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.
The Ministry of Finance has released a latest draft amendment to the Securities Law 2006 (https://tinyurl.com/ydc44zyd), which is scheduled to be passed in the second half of 2019. It looks like that any major law in Vietnam will need to undergo major changes in every 10 years whether or not the changes are necessary. The draft amendments include the following major changes regarding capital raising process:
In December 2018, the Government issues Decree 163/2018 to replace Decree 90/2011 on private issuance of corporate by Vietnamese companies from February 2019. Decree 163/2018 introduces certain new important points as follows:
· To be able issue bonds, a company is no longer required to be profitable in year before the proposed issuance. Instead, the company only needs to operate for at least one year and its financial statement is audited by a qualified auditor. Issuer who has undergone certain restructuring (e.g., merger, conversion or division) may rely on the historical operation of other related companies to meet the one year operating test;
· Secondary trading of privately-issued bonds is limited within up to 100 investors excluding “professional investors” within one year from the issuance date. The new limitation seems to aim at the practice of issuing bonds privately at the first place and reselling the same to public investors in secondary market;
Vietnamese banking regulations do not provide for a clear definition of a financial lease (cho thuê tài chính). The lack of a clear definition may result in unnecessary legal risks for parties to a cross-border lease transaction (e.g., an aircraft lease). For example, if a cross-border lease is regarded as a financial lease, then the lease may need to be registered with the State Bank of Vietnam as a foreign loan.
Under the Law on Credit Institution 2010, the act of finance leasing is defined to be (1) the extension of medium and long-term credit; (2) on the basis of a finance leasing contract; and(3) satisfying one of the following conditions:
upon expiry of the lease under the contract, the lessee may take over ownership of leased assets or may continue to lease them under the agreement of the parties; or
upon expiry of the lease under the contract, the lessee shall have the priority right to purchase the leased assets at a nominal value less than the actual value of the leased assets as at the date of purchase; or
the minimum term of the lease of any single asset must equal at least 60% of the period necessary for depreciation of such leased asset; or
the total rent for any single asset stipulated in the finance lease contract must be equal at least to the value of such asset at the signing date of the contract.
From 29 September 2018, under Decree 131/2018, the Government decides to transfer the management of 19 larges State-owned enterprises (SOEs) from various Ministries to the Commission for the Management of State Capital at Enterprises (CMSC). Brief details of each SOE are provided below:
The core business of a bank (a Bank) is to take monies (Deposits) deposited by its customers (Depositors) and to lend such monies to its borrowers. Therefore, legally, it is important to determine who owns the Deposits. Unfortunately, Vietnamese banking law is not clear whether after the Depositors make a Deposit with the Bank, the Bank or the Deposit owns the Deposit.
The case for the Bank
The most logical conclusion is that:
· the Bank is the owner of the Deposit;
· the Depositor is not the owner of the Deposit, but the Depositor has a contractual right to request the Bank to return the Deposit to the Depositor in accordance with the terms of the Deposit; and
· the borrower will own the Deposit after it borrows the same from the Bank.
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.