Cross border supply of online advertising services into Vietnam

For online advertising, placing advertisement through big US internet companies such as Google or Facebook is a must for many Vietnamese companies. Under the WTO Commitments, Vietnam undertakes to allow cross-border supply for advertising services (CPC 871, excluding advertising for cigarettes) with no limitation. As such, a foreign company should be able to provide online advertising services to Vietnamese customers without having to set up a commercial presence in Vietnam.

That being said, Decree 181/2013 does not allow Vietnamese organisations or individuals to place their online advertisement directly on overseas server-based website. Instead, online advertisement with foreign internet companies must be placed via a local advertising service provider in Vietnam. In addition, 15 days before the placement of the local advertiser’s advertisement on its website, the foreign publisher is required to report the corporate information and key business lines of the authorised local advertising service provider to the Ministry of Culture, Sports and Tourism.

On the other hand, under the Advertising Law, foreign organisations or individuals not having a commercial presence in Vietnam must conduct the advertisement of their products, goods or services in Vietnam via an advertising service provider in Vietnam. In theory, these restrictions may be viewed as contrary to Vietnam’s undertaking under the WTO Commitments which allow cross-border supply for advertising services without limitation. However, it is not clear if one can successfully invoke the WTO Commitments.

New Bankruptcy Law in Vietnam – Some new points

A new Bankruptcy Law has been issued and will become effective from 1 January 2015. The law contains various new points which hopefully will make it easier for a company to enter and exit bankruptcy process in Vietnam. In particular,

• The law for the first time introduces the use of receiver which is a private company with certain professional qualification to manage the bankruptcy process. Under the old regulations, the bankruptcy process is managed directly by the court through an asset management and liquidation unit.
• The insolvency status is defined as the inability to pay overdue debt for three months instead of the inability to pay overdue debt when due. The revised definition could help to reduce abuse of bankruptcy process to settle individual disputes.
• There is now a process for a higher court to review a decision to commence or not to commence a bankruptcy process issued by a lower court.
• Interests can continue to accrue from the time of the decision to commence a bankruptcy process to the time of the decision to declare bankruptcy. Under the old regulations, interests cease to accrue as soon as there is a decision to commence a bankruptcy process. The new provision is more protective to creditors as the bankruptcy process may well last for a couple of years;
• A secured creditor may not be able to enforce its security if the secured assets need to be used for the business recovery plan approved by the unsecured creditors.
• In terms of liquidation preference, it is now clear that taxes owed to the Government have same liquidation preference as other unsecured creditors. Debts arising from the business recovery plan have higher liquidation preference to other unsecured creditors. If the bankrupt company is a credit institution then deposits or monies paid by deposit insurance institution will have higher liquidation preference and special loans given the bankrupt credit institutions during the special control process will have the highest liquidation preference.
• The voidable preference may now extend to 6 months  (instead of 3 months) or, in the case of related persons, 18 months before commencement of a bankruptcy process and to sale transaction conducted not at market price or transaction outside the scope of business of the relevant company. There is also a process to review a court’s decision to void a transaction under the voidable preference regime.
• A bank where a company which is subject to a decision to declare bankruptcy has an account is expressly prohibited from paying debts unless approved by the court. 
• There are detailed procedures for liquidating assets of a bankrupt company. 

Mortgage of land use rights where land rental is exempted

Under Decree 46/2014, a land user in Vietnam who leases land under lump sum payment for the entire lease term and is exempted from all land rental may have the option to pay the exempted land rental in order to enjoy the rights and obligations applicable to a normal land user including the right to mortgage the relevant land use right with credit institutions.

This is an important new point for many BOT projects which need to be able to mortgage their land use rights in favour of their lenders. Under the old land regulations, investors in a BOT project are exempted from land rental payment. However, this investment incentive has caused considerable difficulties for project sponsors in offering an acceptable security package to foreign lenders. 

Potential restriction on foreign investment in printing business

Under the commitments of Vietnam to the WTO (WTO Commitments), printing service is considered as a part of services incidental to manufacturing (CPC 88442). Accordingly, under the WTO Commitments,  from 11 January 2015, a foreign investor should be allowed to set up a wholly owned printing subsidiary in Vietnam.

However, under Decree 69/2014, a company involved in the printing of newspapers, statutory forms issued by the State authorities, anti-counterfeit stamps, and “financial invoices” must “have Vietnamese owners”. It is not clear if this means that (1) all owners of such printing company must be Vietnamese or (2) at least one owner of such printing company must be Vietnamese. In either case, the restriction under Decree 69/2014 seems to be contrary to the WTO Commitments.