Circular No. 03/2004/TT-NHNN dated May 25, 2004 of the State Bank guiding the foreign exchange management over the contribution of capital to, and purchase of shares from, Vietnamese enterprises by foreign investors

CIRCULAR

GUIDING THE FOREIGN EXCHANGE MANAGEMENT OVER THE CONTRIBUTION OF CAPITAL TO, AND PURCHASE OF SHARES FROM, VIETNAMESE ENTERPRISES BY FOREIGN INVESTORS

In furtherance of Article 2 of the Prime Minister's Decision No. 36/2003/QD-TTg of March 11, 2003 promulgating the Regulation on contribution of capital to, and purchase of shares from, Vietnamese enterprises by foreign investors, the State Bank hereby guides in detail the foreign exchange management over the contribution of capital to, and purchase of shares from, Vietnamese enterprises by foreign investors as follows:

Chapter I

GENERAL PROVISIONS

1. Scope of regulation

1.1. This Circular regulates foreign exchange transactions related to foreign investors' activities of contributing capital to, or purchasing shares from, Vietnamese enterprises, including the transfer of capital into Vietnam for capital contribution, share purchase, conversion of foreign currencies into Vietnam dong, opening and use of Vietnam-dong accounts for capital contribution, share purchase, conversion of Vietnam dong into foreign currencies and transfer of foreign currencies abroad.

1.2. Foreign exchange transactions related to activities of securities purchase and sale at the Securities Trading Center in Vietnam shall be conducted according to specific guidance of the State Bank.

1.3. Foreign investors' foreign exchange transactions related to foreign direct investment activities in Vietnam under the Foreign Investment Law shall not be subject to the regulation of this Circular.

2. Interpretation of terms:

In this Circular, the following terms are construed as follows:

2.1. Foreign investors include:

- Non-residents being foreign economic or financial organizations established under foreign laws;

- Non-residents being foreigners not permanently residing in Vietnam or overseas Vietnamese;

- Residents being foreigners permanently residing in Vietnam.

2.2. Licensed banks are banks operating in Vietnam and being licensed by the State Bank to deal in foreign exchange.

2.3. Vietnamese enterprises receiving capital contributed by, or sell their shares to, foreign investors include: equitized State enterprises, joint-stock companies (including those already listed on the securities market), limited liability companies, partnerships, unions of cooperatives, cooperatives doing business in domains, lines or trades decided by the Prime Minister or announced in each period by the Minister of Planning and Investment under the Prime Minister's authorization.

3. Currencies for contribution of capital to, or purchase of shares from, Vietnamese enterprises

In the Vietnamese territory, foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises shall be effected in Vietnam dong.

4. Capital sources for contribution of capital to, or purchase of shares from, Vietnamese enterprises

Foreign investors may use the following foreign-currency and Vietnam-dong sources to contribute capital or purchase shares:

4.1. Foreign currencies transferred from abroad into Vietnam according to current foreign exchange management regulations;

4.2. Foreign-currency and Vietnam-dong balances on accounts opened at commercial banks by foreign investors being the subjects mentioned at Point 2.1, Chapter I of this Circular;

4.3. Vietnam-dong balances on their Vietnam-dong securities trading accounts according to the law provisions on foreign exchange management;

4.4. Profit portions divided to them from foreign direct investment activities in Vietnam;

4.5. Their revenues from the transfer, liquidation or dissolution in foreign direct investment activities in Vietnam according to law provisions;

4.6. Wages, bonuses and other lawful incomes of foreigners in Vietnam in compliance with law provisions;

4.7. Other sources, which are accepted by the State Bank.

5. Transfer of capital into or out of Vietnam:

5.1. Foreign investors may open foreign-currency accounts at the licensed banks according to the current regulations on foreign exchange management.

5.2. Foreign investors having foreign currencies must sell them to the licensed banks for Vietnam dong for capital contribution or share purchase.

5.3. After fulfilling the tax obligations prescribed by Vietnamese laws, foreign investors shall be entitled to buy foreign currencies from the licensed banks for transferring them abroad.

Chapter II

MANAGEMENT OF TRANSACTIONS OF CONTRIBUTION OF CAPITAL TO, OR PURCHASE OF SHARES FROM, VIETNAMESE ENTERPRISES BY FOREIGN INVESTORS

Section I. OPENING AND USE OF ACCOUNTS FOR CONTRIBUTION OF CAPITAL TO, OR PURCHASE OF SHARES FROM, VIETNAMESE ENTERPRISES

6. Opening of "capital contribution or share purchase in Vietnam dong" account

To effect the contribution of capital to, or purchase of shares from, Vietnamese enterprises, foreign investors must each open an account titled "capital contribution or share purchase in Vietnam dong" (hereinafter referred to as "capital contribution or share purchase" account for short) at a commercial bank operating in Vietnam. All money transfer transactions for effecting the capital contribution, share purchase and sale, transfer of contributed capital, collection and use of dividends, divided profits, purchase of foreign currencies at the licensed banks for transferring them abroad and other transactions related to foreign investors' activities of contributing capital to, or purchasing shares from, Vietnamese enterprises must be effected via such accounts.

7. Use of "capital contribution or share purchase" accounts:

Foreign investors shall only be allowed to use "capital contribution or share purchase" accounts to serve the contribution of capital to, or purchase of shares from, Vietnamese enterprises:

Revenues:

b/ Revenues from Vietnam-dong sources specified at Points 4.2, 4.3, 4.4, 4.5 and 4.6, Chapter I of this Circular;

Expenditures:

Securities Trading Center;

Section II. MANAGEMENT OF CAPITAL CONTRIBUTION OR SHARE PURCHASE ACCOUNTS

8. Registration of capital contribution or share purchase accounts:

8.1. Within two working days after opening capital contribution or share purchase accounts at commercial banks, foreign investors shall have to register such accounts with the State Bank (the Foreign Exchange Management Department). Each registration dossier comprises:

8.4. In the following cases, foreign investors must re-register their capital contribution or share purchase accounts with the State Bank:

Dossiers and procedures for re-registration shall comply with the provisions at Points 8.1, 8.2 and 8.3, Section II, Chapter II of this Circular.

8.5. Foreign investors being organizations shall send their dossiers of application for registration of capital contribution or share purchase accounts directly to the State Bank (the Foreign Exchange Department). Written certifications of account registration shall be sent by the State Bank directly to such foreign investors.

8.6. For foreign investors being individuals, their dossiers shall be sent through commercial banks where they open capital contribution or share purchase accounts. Written certifications of account registration shall be sent by the State Bank to such foreign investors through commercial banks.

9. Closure of capital contribution or share purchase accounts:

In the following cases, foreign investors shall have to close their capital contribution or share purchase accounts already opened at commercial banks and return the written certifications of account registration (the originals) to the State Bank (the Foreign Exchange Management Department):

9.1. Transfer of the whole account balance to foreign countries or to securities trading accounts;

9.2. Dissolution, bankruptcy and termination of the legal person status (for foreign investors being organizations);

9.3. Other cases prescribed by the State Bank.

Section III. PROVISIONS ON CHECKING OF DOCUMENTS

10. Checking of the State Bank's written certifications of account registration:

When effecting revenue or expenditure transactions on capital contribution or share purchase accounts at requests of foreign investors, commercial banks shall have to check the State Bank's written certifications of registration of foreign investors' capital contribution or share purchase accounts. Commercial banks shall only be allowed to effect revenue or expenditure transactions on foreign investors' accounts after obtaining the State Bank's written certifications of registration of capital contribution or share purchase accounts according to the provisions in Section II, Chapter II of this Circular.

11. Checking of transaction documents:

Commercial banks, when effecting revenue or expenditure transactions on capital contribution or share purchase accounts for foreign investors, shall have to check the following documents:

11.1. For revenue sources:

For Vietnam-dong remittances in cash into capital contribution or share purchase accounts: Documents proving that such revenue sources arise from activities prescribed at Point 7, Section I, Chapter II of this Circular.

11.2. For expenditures related to the contribution of capital

For each case of contribution of capital to, or purchase of shares from, Vietnamese enterprises of different types, commercial banks shall have to check the following documents:

For cases where they issue stocks for the first time to foreign investors: The competent authorities' documents approving the equitization plans on the sale of shares to foreign investors.

- Minutes of the stockholders' congress or meetings of the managing boards (if any) on the sale of shares to foreign investors.

- Contracts or papers on transfer of shares.

Minutes of meetings of the members' councils, the partners (for partnerships), cooperative members' congresses (for unions of cooperatives or cooperatives) deciding on the mobilization of contributed capital of foreign investors.

11.3. For expenditures transferred into securities trading accounts:

Commercial banks shall have to check whether or not account transfer amounts are transferred into the right securities trading accounts of foreign investors opened at the licensed custody members according to the State Bank's regulations on foreign exchange management over securities purchase and sale by foreign investors at the Securities Trading Center.

11.4. For Vietnam-dong expenditures on purchase of foreign currencies for transfer abroad:

Competent tax agencies' written certifications of the fulfillment of the tax obligations towards the Vietnamese State for profits generated from activities of contributing capital to, or purchasing shares from, Vietnamese enterprises.

Chapter IV

INFORMATION, REPORTING AND HANDLING OF VIOLATIONS

12. Reports of commercial banks:

Once every month (by the 5^th day of the subsequent month at the latest), every six months (by the 10^th of July every year at the latest) and every year (by the 10^th of January of the subsequent year at the latest), commercial banks shall have to report to the State Bank (the Foreign Exchange Department) on:

- Each opening more than one Vietnam-dong capital contribution or share purchase account for effecting the contribution of capital to, or purchase of share from, Vietnamese enterprises;

- Effecting revenues or expenditures on their capital contribution or share purchase accounts at variance with the provisions at Point 7, Section I, Chapter II of this Circular;

- Failing to send complete reports on time to the State Bank according to the provisions at Point 13, Section I, Chapter IV of this Circular;

- Violating the current regulations on foreign exchange management.

Chapter V

IMPLEMENTATION PROVISIONS

15. Implementation provisions

15.1. This Circular takes effect 15 days after its publication in the Official Gazette.

15.2. Foreign investors that conduct transactions of contribution of capital to, or purchase of shares from, Vietnamese enterprises before the promulgation of this Circular must comply with the provisions on account registration and reporting as well as other relevant provisions of this Circular.

16. Organization of implementation:

The director of the Foreign Exchange Management Department, the heads of the units attached to the State Bank, the directors of the State Bank's branches in the provinces and centrally-run cities, the managing boards' chairmen and the general directors (directors) of the commercial banks, and foreign investors that contribute capital to, or purchase shares from, Vietnamese enterprises shall have to implement this Circular.