Managing the Relationship with Special Managers

Successful cooperation between a special manager and an acquirer requires the involved parties to know, name and manage this relationship.

A “special manager”

A “special manager” in this article means a key manager who formerly founded/ owned a company and, after selling most or all of their shares in the company, is retained by the buyer to continue working there as a key manager for an agreed period of time.

Warren Buffet once said, “You can’t make a good deal with a bad person”. Yet ironically, it is also often difficult for “too good” persons to make a good deal with each other, and this precisely describes the relationship between the acquirer and the special manager(s) they retain for the acquired business. The manager cannot be a “bad” person, at least in terms of talent, since they have built up a company successful enough to attract the acquirer. Similarly, neither can the acquirer be considered a “bad person” in that they have chosen to not only acquire the manager’s company but also to retain the manager for cooperation.

A special manager is special not only because of their talents, but also because of their legal status. Before selling their shares in their own company, they are the owner – employer. Subsequently, after selling the said shares, they may be perceived as being employed by the very company which they no longer own. The nature of the legal status would be more difficult to define if the manager sold only part of their shares, and stayed at the company – which they now co-owned with the acquirer – as a minority shareholder and concurrently its manager. The circumstance is too special that it is almost impossible to decidedly label the manager as an employee or not of the company.

But successful cooperation between the special manager and the acquirer requires the involved parties to know, name and manage this relationship.

What legal shirt should the relationship between a special manager and an acquirer be dressed in?

Basically there are two designs that a special manager could wear: an employment relationship shirt which is manifested as an employment agreement, or a service supplier shirt manifested as a management service agreement. In the former, the special manager is an employee, while in the latter, a service supplier. The laws of Vietnam permit the parties to freely decide which legal shirt they would like to put on.

For the manager, the role “employee” is self-explanatorily contrary to “employer”, and thus it would seemingly be more desirable for them to wear the shirt of a service supplier. In reality, however, most would prefer to choose an employment agreement, not a service agreement, to be the legal instrument governing their relationship with the company. Why then?

What’s in it for the special manager to be positioned as an “employee”?

Wearing the “employee” shirt may not sound desirable by name, but it brings an abundance of benefits and protection if the special manager works in Vietnam. If defined as “employment” the relationship will be governed exclusively by the laws of Vietnam, particularly by Vietnamese labor regulations which are infamous for their employee-friendly reputation, and further protected by the exclusive jurisdiction of the Courts, not arbitration.

Being an employee means the special manager will have access to the full social welfare benefit package, which consists of, for instance, annual paid leave, maternity leave (of 6 months), payment of social insurance and so on.

On the other hand, sanctioning an employee for breach of the employment agreement is required to undergo a tightly regulated procedure, often with the participation of employee-protecting agencies such as the trade union and the conciliation organ. Provisions on confidentiality and non-competition are fairly difficult to enforce because, inter alia, these terms may be deemed a violation of the employee’s freedom to choose their job and workplace. Should termination be the employer’s final recourse, termination of an employment contract, especially those with employees of high seniority, is often difficult if not impossible. By contrast, from where the special manager stands, unilateral termination is just a matter of prior notice.

What’s in it for the acquirer if the special manager wears the “service supplier” shirt?

It would be easier for the acquirer to manage the relation if the parties can agree that the special manager would wear the “service supplier” shirt. The legal relationship would now be governed by commercial, not labor, law, and can even be made subject to a foreign jurisdiction; employee related benefits can be cut; confidentiality and non-competition provisions should be contractually binding and enforceable; and termination of the relationship is to be freely agreed by and subject to negotiation between the contracting parties without interference from pro-employee regulations.

Is a win-win possible?

In many cases, the acquirer needs the special manager so much that the former must agree for the latter to wear the “employee” legal shirt. In such a case, how should the conflicting needs be balanced so as to bring about a win-win for both parties?

First, agreement on termination of the relationship should be set out in a separate agreement, with effective conditions and timing to be controlled by the acquirer. In addition, the managerial title of the special manager should be forested out not in the labor contract but in a separate appointment which can be revoked by the company.

Second, agreements on confidentiality and non-competition should in similar veins be set out in a separate agreement to be governed like any other civil transactions. This would pave the way for the argument that these agreements are not part and parcel of any labor contract but should be treated as independent agreements subject to the same legal regime and having the same enforceability as any other civil agreement.

Last, but of course not least, is to build up a cooperative, win-win culture for the relationship. As discussed thus far, the relationship between an acquirer and a special manager is neither purely of an employment nor a service supplier-recipient nature. In such a special relationship, in addition to trust and respect, it is the clarity on how the parties are to exercise their agreed respective powers, how they are to cooperate for their mutual benefits and terminate their relationship as agreed, that will be the most enforceable and efficient tool for making a good deal between “too good” persons.

By Mr. Bui Ngoc Hong – Partner, LNT & Partners

This article is featured in Asian-mena Counsel M&A Special Report.

Disclaimer: This article is for informational purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.

Recent changes regarding trading rights of Foreign Invested Enterprises


During the past eleven years, Decree 23/2007/ND-CP dated 12 February 2007 (“Decree 23”) has been found to be a barrier to the trading activities of foreign investors in the Vietnam market, especially in the retail industry.

Recently, the Vietnamese government has decided to replace Decree 23 with Decree 09/2018/ND-CP dated 15 January 2018 (“Decree 09”) which has brought significant changes, specifically eliminating a number of restrictions previously contained in Decree 23. Nevertheless, Decree 09’s scope of application has been extended to some other business sectors.

Specifying and expanding entities affected

Unlike under Decree 23, where the scope of application was amorphous because the authorities had ample opportunity to use their own discretion in its application (any foreign invested enterprise (“FIE”) regardless of foreign owned capital ratio or investment structure would have to comply), Decree 09 has provided clear instructions on the subject of application, including: (i) legal entities with direct investment from foreign investors, regardless of capital ratio; (ii) entities having at least 51% of their charter capital owned by other FIEs in which  foreign investors directly holds 51% or more of its charter capital, or a partnership that has a majority of partners who are foreign individuals.

Once the scope of application is defined, entities that want to be involved in the following trading activities would have to obtain a Business License, also known as Trading License for: (i) retail sale of goods; (ii) import and wholesale of lubricant products (oils and greases); (iii) logistics services, excluding those for which Vietnam has committed to open the market in international treaties (of which Vietnam is a member); (iv) goods leasing activities, excluding finance leasing and leasing construction equipment with operator; (v) trade promotion activities, excluding advertising; (vi) commercial intermediary activities; (vii) e-commerce services; and (viii) services for arranging tenders/bids for goods and services.

It appears that Decree 09 has extended the scope of application to other business sectors which were not previously governed under Decree 23, such as: goods leasing activities, e-commerce services and services for arranging tenders/bids for goods and services. Providers of the mentioned services are now required to obtain a Trading License, which requires approval from the Ministry of Industry and Trade (MOIT). This new requirement may affect the operations of many e-commerce platform services which are currently operating in Vietnam.

Barrier on trading rights is lifted

Despite the fact that the scope of Decree 09’s application has been extended to additional sectors, Decree 09 is welcomed for the removal of the requirement for a Trading License for the export, import, and wholesale distribution of many types of goods. In particular, only FIEs involved in the trading of lubricant products (i.e., oils and greases) are required to obtain a Trading License for import and wholesale.

As a result, beginning on January 15, 2018, FIEs are only required to add “import, export and wholesale distribution” functions to their IRCs and ERCs in order to conduct such business. Trading Licenses will not be required for FIEs as they were before for the same trading activities. However, FIEs of the same but wish to carry out retail distribution will have to follow the same license requirements under Decree 23.

FIEs involved in wholesale distribution have taken the removal of such requirements as excellent news. There is no longer a waiting period for a Trading License before shipping different products[1] and no more HS Code on items to be imported, with many more opportunities in the future.

Retail Outlet License and Economic Needs Test (“ENT”)

Each and every FIE who wishes to open any retail outlet, even the first one, have to obtain a Trading License and Retail Outlet License.

The economic needs test (ENT) required under Decree 23 is still applied for the second outlets and those after (Additional Retail Outlet) which: (i) have areas from 500 square meters; or (ii) are established outside shopping malls; or (iii) are categorized as minimarts or convenience store. This means investors in those cases will need to pass the ENT and obtain a Trading License and appropriate Retail Outlet License for each outlet to be established inside Vietnam.

Important highlights for owners of franchises

Decree 09 provides clearly that any outlet established under the same name or same trademark with another retail outlet in Vietnam owned by any other FIEs shall be treated as an Additional Retail Outlet and need Retail Outlet License for operation. As a result, the franchising model which is currently used by some giant retail chains or chain stores might have to pass ENT to obtain relevant Retail Outlet License.

The People’s Committee at the province level would be the authority that would consider whether an outlet passes an ENT or not. This means that for such outlets, the establishment application must be approved by the People’s Committee at the province level and the MOIT.

HS Codes in the Trading License

Another interesting point under Decree 09, which is critical to all importers, is the new template for Trading Licenses and Retail Outlet Licenses. According to the new template and guidance provided under the Decree 09, HS Code might not be included in the Licenses while previously it was clearly required in the template of the same. It means that the names of the trading products will be listed in the Licenses while the HS Code of the products might be no longer referred to in the Licenses.

During the past eleven years since the enactment of Decree 23, the HS Code has been an important factor slowing down the investment process due to the complexity caused by these codes (e.g., discrepancy in HS codes referred to for imported items between IRC, Trading License and documents prepared for customs clearance, lengthy codes in the IRCs of FIEs, different import duties to be applied, and many other issues). However, its removal at the beginning stage of the new Decree may also cause difficulties for FIEs because Customs and other authorities might challenge FIEs on their trading rights.

Listing the names of the goods might not be as convenient and accurate as using the HS Code. Even the DOIT has not reached consensus as to how to name the goods in the Trading License. The interpretation of it, unfortunately, is subject to the sole discretion of the DOIT, especially the officer in charge. As a consequence, this can cause inaccuracies. Take the example of a FIE that trades facial brushes. These brushes belong to HS Code 9603, which is described as “Brooms, brushes (including brushes constituting parts of machines, appliances or vehicles), hand-operated mechanical floor sweepers, not motorised, mops and feather dusters; prepared knots and tufts for broom or brush making; paint pads and rollers; squeegees (other than roller squeegees)”. If the officer in charge does not understand the business of the FIE, he/she might put the name of the goods as “brooms” instead of “brushes”. However, because the FIE sells brushes, not brooms, another relevant authority may challenge the FIE for not having the proper Trading License. The FIE might then have to apply to amend its Trading License to be in line with its actual business.

Therefore, at present, FIEs should be careful and clearly describe their goods when applying for Trading Licenses. More detailed guidance from the relevant authorities is essential to avoid problems regarding this advanced and evolving regulation.


In conclusion, Decree 09 does provide a better legal framework to resolve the ambiguous procedures for foreign investors and FIEs pertaining to trading and trade-related activities under Decree 23. However, as this Decree has just been issued, there might be challenges for both FIEs and licensing authorities to fully understand and implement in practice.

[1] Under Decree 23, Trading Licenses provide a list of products under their HS Code which are allowed to be imported into Vietnam for wholesale or retail distribution. If the entities wish to add new products to the list, the Trading License needs to be updated and the MoIT’s approval is required.

By Ms. Hoang Nguyen Ha Quyen – Partner, LNT & Partners

Disclaimer: This article is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.

Understanding “Business Transfer”

Business transfer as a structuring tool — when, how and what to note.

When investing in a business in Vietnam, an investor may prefer to cherry-pick a specific part of the business rather than buying the entire company. In such cases, an asset acquisition may be the best choice — however, in special situations where a share transaction is more appropriate, the transaction needs to be structured as a share acquisition and accordingly a “business transfer” needs to be used.

A business transfer usually covers the transfer of the targeted business to a newly incorporated company (NewCo), so that NewCo will be transferred to the buyer. The transfer generally includes assets, employees, licences and on-going contracts.

Typically, a business transfer can be conducted via two steps.

  • Step 1: the seller establishes NewCo and transfers the targeted business to NewCo
  • Step 2: the buyer acquires share capital to own Newco, thus owning the targeted business

Although there can be some variations, the whole transaction can generally be illustrated as seen in the chart.



Business transfer — an efficient tool for investment
Why and when should investors use business transfer for their investment? By purpose, business transfer helps the buyer to cherry-pick only the asset they wish to acquire. Meanwhile, by nature, business transfer is a means to conduct the contemplated transaction by way of a share acquisition. The hybrid nature of business transfer brings all the pros and cons of an asset deal and a share deal, which makes it a useful structuring tool when a deal needs to take advantage of both asset deal and share deal structures.

Usually, business transfer should be a preferred tool to structure a deal when one or more of the following come into play:

  1. the targeted business is only part of a larger business that the buyer wouldn’t want to acquire entirely;
  2. the company originally owning the targeted business may raise concerns for the buyer about accumulated liabilities that may remain hidden or unacceptable to the buyer;
  3. the licences for engaging in the targeted business are under the name of a company, and accordingly the acquisition transaction must be in the form of a share acquisition deal, not an asset deal; or
  4. it isn’t justifiable for the purchase price to structure the deal purely as an asset acquisition deal, meanwhile a share acquisition deal can help make the purchase price justifiable.

Generally, a transaction by way of business transfer is often more complicated than a purely asset deal or purely share deal. However, when the above listed items become relevant concerns, business transfer may be a preferred solution. Knowing how to use business transfer is therefore necessary.

Some key points to note when consider whether or not to use business transfer
The first point to consider is the transferability of each asset comprising the targeted business. Under Vietnamese law, the transferability of some assets can be conditional or subject to permission or consent by the government or by a third party. For example, land use rights may be restricted from transferring; some licences are granted to a legal entity on the ground of some conditions which may not be met by Newco; some contracts are transferable only upon consent by third party. Transferability, depending on the particular asset, could be decisive when considering whether to use business transfer.

The second point to consider is whether or not the operation of the business to be transferred can be maintained uninterrupted. Transferring an on-going business can be like trying to dismantle and re-assemble the parts of a running engine. In this regard, transfer of existing contracts should be handled carefully.

The third point to consider is the time to be spent for conducting a business transfer. Depending on the specific business component to be transferred, the business transfer process could take a long time to complete. Typically, business transfer of the targeted licences or the like can be very time-consuming and may mean that the business transfer structure is undesirable.


The fourth point to consider is the possibility and arrangements for the potential buyer to control the business being transferred, so that any liabilities newly incurred are monitored and subject to being approved or otherwise controlled by the potential buyer. This control is very important in many aspects, especially to ensure that the objects being transferred comprise only those that are targeted, and any liabilities incurred during the time when the business transfer is conducted are accepted by the potential buyer.

The last key point to consider is the tax perspective. For example, if the company with the targeted business is incurring substantial losses that could be deducted by the buyer, or it currently enjoys a special tax incentive that is no longer obtainable by a company newly incorporated like NewCo, it could become undesirable to use business transfer. Further, tax arising from the acquisition transaction could be a concern as well. That is, in case the company owned by the seller’s sole business is the one to be transferred; accordingly, after the business is transferred, the transferring company will be liquidated. In this case, the seller may be subject to both corporate gains tax (on the purchase price) and individual gains tax (to the shareholder, if the shareholder is an individual), and may find business transfer undesirable.

Some technicalities to help investors conduct a business transfer
Conducting due diligence (DD)
When it turns out that a business transfer is to be used, the DD should focus on only the targeted business, which is to be reflected in a checklist. Accordingly, the existing company’s liabilities which shall not be the subject of the business transferred can be excluded from the DD scope.

In conducting the DD, the transferability — legal and practical — of each item of the targeted business should be verified. When transferability of an item in the targeted business is conditional, eg subject to another party’s consent, obtainment of such consent should be raised for possible solution. When re-issuance of some licences for continuing the targeted business require NewCo to meet some conditions, it should be confirmed that NewCo can meet the respective conditions.

Conducting the business transfer
The parties need to agree on how to implement the business transfer. The buyer needs to have the business transfer conducted so that all the targeted business is transferred properly. In case any desired assets are not transferred, that has to be taken into account, eg for possible price adjustment. Any liabilities incurred to NewCo should be monitored and controlled by the buyer.

Preparing transactional documents

With the investigation results from the DD, transactional documents will be prepared. These may include memoranda of understanding (MOU), master agreement, shareholders’ agreements and other agreements to implement the business transfer and to realise the contemplated transaction.

In an acquisition transaction that involves the use of business transfer, a master agreement should be deployed. The master agreement sets out the terms to conduct the deal, and especially the business transfer — by using many affiliate agreements. Examples of these affiliate agreements include real estate transfer agreement, intellectual property transfer agreement, assignment agreements for each on-going commercial contract and employment contracts such as termination minutes, and new employment agreements.

Special transaction terms: In addition to the standard terms, a transaction involving the use of business transfer may require the transactional documents to take into account the following:

  • The status and performance of the business to be acquired should be detailed. A list of assets, detailing tangible and intangible ones, commercial contracts, liabilities, employees, etc, with detailed status should be annexed to the purchase agreement.
  • Agreement on how the business transfer should be conducted should be set out. As mentioned, a deal using business transfer involves establishment of NewCo, transferring the targeted business from the selling company to NewCo. Accordingly, the method of transfer, the transfer procedures, the record of acquired assets to the NewCo’s accounting system need to be anticipated and agreed beforehand by the parties.
  • The buyer’s right to manage, monitor and check the status of business transfer should be set out. Frequently, the business keeps running during the transfer process and the acquisition. New inventories may be acquired, and new sale contracts and purchase contracts may be concluded. These events may affect receivables and payables of the targeted business. Transactional documents should provide appropriate mechanism to deal with those scenarios. The agreement may set certain rules applicable to the seller in operating NewCo, for example, (i) list of action requiring the buyer’s consent (eg change of NewCo’s charter capital, business lines, loan obtainment, change of management structure, etc); (ii) list of transactions to which NewCo being a contracting parties require the buyer’s consent (which can base on criteria of value or nature of transactions); (iii) agreement between the seller and the buyer so that persons appointed by the buyer will hold some managerial position in NewCo even before the closing.
  • As to purchase price, the transactional document should include a mechanism to evaluate the targeted business at the closing, with the applicable accounting standard rules to apply.
  • And, similar to any M&A deal, the transactional documents should record detailed arrangements on how the buyer can take over the business, including conducting necessary registration procedure, appointment of key managerial positions, decision-making rules, etc.


Some points to note in conducting the transfer of the targeted business

  • Asset transfer: In Vietnam, some types of assets require ownership registration, such as real estate, ships, vehicles, etc. When dealing with transferring these types of assets, it should be clear who is responsible for the registration.
  • Commercial contracts: Transfer of existing contracts to NewCo requires the consent of the contract counterparty. Negotiating a new agreement may result in the loss of attractive terms.
  • For supply contracts and customer contracts: there can be two options, signing new ones or having contracts assigned. In any case, the parties should agree on which obligation to be transferred, how to deal with payables and receivables, and whether NewCo or the buyer shall absorb such rights and obligations.
  • For lease agreement, deposit should be a concern. In practice, the lessor normally does not want to return the deposit. Therefore, the transferor and the transferee to the lease must agree on how to deal with such amount, eg whether this amount should be added to the purchase price.
  • Employment transfer: Basically, for conducting employment transfer, the selling company shall reach agreement with the employees to terminate the employment relationship, and at the same time, NewCo shall enter into new employment contracts with the employees. A note from practice is the termination agreement should include all severance payment amounts payable to the employees. Also, the selling company should have a good filing system to keep all relevant documents recording the fulfilment of its relevant obligations, including confirmation of employees on receiving the payment, no claims declaration.
  • Sublicences: Except for certain sublicences attached to assets and being confirmed transferable, NewCo/the seller needs to reobtain all required sublicences before starting running the business. In Vietnam practice, obtaining sublicences can be very time-consuming. This should be taken into account to avoid the situation where the company has to open without the required licences.

In summary, business transfer can help buyers to cherry-pick desirable assets, avoid liabilities and, when needed, make the purchase price justifiable. Offering all the advantages of both asset deal and share deal structures, a transaction by way of business transfer is often more complicated than a purely asset deal or purely share deal. When business transfer has to be deployed to get a deal through, nevertheless, the deal should be conducted with care, including utilisation of the dos and don’ts for a hybrid of share deal and asset deal, in an on-going business.

By Mr. Bui Ngoc Hong – Partner, LNT & Partners

Disclaimer: This article is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or visit the website: Http://


 “Having signature on the commercial invoice in respect of imported goods” is not a new requirement in the importation and custom clearance procedures. However, this requirement has caused difficulties to importers when they import goods in practice, as there are still a number of discrepancies between the laws of Vietnam and international practices, without any remedy.

From the legal perspective, the requirements of the Ministry of Finance and Vietnamese Customs Authorities are base on Decree 51/2010/ND-CP, which stipulates that invoices must present signatures of the seller, seal of the buyer (if any), and signatures of the buyer. The entities who must comply with Decree 51/2010 are Vietnamese organizations, individuals who are selling goods, providing services in Vietnam’s territory or abroad; organizations, individuals imported goods in the local market regardless of producers or suppliers being Vietnamese or foreign organizations or individuals under Circular 64/2015/TTLT- BTC- BCT- BCA- BQP “With regard to goods sold or stored by entities other than importers, it is required to have invoices and/or documents of the selling entities as prescribed in Decree No. 51/2010/ND-CP.”

From the practical perspective, this regulation embarks a conflict with the common practice of making invoices by European countries in which all invoices are formed, retrieved electronically and without sellers’ signatures and seals in every single invoice. Annually, an automobile manufacturer can sell hundred thousands of products per year, the signing in each invoice is a hand work which makes time-squandering, human resource and increasing expenses. However, in order to complete the import procedure, enterprise must seek for ways to convince the manufacturers to provide their signature on invoices. This step has caused a lot of difficulties to enterprises because it is too hard for the manufacturers to change their goods trading management method contrary to the ordinary method in their home country. As a result, the completion of custom clearance of enterprises is often delayed for months from the scheduled business plan, which causes a lost in term of in business opportunity and cost burden to enterprises. In addition, the fact that the requirement on provision of invoice is still retained which is not caught up with the principle of Article 3.6(b) of Resolution 30c/NQ-CP enhancing the “application of information – telecommunication technology in the process of handling of works of administrative authorities, among administrative authorities and within transactions with organizations and individuals”.

With the understanding of these international practices, World Customs Organization (WCO) recommends its members not to have sellers sign commercial invoices when conducting the customs declaration, in particularly:

(16th MAY 1979)

RECOMMENDS that Members of the Council and members of the United Nations Organization or its specialized agencies, and Customs or Economic Unions, should :

  1. refrain from requiring a signature, for Customs purposes, on commercial invoices presented in support of a Goods declaration;[1]

Vietnam Customs authorities has been a member of WCO as of 01 July 1993 and entered into Kyoto Convention on the Simplification and Harmonization of Customs Procedures. After many renovations to adapt WCO’s objectives and policies, Vietnam Customs procedures have been modernized and reduced significantly yet not abrogated the requirements on signatures affixed to invoices due to existing “barriers” in Decree 51.

The main purpose for presentation of commercial invoices in customs procedures is to make a basis for determining customs values of the goods, goods origin and tax amounts imposed on goods at the time of import. In the Internet age, the authenticity of invoices can be checked by various methods. Therefore, we should learn a feasible way of other countries to check manufacturers’ database to conclude the accuracy of total value of goods rather than request them to sign in each of invoices. Customs Authorities can request the manufacture to send the detailed information of imported goods for checking, or confirm the accuracy and completeness of such invoices. From the author’s perspective, by taking advantage of the internet tool, the checking and verifying the accuracy of commercial bills will easier and more efficient.

 Author: Nguyen Thi Chau Thanh – LNT & Partners





Feel free to download the PDF for your ease of reference: VIETNAM CAPITAL MARKET AND PROJECT FINANCE

Dr. Le Net, LNT & Partners

Although Vietnam’s capital markets were established more than twenty years ago, the participation of Vietnam-based law firms i the markets, both locally and internationally, is still rare. The main reasons for this have been the standardization of the State Securities Committee (SSC), the dominance of state capital, and strict foreign exchange controls.  The central new Government, formed in 2016, declared this year to be the “Enterprise Year” and issued many changes to laws and regulations to help make Vietnam become of the top four most open markets in ASEAN. The Government also accelerated its privatization plan (so-called “equalization”) and reduced interference from official development assistance (ODA) with project financing, as well as with recent legal reforms. The time for Vietnamese lawyers in capital markets and project finance is forthcoming.


The Law on Securities (LOS) governs Vietnam’s debt market for bonds, and the equity market for shares of public companies – joint stock companies (JSC) that have more than 100 shareholders. The largest trading volume in the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) is from Government bonds, which are invested by financial institutions with very rare involvement from law firms. Shares are traded by listed companies, whose IPO’s are prepared by securities companies rather than law firms, unlike in other countries. Corporate bonds and project bonds are still rare, although recently, there have been a number of offshore bonds available on the market.

The role of law firms is mainly for either IP offshore or pre-IPO onshore dealings between strategic partners with a target state owned enterprise (SOE) before equalization has taken place. So far, only leading international law firms or the top three local law firms have been eligible to participate in this narrow market.

Under the LOS, a public company must be registered at the SSC and its shares must be deposited at the Vietnam Securities Depository (VSD). Acquisitions gaining more than 25% of their total shares will be subject to a mandatory public offering (MPO). Almost all state owned enterprises (SOE) going through equalization will become public companies. In reality, many of the equitized SOEs are not registered with the SSC, and therefore, neither the MPO nor the UPCoM apply to them. To facilitate M&As in those companies, certain complex and often unprecedented restructuring models are required, and leading local law firms are proven to be more adept at this, as local laws are complicated and require practical solutions to overcome them.

Another point to note is that selling state shares in equitized SOEs must be done through the HOSE or the HNX, although information on the target company and its valuation is not always transparent. Certain foreign investment funds are willing to take risks investing in equitized companies as such opportunities rarely exist. Many of them can later transfer to Japanese, Thai or Korean conglomerates, with assistance from top law firms that gain innovative lawyers through the Financial Times or deal firm of the year by IFLR, Chambers, or ALB Thomson Reuters. It is expected that  M&As in public or equitized SOEs will be on the rise as those law firms gain more experience on M&A restructuring and legal due diligence with large SOEs.

Apart from the Vietnam debt and equity market, offshore IPOs are on the rise, as the SSC now provides guidelines for investment and offshore listings.  Other areas that Vietnam needs to develop are in high yield products, securitization, debt structuring, and trusts.  Some good news is that, for the first time, the new Civil Code 2015 introduced the concept of “hưởng dụng” – usus fructus that are similar to trusts. Similarly, the Enterprise Law 2014 also reduces conditions to issue bonds or derivatives, making securisation more feasible.


Vietnam’s economic growth was 6.8 percent in 2015, based on two engines: export and a growth of middle income consumers among its young 90 million person population. Due to strong exports, the Vietnamese Dong currency has proven to be resilient despite the devaluation of the Chinese Reminbi. The State Bank of Vietnam (SBV) also issued new regulations allowing enterprises to invest or lend abroad. However,  obtaining offshore investment registration certificates (OIRC) is still a challenge for Vietnamese entities. Recently, Saigon Coop lost its 1 billion EUR Big C bid because of delays in obtaining an OIRC, and the strict foreign exchange controls for offshore lending or using foreign exchange to fund onshore projects.  To overcome these regulations, local investors may either need to contact foreign or local lenders in order to deposit foreign currency abroad. More deregulations are expected to ease capital inflow and outflow.


The second trend in Vietnamese financial services law firms is the sophistication of project finance. Some top local law firms have been involved in highly regarded transactions such as: the funding of Haiphong International Container Terminal (HICT), the M&A of the Big Co supermarket system, the development of mega thermal power plants, offshore oil rigs for Petro Vietnam, or aircraft finance for VietJet Air to acquire 100 aircrafts from Airbus and now Boeing. In those projects, the security comes second to project feasibility, and the risk of non-completion is now recognized as a major issue facing lenders or bond investors. To address these risks, financial service lawyers must be skillful not only with the  Asia Pacific Lenders Master Agreement (APLMA) loan structure but also with  focusing commercial expertise on construction contracts, as well as delays and cost overruns to counter the non-completion risks present in project finance. In addition, lawyers need to assist clients to obtain extra incentives and support to guarantee cash flow from the project.

For state support projects, investors often request the government’s guarantee. Nowadays the Government often refuses to provide guarantees, after its anticipated debt caused by the guarantee under the Nghi Son Oil Refinery project.  Lawyers need to find other means to support clients such as through incentives and investment protections rather than through direct financial supports from the State.

Until recently, Vietnam still relies on state capital and ODA funding for its industrialization and infrastructure development. However, as the public debt is reaches 80% of the GDP, SOEs becoming inefficient, and the country’s growth rate still high, the Government is expected to equitize its public sector and focus on enhancing infrastructure for the private sector, including with foreign investors. Changes in the Civil Code, Civil Procedural Code, Enterprise Law, Investment Law, and the Decree on Private Public Partnership (PPP) are some major examples. This policy shift will no doubt create more room for large law firms to develop their financial service sectors to meet the ever demanding growth for their clients.


For further information/ insights, please contact:

Dr. Le Net, email:

Partner Tuan Nguyen commented on the URC company’s products

Nearly 40,000 barrels of  Red Dragon and C2 by URC Vietnam Company Limited produced that contains the lead content exceeding the permitted level was consumed out of the market. In spite of being obligated administrative penalty with the total amount over 5.8 billion Dong, the more concerning issue should be consumers’ health who directly suffered from such products. So in this situation, what shall consumers need to do to reclaim their rights?

Let’s watch the video to see how Mr. Tuan Nguyen – Partner in charge of Antitrust practice group at LNT & Partners gave comments on this case:

A Liberalised Framework

This article is our newest publication from “FDI Growth Economies Special Focus (2016)” which will be published in June 2016 by the International Financial Law Review (IFLR). This section is written by Mr. Bui Ngoc Hong – Managing Partner of LNT & Partners

Bui Ngoc Hong of LNT & Partners assesses the impact of Vietnam’s new FDI framework on the country’s growth prospects.

According to the Ministry of Planning and Investment of Vietnam, in 2015 FDI into Vietnam reached $24.11 billion, an increase of 10% year-on-year. The first four months of 2016 witnessed a surge of FDI into the country, with new FDI reaching $6.88 billion. This represents an increase of 85% over the same period last year.

It remains to be seen whether this wave of new investment will last. From a regulatory and policy perspective, one possible explanation is that many legislative improvements have recently been introduced to attract more FDI into the country.

A new framework

Vietnam’s new legal framework for FDI comprises two main elements: domestic laws and Vietnam’s commitments to international treaties. The latter are mainly in the form of free trade agreements (FTAs). With respect to domestic laws, the new Law on Enterprises (LOE) and new Law on Investment (LOI) were implemented on July 1 2015. On December 27 2015, Decree 118/2015/ND-CP became effective, completing the new legal platform for investment activities in Vietnam.

Vietnamese laws have narrowed down the areas where foreign investment is restricted. A foreign investor should generally be entitled to invest in and own their invested share capital in Vietnam in any sector, unless exceptionally
restricted in accordance with: (i) industry-based regulations and international treaties; (ii) laws on state-owned enterprises (SOEs), particularly those on the privatisation of SOEs; and, (iii) securities law in cases of investment in public, listed companies, or securities companies.

The restrictions in industry-based regulations and international treaties are being reduced due to recently concluded FTAs. Regarding the restrictions set out in the laws on SOEs, in October 2015 Vietnam’s Prime Minister instructed 10 state-owned conglomerates to divest their entire state-ownership. It is notable that these so-called mega-SOEs operate in crucial sectors such as insurance, mining, infrastructure and real estate, dairy, plastics, trading, and telecommunications. This development offers one of the biggest opportunities for foreign investors to enter into lucrative sectors, acquiring long-established brands and strategically located lands, together with a highly skilled managerial work-force in these privatised SOEs. This move is a signal of the government’s determination to leave private business to the private sector.

With respect to the restrictions in the securities law, according to Decree 60/2015/ND-CP, a local Vietnamese public company can now include the maximum ratio of foreign ownership in its charter. This means a foreign investor’s proposed investment into a local public company should have the company’s by-law restrictions lifted through the public company’s general meeting of shareholders.

Investment forms for foreign investors 

A foreign investor can choose to conduct their FDI in Vietnam by way of: (i) entering into a contractual arrangement – either a public-private partnership agreement (PPP) or a business co-operation contract (BCC); (ii) forming a joint venture (JV) with local investors, especially in those sectors where foreign ownership is yet to open fully; or, (iii) wholly owning a company (a wholly foreign owned company, or WFOC), in sectors open to foreign investors.

As for contract forms, foreign investors must use a BCC in certain restricted sectors. Foreign investors who would like to test the water before setting up their legal entity for market expansion may also choose a BCC. Meanwhile, the PPP is mainly used for infrastructure projects. This has great potential given that Vietnam is calling for more privately financed infrastructure projects. The PPP is advantageous to foreign investors because, once negotiated and agreed between the investors and the authority, a PPP agreement under Vietnamese law will generally have the same contractually-binding effects and enforceability as a private transaction, despite the negotiated matters being of a public nature.

The other two forms – the JV and WFOC – require foreign investors to own partially or wholly a Vietnam-based company. This foreign ownership can be achieved either by setting up a new company or through the foreign investor’s acquisition of share capital in an existing local company.

If choosing to set up a new company, whether a JV or WFOC, foreign investment is project-based, which must undergo two steps. First it is necessary to obtain an Investment Registration Certificate (IRC) approval for the proposed investment project. Second it is necessary to obtain an Enterprise Registration Certificate (ERC), setting up a company to run the approved project.

If choosing to acquire share capital in an existing local company (via M&A), the procedure is significantly simplified. No IRC is required. The general requirement is that the foreign investor conducts the M&A deal, and has it recorded in the relevant corporate registration documents of the target company (for example, the target’s amended ERC or the shareholders’ book) to reflect the foreign investor’s acquired share capital. Approval for the proposed M&A deal is only required when the target company is registered to engage in business lines conditional to foreign investment, or the target has 51% or more of its charter capital held by either: (i) a company with 51% or more charter capital held by foreign investors; or, (ii) a company with 51% or more of its charter capital held by the company in point (i).

Local status entitlement

This is the new legal regime’s most liberal improvement in favour of foreign investors, especially in those sectors where foreign investment is still subject to restrictions. In particular, under the LOI, a foreign invested enterprise (FIE) in which foreign investors hold, directly or indirectly, at least 51% of the FIE’s charter capital, will be treated as a ‘foreign investor’ in applying investment conditions and investment procedures. The others are treated as a ‘domestic investor’ with local status, and will be entitled to enjoy investment conditions and investment procedures applicable to domestic investors such as the freedom to invest in sectors still restricted to foreign investors.

This recognition of the LOI opens legal ways for foreign investors to enter into virtually any and all business sectors in Vietnam. As long as the foreign investor’s investment is structured to be entitled to local status, a foreign investor can invest, own and control their investment, even in sectors not yet open to foreign investment.

Highly restricted areas
Vietnam has a large potential logistics market, currently valued at approximately $60 billion and with an annual growth rate of 20%. As of 2016, all of Vietnam’s market openings to foreign investors in logistics services have become due. These can be grouped into three categories.

Group one is where foreign ownership is lifted completely, ie setting up a WFOC is allowed. This group includes: warehousing and storage services; freight transport agency services; and, maritime transportation services (except for operating a fleet under the national flag of Vietnam). Group two is where foreign ownership can be up to a majority, but a JV is still required. This group includes road transport services and transportation agency services (except for freight transport agency services). In group three foreign ownership is restricted to 50% or less. It includes: loading and unloading services; towage services in Vietnamese seaports; shipping agency services and maritime transportation services which operate a fleet under the national flag of Vietnam; internal waterway and rail transportation services; and, air transport business services.

Retail sector
Vietnam’s current population is approximately 92 million, more than 60% of which are of working age. Vietnam’s economy is growing fast (the GDP was 6.7% in 2015) and the middle-class is growing rapidly. During the last 10 years, Vietnam has been one of the world’s most buoyant retail markets. The current annual revenue of Vietnam’s retail market is approximately $110 billion. Over recent years, the Vietnamese consumer trend has shifted from traditional to modern shopping channels, offering huge opportunities for the retail sector.

A foreign investor can legally set up their subsidiary in Vietnam in the form of a WFOC to retail almost anything. There are a small number of restricted products such as cigarettes, books and newspapers, pharmaceutical products and drugs, explosives, processed oil and crude oil, and rice. The restrictions to foreign retailers are not in the form of a maximum foreign ownership. Rather, it resides in a tool that is potent to the retail sector: the Vietnam authority’s discretion to permit opening retail outlets– or the socalled Economics Needs Test (ENT). The ENT applies to all FIEs. With the ENT, the establishment of more than one outlet is subject to approval based on the number of existing service suppliers in a particular geographic area, and the stability of the market and geographic scale. These criteria are vague, and difficult to judge. They give the licensing authority a high degree of discretion to permit – or otherwise – a FIE to open retail outlets beyond the first. The success of a retail business depends heavily on the number of outlets, which in this case is subject to approval of the authority.

Under the Trans-Pacific Partnership Agreement (TPP), Vietnam has committed to abolish the ENT within five years from the TPP’s effective date. This is positive news for foreign investors from TPP countries. Even so, during the next five years, a foreign-invested retail company must either accept being subject to ENT restrictions, or use special legal structures for their investment so as to enjoy local status, to win end-customers and build their retail outlets in this buoyant sector.

The pharmaceutical sector
Vietnam is the ASEAN’s third-largest by population. With living conditions improving rapidly, pharmaceuticals is one of the most lucrative sectors in the country. However, foreign investment into pharmaceuticals is welcomed only
in manufacturing, and is highly restricted in pharmaceutical retail. Despite the restrictions, as a result of the LOI’s liberal provisions, a foreign investor in pharmaceuticals can still find ways to achieve their commercial purposes either by using a special legal structure, licence partnerships, or product manufacturing arrangements.

Looking forward
Vietnam has recently made great efforts to improve its legal framework to attract more foreign investments. With the economy expanding and opening to foreign investors, the country seems to have committed to joining and playing by the rules of the global market. The playing field has become almost level, so foreign investments have never been so welcome. The coming years should see much more interesting competition and cooperation among investors.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This article is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact the author Hong Bui at ( or visit the website: Http://

Legal briefing February, 2016

Please click here to download our report: Legal Briefing October _ LNTpartners

I. Circular No. 20/2015/TT-BTP giving details and providing guidelines for implementation of a number of articles of the Decree 23/2015/ND-CP dated 16 February 2015 issuing copies from masters registers, certification of true copies from originals, authentication of signatures and contracts (Circular 20)

Sector: Administrative

Effective date: 15 February 2016


Circular 20 has provided the guidelines for implementation of a number of articles on certification of true copies from originals, authentication of signatures, notarization of contracts, transactions, in particular:

Decree 23 has simplified the procedure on notarization of contracts. However, due to the unfamiliarity with new administrative procedures, some of local authorities themselves invent additional provisions or require additional documents in the notarization dossier. The Circular 20 has addressed this shortcoming: in receipt and settlement of the notarization requests, the notary is not allowed to invent any additional step, or request for more documents other than those stipulated in the Decree 23. Circular 20 also regulates that if the notary fails to settle the notarization requests within 15 hours and fails in producing results within one day or having to extend the settlement schedule under Article 21, 33, 37 of Decree 23, a clear appointment letter is required to be sent to the requester.

Besides the cumbersome in notarization, Decree 23 has not also detailed the template of testimonies on document of legacy inheritance, document of legacy refusal.  Consequently, the competent authorities were confused and even refused to authenticate. Therefore, Circular 20 has given details for this matter in Article 3.1 and issued a template attached with the Circular. In addition, Circular 20 also attached a sample of authentication testimony of signatures to ensure the consistency of application of the Circular.


Circular 20 expectedly settles the problems arising from implementation of Decree 23 such as the lack of templates and inconsistency of required dossier.

II. Circular No. 59/2015/TT-BLDTBXH detailing and guiding the implementation of some articles of the Law on Social Insurance on compulsory social insurance (Circular 59)

Sector: Insurance

Effective date: 15 February 2016


Circular 59 has various remarkable points as follows:

(i) Circular 59 supplements the provision on the payment of compulsory social insurance drawing from the monthly wage, allowances (from 1st January 2016 to 31th 2017), in which such allowances are the ones to offset the factors of working conditions, the complexity of work, activity conditions, level of labor attraction for which the agreed wage in labor contract is not calculated or incompletely calculated such as allowances of position, title, responsibility, heaviness, hazardousness, dangerousness, seniority, region, mobility, attraction and the like. Besides, the monthly wage paid for compulsory social insurance shall not include the other benefits and welfare, initiative bonus, meals between shifts, gasoline, telephone, travel, accommodation and child care allowances; assistance upon the death of employees’ relatives, the marriage of employees’ relatives, employees’ birthday, subsidy to the employees in difficult situation in case of work accident, occupational disease and other allowances and assistance recorded in separate items in the labor contract.

(ii) Circular 59 provides conditions to enjoy an one-time subsidy upon birth giving as follows: (a) In case only the father participates in the social insurance, the time of payment must be from full 06 months or more within the period of 12 months before birth giving; (b) For the husband of the mother requesting surrogacy, the social insurance payment must be from full 06 months or more within a period of 12 months to the time of child receipt.

(iii) Under Circular 59, when applying monthly pension, a rate of 2% of monthly pension shall be reduced for each year of retirement prior to the prescribed age, which is higher than the rate of 1% under Circular 03/2007//TT-BLDTBXH.

(iv) The rate of entitlement to enjoy one-time social insurance of the employees having the time of social insurance payment of less than 01 year is equal to 22% of the rates of monthly wage of social insurance payment; the maximum rate is equal to 02 months of the average monthly wage of social insurance payment.


Circular 59 has provided a means for realization of the Law on Social Insurance and Decree No. 115/2015/ND-CP. The Circular is expected to protect tens millions employees and financial resources of entities engaging in social insurance.

III. Circular No. 09/2015/TTLT-BCA-BYT-BTC guiding implementation of health care insurance applicable to employees, students, relations of solider of People’s Public Security of Vietnam (Circular 09)

Sector: Insurance

Effective date: 11 February 2016


Noticeably, Circular 09 details the scope of employees whose health insurance is contributed by the local Public Security and the employee themselves, and the ones whose health insurance is contributed by state budget. Accordingly, the relations of soldier, students of Public Security cultural school and foreign students who are granted scholarship at Public Security school shall enjoy the health insurance covered by the state budget.

Regarding the contribution responsibility in special cases, Circular 09 prescribes that within the time of sick leave from 14 days onward, in which the sick leave benefit is applicable, employees and their employers are not required to contribute into the health insurance while the health insurance benefit is still applicable.

Circular 09 provides that within the time of detention, in custody or temporarily suspended from their work before being investigated or judged guilty or not guilty of their offences, ratio applicable to health care insurance contribution shall be 4.5% of 50% of the monthly salary subject to social insurance contributions as stipulated by laws. The remaining contribution shall be contributed in case it is concluded that there is no violation accordingly.

Employees who are currently living and working abroad are not subject to health care insurance contribution within the period of being aboard. The period of being abroad shall be counted as uninterrupted in application of health care insurance contribution.


This Circular has come into effect from 11 February 2016. However, the provisions on contribution level, contribution liability, and contribution method in respect of health insurance have been effective since 1 January 2015.

IV. Decree No. 11/2016/ND-CP providing guidelines for implementation of Labor Code on foreigners working in Vietnam (Decree 11)

Sector: Labor

Effective date: 1 April 2016


The scope of foreigners who are exempted from work permit is extended to include experts, individuals being the chief executive officials or those holding management positions or technicians who work in Vietnam for less than 30 days per period and the total accumulated working day in Vietnam is no more than 90 days per year. Further, method for determination of an expert, a chief executive official and management positions is also detailed in this Decree.

Confirmation of demand for use of foreign employees by Chairman of provincial people’s committee is not required in particular cases, noticeably for foreign employees with abovementioned working period in Vietnam.


With respect to the application for obtaining work permit, in case a foreigner has been residing in Vietnam, only criminal record issued by competent authority in Vietnam is required. However, there is still no further clarification for applying this provision, i.e. how to determine that a foreigner has been residing in Vietnam. In addition, processing time for the issuance of work permit is shortened from 10 to 7 working days from full submission.


Decree 11 simplifies the process of work permit and facilitates favorable conditions for foreigners working in Vietnam.

V. Circular No. 36/2015/TT-NHNN on restructuring of credit institutions (Circular 36)

Sector: Banking and Finance

Effective date: 1 March 2016


Inheriting positive points of Circular 04 and being amended, supplemented to qualify requirements on restructuring of bank system and sustainable development of credit institutions system, Circular 36 has the following notable points:

  • The Circular 36 applies to credit institutions being commercial banks and finance companies only.
  • In addition to merger and consolidation, conversion of legal form of credit institutions is also be governed as one of restructuring form. Accordingly,
  • a commercial bank or finance company may convert from a limited liability company into a shareholding company, or vice versa; and a commercial bank or finance company may convert from a single member LLC into a multiple member LLC, or vice versa.
  • In case of conversion, the credit institution must have a conversion plan approved by its competent body and satisfy other requirements in accordance with laws.

It is strictly prohibited to disperse assets in any form.


Circular 36 is expected, by supplementing regulations regarding conversion of legal form of credit institution and improving regulations regarding merge and consolidation of credit institution, to create a bank system fully complying with current market principles.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at

Updates on M&A Legal Framework

We are pleased to introduce to you our newest publication on M&A Legal Framework from The Vietnam M&A Research Report 2016 (Issue 6) published by StoxPlus on 8th January 2016. This section is written by Mr. Bui Ngoc Hong – Partner of LNT & Partners. We strongly believe that these updates will be valuable to institutional investors, investment company and foreign players to set a foothold or to expand your businesses in Vietnam.

New legal improvements are likely to simplify the M&A procedures for foreign investors into Vietnam

  • Towards the end of 2015, Vietnam improved significantly its legal platform for M&A transactions, especially for foreign investors.
  • For on-the–stock-market M&A, Decree 60/2015/ND-CP, effective as of 1 September 2015, revised a number of articles of Decree 58/2012/ND-CP (Decree 60) and replaced the previous foreign ownership cap of 49% charter capital, relaxing the thresholds for foreign ownership. Depending on the target company’s business lines and its shareholders’ approval, these changes could enable foreign investors’ acquisition of up to 100% of a local company’s charter capital.
  • For not-on-the-stock-market M&A, effective as of 1 July 2015, the new Law on Enterprises (LOE) and the new Law on Investment (LOI) offer foreign investors relaxed ownership thresholds and simplify the investment procedures.
  • These legal improvements coupled with Vietnam’s full market openings to foreign investments in 2015 and fueled by the local economy’s heightened productivity rates, all suggest that now is the right time for buyers and sellers to actively engage in M&A transactions.

     Market openings ripen foreign investments

  • Under the LOI, foreign investors are permitted to own charter capital of a Vietnamese enterprise without being subject to any limits, unless otherwise stipulated in the following situations:
  1. International treaties to which Vietnam is a party, i.e. the WTO Commitments on Services and other free trade agreements (FTA);
  2. Securities laws governing investment in public companies, securities business organizations or securities investment funds;
  3. Laws on specific industries applicable to particular business lines; or
  4. Laws on state-owned enterprises in case of investments in state-owned enterprises.
  • Interestingly, the remaining restrictions under the WTO Commitments on Services (such as logistics services, foods and beverage supply, among others) are scheduled to be lifted this year 2015. This means, unless future free trade agreements offer better market openings, the scheduled openings under the WTO Commitments will provide the most preferential concessions to foreign investors.

M&A on the stock market –foreign ownership caps relaxed due to Decree 60

  • On October 26th 2015, Vietnam Government issued Decree 60/2015/ND-CP amending several contents of Decree 58/2012/ND-CP. In total, there are 24 adjustments in this new Decree. Decree 60 is intended to add vitality to the Vietnam stock markets and an extra boost to the equitization of State enterprises, as part of the plan to upgrade Vietnam from “frontier” market classification to “emerging” market classification at MSCI, while racing up to finish the SOE equitisation goal set out in Decision 929 by the Government.
  • Under Decree 60, there is no restriction on foreign ownership ratio of a public company, calculated by holdings of voting shares, unless:
    1. otherwise provided in relevant international treaties to which Vietnam is a party;
    2. the company operates in business line(s) for which the LOI and other relevant laws provide limits on the foreign ownership ratio;
    3. the target company operates in a business line with conditions applicable to foreign investors but there is not yet any specific provision on the foreign ownership ratio, then the maximum foreign ownership ratio is 49%;
    4. in case of equitization of Stated-owned enterprises, if the laws on equitization are silent on the foreign ownership ratio, the provisions of Decree 60 shall apply; or
    5. otherwise provided in the target company’s charter, which is subject to change by the shareholders at the annual general meeting.
  • For companies operating in multi-business lines with different provisions on foreign ownership ratios, the foreign ownership ratio shall not exceed the lowest ratio permitted (unless an international treaty provides otherwise).
  • Foreign investors may invest without limitation in government bonds, Government-backed bonds, local government bonds, and corporate bond unless prevented by Law or regulations.
  • The duration for equitized SOEs to finish new business certificate registration and register on UpCom is tighten up to 90 days.
  • The above rules of Decree 60 are expected to ease and increase foreign investment into Vietnam’s stock market. Once the list of business lines with conditions applicable to foreign investors are issued, the participation levels of foreign investors into companies on the stock market will depend only on the target companies’ shareholders’ decision at the general meeting.

For M&A into companies not on the stock market, the improvements introduced by the LOE and LOI are even more comprehensive and significant

New categorization of foreign invested companies, with different investment conditions and procedures depending on foreign ownership levels in the invested company

  • Perhaps the most significant change to M&A foreign investment into Vietnam governed by the LOI and LOE is the categorization of economic organizations into 2 groups depending solely on the foreign owned capital factor, with respectively different investment procedures and investment conditions accorded to each group. The first group includes those economic organizations that are subject to investment procedures and business conditions applicable only to foreign investments and generally are more restrictive (Foreign Controlled Group -FCG).
  • FCG includes any company in which the following conditions exist:
  1. 51% or more of its charter capital is held by one or more foreign investors (i.e. foreign individual or offshore entity); or
  2. 51% or more of its charter capital is held by an enterprise in (1) above; or
  3. 51% or more of its charter capital is held by foreign investor(s) and enterprise(s) in (1) above.
  • Of note, under the LOE the 51% threshold is calculated on the total charter capital of a company, rather than total voting shares.
  • Those that do not belong to the FCG make up the second group (Locally Controlled Group -LCG), which is entitled to enjoy investment procedures and conditions equal to those applicable to domestic investments.

M&A procedures under the new Law of Investment and Law of Enterprises are simplified

Simplified M&A procedures under the LOI and LOE

  • Now that M&A procedures have been simplified and shortened by the LOI and LOE, foreign investors’ share acquisitions into domestic companies shall follow one of the following two types of procedures:
  1. Type 1: If (a) any of the target company’s business lines falls under the business lines conditional to foreign investors , or (b) the foreign ownership resulted from the proposed M&A deal will lead the target company to become one belonging to the FCG, the M&A procedures shall comprise of 2 steps being (i) register and obtain an approval notice from the provincial Department of Planning and Investment and, (ii) upon approval, register the change of ownership as a result of the transaction.
  2. Type 2: For other cases, the sole step is to register the resulting change of ownership or the increase in charter capital of the target company. In case new shares have been issued privately to new investors, registration of the private placement may be required.
  • At the time of this article, the implementing regulations guiding the LOI and LOE have not taken effect. Thus, it remains to be confirmed whether the simplified M&A procedures will prove realistic. Nevertheless, if implemented successfully, the new M&A procedures will reduce significantly the paperwork and shorten the registration time by at least two-thirds of the time it took under the former, repealed legislation.
  • In any event, one virtual certainty is that foreign investors will not have to face the same time consuming procedures to obtain the so-called Investment Certificate, which was required under the former legislation when foreign investors acquired as little as 1% of the local target company’s charter capital.


Other improvements in the legal framework that support M&A deals

Registrability of M&A transactions involving foreign buyers becoming more transparent and predictable

  • Under the former laws, registrability of M&A transactions involving foreign buyers could not be confirmed until the signed M&A transaction documents were submitted to the licensing authority for final registration, or sometimes even worse, until an Investment Certificate was issued to the target company.
  • Now, if the proposed transaction leads the target company to become an enterprise falling under the FCG rubric or involves business lines conditional to foreign investors, it takes 15 days to obtain a notice from the authority to confirm whether or not the transaction is registrable or refused. When either the legal feasibility of the proposed transaction is confirmed or the approval notice is not required, parties to the proposed transaction may enter into contractual binding documents.
  • Taking advantage of this new procedure, foreign investors can avoid practical risks which may arise from lengthy licensing procedures, especially in applying for an Investment Certificate for the target company as previously required under the former legal regime. Owing to the improved procedures, it can be expected that those tools for controlling payment such as escrow account instructions, bank guarantees or share pledges may no longer be as necessary as they were under the former legislation.

Industries and trades restrictive to foreign investment now specified

  • Even with the market openings fully due under international trade treaties, there are a number of industries and trades into which foreign investments are still subject to restrictive conditions. On 30 December 2015, for the first time, the list of these industries and trades together with the respective investment conditions applicable to foreign investment (FCG Restricted Sectors) have been publicized on the Ministry of Planning and Investment’s website for foreign investment, at The FCG Restricted Sectors consists of businesses which must adhere to conditions applicable solely to foreign investment, and those conditions can be one or more of the following:
  1. Conditions of investment forms, e.g. setting up new companies, M&A, or contractual forms;
  2. Requirements of the Vietnamese party’s participation in the investment; and
  3. Conditions in investment areas and scope;
  4. Other conditions stipulated in international investment treaties and laws, ordinances, and decrees.

Other improvements in the legal framework that support M&A deals (cont’d)

The new legal regime helps ease structuring for M&A into sectors restrictive to foreign investments

  • Despite the restrictions placed on the FCG Restricted Sectors, special investment structures can be developed for FCG acquirers to commercially make the most of their investment. In particular, the new voting rules under the LOE and the new, higher allowance of foreign capital in categorizing FCG and LCG, along with other tools, help ease the deal structuring process.
  • Along with the new 51% ownership threshold, voting thresholds to pass a resolution by the decision-making organs of a company have been lowered under the LOE. Specifically, in a joint stock company (JSC) the voting thresholds for passing shareholders’ ordinary resolutions have been lowered to 51% of qualified votes and 65% for certain important matters (previously 65% and 75% respectively) requiring extraordinary resolutions. If voted by way of circulation, shareholders’ resolution may also be passed with only 51% approving votes. Accordingly, a shareholder may generally control a joint stock company by controlling only 51% of the voting shares.
  • In a multi-member limited liability company (MLLC), statutory voting threshold for members’ ordinary resolutions remains unchanged at 65% and 75% for special resolutions. However, the LOE allows the MLLC’s charter to provide a lower voting threshold, e.g. 51% or even less, subject to its members’ agreement.
  • Compared to the voting rules under the former, repealed LOE, majority shareholders will find that these new voting thresholds will make it cheaper to control the target company’s corporate management, as they now need to control only as little as 51% of the company’s voting shares. In contrast, for minority shareholders, it will cost more to buy enough shares (i.e. votes) to block a decision from being passed by the other shareholders.
  • Of note, different from the laws on securities, under the LOE the 51% threshold is calculated on the total charter capital of a company, rather than total voting shares. Accordingly, an acquirer investing via the LOE, i.e. not on the stock market, may find it cheaper to structure their investment so that they can hold and control in their invested company even if their operating company is engaged in the FCG Restricted Sectors. In any event, structures can be devised to achieve the commercial purposes of an investment.

Despite many improvements, some shortcomings still remain

Payment regulations applicable to M&A transaction not compatible with the LOI and LOE

  • Payment in M&A transactions is also an issue to be dealt with urgently. The current payment rules applicable to foreign related M&A transaction are provided by Circular 05/2014/TT-NHNN dated 12 March 2014 (Circular 5) and Circular 19/2014/TT-NHNN dated 11 August 2014 (Circular 19). These rules did not accommodate the relevant changes in the LOI and LOE in which such fundamental concepts as direct investment and indirect investment are no longer been used. In short, both Circular 5 and Circular 19 must be amended. The most expedient payment mechanism is to allow each offshore acquirer to open its own sole investment capital account at a commercial bank in Vietnam, and have the payment from their M&A deals into Vietnam-based companies transferred from that sole investment capital account to the seller’s account.

Existing shareholders may keep foreign acquirers locked out of a public company

  • Compared with former legislation, both the LOE and Decree 60 seem to allow parties of M&A transactions to decide the terms of their deal, i.e. corporate matters are becoming more democratic.
  • With respect to M&A transactions on the stock market, under Decree 60, the existing shareholders in a public company can effectively decide whether or not to open their doors to foreign investors, by setting maximum foreign ownership thresholds in their company’s charter. This should trigger plenty of negotiations not only among the existing shareholders in a public company, but also between a potential acquirer and the existing shareholders, so that a foreign acquirer may purchase shares.

Despite many improvements, some shortcomings still remain (cont’d)

Documents evidencing completion of M&A transactions –the tricky law interpretation may come back

  • With respect to registering M&A transactions which are not on the stock market, i.e. to abide by the LOE, Decree 78/2015/ND-CP (Decree 78, effective as of 1 November 2015) provides a change which may be very consequential especially to the acquirer. This change reads, “share purchase agreements or documents proving completion of the share purchase transaction” must be submitted for licensing registration. Positively interpreted, it could mean that instead of submitting documents evidencing the completion of the share transfer (in previous practice, evidence that the entire purchase price has been made), the parties to an M&A can choose to submit their share purchase agreement.
  • On the other hand, negatively interpreted, the “share purchase agreement” could be deemed as a tool to prove that the share purchase transaction has been completed. If so interpreted, payment terms in the share purchase agreement should require that the purchase price must be fully made at the time the share purchase agreement is submitted for licensing registration. If the positive interpretation applies, payment terms of share purchase agreements can be freely negotiated, and this change should revolutionize the payment terms in an M&A transaction, where lots of trade-offs are expected to be made between the parties. In that sense, the legal environment for M&A in Vietnam under the new legislation empowers parties to make more of their own decisions.

Looking forward

For the first time, Vietnamese law makers introduced new, more reasonable classification of foreign invested companies –FCG and LCG -together with different investment conditions and M&A procedures respectively applicable to each of the two groups. With the new voting thresholds, the new M&A legislation makes it more cost effective, dramatically reducing the time it takes to conduct M&A transactions. The new voting rules tend to support financially stronger shareholders, i.e. those who wish to become a majority shareholder, as they can pass decisions in a company with a smaller percentage of approving votes. In this regard, the new legislation encourages acquirers to buy more into the target company. With the new, improved legal platform, M&A transactions in Vietnam should run faster and more smoothly. With respect to implementation, as usual, there remain issues to be addressed and resolved. However, with the macro-economic factors getting more and more encouraging, the market should soon experience a noticeable increase in M&A traffic.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact the author Hong Bui at ( or visit the website: Http://

Civil Transactions under the new Civil Code 2015 – Vietnam Law Insight

On 24 November 2015, the National Assembly passed the new Civil Code 2015, a leading code governing all civil relations in the society, which will take effective and replace the current one on 1 January 2017.

The official text of the new Civil Code has not yet been announced and published. However, referring to the most updated draft which was submitted for adoption of the National Assembly, it finds that the new code has many significant and progressive amendments learning from shortcomings of the current one and from the practice. These amendments surely will significantly change the way contracting parties negotiate, agree and enter into agreements.

Among those amendments, there are some initial notable changes as follows:

  • Company charter may provide the term and scope of the representative authority a legal representative may have. Accordingly, companies may have a chance to limit the representative scope of their legal representative in their charter, which is not possible under the current prevailing laws. However, it will also increase the burden on contracting parties when entering into an agreement, because they must check other parties’ charters, or other evidence, to make sure that they are dealing with the right persons.
  • Civil transactions which are not in compliance with form, e.g. not notarized when it is required so, may NOT invalid if one party or both parties have implemented at least two thirds of their obligations under the relevant transaction. Though, identification of such “two thirds” may require further guidance from competent authorities.
  • Statute of limitations shall only be applied to a lawsuit upon request of a party(ies) if such request is given before the issuance of the first instance judgment. A party who may benefit from applying statute of limitations is also entitled to refuse such application.
  • The new code also entitles contracting parties to “new” security means for performance of obligations in contracts, in addition to the current ones, including (i) reserving ownership of assets until completion of payment, and (ii) putting a lien on assets in case of any violations. Actually, these means have been practically employed for a long time, but they are not legally recognized until the establishment of the new code.

There is still a long way before the new code comes into effect and brings its progressive changes to Vietnam practice. However, it is expected that the new Civil Code shall, together with other significant changes in various sectors of law, support the development of Vietnamese market and help to narrow down the gap between the effectiveness of Vietnamese legal frameworks and of other developing countries.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Foreign Investment under Decree 118 detailing the Law on Investment

Law on investment 2014 has taken effect since 01 July 2015 with significant changes in the investment policies and procedures. Being struggle with a completely new platform, both investors and executive agencies were craving for a detailing decree, which has just been issued on 12 November 2015, after 4 months as of the effective date of the LOI. Decree 118/2015/ND-CP detailing and guiding a number of provisions of the Law on Investment (Decree 118), which is expected to facilitate the investment environment for foreign investors in Vietnam shall enter into effect on 27 December 2015.

The most striking feature of the Decree 118 is the simplification of investment procedure regarding the purchase of shares, capital, and contribution of capital. In particular, foreign investors are not required to obtain Investment Registration Certificate if the investment is conducted via purchase of share, capital, and contribution of capital. In this case, Decree 118 only obligates the economic organization whom foreign investor invested into to adjust the list of members, shareholders at the competent authority, except for the two following circumstances where the purchase of shares, capital, contribution of capital need to be registered by the investors: (i) the target company is operating in a conditional business line for foreign investors; and (ii) the investment result in a consequence that the foreign investor holds at least 51% of the economic organization’s charter capital.

In addition, regarding the obtainment procedure of Investment Registration Certificate and Enterprise Registration Certificate, Decree 118 provides a co-ordination mechanism for the investment registration authority and business registration authority. Under Article 24 Decree 118, foreign investors shall be able to submit both investment registration and business registration dossier to one agency – investment registration authority, who shall afterwards transfer the business registration dossier to the competent authority.  Moreover, the registration authorities are allowed to notify to the investors regarding the shortcomings of the whole dossier once only. The provision potentially prevents the practice that the investors have to amend the dossier over and over.

On the other hand, Decree 118 requires the Ministry of Planning and Investment to co-operate with other Ministries and agencies to publicize the conditional business lines applicable to foreign investors, along with its legal basis and details of the conditions on the national portal. A consolidated list of conditional business lines is estimated to bring convenience and efficiency to the foreign investors in making their investment decision.

To sum up, after 4 months waiting, issuance of the Decree 118 is tagged along with a considerable expectation in clarification of policies and procedures in foreign investment. Although it has not been effective, one cannot deny is that it would help to tidy up the mess left by the gap between the LOI 2005 and the LOI 2014.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Compulsory Social Insurance – Vietnam Law Insight

Decree No. 115/2015/ND-CP providing detailed regulations on compulsory social insurance

The Decree No. 115/2015/ND-CP (Decree) shall take effect from 01 January 2016. Following the Law on Social Insurance, this Decree has provided detailed regulations on compulsory social insurance (CSI) as follows:

The Decree has extended the applies, adding the male employee whose wife is in the gestation, the employee who works pursuant to the at least 1 month to 3 months labour contract, etc., which stipulated in Article 02 the Decree.

Regarding the CSI regime, there are 03 remarkable principles

  • First and foremost, the payment of CSI drawing from the monthly wage shall be calculated not only on the monthly wage rate but also the allowances and other additional payments[1]. Particularly, from 01 January 2016 to 31 December 2017, the allowances will be added to calculate the payment; and since 01 January 2018, the payment thereof will include the wage rate, allowances and other additional payments.
  • Second, the Decree supplemented the provisions on the maternity regime and maternity leave in case of surrogacy stipulated in Section 1 Chapter II.
  • The third noticeable principle is that the Decree has changed the benefit rate of one-time CSI subsidies from 1.5 months’ wage up to 02 months’ wage.

This Decree shows a great effort of the Government in protecting the labour’ legitimate rights and interests, as well as in implementing the Law on Social Insurance on the right track.

Such exemption is mentioned in item h clause 7 article 5 of the Circular 219. The Circular 193 will take effect on 10th January 2016.

[1]. In case the allowances and other additional payments are mentioned in the Labour Contract (Article 17 the Decree)

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Implementation of the Law on Value Added Tax – Vietnam Law Insight

Circular No.193/2015/TT-BTC amending Circular No.219/2103/TT_BTC guiding implementation of the law on value added tax


On 24th November 2015, Ministry of Finance issued Circular No. 193/2015/TT-BTC (hereinafter referred as “Circular 193”) amending Circular No. 219/2013/TT-BTC (hereinafter referred as “Circular 219”) guiding implementation of the Law on Value-Added Tax and Decree No. 209/2013/ND-CP detailing and guiding implementation of some articles of Value-Added Tax issued by Minister of Finance Ministry.

The Circular 193 supplements one (01) exemption of declaration and payment of the value added tax (hereinafter referred as “VAT”). Therefrom, organizations, enterprises who receive remunerations from state agencies by collecting, paying such remunerations on behalf of the state agencies shall not be obliged to declare and pay VAT relating to such remuneration.

In details, such exempted remunerations have to be collected and paid on behalf of the state agencies from the following activities: collecting from voluntary social insurance, voluntary medical insurance for Social Insurance agencies, paying preferential allowances for people contributed to revolution, other allowances for Ministry of Labor – Invalids and Social Affairs; collecting tax of households for tax agencies and other remunerations collected, paid on behalf of the state agencies for the State agencies.

Such exemption is mentioned in item h Clause 7 Article 5 of the Circular 219. The Circular 193 shall take effect on 10th January 2016.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Conversion of 100% State-owned Enterprise into Joint Stock Company

Decree No.116/2015/ND-CP providing amendments, supplements to Decree No. 159/2011/ND-CP on conversion of 100% State-owned Enterprise into Joint Stock Company

On 11 November 2015, the Government issued Decree No.116/2015/ND-CP (Decree 116) providing amendments, supplements to Decree No. 159/2011/ND-CP on conversion of 100% State-owned Enterprise into Joint Stock Company (Decree 59) with the highlighted points as follows.

 Regarding the investment capital of the enterprise undergoing equitization in other economic organizations, it is noticeable that in case there is a difference between the value recorded in the accounting books and the actual value of the re-assessment, i.e. the former is lower than the latter, the value of the re-assessment shall be the final statistic.

With regard to the determination of the initial share structure, the Decree 116 does not provide any restriction in the number of shares to be sold to strategic shareholders and other investors, which is in contrast with the Decree 59 where the number of shares to be sold was stipulated to be not less than 25% of charter capital for strategic shareholders not less than 50% for other investors.

With respect to large scale enterprises in which State owned capital is above 500 billion Dong operating in sensitive sectors and industries (such as insurance, banking, post and telecommunications, aviation, coal mining, petroleum and other rare mineral mining) and parent companies belonging to State Economic Groups and Corporations, the ratio of shares auctioned to investors shall be considered and specifically decided by the Prime Minister or by an agency authorized by the Prime Minister.

Decree 116 also provides that in case equitization of State Economic Group, State Corporation or enterprise operating in aforementioned sensitive sectors is subject to the approval authority of the Prime Minister, the Ministers, Head of Ministerial equivalent or Government agency or Chairman of the provincial people’s committee shall select the Stock Exchange or hire an intermediary financial institution to hold the auction.

Decree 116 takes effect from 11 November 2015 and revokes Article 1.2 of Decree No. 189/2013/ND-CP dated 20 November 2013.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or our website

Regulations on Development of Supporting Industries – Vietnam Law Insight

Decree 111/2015/ND-CP guiding regulations on development of supporting industries

On 03 November 2015, the Government issued Decree No.111/2015/ND-CP on developing supporting industries and replaced Decision 12/2011/QD-TTg dated on 24 February 2011 on development policy of a number of supporting industries and Decision No. 1483/QD-TTg dated 26 August 2011 on promulgating the list of products of supporting industries prioritized for development.

Under Decree 111/2015/ND-CP which shall take effect on 01 January 2016, organizations and individual operating in supporting industries that are subject to the list of prioritized sectors under the Decree may be supported with financial funding as well as incentive policies from the State for their activities, i.e. research and development, application and transfer, human resources, international cooperation, market development.


Decree 111/2015/ND-CP stipulates general incentive policies for enterprises operating in supporting industry, including incentives on import-export tax, VAT, favorable interest rates for investment credits capital of the State. In additions, small and medium-sized enterprises producing supporting industrial shall be exempted or reduced land or water surface from rentals. The maximum loans at credit institutions for these enterprises can be up to 70% invested capital. To provide prompt supports, especially in local area, the development program of supporting industries and the supporting industry development center are also established under this Decree.

In the context of rapidly growing of Vietnamese economy, there should be more and practical support from the State to attract more investments into supporting industries thereby meeting the high development pace of Vietnam’s economy and industry. Decree 111/2015/ND-CP has made a significant improvement in providing a clearer and more complete legal framework for such development of supporting industries.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at Our website

Vietnam: Merger Control – Vietnam Law Insight

Published by The Global Competition Review in association with LNT & Partners

Under Vietnam’s Competition Law (VCL), economic concentration includes company mergers, consolidations and acquisitions, and the creation of joint venture. Since it was created in 2005, the Vietnam Competition Authority (VCA) has not officially rejected any proposals for economic concentration that have been notified. However, this does not necessarily mean that this aspect of competition law is overlooked in Vietnam. According to the VCA’s reports, since 2011, it has dealt with an average of three to four notifications per year. In addition, the VCA is closely monitoring merger and acquisition activities in the market by cooperating with the licensing authorities and administering the structural changes of enterprises to ensure that all economic concentration is properly controlled by the competition authority. Notably, on 22 December 2014, the prime minister issued Decision 2327/QD-TTg (Decision 2327), granting an exemption to a merger between the only two card networks, resulting in a monopoly in the relevant market. This is remarkable for being the first exemption granted by the prime minister after 10 year’s enforcement of the VCL.

In this chapter, we shall revisit the merger control regime under the VCL, focusing particularly on the application of exemption rules. We shall comment on the merger control policy in Vietnam through the case study of the Card Union merger, and recommend some lesser-known solutions that investors may consider in the early stages to get the deal through.

Overview of the economic concentration regime

Certain merger controls may impose these economic concen­trations (ie, a statutory notification or prohibition). The applicable form of merger controls shall be subject to the combined market share of a transaction.

If the combined market share of an economic concentration in the relevant market is below 30 per cent, then there are generally no restrictions. Such non-restriction also applies if the resulting merger is considered a small or medium-sized enterprise. Under the current applicable regulations, the criteria for determining the size of business are based on investment capital and number of employees, depending on the line of business. For example, a medium-size trading or service enterprise will have an investment capital of from approximately US$500,000 to US$1 million and a number of employees from 50 to 100.

If the combined market share is between 30 per cent and 50 per cent, the economic concentration must be notified to and approved by the VCA before the parties may proceed with the merger.

If the combined market share is more than 50 per cent, the economic concentration will be prohibited unless exempted by the prime minister or the minister of industry and trade (minister), as the case may be.

A violation of economic concentration regulation would result in a penalty of up to 10 per cent of the turnover of the participating parties. Other remedies, including divestiture or separation of a merged company, may be applied subject to the authorities’ decision.

The market share of a company is calculated by reference to its percentage of turnover from sales or inwards purchases over the total turnover from sales or inwards purchases of all companies in the business of the same type of goods in the relevant market for a month, quarter or year. The combined market share is the total market share in the relevant market of all companies participating in the economic concentration.

The data necessary for determining market share may be obtained from various government agencies, such as the General Statistics Office (in general), the Ministry of Finance (for the insurance industry), the Ministry of Information and Communications (for the telecommunications industry) or the State Bank of Vietnam (for the banking industry). Data published by reputable market researchers can also act as a useful starting point. Interestingly enough, the Vietnam Competition Authority (VCA), a govern­mental competition watchdog, will predominantly look at the extent of the combined market share when assessing whether an economic concentration shall be notified or prohibited in accordance with the VCL.


The prime minister has the authority to exempt an economic concentration that would otherwise be prohibited if it is considered to contribute to the nation’s socio-economic development or techno­logy advance. Such exemption authority shall be under the minister in case a party of the prohibited economic concentration is at risk of dissolution or bankruptcy. The decision to grant an xemption shall consider, among others, the duration of the exemption, and the conditions on and obligations of the parties.

The VCA is responsible for evaluating requests of exemption and proposing that the minister grant exemption within its authority. If the prime minister authorises such exemption, the minister is required to send official letters seeking opinions on the exemption request from ministries, ministerial equivalent bodies, government bodies and other organisations and agencies concerned before submitting an evaluation report to the prime minister for his consider­ation and decision. Nevertheless, the VCL does not provide further guidance or criteria on determining such duration, conditions and obligations.

According to Decree 116/2005/ND-CP of the government dated 15 December 2015, providing detailed regulations for implement­ation of a number of articles of the Law on Competition, the follow­ing basic particulars must be included in the evaluation report:

  • compliance by the explanatory report of the merging parties with satisfaction of the criteria for entitlement to exemption for a definite period;
  • issues on which there are differing opinions and a plan for dealing with such issues; and
  • the opinion of the VCA or minister where the economic concen­tration falls within the category for which the prime minister has authority to make a decision on exemption.

The exemption decision must be made public within seven days from the date of issuance. The exempting authority (ie, the prime minister or the minister) may revoke the exemption at any time during the exemption period in certain circumstances, such as if the conditions for granting exemption no longer exist.

The Card Unions merger

Case background

Decision 2327 concerned the merger of the only two card unions in Vietnam: Smartlink Card Services JSC to Vietnam National Financial Switching JSC (Banknet). The two companies are the result of a joint venture established by commercial banks operating in Vietnam to provide payment services for bank and payment cards and other related services (ie, card unions). It is worth noting that the State Bank of Vietnam (SBV) became a major shareholder of Banknet in March 2010. Since these companies are exclusive providers for banks in Vietnam, the merger would result in a card union monopoly. As such, its initial proposal of merging Smartlink into Banknet in 2012 was considered controversial, despite the SBV’s endorsement.

The main concern was that the monopoly status of Banknet would effectively eliminate the competition in the market and relieve the banks from pressure of innovation. Furthermore, the monopoly may create commercial advantages for the bank members against those that have yet joined the system. In response to this concern, a representative of SBV assured the public that after the merger, Banknet would have various business plans to serve the nation and consumer interest. According to SBV, certain benefits of the merger include:

  • developing infrastructure for retail banking and non-cash payments in Vietnam;
  • providing better services to customers without interfering with the banking services; and
  • developing the national chip card standard set copyrighted by Vietnam which is also compatible with international standards.

As the combined market share of the participating parties exceed 50 per cent, an exemption is required for this merger. Upon a lengthy process of preparation, the application for exemption was finally submitted to the VCA in July 2014.

Conditions and duration

Under Decision 2327, the exemption was granted conditionally and for a limited period of time. Accordingly, the exemption is conditional upon the following obligations, whereby the post-merger Banknet is required to:

  • develop and implement a roadmap for the use of modern technology in ensuring the quality of the payment infrastructure service;
  • not discriminate among customers (eg, banks and other payment service providers);
  • register with the VCA the template of intermediary payment service agreement before contracting such agreement with the customer – this register is a guarantee to remove any disadvantageous terms and conditions, if any, that the company may impose to customers;
  • comply with the regulations and instructions of the State Bank of Vietnam when adjusting the service fee; and
  • report to the VCA on the performance of each of these items above every five years.

The exemption is granted for an initial term of five years, which will be automatically renewed every five years subject to the monopoly’s compliance with the aforementioned conditions.

Positive outlook

As the first economic concentration exemption issued under the VCL, Decision 2327 presents positive signals for the enforcement of the competition law regime in Vietnam. With Decision 2327, it is expected that there will be more compliance with the law, particularly in the public sector. It is worth noting that in the past, economic concentrations between State-Owned Enterprises often bypassed the competition procedures that are much more complicated and time-consuming than administrative procedures. In 2011, a controversial acquisition of Viettel (a corporation wholly owned and operated by the Ministry of Defence) over EVN Telecom (a subsidiary of Vietnam Electricity (EVN)), which had the alleged effect of increasing Viettel’s market share to over 50 per cent in 3G frequency resources, was conducted without the exemption procedures from the competition authority. Similarly, in 2012, the largest national air carrier, Vietnam Airlines, took over the state shares in low-cost carrier Jetstar Pacific without a competition exemption, although the acquisition has increased its share of the domestic market to over 90 per cent. These acquisitions were approved by the government decisions.

Missing the chance

Despite its positive outlook, Decision 2327 missed the chance to clear the murky water of the exemption rules under the VCL. The decision fails to present the authorities’ viewpoint on the economic benefits and potential anti-competitive effects of the merger. In particular, the decision did not provide any rationales for exemption (eg, factors that would be deemed to contribute to the nation’s socio-economic development or technology advance resulting from the merger). Likewise, since no potential effect on the restraint of compe­tition was identified, it is hard to say whether or not the conditions listed in Decision 2327 are adequate or even necessary to ensure that the merger would not cause any harm to consumers. Finally, Decision 2327 does not devise a sound mechanism to monitor and control the compliance of the post-merger company with the exemption condition. It leaves doubt on the enforceability of the decision because such mechanism is not available in the VCL.

Given the lack of a cost–benefit analysis in Decision 2327, it does not provide much implication for others cases. In addition, it may arguably create potential discrimination among cases given Vietnam does not have a binding precedent system.

Pre-merger consultation

The VCL is silent on pivotal issues and accordingly provides a leeway for the authorities to determine such issues at their discretion. Such leeway may be justified because the exemption should be granted on a case-by-case basis, subject to the industry, form of economic concentrations and so on. As such, the consultation with the VCA is one of the key factors for ensuring compliance with competition law requirements, especially in cases where investors have doubts or concerns over whether their proposed transaction will be prohibited or require notification to the VCA.

This consultation function of the VCA has proved successful and, in numerous cases, the VCA has even assisted in the accurate calculation of the combined market share. There were cases for which the VCA consultation has provided its worth, including a state company in the oil and gas industry and a Korea-invested company in Vietnam. These companies were advised not to make any notification as the combined market share of the participants did not meet the threshold stipulated by law.

However, despite this function being readily accessible and available (and, in fact, free of charge), only a small handful of companies have utilised it to date. Surprisingly, from 2008 to 2011, consultation from the VCA had only been requested nine times – an insubstantial figure considering the number of major economic concentrations closed in Vietnam during this period.

The VCA currently offers two types of consultation: general consultation and specific consultation. The former, which can be done by e-mail or phone, is primarily used for clarifying general concerns over the provisions of the VCL. The latter is used when considering the threshold of whether the proposed transaction requires notification or is prohibited. By providing the VCA with the salient details of the proposed transaction (to the extent sufficient), the VCA will be able to assist in ascertaining the relevant market share and its potential impact on the market.

While consultation does not eliminate the need for companies to legally notify the VCA for larger economic concentrations, they are an invaluable resource for investors in navigating the country’s complex merger control regime. When the free consultation has the potential to save millions of dollars in penalties and legal headaches, as well as save time and costs in ascertaining whether there may be a breach, it is surprising as to why many investors have not utilised it.

Past experience has shown that the VCA does not act as a roadblock to transactions upon receiving a notification. In fact, to date, the VCA has not objected to any economic concentrations that have been notified to it. These include substantial economic concen­trations that have resulted in a considerable increase to local market share, such as the merger of Nippon Steel and Sumikin Bussan Corporation, and the proposed merger of AIA and Prudential.

For this reason, prospective investors are advised to put these fears behind them and notify the VCA to close the transaction to the extent that they comply with competition laws. In addition, companies are not bound to proceed with their transactions after receiving approval by the VCA. Therefore, this notification can be provided as soon as the commercial terms of the transaction have been reached or even earlier during the deal negotiations.

Final words

While Vietnam’s competition law (particularly, its merger controls) arguably lack the sophistication of other developed jurisdictions, with their substantial penalties and potential to make or break a deal, they are often the overlooked elephant in the room for larger transactions.

Investors are reminded that competition law compliance should always be on the agenda when proposing and negotiating an upcoming economic concentration. However, these complex regulations need not be daunting and in fact, to ensure prospective transactions proceed as smoothly as possible and comply with competition law, the VCA should be considered as a friend, not a foe.

After all, to carry out the state’s overarching goals of promoting foreign investment and bolstering Vietnam’s economic growth, the VCA serves to promote healthy competition and foreign investment in the market to the extent permissible under the competition law.

AuthorAnh Tuan Nguyen

An extract from The Asia-Pacific Antitrust Review 2015 –

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or the author: Dr. Anh Tuan Nguyen at 

Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field – Vietnam Law Insight



LNT & Partners, Viet Nam November 2015

The Economic Research Institute for ASEAN and East Asia (ERIA) is an international organization established by a formal agreement among 16 heads of government at the 3rd East Asia Summit in Singapore on 21 November 2007. ERIA works closely with the ASEAN Secretariat, researchers and research institutes from East Asia to provide intellectual and analytical research and policy recommendations. Another key ERIA objective is capacity building aimed at strengthening policy research capacities in less developed countries.

This year, ERIA together with law experts in the region works on the discussion paper on Competition Law.

Dr Tuan Nguyen, is incharge of the Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field in Vietnam.


Despite Vietnamese competition authorities’ attempts to control state monopolies in domestic markets during the last 10 year of establishment, this appears to be the key challenge of Vietnamese competition regime. In the process of transitioning from a centrally planned economy to a market economy, the State-owned enterprises (SOEs) sector is perceived as a means to ensure the socialist orientation of the economy as well as preserve national economic goals. For these purposes, SOEs have been offered several advantages ranging from tangible incentives to latent conveniences over the privately owned enterprises. In this context, competition laws and policies should be able to neutralise the advantages of SOEs to level the playing field or else it would be used a shield to protect SOEs from their private rivals.

This paper looks into the issues with the SOE sector in the context of Viet Nam’s political economy and identifies the factors inhibiting the country’s effort to control State monopolies in the last 10 years of competition law enforcement. It provides commentaries on the implementation of competition laws and policies in Viet Nam from the perspective of economic integration, particularly the on-going negotiation Trans-Pacific Partnership.

The author expresses his gratitude to Associate Professor Hayashi Shuya, Graduate School of Law, Nagoya University, for his invaluable support during the drafting of this paper.


Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field _ Dr Tuan Nguyen

Simplify Requirements in Importing Used Machinery – Vietnam Law Insight

Enhancing the government’s regulation on importation of used machinery, equipment and production line (“used Machinery”), new provisions have been provided as follows:

Manifest clearly groups of imported used Machinery to be governed by Circular 23 which are Chapter 84 and 85 of Vietnamese List of Goods imported and exported provided for in Circular 103/2015/TT-BTC, whereas the precedent Circular 20/2014/TT-BKHCN (“Circular 20”) did not;

Expand governing scope to used accessories, component and replacement parts of used Machinery falling into the above-mentioned groups;

Change requirements for used Machinery to be imported which are more simple;

Used Machinery listed in Dossier of Investment Project which is issued Decision on Investment Policy or Certificate of Investment Registration can be imported regardless of requirements set out in the Circular;

List of Goods banned from import is to be publicized on official website of Ministry of Science and Technology (“MST”), whereas such list is combination of lists provided for in specialized legal documents;

List of Qualified Examination Organizations is to be publicized on official website of MST and foreign organizations can be listed by providing certain information to the Ministry, such information is less severe than these stipulated in Circular 20;

Importers can take used Machinery before completing customs clearance procedures in order to put the goods in preservation, whereas in the past, importers could not;


Requirements and procedures for importing used Machinery is more transparent as such requirements, procedures are provided for in Circular 23 and publicized in website of MST. These helps enterprises import used Machinery easier albeit regulates more strictly import of used accessories, component and replacement parts.

For used Machinery listed in Dossier of Investment Project, they can be imported straightforwardly without further requirements. This provision make it more feasible especially for FDI enterprises since they all have to obtain Certificates of Investment Registration. By incorporating list of desire used Machinery into the Dossier, FDI enterprises can save more time.

Unlike Circular 20, foreign Qualified Examination Organizations nowadays have more chances to issue acceptable qualified test certificate if they are listed on website of MST. FDI enterprises can actively obtain a certificate at importing countries to save time in Vietnam.

Finally, used Machinery while waiting for a qualified test certificate can be put on preservation. Importers therefore could decrease expenses.

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at

Full Trans-Pacific Partnership Text Released

Today, on 5th November 2015, New Zealand has released the text of the Trans-Pacific Partnership on behalf of the twelve member countries in its capacity as Depositary of the agreement.

The agreement will also be translated into French and Spanish language versions. Both steps, as well as the Government’s consideration of the final outcome from negotiations, will need to be completed before signature takes place.

Current status of the Agreement

TPP has not yet been signed or entered into force. Negotiations concluded on 5 October 2015.


Please follow the links for full text of TPP released today.

  1. Chapter Texts and Associated Annexes
  2. Market Access Offers and Country-Specific Annexes
  3. Side Instruments between Viet Nam and TPP countries


Text of the Trans-Pacific Partnership

The text of the Agreement was released by TPP Parties on 5 November 2015 and can be accessed by chapter below. The text will continue to undergo legal review and will be translated into French and Spanish language versions prior to signature.

Preamble [PDF, 21KB]

1. Initial Provisions and General Definitions [PDF, 61KB]

  • The Chapter includes the following Annex:
    • Annex 1-A: Party-Specific Definitions

2. National Treatment and Market Access for Goods [PDF, 520KB]

3. Rules of Origin and Origin Procedures [PDF, 155KB]

4. Textiles and Apparel [PDF, 70KB]

5. Customs Administration and Trade Facilitation [PDF, 59KB]

6. Trade Remedies [PDF, 52KB]

  • The Chapter includes the following Annex:
    • Annex 6-A: Practices Relating to Antidumping and Countervailing Duty Proceedings

7. Sanitary and Phytosanitary Measures [PDF, 92KB]

8. Technical Barriers to Trade [PDF, 198KB]

  • The Chapter includes the following Annexes:
    • Annex 8-A: Wine and Distilled Spirits
    • Annex 8-B: Information and Communications Technology Products
    • Annex 8-C: Pharmaceuticals
    • Annex 8-D: Cosmetics
    • Annex 8-E: Medical Devices
    • Annex 8-F: Proprietary Formulas for Pre-packaged Foods and Food Additives
    • Annex 8-G: Organic Products

9. Investment [PDF, 262KB]

  • This Chapter includes the following Annexes:
    • Annex 9-A: Customary International Law
    • Annex 9-B: Expropriation
    • Annex 9-C: Expropriation Relating to Land
    • Annex 9-D: Service of Documents on a Party Under Section B (Investor State Dispute Settlement)
    • Annex 9-E: Transfers
    • Annex 9-F: DL-600
    • Annex 9-G: Public Debt
    • Annex 9-H
    • Annex 9-I: Non-Conforming Measures Ratchet Mechanism
    • Annex 9-J: Submission of a Claim to Arbitration
    • Annex 9-K: Submission of Certain Claims for Three Years After Entry into Force
    • Annex 9-L: Investment Agreements
  • Drafters’ Note on Interpretation of In Like Circumstances [PDF, 43KB]
  •  See country-specific Annexes to the Agreement

10. Cross-Border Trade in Services [PDF, 126KB]

  • The Chapter includes the following Annexes:
    • Annex 10-A: Professional Services
    • Annex 10-B: Express Delivery Services
    • Annex 10-C: Non-Conforming Measures Ratchet Mechanism
  • See the country-specific Annexes to the Agreement

11. Financial Services [PDF, 251KB]

  • This Chapter includes the following Annexes:
    • Annex 11-A: Cross-Border Trade
    • Annex 11-B: Specific Commitments
    • Annex 11-C: Non-Conforming Measures Ratchet Mechanism
    • Annex 11-D: Authorities Responsible For Financial Services
    • Annex 11-E

See the country-specific Annexes to the Agreement

12. Temporary Entry for Business Persons [PDF, 43KB]

13. Telecommunications [PDF, 125KB]

  • This Chapter includes the following Annexes:
    • Annex 13-A: Rural Telephone Suppliers – United States
    • Annex 13-B: Rural Telephone Suppliers – Peru

14. Electronic Commerce [PDF, 60KB]

15. Government Procurement [PDF, 130KB]

16. Competition Policy [PDF, 44KB]

  • This Chapter includes the following Annex:
    • Annex 16-A: Application of Article 16.2, Article 16.3 and Article 16.4 to Brunei Darussalam

17. State-Owned Enterprises and Designated Monopolies [PDF, 221KB]

  • This Chapter includes the following Annexes:
    • Annex 17-A: Threshold Calculation
    • Annex 17-B: Process for Developing Information Concerning State-Owned Enterprises and Designated Monopolies
    • Annex 17-C: Further Negotiations
    • Annex 17-D: Application to Sub-Central State-Owned Enterprises
    • Annex 17-E: Singapore
    • Annex 17-F: Malaysia
    • Annex IV: Non-Conforming Activities
    • See country-specific Annexes to the Agreement

18. Intellectual Property [PDF, 411KB]

  • This Chapter includes the following Annexes:
    • Annex 18-A: Annex to Article 18.7.2 (International Agreements)
    • Annex 18-B: Annex to Article 18.50 (Protection of Undisclosed Test or Other Data) and Article 18.52 (Biologics)
    • Annex 18-C: Annex to Article 18.50 (Protection of Undisclosed Test or Other Data) and Article 18.52 (Biologics)
    • Annex 18-D: Annex to Article 18.46 (Patent Term Adjustments for Patent Office Delays), Article 18.48 (Patent Term Adjustment for Unreasonable Curtailment), Article 18.50 (Protection of Undisclosed Test or Other Data) and Article 18.52 (Biologics)
    • Annex 18-E: Annex to Section J (Internet Service Providers)
    • Annex 18-F: Annex to Section J (Internet Service Providers)

19. Labour [PDF, 73KB]

20. Environment [PDF, 170KB]

  • This Chapter includes the following Annexes:
    • Annex 20-A
    • Annex 20-B

21. Cooperation and Capacity Building [PDF, 27KB]

22. Competitiveness and Business Facilitation [PDF, 20KB]

23. Development [PDF, 33KB]

24. Small and Medium-Sized Enterprises [PDF, 21KB]

25. Regulatory Coherence [PDF, 39KB]

26. Transparency and Anti-Corruption [PDF, 88KB]

  • This Chapter includes the following Annex:
    • Annex 26-A Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices

27. Administrative and Institutional Provisions [PDF, 34KB]

28. Dispute Settlement [PDF, 105KB]

29. Exceptions and General Provisions [PDF, 62KB]

30. Final Provisions [PDF, 29KB]


Zip file of all 30 Chapters (excluding Annexes) [ZIP, 3.15MB]


Text of the Trans-Pacific Partnership – Annexes

The text of the Agreement was released by TPP Parties on 5 November 2015. The text will continue to undergo legal review and will be translated into French and Spanish language versions prior to signature.

Annex I – Cross-Border Trade in Services and Investment Non-Conforming Measures

Annex II – Cross-Border Trade in Services and Investment Non-Conforming Measures

Annex III – Financial Services Non-Conforming Measures

Annex IV – State-Owned Enterprises and Designated Monopolies Non-Conforming Measures

Side Instruments between Viet Nam and TPP countries

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at

Công bố toàn văn Hiệp định Đối tác xuyên Thái Bình Dương (TPP)

(MOIT) – Theo thông lệ đàm phán thương mại quốc tế, một hiệp định sẽ chỉ được công bố sau khi các Bên tham gia đàm phán đã hoàn tất thủ tục rà soát pháp lý. Tuy nhiên, trước nhu cầu tìm hiểu thông tin rất lớn của người dân và doanh nghiệp, các nước tham gia đàm phán Hiệp định Đối tác xuyên Thái Bình Dương (TPP) đã quyết định công bố toàn văn Hiệp định TPP mặc dù thủ tục rà soát pháp lý vẫn chưa hoàn tất.

Các nước TPP đã thống nhất giao Niu Di-lân (nước được giao nhiệm vụ lưu chiểu văn kiện của Hiệp định) công bố toàn văn Hiệp định vào chiều ngày 05 tháng 11 năm 2015 (giờ Hà Nội).

Bộ Công Thương xin trân trọng công bố toàn văn Hiệp định TPP (bản tiếng Anh) đã được các nước TPP thống nhất. Do quá trình rà soát pháp lý vẫn đang tiếp tục nên bản công bố lần này chưa phải là bản cuối cùng. Bản cuối cùng có thể sẽ có một số thay đổi nhưng chỉ là các chỉnh sửa về mặt kỹ thuật, không ảnh hưởng đến nội dung cam kết.

Ngoài các nội dung cam kết trong Hiệp định, trong quá trình đàm phán các nước TPP cũng đạt được một số thỏa thuận song phương. Do các thỏa thuận này chỉ liên quan đến các Bên ký kết nên sẽ được các Bên ký kết công bố riêng. Bộ Công Thương xin công bố kèm theo đây các thỏa thuận song phương mà Việt Nam đã thống nhất với một số nước TPP. Các thỏa thuận này sẽ có hiệu lực cùng thời điểm với Hiệp định TPP.

Do các nước TPP vẫn đang tiến hành thủ tục rà soát pháp lý, khối lượng tài liệu phải biên dịch lại rất lớn nên Bộ Công Thương và các Bộ, ngành chưa thể công bố kèm theo bản dịch tiếng Việt của Hiệp định TPP. Để đáp ứng yêu cầu của người dân và doanh nghiệp, Bộ Công Thương sẽ tích cực phối hợp với các Bộ, ngành nhanh chóng hoàn tất công việc dịch thuật và công bố bản dịch tiếng Việt trong thời gian sớm nhất.

Sau khi công bố toàn văn Hiệp định, các nước TPP sẽ nhanh chóng hoàn tất thủ tục rà soát pháp lý để chuẩn bị cho việc ký kết Hiệp định. Mỗi nước, theo quy định của pháp luật nước mình, sẽ dành thời gian nhất định để người dân nghiên cứu Hiệp định trước khi ký kết, dao động từ 60 đến 90 ngày. Sau khoảng thời gian này, các nước TPP sẽ tiến hành ký kết chính thức. Thời điểm ký kết chính thức Hiệp định hiện chưa được xác định nhưng dự kiến sẽ không muộn hơn quý I năm 2016. Sau khi ký chính thức, các nước sẽ tiến hành thủ tục phê chuẩn Hiệp định theo quy định của pháp luật nước mình.

Please follow the links for full text of TPP released today.

  1. Chapter Texts and Associated Annexes
  2. Market Access Offers and Country-Specific Annexes
  3. Side Instruments between Viet Nam and TPP countries


Specific links

I. Chapter Texts and Associated Annexes

II. Market Access Offers and Country-Specific Annexes

III. Side Instruments between Viet Nam and TPP countries

Theo Website chính thức của Bộ Công Thương

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at