Before Decree 55/2013 which were issued last week, there are no regulations on secondment services (or “employee leasing services”). However, from July 2013, secondment services are subject to quite comprehensive regulations. Initial reading of the regulations indicate that the requirements under Decree 55/2013 may make it more difficult for a company to restructure its workforce to save costs. Some salient points of Decree 55/2013 are as follows:
- Secondment services can only be used or provided in 17 kinds of jobs including translators, admin staff, sale assistance, project assistance, repairs, finance and tax, customers services, bodyguards, mechanics, production of telecommunication equipment, document prepration, and drivers.
- A company can only receive secondees from secondment service suppliers if (1) it needs to satisfy temporary needs for human resources in a short time, or (2) it needs to replace employees who are on long term leave due to pregnant or job accident, or (3) it needs high skill employees.
- A company cannot receive secondees from secondment service suppliers if (1) there is an ongoing employment dispute at the company’s premise, or (2) it hires secondees to replace employees who are fired on the ground of internal restructuring or economic reasons.
- The term for a secondment must not exceed 12 months and cannot be renewed.
- A secondment service supplier will need a special permit issued by the Ministry of Labour, War Invalid and Social Affairs. Conditions for obtaining the special permit include (1) minimum paid up capital, (2) evidence of long term office use, and (3) deposits to be made to the authority.
- A foreign investor appears may set up a joint venture (but not wholly-foreign owned) secondment service supplier with a local company.
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,
On 15 October 2018, the Government issued Decree 143/2018, which details regulation on compulsory social insurance (Social Insurance) applicable to foreign employees under the Social Insurance Law 2014. Before the issuance of Decree 143/2018, the Social Insurance Law 2014 only provides that foreign employees would be “allowed” to participate in Vietnam’s Social Insurance from 1 January 2018. For a long time, this vague regulation has given rise to concern as to whether the Social Insurance contribution for foreign employees is compulsory or voluntary. Decree 143/2018 now officially confirms that this is compulsory. In particular,
On 20 August 2018, the Ministry of Industry and Trade (MOIT) issued Circular 21/2018 to amend and supplement some articles of Circular 47 of the MOIT dated 05 December 2014 on management of e-commerce websites (Circular 47/2014) and Circular 59 of the MOIT dated 31 December 2015 on management of e-commerce activities via applications on mobile equipment (Circular 59/2015). Below are some notable provisions of Circular 21/2018.
Set out below are some legal issues in transfer of debts (Debts) from a credit institution (Originator) to a company licensed to trade debts in Vietnam (Debt Trading Co). Debt trading between a credit institution and a credit institution is useful for the credit institution to handle its bad debts or to issue assets-backed securities:
Credit institutions are allowed to negotiate loan interest rates based on market demand and supply and the creditworthiness without being restricted to maximum interest rate except in some cases. Meanwhile, interest rates of loans extended by non-credit institutions are subject to the maximum interest rate of 20% per annum under the Civil Code 2015. In practice, interest rates of consumer loans are quite high and could be higher than the maximum rate of 20% per annum. If the interest rate of the Debts is higher than 20% per annum, it is not clear at law whether the Debt Trading Co, upon owning the Debt, can continuously charge such interest rate;
In September 2018, the Government issues Decree 117/2018 on protection of customers information in banking sectors replacing Decree 70/2000. Decree 117/2018 applies to confidentiality, storage and providing of information by credit institutions and foreign bank branches (collectively referred to as CI) relating to the deposit and asset of customers with the CI. The following points are notable:
· Decree 117/2018 does not apply to, among other things, information, which is classified as State secrets and which is governed by State secrets regulations. Under the old Decision 151/2003 of the Ministry of Police, information regarding customer deposits with a CI is classified as “State secret” at secret level. It is not clear if this classification still remains valid since Decision 45/2007 of the State Bank, which is based on Decision 151/2003, does not list customer deposit information as a State secret. Decree 117/2018 does not clarify this uncertainty;
Decree 9/2018 introduces a new approach regarding trading activities of foreign invested enterprises (FIE) in Vietnam. In particular, wholesale of most goods is not subject to the requirement of Trading License (Giấy Phép Kinh Doanh). However, Decree 9/2018 is still uncertain on the category of wholesale versus retail activities. A clearer definition of these concepts is important because an FIE conducting retail activities must apply for a Trading License with the Ministry of Industry and Trade (MOIT).
Under Decree 9/2018,
“wholesale” means the activities of selling goods to (a) wholesalers, (b) retailers, and (c) other traders, organizations; exclusive of retail activities;
“retail” means the activities of selling goods to (a) individuals, (b) households, and (c) other organizations for consumption purposes.
There are some issues arising from the above definitions under Decree 9/2018:
The Enterprise Law 2014 provides that in a meeting of the Board of a joint stock company (JSC), a Board director may authorise another person to attend if such authorisation is approved by the majority of members of the Board. However, the Enterprise Law 2014 is silent about the ability of a Board member to authorise another person to vote for such Board member if the Board decides to pass its decision by way of collecting written opinion of Board members.
Under the Law on Construction 2014, a dispute relating to a construction contract can be resolved through mediation, by a commercial arbitration or court “in accordance with law”. This standard wording seems to allow parties to a construction dispute in Vietnam to select arbitration to settle the dispute. However, Circular 26/2016 of the Ministry of Construction provides that a dispute relating to quality of a construction work will be resolved in the following steps:
A new Decree (Decree 108/2018) was issued on 23 August 2018 to provide various amendments to the existing business registration regulations under Decree 78/2015. Decree 108/2018 will take effect from 10 November 2018. Here are some notable changes:
Decree 108/2018 makes it clear, which is not in Decree 78/2018, that the following documents in the registration application are not required to have company stamp on them: enterprise registration application; notice of changes to enterprise registration; and decision, resolution, and meeting minutes.
A new Law on Cybersecurity (Luật an ninh mạng) (the CSL 2018) will come into effect from 1 January 2019 in Vietnam. Not only providing measures to secure the cyber-environment which to some extent has been regulated by the Law on Cyber-information Safety dated 19 November 2015, the CSL 2018 also includes various provisions to control the contents posted or published on the cyber-network. Below are some salient issues of the CSL 2018.
Scope of the CSL 2018
The CSL 2018 applies to all agencies, organizations and individuals involving in the protection of cybersecurity, which is broadly defined as the assurance that activities in cyberspace not causing harm to the national security, social order and safety, lawful rights and interests of agencies, organizations and individuals. In particular, the CSL 2018 will apply to overseas organisations, which have users residing in Vietnam such as Google or Facebook.
The CSL 2018 covers all networks of IT infrastructure, telecommunication, Internet, computer systems, databases, information processing, storage and controlling systems, and regulates activities of every enterprise providing services in cyberspace and Internet users including e-commerce, websites, online forums, social networking and blogs.
Operators of information system (Chủ quản hệ thống thông tin)
The CSL 2018 imposes various obligations on an operator of an information system. Under the Law on Cyber-information Safety according to which, an operators of information systems means any agencies, organizations or individuals having directly managing authority to an information system.
A new Law on Competition (Competition Law 2018) will take effect from 1 July 2019 in Vietnam. Some key changes in the Competition Law 2018 are as follows:
Broader scope of application: The Competition Law 2018 now governs any activities whether by Vietnamese or foreign entity or individual which have or may have the “competition restraining impact” to Vietnam market. Competition restraining impact means impact which excludes, reduces, distorts or hinders competition in the market. Under the Competition Law 2018, the competition authority of Vietnam now has clear authority to deal with offshore activities and transactions which has impact on Vietnam market. In addition, the Competition Law 2018 now also apply to public service units such as hospitals, or schools which are technically not enterprises.
Besides the principle of honesty, companies are required to compete with each other in accordance with the principles of justice and fairness.
Relationship with other laws: Contrary to the old competition law, the new Competition Law 2018 will not prevail other laws in case such other laws have regulations on action in restraints of competition, form of economic concentration, activities of and dealing with unfair competition.
Under the new Competition Law 2018, a State agency is prohibited not only from forcing but also from “requesting or recommending” enterprises or individuals or organisations to perform or not to produce and sell specific goods, provide and use specific service, or produce and sell goods to or provide and use services of specific enterprises.
Decree 71/2017 replaced Circular 121/2012 on corporate governance of public join-stock company (Public JSC) since 1 August 2017. Decree 71/2017 does not have its own criteria for being an independent director but refers to the criteria under the Enterprise Law 2014. The table below compares the old criteria of an independent director in a Public JSC with the new criteria under the Enterprise Law 2014. Although in some areas, the Enterprise Law 2014 provides stricter criteria, the Enterprise Law 2014 contains certain major omission (e.g., including omission to exclude managers of an affiliate or representatives or related persons of a major shareholder in a Public JSC from acting as an independent director of a Public JSC).
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.
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?
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.