Relationship between Vietnamese State-owned enterprises (SOEs) under control of the “Super Committee.”

Since the end of 2018, the Commission for the Management of State Capital at Enterprises (CMSC) will become the new Owner Representative Agency (Cơ quan đại diện chủ sở hữu) of 19 large SOEs including State Capital Investment Corporation (SCIC), Petro Vietnam (PVN), Vietnam Electricity (EVN), Vietnam National Petroleum Group (Petrolimex). This change causes some SOEs to have CMSC as the common Owner Representative Agency, which may cause these SOEs to become related persons according to the Enterprise Law 2014, because:

New guidance of the State Bank of Vietnam (SBV) on foreign direct investment

M&A lawyers in Vietnam usually spend a great deal of time (and client’s monies) to figure out how and when payment for an M&A transaction should be made. This is partly due to the fact that the SBV has not issued any guidance on foreign exchange control for investment activities under the Investment Law 2014 since 2015. From September 2019, hopefully, the situation will be significantly improved thanks to the new Circular 6/2019 of the SBV. Under Circular 6/2019,

· Foreign-invested enterprises, which must open a Direct Investment Capital Account (DICA), include, among others, (1) enterprises which are incorporated by, among others, foreign investors and are issued an Investment Registration Certificate (IRC), and (2) enterprises which are first incorporated by Vietnamese investors but are later acquired by foreign investors who own 51% or more of the charter capital of such enterprises. Previously, enterprises under (2) are not required to open a DICA if they do not have an Investment Registration Certificate. However, it appears that an enterprise, which is a subsidiary of a DICA enterprise, is not required to open a DICA.

· The DICA is used by a DICA enterprise to handle fund transfers for capital transactions such as capital contributions by shareholders/members of the DICA enterprise or loans from foreign lenders. For M&A transactions including secondary transfer of shares/capital contribution, the DICA plays an important role because the SBV requires payment for secondary transfer of capital in a DICA enterprise to be made via DICA. The bank which operates DICA could require various supporting documents in order to allow monies can be transferred in or out of the DICA.

Latest proposed amendments to the Investment Law 2014

The latest proposed amendments to the Investment Law 2014 submitted to the National Assembly in June 2019 include the following points, among others:

· The Investment Law will not apply to PPP projects which will be subject to a separate law.

· Investment conditions are not separated into two groups (1) operational conditions which apply to the operation of an investment project and (2) market access conditions which apply to foreign investors who wish to invest in sectors/industry which have market access restrictions.

· The proposed definition of foreign-controlled enterprises is removed (http://tinyurl.com/y2nl4ork). Accordingly, the regime regarding deemed foreign-invested enterprises under the Investment Law2014 remains unchanged. This should be a major relief for transactions which have relied on existing definitions of deemed foreign-invested enterprises.

· A foreign investor which incorporates a “start-up innovative” enterprise will not need to obtain an Investment Registration Certificate.

· Foreign investors investing in public companies or securities companies under the Securities Law are not subject to the investment conditions and investment procedures under the Investment Law 2014.

· Outbound investments by Vietnamese investors are now subject to more restrictions. The draft amendments include sectors where outbound investments are prohibited or subject to conditions (including financial services, securities, real estates and technologies).

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Comment

Voting rights at the Member’s Council of a single-member limited liability company (Single LLC) in Vietnam

It is not clear whether voting rights of members of the Member’s Council of a Single LLC is based on (1) the amount of charter capital that such member represents, or (2) principle one person-one vote. Article 75.5 of the Enterprises 2014 provides that unless otherwise provided in the charter, each member of the Members’ Council of a Single LLC has one vote. This provision suggests that in the charter of the Single LLC, the owner of a Single LLC can allocate different voting rights to members of the Members’ Council who are usually the representatives of the owner in the Single LLC. The most common criteria is based on the amount of charter capital of the Single LLC represented by each member. The ability to allocate different voting rights to different members of a Single LLC is important since the owner of a Single LLC may have different shareholders who want to directly manage the Single LLC.

Vietnam Business Law