Lawyer in Vietnam Oliver Massmann - Legal Update January 2016

1. Lawyer in Vietnam Oliver Massmann - Legal Update January 2016
1. Decree No. 07/2016/ND-CP issued by the Government detailing the Commercial Law
regarding Vietnam-based representative offices and branches of foreign traders (“Decree 07”)
Issuance date: 25 January 2016
Effective date: 10 March 2016
Under Decree 07, the Ministry of Industry and Trade is still the competent licensing authority for
establishment of foreign traders’ branches. We nevertheless note that from 10 March 2016, provincial
Department of Industry and Trade shall only grant licenses for establishment of representative offices
(“ROs”) which are located outside of industrial parks, export-processing zones, economic zones, high
technology zones. With respect to the ROs located in industrial parks, export-processing zones,
economic zones, high technology zones, licensing authority for the establishment shall be the
Management Board of industrial parks, export-processing zones, economic zones, high technology
zones.
It is worth noting from this Decree 07 that the ROs, branches having operational contents not in
conformity with international treaties to which Vietnam is a member may still have chance to be
granted licenses for establishment if having approval of specialized management ministries. In case the
foreign traders do not belong to nations and territories participating in the international treaties of
which Vietnam is a member, the establishment of their ROs, branches in Vietnam must be subject to the
approval by specialized management ministries.
Conditions for establishment of branch shall be more "open-minded". Particularly, foreign traders’
certificates of business registration (or equivalent documents) must remain their business duration of at
least 1 year from the date of filing establishment application rather than 3 years as under current
regulations.
Application of establishment of ROs, branches shall include nearly the same documents as those under
previous regulations, e.g. (i) Appointment document of the foreign trader for the head of representative
office or branch; (ii) Copy of passport or ID card or citizen’s identity card of the head of representative
office or branch; (iii) Documents on the planned location of the head office of the representative office,
branch. We nevertheless note that copy of operational charter of foreign trader being an economic
organization is no longer required under Decree 07.
Statutory timeframe for granting the licenses for establishment of ROs, branches shall be seven (7) days
instead of 15 days as under current Government’s Decree No. 72/2006/ND-CP.
From 10 March 2016, ROs, branches shall not be required to publish their establishment information in
three consecutive editions of a newspaper or electronic press. The licensing authorities shall be
responsible for announcement of information of ROs, branches on their portals within 15 days from the
date of grant, re-grant, adjustment, extension and withdrawal of licenses for establishment of ROs,
branches.

2. 2. Decree No. 135/2015/ND-CP issued by the Government guiding indirect offshore investment
(“Decree 135”)
Issuance date: 31 December 2015
Effective date: 15 February 2015
Decree 135 details the offshore investment in the forms of purchase and sale of securities, other
valuable papers or making investment via overseas securities investment funds or other intermediary
financial institutions.
Foreign-invested economic organizations as defined under Article 23.1 of Law on Investment 2014 shall
not be permitted to perform indirect offshore investment.
The indirect offshore investment of economic organizations shall be performed by the following
methods: (a) self-trading for offshore indirect investment and (b) consignment of offshore indirect
investment. As such, economic organizations shall only perform the offshore indirect investment in the
form of investment consignment for consignees (including the fund management companies and
commercial banks).
The State Bank of Vietnam (“SBV”) shall detail the types of, criteria for selection of investment tools in
foreign countries during each period. Investors may only make offshore indirect investment in
accordance with the investment tools specified by the SBV.
Investors shall not be permitted to use domestic or overseas loan in foreign currencies, loan in VND
from credit institutions and foreign banks’ branches to purchase foreign currencies for offshore indirect
investment, except the economic organizations of which the State owns at least 65 percent of charter
capital and those making total offshore indirect investment of at least VND 800 billion.
There are six subjects licensed to self-trade for offshore indirect investment, including:
(i) Security companies, fund management companies;
(ii) Securities investment funds through fund management companies, securities investment
companies;
(iii) Insurance business enterprises;
(iv) Commercial banks;
(v) General financial companies; and
(vi) State Capital Investment Corporation.
Putting that aside, this Decree 135 also additional regulates other important contents with respect to
conditions for self-trading, consignment and consignment receipt of offshore indirect investment;
annual total of limits of offshore indirect investment, self-trading limits, consignment receipt limits, etc.

3. 3. Circular No. 59/2015/TT-BLDTBXH issued by Ministry of Labour, War Invalids and Social Affairs
detailing and guiding the implementation of a number of articles of Law on Social Insurance
with respect to compulsory social insurance (“Circular 59”)
Issuance date: 29 December 2015
Effective date: 15 February 2016
In practice, we are aware that a number of enterprises and employees do not focus on the regime on
sickness of children. Circular 59 has detailed the calculation of leave period and allowance levels of such
regime. From 01 January 2016, allowance levels of the sickness regime and sickness of a child shall be
higher due to the change in calculation formula: the daily wage on which the allowance level is based
shall be determined as monthly wage divided by 24 days (rather than 26 days as present).
Circular 59 specifies in detail which amounts are required to be included in monthly wage for social
insurance contribution. The recently issued Ministry of Labour, War Invalids and Social Affairs’ Circular
No. 47/2015/TT-BLDTBXH has regulated this matter, however, this Circular 59 guides more specifically.
In particular, amounts not being calculated into the monthly wage for social insurance contribution
include: bonus, bonus for initiative, mid-shift meal payment, supports payment for vehicles petrol,
telephone, house rent, childcare costs, breeding child, happy employee’s birthday payment, etc.
Also, Circular 59 provides in detail with specific examples on health rehabilitation after sickness; the age
of enjoying retirement pensions in case of working capacity decrease applicable to employees who
reach pension age from 2016, 2017, 2018, 2019, 2020 and later; period of enjoying regimes in the event
of child adoption; temporarily stopping, continuously enjoying retirement pension, monthly social
insurance allowances; etc.
Regimes of this Circular shall be applied from 01 January 2016. With respect to employees working
under the labour contracts with term from full 01 month to less than 03 months, such regimes shall be
applied from 01 January 2018.
4. Circular No. 36/2015/TT-NHNN issued by State Bank of Vietnam regarding re-organization of
credit institutions (“Circular 36”)
Issuance date: 31 December 2015
Effective date: 01 March 2016
The SBV issued Circular 36 guiding the re-organization of credit institutions in order to implement Law
on Credit institutions 2010 and create legal framework to carry out the re-organization of credit
institutions system, increase financial abilities and expand scale, network of banks, increase the prestige,
brand name of credit institutions and reduce costs for activities of credit institutions.
Generally speaking, this Circular 36 inherits positive regulations of SBV’s Circular No. 04/2010/TT-NHNN
and in the mean time amends and supplements some requirements to manage credit institutions in
process of bank system re-structuring, stable development of credit institutions system for conformity
with the real management of credit institutions.
Circular 36 does not introduce the regulations on the re-purchase of bank but amends several contents
on conversion of legal forms instead. Putting that aside, it is worth noting that this Circular is not

4. applicable to Cooperative banks, the Vietnam Bank for Social policies, People’s Credit funds,
Microfinance institutions.
Operational conditions applicable for credit institutions after merger or consolidation are expressly
addressed in Circular 36. Specifically, the operational scope of credit institutions after merger is (a) the
operation of the merging credit institution and (b) the operation of the merged credit institutions if the
credit institutions after merger meet all operation conditions under law. The operational scope of credit
institutions after consolidation is the operation of consolidated credit institutions if they meet all
operation conditions under law.
5. Decision No. 2730/QD-NHNN on promulgating the central exchange rate between VND and
USD, cross rate between VND and other foreign currencies (“Decision 2730”)
Issuance date: 31 December 2015
Effective date: 04 January 2016
From 04 January 2016, the SBV promulgates the central exchange rate between VND and USD on the
State Bank portal on a daily basis. “The Central exchange rate between VND and USD” in this Decision is
defined as “the average transaction rate in the inter-bank foreign currency market between VND and
USD”.
The central exchange rate between VND and USD is the basis for credit institutions, foreign banks’
branches that were licensed to do business, providing foreign exchange services to determine the
USD/VND rate for sale and purchase activities. The central rate is calculated by reference to the inter-
bank average VND/USD exchange rate, the exchange rate in the international market of foreign
currencies of several countries having trade, lending - borrowing relations or large investment with
Vietnam, the macro - economic and national monetary balances in line with the SBV monetary policy
targets. The new method of managing exchange rate allows exchange rate system to be determined
more flexibly in line with the domestic supply and demand of foreign currencies, the fluctuations of
exchange rate in the international market, while ensuring the role of the SBV in managing the monetary
policies.
The announcement of the central rate is a step towards consistent measures conducted by the SBV in
order to appreciate VND, stabilize the exchange rate and foreign exchange market, thereby contributing
to stabilizing macro-economy, supporting production and business of enterprises.
The SBV shall perform measures and tools of monetary policy in a consistent manner and shall be willing
to sell foreign currencies, if necessary, for proper exchange rate developments and a stable foreign
exchange market.
The cross rate between VND and other foreign currencies for determining the taxable value shall be
promulgated on the SBV’s portal every Thursday or the previous working day of Thursday in case
Thursday is a holiday or a day off.

5. 6. Draft Circular guiding the implementation of contributing capital, purchasing shares or
contributed capital in Vietnamese enterprises applicable for foreign investors, economic
organizations where the foreign parties hold controlling right (“Draft Circular”)
Draft Circular guiding the implementation of contributing capital, purchasing shares or contributed
capital in Vietnamese enterprises applicable for foreign investors, economic organizations where the
foreign parties hold controlling right is to regulate separately the definition of foreign investor and
economic organization where the foreign parties hold controlling right. This Draft Circular concurrently
lists down six circumstances considered as economic organizations where the foreign parties hold
controlling right.
In addition, this Draft Circular also regulates the way to determine foreign ownership rate and
supplements provisions of principle on cross-ownership restriction.
Regarding the investment procedures, the Draft Circular supplements procedures for registration of
capital contribution, share purchase, contributed capital purchase in two cases: (i) Foreign investors
invest in economic organizations operating in conditional investment business lines, or (ii) The
investment leads the economic organizations where the foreign parties hold controlling right to hold
51% of economic organizations’ charter capital or more.
Regarding report regime, this is a newly supplemented provision to remedy the previous limitations in
monitoring and managing the implementation of capital contribution and share purchase of foreign
investors in Vietnam enterprises. Accordingly, Vietnam enterprises must do report when receiving
capital contribution, selling shares to foreign parties.
The Draft is expected to limit the difficulties on how to determine the criteria of foreign investors;
provide detailed regulations on foreign ownership ratio in many conditional business lines, and guide in
detail on sequence of and procedures for granting, changing, amending of enterprise registration
certificate in case the foreign investors contribute capital or purchase shares.
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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have
any questions or want to know more details on the above. Oliver Massmann is the General Director of
Duane Morris Vietnam LLC.
THANK YOU !