Decree No. 01/2014/ND-CP dated January 3, 2014 of the Government on foreign investors’ share purchase from Vietnamese credit institutions

DECREE

On foreign investors’ purchase of shares of Vietnamese credit institutions[1]

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions;

Pursuant to the November 29, 2005 Law on Enterprises;

Pursuant to the June 29, 2006 Law on Securities and the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Securities;

At the proposal of the Governor of the State Bank of Vietnam;

The Government promulgates the Decree on foreign investors’ purchase of shares of Vietnamese credit institutions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides conditions and procedures for share purchase, the total maximum shareholding rate of foreign investors and the maximum shareholding rate of a single foreign investor in a Vietnamese credit institution; and conditions for Vietnamese credit institutions to sell shares to foreign investors.

Article 2. Subjects of application

1. Joint-stock credit institutions and credit institutions transformed into joint-stock credit institutions (below referred to as Vietnamese credit institutions).

2. Foreign investors.

3. Other organizations and individuals involved in foreign investors’ purchase of shares of Vietnamese credit institutions.

Article 3. Interpretation of terms

In this Decree, the terms below are construed as follows:

1. Joint-stock credit institution means a credit institution established and organized in the form of joint-stock company, including joint-stock commercial bank, joint-stock finance company and joint-stock financial leasing company.

2. Credit institution transformed into a joint-stock credit institution means a credit institution which is currently transforming its legal form from a credit institution operating in the form of limited liability company into a credit institution operating in the form of joint-stock company.

3. Foreign investors include foreign organizations and individuals.

4. Foreign organizations include:

a/ Organizations established and operating under foreign laws, and branches of these organizations in foreign countries and Vietnam.

b/ Organizations, closed-end funds, member funds and securities investment companies established and operating in Vietnam with foreign-contributed capital exceeding 49%.

5. Foreign individual means a person not holding Vietnamese nationality.

6. Foreign strategic investor means a foreign organization which has financial capacity and a written commitment of a competent person to bind its long-term benefits with a Vietnamese credit institution and support the Vietnamese credit institution in acquiring modern technologies; developing banking products and services; and raising its financial, governance and executive capacity.

7. Shareholding includes direct and indirect shareholding.

Article 4. Currency used in share purchase and sale transactions

The currency used in foreign investors’ purchase and sale of shares of Vietnamese credit institutions is Vietnam dong.

Article 5. Participation in governance at Vietnamese credit institutions

1. The participation or appointment of a representative for the contributed capital amount to participate in the Board of Directors of a Vietnamese credit institution must comply with the Law on Credit Institutions and relevant laws.

2. A foreign investor may participate in, or appoint a representative for its/his/her contributed capital amount to participate in the Board of Directors at only one Vietnamese credit institution, except the following cases:

a/ A foreign investor participates or appoints a representative for its/his/her contributed capital amount to participate in the Board of Directors of another credit institution being a subsidiary of the Vietnamese credit institution in which the foreign investor has participated or appointed a representative of its/his/her contributed capital amount to participate in the Board of Directors.

b/ A foreign investor participates or appoints a representative of its/his/her contributed capital amount to participate in the Board of Directors of a poorly performing joint-stock credit institution in order to restructure it under a plan  approved by the State Bank of Vietnam.

Chapter II

SPECIFIC PROVISIONS

Section 1

FORMS AND RATES OF AND PROCEDURES FOR SHARE PURCHASE

Article 6. Forms of share purchase applicable to foreign investors

1. Foreign investors purchase shares from shareholders of joint-stock credit institutions.

2. Foreign investors purchase shares from joint-stock credit institutions that sell shares to increase charter capital or sell treasury stocks.

3. Foreign investors purchase shares in case credit institutions transform themselves into joint-stock ones.

Article 7. Shareholding rates applicable to foreign investors

1. The shareholding rate of a foreign individual at a Vietnamese credit institution must not exceed 5% of the charter capital of such credit institution.

2. The shareholding rate of a foreign organization at a Vietnamese credit institution must not exceed 15% of the charter capital of such credit institution, except the case specified in Clause 3 this Article.

3. The shareholding rate of a foreign strategic investor at a Vietnamese credit institution must not exceed 20% of the charter capital of such credit institution.

4. The shareholding rate of a foreign investor and its/his/her affiliated persons at a Vietnamese credit institution must not exceed 20% of the charter capital of such credit institution.

5. The total shareholding rate of all foreign investors at a Vietnamese commercial bank must not exceed 30% of the charter capital of such bank. The total shareholding rate of all foreign investors at a Vietnamese non-bank credit institution must comply with the law applicable to public companies and listed companies.

6. In special cases, in order to restructure poorly performing, difficulty-stricken  credit institutions so as to ensure safety for the credit institution system, the Prime Minister shall decide on the shareholding rate of each foreign organization and foreign strategic investor as well as the total shareholding rate of all foreign investors at the poorly performing credit institutions higher than the limits specified in Clause 2, 3 or 5 this Article, respectively, on a case-by-case basis.

7. The shareholding rates specified in Clauses 1, 2, 3, 4, 5 and 6 of this Article cover also capital amounts entrusted by foreign investors to other organizations and individuals for share purchase.

8. In case of converting Vietnamese credit institutions’ convertible bonds into stocks, foreign investors shall ensure the shareholding rates and the shareholding conditions prescribed in this Decree.

Article 8. Competence, order, procedures and dossiers for foreign investors’ purchase of shares of Vietnamese credit institutions

1. In case of share purchase resulting in the shareholding rate to reach 10% or more of the charter capital, or of share purchase to become a foreign strategic investor of a Vietnamese credit institution:

a/ The Vietnamese credit institution (for unlisted credit institutions) or the foreign organization (for listed credit institutions) shall make a dossier and send it directly, by post or via the electronic network to the State Bank of Vietnam for approval before conducting the transaction.

b/ Within 40 days after receiving a complete and valid dossier, based on the conditions prescribed in Articles 9 and 10 of this Decree, the State Bank of Vietnam shall consider and decide to approve or disapprove in writing the foreign organization’s share purchase. In case of disapproval, the State Bank of Vietnam shall clearly state the reason.

2. In case of share purchase resulting in the shareholding rate to reach 5% or more of the charter capital, or of additional share purchase by a foreign organization that already holds 5% or more of the charter capital of a Vietnamese credit institution, except the case specified in Clause 1 of this Article, foreign investors shall comply with the order and procedures specified in Clause 2, Article 29 of the Law on Credit Institutions.

3. Other cases of share purchase, except the cases specified in Clauses 1 and 2 this Article:

a/ A foreign investor purchasing shares of an unlisted Vietnamese credit institution shall make a dossier and send it directly or by post to the Vietnamese credit institution for decision, in order to ensure compliance with Article 7 of this Decree.

Vietnamese credit institutions shall specify dossiers of foreign investors’ purchase of shares in accordance with law.

Within 20 working days after receiving a complete and valid dossier, the Vietnamese credit institution shall reply the foreign investor in writing. In case of refusal, the Vietnamese credit institution shall state clearly the reason.

b/ Foreign investors may purchase shares of listed joint-stock credit institutions in accordance with the law on securities and the securities market and shall comply with Article 7 of this Decree.

4. The State Bank of Vietnam shall specify the order, procedures and dossiers for foreign investors’ purchase of shares of Vietnamese credit institutions under Clauses 1 and 2 of this Article.

Section 2

CONDITIONS FOR SHAREHOLDING

Article 9. Conditions for a foreign organization to purchase shares of a Vietnamese credit institution accounting for 10% or more of the charter capital of such credit institution

1. Being rated as stable or equivalent or higher by prestigious international credit rating agencies.

2. Having sufficient financial sources for share purchase as determined in the independently audited financial statement of the year preceding the year of dossier submission and lawful capital sources for share purchase as prescribed by law.

3. The share purchase neither affects the safety and stability of, nor creates monopoly or restricts competition in, the Vietnamese credit institution system.

4. Having committed no serious violations of the monetary and banking laws and the laws on securities and securities market of the country where it is headquartered and of Vietnam within 12 months by the time of submission of the share purchase dossier.

5. Having total assets equivalent to at least USD 10 billion, for banks, finance companies or financial leasing companies, or having a charter capital equivalent to at least USD 1 billion, for other organizations, in the year preceding the year of submission of the share purchase dossier.

Article 10. Conditions for a foreign organization to purchase shares and become a strategic investor

1. The conditions specified in Clauses 1, 2, 3 and 4, Article 9 of this Decree.

2. Being a foreign bank, finance company or financial leasing company licensed to conduct banking operations under the law of the country where it is headquartered. Foreign finance companies may only act as strategic investors of  Vietnamese finance companies. Foreign financial leasing companies may only act as strategic investors of Vietnamese financial leasing companies.

3. Having at least five years’ experience in international banking or finance operations.

4. Having total assets equivalent to least USD 20 billion in the year preceding the year of submission of the share purchase dossier.

5. Having made a written commitment and a clear plan on binding its long-term benefits with the Vietnamese credit institution and supporting the Vietnamese credit institution in applying modern technologies; developing banking products and services; and raising financial, governance and executive capacity.

6. Not holding 10% or more of the charter capital of any other credit institution in Vietnam;

7. Committing to hold or having held 10% or more of the charter capital of the Vietnamese credit institution at which the foreign organization applies for share purchase to become a strategic investor.

Section 3

 VIETNAMESE CREDIT INSTITUTIONS SELLING SHARES

Article 11. Conditions for Vietnamese credit institutions to sell shares to foreign investors

1. A credit institution transformed into a joint-stock credit institution must have its equitization or transformation plans, covering the plan on sale of shares to foreign investors, approved by a competent authority in accordance with law.

2. A joint-stock credit institution must have its plan on increase of charter capital or on sale of treasury stocks, covering the plan on sale of shares to foreign investors, approved by its General Assembly of Shareholders.

For a joint-stock credit institution in which the State holds more than 50% of charter capital, the plan on increase of charter capital or on sale of treasury stocks submitted to the General Assembly of Shareholders for approval must comply with the law on financial management of state enterprises.

Article 12. Selling prices of shares for foreign investors

1. The selling price of shares of an unlisted Vietnamese credit institution to foreign investors must be determined through auction or negotiation.

2. The selling price of shares of a listed joint-stock credit institution to foreign investors must comply with the law on securities and securities market.

3. The making of deposits for share purchase transactions shall be agreed between foreign investors and Vietnamese credit institutions in accordance with law.

Section 4

RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS

Article 13. Rights of foreign investors

1. To have all the rights of shareholders as prescribed by Vietnamese law, the charters of joint-stock credit institutions in which they have purchased shares, and as agreed in accordance with Vietnamese law in the share purchase and sale contracts between them and Vietnamese credit institutions.

2. To remit abroad incomes from investment and share purchase, and revenues from the transfer of shares after fulfilling all financial obligations in accordance with Vietnamese law.

3. To participate in or appoint representatives to participate in the Boards of Directors and Control Boards or act as executives of joint-stock credit institutions in which foreign investors have purchased shares in accordance with the charters of such joint-stock credit institutions, and Vietnamese law.

4. To have other legitimate rights and interests protected by the State of the Socialist Republic of Vietnam in accordance with Vietnamese law and treaties to which Vietnam is a contracting party.

Article 14. Obligations of foreign investors

1. To fulfill all the obligations of shareholders as prescribed by Vietnamese law, the charters of Vietnamese credit institutions in which they have purchased shares, and as agreed in accordance with Vietnamese law in the share purchase and sale contracts between them and Vietnamese credit institutions.

2. To ensure and take responsibility for the lawfulness of capital sources used for share purchase, the validity of share purchase dossiers and the accuracy of provided information and documents in accordance with Vietnamese law.

3. To fully report and take responsibility for information on their affiliated persons holding shares and information about shareholding through their affiliated persons and though investment entrustment at the Vietnamese credit institutions in which they purchase shares.

4. To fully transfer the amount of capital for the registered purchase of shares of Vietnamese credit institutions as agreed in the share purchase and sale contracts between them and Vietnamese credit institutions and in accordance with law.

5. A foreign strategic investor of a Vietnamese credit institution may not transfer its shares at such credit institution to other organizations or individuals within 5 years from the time of becoming a strategic investor of the Vietnamese credit institution as stated in the written approval of the State Bank of Vietnam.

6. A foreign institutional investor holding 10% or more of the charter capital of a Vietnamese credit institution may not transfer its shares to other organizations or individuals within 3 years from the time of acquiring 10% or more of the charter capital of such credit institution.

7. Foreign investors purchasing shares of to-be-restructured poorly performing joint-stock credit institutions under Clause 6, Article 7 of this Decree shall draw up plans on share purchase and restructuring of the credit institutions, and send them to the State Bank of Vietnam for consideration, appraisal and submission to the Prime Minister for decision.

8. To comply with Vietnam’s current regulations on foreign exchange management.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 15. Responsibilities of state management agencies

1. The State Bank of Vietnam shall:

a/ Guide, inspect, examine and supervise the implementation of this Decree;

b/ Provide information relating to foreign investors’ share purchase and sale under its management to the Ministry of Finance for coordinated management according to this Decree.

2. The Ministry of Finance shall:

a/ Manage and guide foreign investors’ purchase of shares of listed joint-stock credit institutions, ensuring compliance with the shareholding rates prescribed in this Decree and the law on securities and securities market;

b/ Provide information relating foreign investors’ share purchase and sale under its management to the State Bank of Vietnam for coordinated management according to this Decree.

Article 16. Responsibilities of Vietnamese credit institutions

1. To sell shares in accordance with this Decree and relevant laws.

2. To disclose information as prescribed by law.

3. To fully and timely report to competent agencies information relating to foreign investors’ share purchase.

Article 17. Handling of violations

All violations of this Decree must be handled under the Decree on sanctioning administrative violations in monetary and banking sectors.

Article 18. Effect

This Decree takes effect on February 20, 2014, and replaces Government’s Decree No. 69/2007/ND-CP of April 20, 2007, on foreign investors’ purchase of shares of Vietnamese commercial banks.

Article 19. Implementation provisions

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees; chairpersons of Boards of Directors, chairpersons of Members’ Councils and general directors (directors) of Vietnamese credit institutions; foreign investors and related organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG