Contract Structure for Senior Managers in Vietnam - Part 1

A good employment contract for a senior position, like any other employment contract, is the one that can balance the needs of the employer and the employee. A senior-level employee usually seeks attractive salary, incentives, benefits, while problems like non-competition and non-disclosure are the major concerns of an employer. On the other hand, both sides may want certain same things in an employment contract, for example, long-term contract (fixed or indefinite term), ability to terminate the contract without cause, indemnification for wrongful termination of employment contract, and so on.

Unfortunately, under Vietnamese employment laws, there are certain restrictions that prevent the parties, especially the employer side, from having an employment contract that can reflect accurately their commercial needs. This is because Labor Law 2012 is drafted in favor of the employee side due to the view of the State that the employee is the one who is in a weaker position in a labor relationship.

One potential solution to overcome the restrictions under the Labour Code 2012 for contract with a key personnel is to have a separate “civil contract” between the key personnel and the key shareholder or director of the employer in addition to the normal employment contract.

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Written by Nguyen Quang Vu On In

Rights to claim for reflective loss under Vietnamese Enterprises Law 2014

If a director of a joint stock company (the Company) breaches his/her fiduciary duties and causes damage to the Company, under Article 161.1 of the Enterprises Law 2014, a shareholder or group of shareholders holding 1% or more ordinary shares for six consecutive months (1% Shareholder) can on its own behalf or on behalf of the Company to make a civil claim against the director. However, it is unclear whether (1) the 1% Shareholder can request the director to pay compensation directly to the 1% Shareholder or (2) the 1% Shareholder can only request the director to pay compensation to the Company. In other words, it is not clear if the 1% Shareholder can claim the director for reflective loss (e.g., the diminution of the value of such Shareholder’s shareholding in the Company).

The following arguments support the view that the 1% Shareholder cannot claim for reflective loss:

·          Under the Enterprises Law 2014, a shareholder is not allowed to withdraw capital from the Company in any form. If a claim for reflective loss is permitted then the 1% Shareholder is indirectly allowed to withdraw capital from the Company which is contrary to the principle provided by the Enterprises Law 2014;

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Written by Nguyen Quang Vu On In ,

Tariff calculation for a coal-fired IPP power project in Vietnam

The method of pricing an electricity power purchase agreement (PPA) is regulated under Circular 56 of the Ministry of Industry and Trade (MOIT) dated 19 December 2014, as amended (Circular 56/2014). Circular 56/2014 will govern PPA of (i) power plants which are not multi-target strategic hydroelectric plants (nhà máy thủy điện chiến lược đa mục tiêu), independent BOT power plants, power plants using renewable energy, and (ii) power plants without a separate mechanism issued by the MOIT.

The unit price in general is comprised of the following component:

Unit Price = Fixed Capacity Price + Fixed O&M Price + Fuel Price + Main Fuel Transport Price

Of which:

  • Fixed Capacity Price is a fixed number which is pre-determined throughout the entire economic life of the project. Fixed Capacity Price is calculated so that the internal of return of the power plant project will not exceed a regulatory rate (i.e. 10% or 12% depends on each case).                        

  • Fixed O&M Price is the fixed operation and maintenance price, which is the aggregate of (i) fixed price for major repair, equipment and service costs; and (ii) fixed price for employment costs. A change in inflation will be reflected in the calculation of the electricity price. However, the change is capped at 2.5% per year which is lower than the normal annual inflation rate in Vietnam.

  • Fuel Price is a variable number which is the aggregate of coal price component, DO fuel price component, limestone price component, miscellaneous price component (if any).

  • Main Fuel Transport Price is a variable number depending on the contract year transport price (if any).

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Written by Nguyen Quang Vu On In ,

Are Land Use Rights Considered As Immovable Properties Under Vietnamese Law?

Under the current law of Vietnam, it is possible that “land use rights” (quyền sử dụng đất) are considered “immovable properties”. The following arguments support the view that land use rights are immovable properties under Vietnamese law:

  • Land use rights (LUR) are property rights (quyền tài sản), which is a property (tài sản). Properties are divided into movable properties (động sản) and immovable properties (bất động sản). Immovable properties are defined to include: (i)  Land; (ii) House and construction work attached to land; (iii) Other properties attached to land, house or construction works; and (iv) other properties as stipulated by law.

  • Regarding item (iv) above, LURs are stipulated under Article 5.4 of the Law on Real Estate Business 2014 as types of “immovable properties made available for trading” (bất động sản đưa vào kinh doanh). This view is also adopted by Dr. Do Van Dai in his book on Civil Code 2015.

  • Regarding item (iii), Dr. Nguyen Minh Tuan considers LURs being immovable properties because they are “properties attached to land”.

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Written by Nguyen Quang Vu On In