Vietnamese regulator’s imposing prohibition on cryptocurrency activities

Under a recent announcement in Official Letter No. 4486/UBCK-GSDC dated 20 July 2018, the State Securities Commission of Vietnam (SSC) requires public companies, securities companies, asset management companies, and securities investment funds (quỹ đầu tư chứng khoán) (i) not to conduct any illegal offering, transaction or transaction brokerage relating to virtual money (tiền ảo) which should include cryptocurrencies like Bitcoin and to (ii) adhere to the legal regulations on anti-money laundering.

The above official letter was based on Directive 10/CT-TTg of the Prime Minister dated 11 April 2018. Both of them once again confirm the view of Vietnamese government on virtual money that was stated by the State Bank of Vietnam in its press release dated 27 February 2014 about Bitcoin in Vietnam:

(a) virtual money is not currency; and

(b) virtual money is not a legal tender.

ISSUES REGARDING APPROVAL PROCEDURES OF A RELATED PARTY TRANSACTION IN A MULTI-MEMBER LLC IN VIETNAM

1. Where a member (the Conflicted Member) in a limited liability company with two or more members (the LLC) has an interest in a related-party transaction or contract (an RPT) with the Multi-Member LLC, the Enterprise Law 2014 requires the RPT to be approved by the Members’ Council (MC) of the LLC excluding the votes of the Conflicted Member. However, relating to the approval process, the Enterprise Law 2014 is not clear on the following issues:

1.1. whether the charter capital of the Conflicted Member should be excluded from the calculation of quorum of the MC’s meeting to approve the RPT? and

1.2. if the Conflicted Member is the chairman of the MC, whether the Conflicted Member can still preside over the MC’s meeting?

Transfer of loan commitments between banks in Vietnam

Vietnamese banking regulations do not have clear mechanics for transfer of loan commitments between banks or credit institutions in Vietnam. In particular:

Under Circular 9/2015 of the State Bank of Vietnam (SBV) on loan transfer, loan transfer is defined to mean the transfer of “the right to collect loan” arising from the lending operation by a bank (the Original Bank) to a loan purchaser, which may or may not be a bank. The definition of loan under Circular 9/2015 does not include loan commitment where a bank only commits to lend to a borrower but has not actually disbursed the loan. Accordingly, all the loan transfer mechanics under Circular 9/2015 do not directly apply to transfer of loan commitment.
One way for banks to overcome the lack of regulations on transfer of loan commitment is for the Original Bank to actually disburse the loan and then transfer such loan to another bank (New Bank) in accordance with Circular 9/2015. However, under Circular 9/2015, if the loan purchaser is a bank, then the SBV requires the New Bank to have a loan purchase license. Not all banks in Vietnam are granted a loan trading licence by the SBV.
Under the lending regulations (Circular 39/2016), a loan commitment could be understood to be an undertaking by a bank to handover to the client an amount of money to use. Therefore, it appears that a loan commitment is regarded as an obligation to lend by a bank (which, of course, is usually conditional on the borrower’s satisfying certain conditions precedent). Therefore, transfer of a loan commitment is regarded as a transfer of obligation and will require the consent of the borrower. Borrower’s consent is usually not a problem since any proper loan agreement will include a transfer clause which allows the bank to transfer any of its rights and obligations under the loan agreement to a third party.

LAWYER’S CRIMINAL LIABLITY FOR FAILURE TO REPORT CRIMES COMMITTED BY A CORPORATION IN VIETNAM

Under Article 19.3 of the Penal Code 2015 of Vietnam, if a defender (người bào chữa), in the course of defending for an accused person, has knowledge of a crime that was committed or has been committed or is under the process of preparation by such person, the defender will not bear criminal liability for failure to report such crimes to the authorities unless such crimes are extremely serious crimes or crimes relating to the national security. This appears to be a watered-down version of the attorney-client privilege in other jurisdictions. The previous Penal Code 1999 does not clearly exempt a defender from criminal liability for failure to report crimes. The exemption for a defender under Article 19.3 is first introduced in the Penal Code 2015. When applying Article 19.3 in the context of corporate criminal liability, one should take note of the followings:

A defender is defined as a person appointed by another person (an individual or a commercial legal person) who is alleged to commit a crime to defend him/her in accordance with Article 72 of the Criminal Proceedings Code 2015. A lawyer will become a defender when that lawyer is appointed in accordance with the proceedings (Appointed Time). Therefore, before the Appointed Time, a lawyer is not entitled to the privilege exemption of Article 19.3.
Whether before or after Appointed Time, a lawyer for a commercial legal person in a criminal case is not entitled to the privilege exemption of Article 19.3 in respect of the following crimes (1) smuggling, (2) manufacturing or trading counterfeit food or food additives, and (3) manufacturing or trading counterfeit medicines for treatment or prevention of diseases; and
Before the Appointed Time, lawyers may be subject to criminal liability for failure to report the following crimes if the lawyers have “clear knowledge” (biết rõ) of such crimes: (1) financing terrorism, (2) money laundering, (3) illegally trafficking goods or money across the border, (4) manufacturing or trading banned goods, (5) hoarding or, transporting banned goods, (6) manufacturing or trading counterfeit goods, (7) manufacturing or trading counterfeit food or food additives, (8) manufacturing or trading counterfeit medicines for treatment or prevention of disease, (9) manufacturing or trading counterfeit animal feeds, fertilizers, veterinary medicine, pesticides, plant varieties, animal breeds, (10) speculating, and (11) destructing forest.

This post is contributed by Tran Thi Ha Phuong, a legal intern at Venture North Law, and Ha Thi Dung, a partner at Venture North Law.

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Vietnam Business Law