From 1 October 2015, foreign investors investing public companies and listed securities in Vietnam will be subject to a Circular 123/2015 issued in August 2015 replacing Circular 213/2012. The following are some key points of Circular 123/2015:

• Circular 123/2015 provides more details on foreign ownership limits applicable to public companies and securities companies which were first introduced by Decree 60/2015. Instead of the default level of 49% applicable to all public companies, now Circular 123/2015 seems to require each public company to determine its own foreign ownership limit and report the same to the State Securities Commission (SSC) with supporting documents. The SSC will then either confirm such determination or seek further opinions from other relevant Ministries in case the SSC thinks that the determination is not correct or if the company operates in sectors which are not covered by any international treaty. Only after confirmation by the SSC then, foreign investors may acquire shares in the public company at the permitted level.

• Without further clarity on the list of foreign ownership limits and conditions for foreign investment, it may be difficult for a public company to (i) determine the foreign ownership limits applicable to it and (ii) convince foreign investors that its determination is correct without the SSC’s confirmation of the same. As such, the SSC’s confirmation on foreign ownership limit may become a necessary permit to attract foreign investors by a public company. It is also not clear how this requirement would apply to existing listed companies most of which are subject to 49% foreign ownership limit under the old regulations.

• Similar to Decree 60/2015, Circular 123/2015 allows a public company to reduce the foreign ownership limit applicable to it in its charter. However, Circular 123/2015 does not address the scenario where the local shareholders in a public company, which has a minority foreign shareholder, decide to reduce the applicable foreign ownership limit in order to “kick out” the foreign shareholder against its will.

• From May 2016, Circular 123/2015 substantially reduces the paper works required for a securities trading code. A trading code is necessary for a foreign investor who wants to invest directly in public companies and listed securities in Vietnam. Circular 123/2015 also requires VSD to put in place a computer system to issue electronic trading code by May 2016. By then, a foreign investor no longer needs to submit legalized documents to the Vietnam Securities Depository and English documents are accepted.

• The VSD no longer deals directly with foreign investors. Instead, the securities custodian who is a member of the VSD is now responsible for reviewing (i) application for a trading code instead of the VSD and (ii) all reports and supporting documents submitted by a foreign investor. A custodian who fails its gate-keeping obligation may be prohibited from representing foreign investors forever.

• A group of related foreign investors which include a group of funds managed by the same manager is now subject to a reporting obligation similar to that of a substantial shareholder.