Payment for shares in Vietnamese companies

Article 12.1 of the amended Ordinance on Foreign Exchange of the Standing Committee requires a foreign investor making an indirect investment including purchasing shares or capital contribution in a Vietnamese company to convert its foreign currency into Vietnamese Dong and transfer all payment through a Vietnamese Dong indirect investment capital account (CCA). Therefore, payment for shares in a Vietnamese companies should be made in Vietnamese Dong.

However, before Circular 32/2013 of the State Bank of Vietnam (SBV), it is not clear whether it is possible for a foreign investor to agree to denominate the share purchase price in US$ and pay the same in equivalent Vietnamese Dong. Article 22 of the Ordinance on Foreign Exchange requires all transactions “in the territory of Vietnam” must not be denominated in US$ except in case permitted by the SBV. Although a foreign investor does not reside in Vietnam, the CCA of such foreign investor is located in Vietnam. Therefore, a share purchase transaction between a foreign investor and a local seller could still be captured by the words “in the territory of Vietnam”.

Under Circular 32/2013 effective from 10 February 2014, it should now be possible for the parties to denominate the purchase price for shares in a Vietnamese company in US$. This is because:

  • Under Article 4.16 of the new Circular 32/2013, a resident supplying goods to a non-resident may denominate the price and receive payment in foreign currency; and
  • Under the Civil Code and the Commercial Law, goods may include valuable papers such shares.
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: