Under Decree 135/2015 effective from 15 February 2016, a local company can invest in shares, bonds and other securities issued offshore of Vietnam (Offshore Indirect Investment) via an entrustment agreement (hợp đồng ủy thác đầu tư) with a licensed fund management company, securities company or commercial bank (Local Managers) if:

• the State Bank of Vietnam (SBV) designates investment in offshore securities investment funds includingOffshore Fund as a permitted type of offshore indirect investment;
• the entrusted amount is within the annual limits for overall offshore indirect investment approved by the Prime Minister;
• the local company satisfies certain conditions (see below); and
• the Local Manager satisfies certain conditions (see below).

Under Decree 135/2015, a local company can make an Offshore Indirect Investment via an entrustment agreement if:

• foreign investors own less than 51% charter capital of the local company;
• if 65% or more of the charter capital of the local company is owned by the State then the local company will need to comply with the regulations on management of State capital and to be approved by the Prime Minister;
• if the local company is not a commercial bank or a general finance company then the local company must use “self-available foreign currency on account balance” (ngoại tệ tự có trên tài khoản) for the offshore investment and must supply documents to prove that the foreign currencies used for the offshore investment is self-available. “Self-available foreign currency on account balance” is foreign currency that is legally owned by the local company and is not borrowed or bought from credit institutions in Vietnam. This effectively means that the local company must have foreign currencies revenue from offshore or, if permitted by Vietnamese law, onshore.
• the local company is not allowed to borrow foreign currencies to make an indirect offshore investment;
• if the local company is already allowed to make an indirect offshore investment in its own name then the local company is not allowed to entrust such investment to another company;
• the local company must be profitable for a period of five consecutive years before the time of making an offshore indirect investment as evidenced by unqualified audited financial statements;
• the local company must not have any overdue taxes or other debts owing to the State budget; and
• the local company must an investment plan approved by competent corporate bodies (e.g. shareholders meeting or the board of directors).

Under Decree 135/2015, a Local Manager can receive entrusted funds from a local company to make an Offshore Indirect Investment via an entrustment agreement if:

• foreign investors own less than 51% charter capital of the fund management company;
• the Local Manager must open one account to receive entrusted capital for offshore indirect investment in foreign currency at a licensed credit institution to conduct all monies transfer relating to the entrustment arrangement;
• the Local Manager must not sub-authorise or sub-entrust the entrusted funds received from local company;
• the Local Manager must obtain a “certificate of registration of offshore indirect investment entrustment services” (giấy chứng nhận đăng ký hoạt động nhận ủy thác đầu tư gián tiếp ra nước ngoài) from the Ministry of Finance (MOF);
• the Local Manager must be profitable for a period of five consecutive years before applying for the certificate of registration of offshore indirect investment entrustment services as evidenced by unqualified audited financial statements issued by an audit company approved by the MOF;
• the Local Manager must not have any overdue taxes or other debts owing to the State budget;
• the Local Manager must (1) have adequate internal regulations on offshore indirect investment entrustment services including risk management and know-your-client procedures; (2) have adequate infrastructure, technical capacities and human resources; and (3) comply with all applicable prudential regulations;
• the Local Manager must register its proposed annual limit for offshore indirect investment entrustment services in the relevant year with the SBV before 15 May of that year; and
• the fund management company must report on its offshore indirect investment entrustment services to the SBV in accordance with the SBV’s regulations.

To fully implement Decree 135/2016, the following, among other things, should also happen:

• the SBV must issue a list of permitted offshore securities that can be invested;
• the Prime Minister must approve the annual limit for Offshore Indirect Investment;
• the MOF must issue guidance on the procedures to obtain certificate of registration of offshore indirect investment entrustment services; and
• the SBV must issue guidance on the procedures to register annual limit for offshore indirect investment entrustment services, on foreign exchange control regarding offshore indirect investment and reporting regime regarding offshore indirect investment.