Earlier this month, the Prime Minister approved the restructuring plan for securities and insurance sectors in Decision 1826/2012. According to Decision 1826/2012, all State-owned or State-controlled enterprises including commercial banks are required to divest from insurance companies. In particular, these SOEs are required to reduce their ownership interest in insurance companies to less than 20% charter capital of the relevant insurance companies by 2015. Currently, there are several insurance companies controlled by SOEs including PetroVietnam Insurance Company, Post Telecom Insurance Company, Vietnam Airline Insurance Company, BIDV Insurance Company, Vietinbank Insurance Company, AgriBank Insurance Company, and Petrolimex Insurance Company. If Decision 1826/2012 is implemented in practice then one could expect an increased number of deals regarding insurance companies in the next couple of years.
Vietnamese banking regulations do not provide for a clear definition of a financial lease (cho thuê tài chính). The lack of a clear definition may result in unnecessary legal risks for parties to a cross-border lease transaction (e.g., an aircraft lease). For example, if a cross-border lease is regarded as a financial lease, then the lease may need to be registered with the State Bank of Vietnam as a foreign loan.
Under the Law on Credit Institution 2010, the act of finance leasing is defined to be (1) the extension of medium and long-term credit; (2) on the basis of a finance leasing contract; and(3) satisfying one of the following conditions:
upon expiry of the lease under the contract, the lessee may take over ownership of leased assets or may continue to lease them under the agreement of the parties; or
upon expiry of the lease under the contract, the lessee shall have the priority right to purchase the leased assets at a nominal value less than the actual value of the leased assets as at the date of purchase; or
the minimum term of the lease of any single asset must equal at least 60% of the period necessary for depreciation of such leased asset; or
the total rent for any single asset stipulated in the finance lease contract must be equal at least to the value of such asset at the signing date of the contract.
The core business of a bank (a Bank) is to take monies (Deposits) deposited by its customers (Depositors) and to lend such monies to its borrowers. Therefore, legally, it is important to determine who owns the Deposits. Unfortunately, Vietnamese banking law is not clear whether after the Depositors make a Deposit with the Bank, the Bank or the Deposit owns the Deposit.
The case for the Bank
The most logical conclusion is that:
· the Bank is the owner of the Deposit;
· the Depositor is not the owner of the Deposit, but the Depositor has a contractual right to request the Bank to return the Deposit to the Depositor in accordance with the terms of the Deposit; and
· the borrower will own the Deposit after it borrows the same from the Bank.
In a recent post, we have discussed the concept of “wholesale” and “retail” as two forms of activities under the regulations concerning trading activities by FIEs in Vietnam. From the commercial perspective, “distribution” (phân phối) activities should involve the purchase or import of goods from suppliers for selling to customers. Thus, if an FIE has registered distribution business (i.e., wholesale or retail), it should naturally be able to import goods to sell within its distribution rights without being subject to further licensing requirements. However, this may not be justified from the legal perspective as the purchase of goods to sell in Vietnam or abroad by an FIE is classified as other forms of trading and should be licensed before implemented. Under Vietnamese regulations,