Under Decision 10 of Ministry of Trade (now Ministry of Industry and Trade) dated 21 May 2007 on publicizing roadmaps for goods trading and directly related activities (Decision 10), “foreign-invested company” (doanh nghiệp có vốn đầu tư nước ngoài) in Vietnam is not allowed to distribute drugs in Vietnam. Under Vietnamese law, “distribution” includes wholesale, retail sale, sale and purchase agency and franchising.
The current regulations are silent on the foreign ownership threshold in a Vietnamese enterprise that makes such Vietnamese enterprises become a foreign-invested enterprise under Decision 10. There are two possible interpretations:
(1) Only companies with more than 49% foreign ownership are regarded as foreign invested enterprises. This interpretation is based on Article 29.4 of the Investment Law and Article 11.3 of Decree 102 of the Government dated 1 October 2010 implementing the Enterprise Law (Decree 102); or
(2) Companies with even 1% foreign ownership are regarded as foreign invested enterprises.
In practice, different authorities seem to take different views at different times for different companies. However, it seems that:
(1) the authorities (especially those in Hanoi and Ho Chi Minh City) are increasingly take the more restrictive views on definition of foreign-invested enterprises; and
(2) for drug distribution business, the authorities seem to take more restrictive views than other sectors. The notable case is the view that the authorities take against Mekophar, a pharmaceutical company with shares listed in the Ho Chi Minh City Stock Exchange. It is reported that in March 2011 the Ministry of Planning and Investment took the view that Mekophar with 4.28% foreign ownership is a foreign-invested enterprise.
Pursuant to Decision 10, foreign-invested enterprises are allowed to import drugs. Under of the Government dated 12 February 2007 on import and distribution rights of foreign investors (“Decree 23”), if a foreign-invested enterprise is licensed to import drugs, it would be expressly allowed to:
(1) conduct the procedures to import drugs in its own name; and
(2) sell imported drugs to business entities, which have the right to distribute pharmaceutical goods in Vietnam.
A foreign-invested enterprise with drug import licence may operate substantially similarly to a company with drug wholesale licence. However, a foreign-invested enterprise with drug import licence would not be permitted to set up its own distribution network for its imported products and would not be able to purchase local drugs for wholesale business.
Under Decree 79 of the Government dated 9 August 2006 implementing the Law on Drugs (Decree 79), a foreign-invested enterprise with drug import activities would also need to obtain a Certificate of Satisfactions of Conditions for Drugs Business (Drug Trading Licence) for the drug import business from the relevant provincial Health Department. However, Decree 79 seems to suggest that only companies that are licensed to manufacture drugs or conduct wholesale trading of drugs can apply for a Drug Trading Licence for the drug import business. Further, Circular 47 of MOH dated 29 December 2010 on import and export of drugs and its wrapping (Circular 47) re-states that foreign invested companies in Vietnam holding the Drug Trading Licence are allowed to import drug materials for its drug manufacturing business and indicates that other drug import activities, unconnected to manufacturing will be governed by separate legislation to be issued by the Ministry of Health. However, it seems that there is no such subsequent legislation and as such Vietnamese law is still silent on whether a foreign investor can obtain a Drug Trading License to import drugs unconnected to its manufacturing business and without being a drug manufacturer or a wholesaler.
Below is a list of key approvals and contracts required for a wind farm project in Vietnam (the Project):
Permission by provincial People’s Committee for the Project to carry out wind measurement;
Report on wind measurement result to the provincial People’s Committee;
Approval of the Pre-Feasibility Study of the Project;
Approval of the basic design part of the Feasibility Study of the Project;
In-principle Approval of the Project under the Investment Law 2014;
For a project financing or limited recourse financing in Vietnam, a mortgage over shares (or equity capital) of the project company usually forms part of the security package due to the ease of creating and perfecting a mortgage over shares. That said, when an enforcement event occurs and if the borrower or the project company does not cooperate, the lenders (usually foreign lenders), who wish to immediately taking over the mortgaged shares, may find it difficult to actually enforce the mortgage due to the need to complete various licensing procedures for the sale or transfer of the mortgaged shares.
Thanks to the flexibility offered by the Enterprises Law 2014 and the Investment Law 2014, lenders may now consider taking some extra measures to increase their ability to enforce the mortgaged over shares of a project company in Vietnam. In particular,
On 29 March 2019, the State Bank of Vietnam (SBV) issued Circular 3/2019 to amend and supplement some articles of Circular 32 of the SBV dated 26 December 2034 on restrictions in using foreign exchange within the territory of Vietnam (Circular 32/2013). Circular 3/2019 will take effect from 13 May 2019.
First, a bit of background, under the Foreign Exchange Ordinance, “in the territory of Vietnam” all transactions, payment, price denomination must not be made in foreign currencies except as permitted by the SBV. The SBV usually takes quite a restrictive (and, in our opinion, not reasonable) on what transactions are considered to occur “in the territory of Vietnam”.
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.