Termination of an employment contract

Under the new Labour Code, an employer may terminate an employment contract in the following circumstances, among others:

  • the contract duration expires except in the case the employee who is a part-time trade union officer is still within the term of such office;
  • the employee has contributed to the social insurance fund for a sufficient period and has reached pension age (60 for male and 55 for female). It is not clear if the employer can terminate the contract if employee reaches pension age only but has not contributed to the social insurance fund sufficiently;
  • the employee is sentenced to a jail term or to the death penalty, or is prohibited from performing the job prescribed in the labor contract by a legally enforceable decision of a court;
  • the employee dies; or is declared by a court to have lost legal capacity for civil acts, to be missing or to be deceased;
  • the employer terminates its operation;
  • the employee is disciplined in the form of dismissal in accordance with the law;
  • the employee repeatedly fails to perform the work in accordance with the terms of the labor contract;
  • the employee is ill or injured and remains unable to work after having received treatment for a period of twelve consecutive months in the case of an indefinite term labor contract, or six consecutive months in the case of a definite term contract, or more than half the duration of the contract in the case of a seasonal or specific job labor contract with a duration of less than twelve months;
  • where as a result of a natural disaster, fire or for any other reason of force majeure as prescribed by law, the employer needs to narrow production;
  • the employee fails to attend the workplace within 15 days from expiry of the term of suspension of performance of the labor contract;
  • the employer terminates employment contracts due to restructuring, change of technology, economic reasons, or due to merger, consolidation or separation; and
  • when the employer transfers ownership or right to use assets.
Vietnam Business Law Blog

The following is a non-exhaustive list of licenses, permits and requirements on environment which an industrial park in Vietnam need to comply with.

1. Environment impact assessment report (EIAR – Báo cáo đánh giá tác động môi trường) or environment protection plan (EPP – Kế hoạch bảo vệ môi trường).

2. Confirmation on completion of the environmental protection works (Xác nhận hoàn thành công trình bảo vệ môi trường).

The following is a non-exhaustive list of licenses, permits and requirements on firefighting and prevention applicable for an industrial park in Vietnam which are subject to the monitor of firefighting and prevention and may pose a risk of fire and explosion.

1)          Appraisal of firefighting and prevention design (Thẩm duyệt thiết kế về phòng cháy chữa cháy) by the competent authority before commencing the construction.

2)          Acceptance of firefighting and prevention (Nghiệm thu về phòng cháy và chữa cháy) by the competent authority before putting the construction works into operation.

3)          Compulsory fire and explosion insurance for the properties of the industrial park.

Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:

  • Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;

On 11 January 2019, the Supreme Court issued Resolution 1 guiding the application of several regulations on interest, interest rate and relevant penalty (Resolution 1/2019). Resolution 1/2019 will take effect from 15 March 2019. Below are some salient points of Resolution 1/2019

  • Resolution 1/2019 clearly states that the interest rate caps of the Civil Code 2005 and 2015 will not apply to credit contracts between banks and its customers. In the past, there has been long debate regarding whether the interest rate caps of the Civil Code 2005 and 2015 will apply to credit contracts.

  • If the interest rate, overdue interest on principal and overdue interest on interest are higher than the permitted cap, the exceeding interest which has been paid will be deducted from the principal of the loan.

Collective action mechanism among bondholders is one of the common features in terms and conditions of a corporate bond.  Two important features of collective action mechanism are:

·        the use of a bond trustee to act for the benefit of bondholders; and

·        the use of bondholders’ meeting to allow a decision of a majority (or super-majority) of bondholder regarding the bond (e.g. changing the terms of the bond) to bind minority bondholders who disagree with such decision.

Arguably, if the provisions of bondholders’ meeting are included in the terms of the bond and a bondholder agrees to such term then the provisions on a civil transaction under Civil Code 2015 may allow the use of bondholders’ meeting in Vietnam. However, the validity of a decision of a bondholders’ meeting which is not approved by all bondholders is still questionable under Vietnamese law. This is because:

Under the Law on E-Transactions, an e-signature (chữ ký điện tử) is defined as being created in the form of words, script, numerals, symbols, sounds or in other forms by electronic means, logically attached or associated with a data message, and being capable of identifying the person who has signed the data message, and being capable of identifying the consent of that signatory to the contents of the signed data message.

According to Article 24.1 of the Law on E-Transactions, an e-signature of an individual affixed to a data message will be legally equivalent to the signature of such individual affixed to a written document if:

·        the method of creating the e-signature permits to identify the signatory and to indicate his/her approval of the contents of the data message; and

·        such method is sufficiently reliable and appropriate to the purpose for which the data message was originated and sent.

Accordingly, if an user being an individual of an e-commerce website, who can be identified by his/her username, password, and other means of verification (e.g., OTP code), clicks on a confirmation button of an online order then such action can be regarded as creating and affixing an e-signature to the online order by the individual user. This is because:

On 28 December 2018, the State Bank of Vietnam (SBV) issued Circular 42 amending current foreign currency borrowing regulations (in Circular 24 of the SBV dated 8 December 2015, as amended from time to time (Circular 24/2015)) (Circular 42/2018). Circular 42/2018 will take effect from 1 January 2019.

Changes to permitted lending purpose

Vietnamese banks only lend in foreign currency for a few limited purposes. Circular 42/2018 has following changes to these purposes:

On 20 June 2018, the Ministry of Justice issued Circular 8 on the registration and provision of information on security interest and contracts (Circular 8/2018). Circular 8/2018 will replace Circular 5/2011 on the same subject from 4 August 2018.

Name of the object of the registration

The object of registration under Circular 5/2011 is secured transactions (giao dịch bảo đảm), which is in line with the Civil Code 2005. However, the term “secured transaction” is almost removed from the Civil Code 2015 and the registration is now the registration of security interest (biện pháp bảo đảm). Circular 8/2018 adopts such approach and determined the object of registration is security interest to be consistent with the new Civil Code 2015.

The Ministry of Finance has released a latest draft amendment to the Securities Law 2006 (https://tinyurl.com/ydc44zyd), which is scheduled to be passed in the second half of 2019. It looks like that any major law in Vietnam will need to undergo major changes in every 10 years whether or not the changes are necessary. The draft amendments include the following major changes regarding capital raising process:

In December 2018, the Government issues Decree 163/2018 to replace Decree 90/2011 on private issuance of corporate by Vietnamese companies from February 2019. Decree 163/2018 introduces certain new important points as follows:

·        To be able issue bonds, a company is no longer required to be profitable in year before the proposed issuance. Instead, the company only needs to operate for at least one year and its financial statement is audited by a qualified auditor. Issuer who has undergone certain restructuring (e.g., merger, conversion or division) may rely on the historical operation of other related companies to meet the one year operating test;

·        Secondary trading of privately-issued bonds is limited within up to 100 investors excluding “professional investors” within one year from the issuance date. The new limitation seems to aim at the practice of issuing bonds privately at the first place and reselling the same to public investors in secondary market;

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.

From 29 September 2018, under Decree 131/2018, the Government decides to transfer the management of 19 larges State-owned enterprises (SOEs) from various Ministries to the Commission for the Management of State Capital at Enterprises (CMSC). Brief details of each SOE are provided below: