The importance of shareholding ownership ratio of a foreign investor in a Vietnamese commercial bank

It is important to determine the shareholding ownership ratio of a foreign investor in a Vietnamese commercial bank (a VN Bank), since:

there is different foreign ownership cap applicable to each type of foreign investor in a VN Bank (see here);
there are different requirements applicable to a foreign investor in a VN Bank depending on the shareholding ownership ratio of such foreign investor. For example, a foreign investor with 10% or more shareholding ownership must, among other things, have an international credit rating and must have a total assets of US$ 10 billion or more (for investors being financial institutions) or a charter capital of US$ 1 billion or more (for investors being non-financial institutions);
there are different approval procedures applicable to a foreign investor acquiring shares in a VN Bank depending on the shareholding ownership ratio that the investor intends to acquire. For example, an acquisition resulting in a less-than 5% shareholding ownership ratio by a foreign investor is not subject to approval by the State Bank of Vietnam (SBV). An acquisition resulting in a shareholding ownership ratio between 5% to less-than 10% is subject to an approval procedures different from an acquisition resulting in a a shareholding ownership ratio of more than 10% (see here); and
there are different transfer restrictions applicable to a foreign investor in a VN Bank depending on its shareholding ownership ratio. For example, a foreign investor with a less-than 5% shareholding ownership is not subject to any share transfer restriction. A foreign investor with a shareholding ownership ratio between 5% to less-than 10% may transfer shares subject to SBV’s approval for transfer shares by a major shareholder. A 10% or more foreign investor is not allowed to transfer shares for at least three years.

However, determination of the foreign ownership ratio held by a foreign investor in a VN Bank is not always straightforward since the Law on Credit Institution 2010 and Decree 1/2014 may take into account “indirect ownership” (sở hữu gián tiếp) when determining the foreign ownership ratio held by a foreign investor (see here).

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Decree 163/2017 on logistic services in Vietnam

Decree 163 of the Government on logistics services was issued on 30 December 2017 (Decree 163/2017). It is going to take effect on 20 February 2018 and replace Decree 140 of the Government on logistics services dated 5 September 2007 (Decree 140/2007). Below are salient changes in Decree 163/2017.

Decree 163/2017 no longer requires the logistics services providers to meet the condition of adequate equipment and personnel. That condition was applied to some logistics services, but under Decree 163/2017, the logistics services providers have only to meet conditions specific to the logistics service that they provide.

Decree 163/2017 allows foreign investors to apply, at their discretion, investment conditions regarding logistics services under an international treaty where multiple treaties are applicable.

Decree 163/2017 classifies logistics services in accordance with Vietnam’s commitments to the WTO. By contrast, Decree 140/2007 has its own classification of logistics services which is not consistent with the description of logistics services under the WTO Commitments. And the investment conditions and foreign ownership limit provided in Decree 163/2017 are generally consistent with the WTO Commitments. Therefore, it is easier to compare the Decree 163/2017 with the WTO Commitments.

The table below sets out the applicable foreign ownership limit under Decree 163/2017, to the extent possible, in comparison with Decree 140/2007:

New requirements on strategic investors investing during the equitisation of a State-owned enterprise

Decree 126/2017 replacing Decree 59/2011 on equitisation of State-owned enterprises introduces various new requirements for a strategic investor who invests during the equitisation of a State-owned enterprise (equitised SOE). These new requirements (especially the pricing requirement) are more difficult for a strategic investor to satisfy. In particular,

The equitized SOE must decide to select the strategic investor and the strategic investor must commit to invest before publication of the public offering document for the public auction. Under Decree 59/2011, the strategic investor may decide to invest either before or after the public auction;
Despite being required to commit to invest before the public auction, in most cases, the strategic investor must pay a price not lower than the average bidding price at the public auction. Under Decree 59/2011, there is no such requirement and the minimum price is the lowest successful bidding price. This requirement under Decree 126/201 seems to repeat the mistake under Decree 109/2007. There is unlikely any sensible investor who will commit to invest without knowing the price that it has to pay first;

Can a Board director in a Vietnamese joint stock company be removed by the courts?

A Vietnamese court does not have clear authority to remove a Board director from the Board of a Vietnamese joint stock company like other more developed jurisdictions. Under Article 156.1 of the Enterprise Law 2014, a Board director may be dismissed (miễn nhiệm) if he/she:

fails to maintain the qualifications of a Board director including not having full capacity for civil acts or belonging to the types of persons who are not allowed to manage an enterprise in Vietnam;
fails to participate in activities of the Board for six consecutive months, except in the case of an event of force majeure; and
tenders a written resignation.

Vietnam Business Law