nature as well as to be easier for the application of fines to violations.

Another noteworthy point is the maximum fine to the violations against regulations on unfair competition under the Decree 75/2015 is increased ten times in comparison with the same in the Decree 71/2014, specifically it grew from VND 200,000,000 to VND 2,000,000,000. Such change shows the attention of the legislators to violations against regulations on unfair competition and their intention in controlling/restricting these violations on the market.

To satisfy new regulations of the Law on competition 2018, Decree 75/2019 has added provisions on the violations and fines to actions of providing information for or mobilizing, inciting, coercing or enabling enterprises to engage in anti-competition or unfair competition activities. Accordingly, the main penalty to the violations could be up to VND 50,000,000, additionally the violating entities may be imposed other additional penalties and remedies such as the public correction of information.

The competent authorities for deciding penalties to violations are National Competition Committee, Inspections or the chief Inspector of the Ministry of Industry and Trade, of which National Competition Committee is a new authority established by the mergence between Competition and Consumer Authority and Competition Committee.

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Use of public property as payment in build-transfer projects

By Huynh Hoang Sang.

The Government recently promulgated Decree No.69/2019/ND-CP on the utilisation of public property for making payment to investors upon execution of construction projects in the form of build-transfer contracts (BT Contract) (Decree 69/2019). Decree 69/2019 replaced Decision No. 23/2015/QD-TTg (Decision 23) and takes effect from October 1, 2019.

In the past, Decision 23 allowed the State to make payment only by land funds to investors executing construction investment projects in the form of build-transfer (BT Project). Otherwise, Decree 69/2019 provides that the State could expend the public property including (i) land funds; (ii) land, houses and other assets on land; (iii) infrastructure assets used for the national interest, public interest; and (iv) other types of public properties (according to the Law on management and use of public property). The expansion of the extent of public properties under Decree 69/2019 is reasonable and in line with the Law on management and use of public property 2017 and further adaptable to the need of BT Projects. Besides that, proceeds from public properties auctions could also be used to pay investors for execution of BT Projects in accordance with the Law on Public Investment and Law on State Budget. The expansion of subject of properties used for payment to investors undertaking BT Projects will provide more tools for payment in such projects and encourage the development of BT Projects in the future.

The use of public property for payments to investors undertaking BT Projects is implemented under the principle of parity — the value of the BT Project is equivalent to the value of public properties expenditure. Accordingly, the value of public property shall be determined based on market price as per the regulations at the time of payment and the value of the BT Project shall be determined based on the result of the auction. In case the value of the paid land funds is larger than the value of the BT Project, investors shall pay the difference to the State budget. Otherwise, if the value of the paid land funds is smaller than the value of the BT Project, the State shall choose to pay the difference in cash or through land funds at the time of finalisation of the BT Project.

Decree 69/2019 provides the valuation method and payment schedule for each type of public properties. However, payment made from the public properties as mentioned above always requires an approval from the Prime Minister.
One noteworthy point in Decree 69/2019 is that the payment through land funds for investors shall be enforced in two methods as follows: (i) allocating land with collection of land use fees or (ii) leasing land with collection of a one-off lump sum payment of rent for the entire lease term. The land fund paid for investors includes non-clearance lands or land with completion of clearance. Noting that the use of land with completion of clearance for making payment to investors must be reported by Provincial People Committee (PC) to the Prime Minister for considering and deciding before the issuance of the decision on in-principal approval of the BT Project.

In contrast, in terms of non-clearance lands, based on (i) approved plan 1/500 or 1/2000 and (ii) request from competent authorities who signed the BT Contract, the Provincial PC shall commit with investors in writing on the use of land funds for the payment to the BT Project. In such case, investors should pay attention to the advance payment for compensation, clearance expenses under the approved plan on compensation and clearance, and such advance payment amount shall be put in the price of the BT Contract. One critical thing to note is that the advance payment amount shall not be accounted for loan interest charges in capital mobilisation of the BT Project. After receiving the deposit, the State shall implement compensation and clearance works as per the approved plan. In this situation, investors should expect that the compensation and clearance works may take a long time and, in the worst case, may be long-term delayed, hence the capital cost of the BT Project may be materially affected due to the non-interest in loan of capital mobilisation of the BT Project from the advance payment amount.

The time of payment for the BT Project shall be calculated from the date the authorities issue a decision on land allocation, land lease or property transfer to the investor. The handing-over of public properties for payment to the investor shall be enforced after the BT Project is completed or under the schedule determined by the authorities in accordance with the Law on investment and construction.

Under this new and favourable regulation, we think that BT Projects in Vietnam will not only be developed steadily but also attract more investor interest from across the region.

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