Certain Limitations on Privately Issued Shares

Under the controversial Decree 1/2010,  a private placement of shares in a private shareholding company was subject to various restrictions under Decree 1/2010, including:

• shares privately issued were subject to a lock-up period of 1 year;
• there had to be a six-month gap between two tranches of a private placement; and
• the proceeds resulting from the sale of shares had to be kept in an escrow account.

Decree 58/2012 of the Government dated 20 July 2012 implementing the Securities Law has repealed Decree 1/2010 and therefore has removed these restrictions. However, except in certain limited circumstances, private placement of shares by a public shareholding company is still subject to the first two restrictions, which are provided in the amended Securities Law rather than in Decree 1/2010.

The role of "Official Letters" in Vietnam legal system

Official letters (công văn) are regarded as administrative documents (văn bản hành chính) as opposed to a legal instrument and are intended to contain correspondences from various authorities. However, in practice, in official letters addressed to other authorities or companies, many authorities express their views and interpretations of a legal provision. In many cases, Government authorities even give instruction on how certain issues should be addressed if there is no law regarding such issue or the law is not clear.

Accordingly, although official letters are not legal instruments and do not have the force of law, in practice, official letters provide useful interpretive aid and guidance for lawyers and practitioners in Vietnam. The downside of relying on official letters is that they are not always publicly available and the view or interpretation contained in an official letter can be changed in the future or conflict with other official letters or legal instruments. An official letter issued by one authority may not bind another authority if the other authority is not under control of the issuing authority.

Hierarchy of Vietnamese legislation

The law of Vietnam consists of the following main legal instruments, which can be issued by various authorities:


                                                     

Issuing authorities	Instruments dated from 1 January 2009
The National Assembly	Constitution; Laws and Resolutions
The Standing Committee of the National Assembly	Ordinance; and Resolutions
The President	Order; and Decision
The Government	Decrees
The Prime Minister	Decisions
The Supreme Court	Resolutions
The Chief Judge of the Supreme Court	Circulars
The Procurator-General	Circulars
Ministries or ministerial level entities	Circulars
The General State Auditor	Decisions
Local People’s Committees	Decisions, and Directives
Local People’s Council	Resolutions

In addition to the above legal instruments, more than one issuing authorities can together issue a “joint” legal instrument. Legal instruments issued before 1 January 2009 may be issued in a different form under the old Law on Legal Instruments. Nowadays, Vietnamese copies of legal instruments in Vietnam are regularly published on the Official Gazette of the Government and  widely available on the internet (e.g. luatvietnam.com.vn; legal.khaitri.vn). English copies of certain important legal instruments are also available for a fee on certain websites (the most reliable one being www.vietnamlaws.com).

In general, legal instruments issued by higher authorities will have higher validity. Legal instruments issued by central authorities will be applicable nationwide while legal instruments issued by local authorities will be applicable within the specific localities only.

Usually, the “legal framework” covering a specific area of law includes:

·   a Law issued by the National Assembly setting out the general principles of such area;

·   one or more Decrees issued by the Government, which further clarify and implement the Law issued by the National Assembly; and

·   one or more Circulars issued by the relevant Ministries in charge of the area in question, which provide more detailed implementation of the Decrees issued by the Government.

In practice, the drafting of all of the above legal instruments is controlled by the relevant Ministry in charge of the relevant area. For example, the Ministry of Finance will control the drafting of all legislations regarding capital market such as the Law on Securities, the implementing Decrees and Circulars. In addition, usually the Law issued by the National Assembly can only be expected to be fully implemented in practice after the relevant Ministries issue the detailed implementing Circulars. Therefore, there is usually substantial delay between the time a Law of the National Assembly is issued and the time such Law is fully implemented in practice.

New (but not fully mandatory) model charter for public companies

Under Decision 15/2007 of the Ministry of Finance, public listed shareholding companies in Vietnam are required to adopt the model charter under Decision 15/2007. From 17 September 2012, Decision 15/2007 is repealed by Circular 121/2012 of the Ministry of Finance providing corporate governance rules of public companies (including both listed and unlisted public companies). Circular 121/2012 also contains a model charter for public companies in replace of the one under Decision 15/2007. However, public companies are only required to "refer to" the model charter to prepare their own charters. So the new model charter is not mandatory for public companies under Circular 121/2012. That being said, the new model charter may still be mandatory for listed public companies, which are subject to listing rules of the relevant stock exchanges.