PetroVietnam Restructuring Plan

On 5 January 2013, the Prime Minister approved a restructuring plan for PetroVietnam (“PVN”), the national oil company. Under the restructuring plan, PVN is instructed to:

• equitise Dung Quat refinery, the only refinery in operation in Vietnam by 2015. PVN is required to retain at least 75% of the shares in Dung Quat refinery;
• equitise Ca Mau Fertilizer Plant which has an annual capacity of 800,000 tons by 2015. PVN is required to retain at least 51% of the shares in Ca Mau Fertilizer Plant;
• equitise PV Oil which is mainly in charge of the downstream operation of PVN including import and distribution of petrol after 2015. PVN is required to retain at least 75% of the shares in PV Oil;
• equitise  PV Power, the second largest electricity producer after Vietnam Electricity in Vietnam. PVN is required to retain at least 75% of the shares in PV Power;
• reduce its shareholding in PetroVietnam Insurance Company, the second largest non-life insurance, from 39% to 35% by 2015;
• divest entirely its shares in Ocean Bank by 2015; and
• continue studying a restructuring plan for PetroVietnam Finance Company (PVFC), a finance company with total assets of about US$ 4.5 billion. In August 2012, the Prime Minister has opined that PVN needs to divest from PVFC entirely. However, the fate of PVN’s 78% shares in PVFC has not been decided in the restructuring plan.

Vietnam Airlines Restructuring Plan

On 16 January 2013, the Prime Minister approved the restructuring plan for Vietnam Airlines, the national and largest carrier in Vietnam. The notable points of the restructuring plan include:

• Vietnam Airlines to be equitised within 2013. This may be an encouraging news for foreign investors interested in Vietnam Airlines who have waited for a long time since the intention to equitise Vietnam Airlines have been floated. However, the Prime Minister does not provide any further details on the proposed equitisation of Vietnam Airlines (e.g capital structure and how many shares will be owned by the Government after equitisation). This indicates that there are still works to be done;
• Vietnam Airlines to reduce its shareholding in Vietnam Air Petrol Limited Company (VINAPCO) from 100% to more than 50%. Vinapco is currently the only petrol company, which supplies fuel to commercial aircrafts in Vietnam;
• Vietnam Airlines to divest entirely from its holdings in various companies not relating to air transportation services including Techcombank (a large private joint stock bank with 20% investment from HSBC), Bao Minh Insurance Company, and Hoa Binh Securities Company; and
• Vietnam Airlines may adopt a sale and lease back arrangement for certain aircrafts currently owned by it.

Circular 213/2012 on activities of foreign investors on Vietnamese securities market

In December 2012, the Ministry of Finance (MOF) issued Circular 213/2012 on activities of foreign investors on Vietnamese securities market (Circular 213/2012). Circular 213/2012 will take effect from 15 February 2013 replacing Decision 121/2008 of the MOF on the same subject. The salient points of Circular 213/2012 include:

• Not applicable to non-public companies: Circular 213/2012 does not apply to (1) direct investment by way of share purchase or capital contribution and merger and acquisition, (2) trading of shares by non-public companies, and (3) trading of capital contribution in limited liability companies. On the other hand, Decision 121/2008 applies to, among other things, (1)  purchase unlisted shares which may include shares of non-public companies and (2) making capital contribution in Vietnamese companies which may include capital contribution of limited liability company. The reduced scope of application of Circular 213 may allow a foreign investor investing an a non-public company without having to obtain a securities trading code from the Vietnam Security Depository Center (VSD);
• Member funds established in Vietnam with more than 49% foreign capital is regarded as a “foreign investor”. Under Decision 121/2008, only member funds with more than 100% foreign capital is regarded as a “foreign investor”;
• Disclosure obligation for “related foreign investors”: A group of related foreign investors include (1) a group of foreign funds managed by the same fund manager, (2) sub-funds of the same master fund, (3) multiple investment managers fund, and (4) funds having the same trading representative in Vietnam. A group of related foreign investors must designate the single contact point to make public disclosures about its trading activities in Vietnam. In addition, a group of related foreign investors is prohibited from manipulating trading activities; and
• Issuance of Securities Trading Code before submission of legalized copies: Many foreign investors have complained that the requirement to have legalized copies of documents submitted to the VSD is cumbersome and takes time. Responding to the complaint, Circular 213/2012 now allows certain foreign investors to be issued a Securities Trading Code before submitting the required legalized copies of documents. 

Is “business transfer” a “share transfer”, “project transfer” or “assets transfer”?

A business transfer can generally understood as the transfer of, among other things, the assets, employees, contracts, clients and goodwill associated with a particular business. However, “business transfer” is not clear legal concept under Vietnamese law. In Vietnam, when one mentions "business transfer", it is not clear whether it refers to the transfer of (1) shares of the company that runs such business or (2) the assets and other components that constitute such business.

In case of (1), then a business transfer should probably better called as a share transfer transaction. In case of (2), commercially, a business transfer could be structured as the transfer of an “investment project” (see earlier post here) as provided under Article 66 of Decree 108/2006. However, there is no clear procedures under Decree 108 for a "project transfer" transaction which does not involve the transfer of shares of the project company. In particular,

• Article 66.2 of Decree 108 provides that in the case of assignment of a project of an economic organization not associated with the termination of operation of the assigning economic organization, the assignment of the project will comply with the conditions and procedures for assignment of capital;
• Article 66.3 of Decree 108 provides that in the case of assignment of a project of an economic organization associated with the termination of operation of the assigning economic organization, the assignment of the project shall comply with the conditions and procedures for merger with or acquisition of an enterprise;
• Article 66.4 of Decree 108 provides that in the case of assignment of an investment project associated with the termination of operation of the assigning organization and the assignee establishing an economic organization to continue implementation of the project, the investment procedures stipulated by this Decree must be carried out.

A “project transfer”, which is not a share transfer, is not associated with the termination of the assigning organization so Articles 66.3 and 66.4 of Decree 108 are not applicable. However, Article 66.2 of Decree 108 requires a transfer of project not associated with the termination of the assigning organization to follow procedures for assignment of capital. It is not clear how a project transfer by way of selling assets could comply with the procedures for assignment of capital.

As such, in case of (2), to avoid all the complications of a project transfer regulations, the parties can just structure a business transfer as a transfer of assets and other components of the transferred business.