Simplify Procedures for Foreign Investors in Vietnam Securities Market

Circular No. 123/2015/TT-BTC on providing guidance of foreign investment activities in Vietnam securities market.

The Ministry of Finance issued the Circular No. 123/2015/TT-BTC (“Circular No. 123”) regarding Vietnam securities market. This Circular No. 123 shall take effect on 01 October 2015.

Circular No. 123 stipulates detailed procedures and guidance on dossiers for foreign investors in terms of registering the online securities transaction codes. In addition, Circular No. 123 shall simplify the procedures for market participation of foreign investors in Vietnam stock market, by minimizing the number of required dossiers; abolishing the procedure of legalizing consular records with documents and English documents not necessarily translated into Vietnamese, among others.

Additionally, Circular No. 123 provides detailed procedures or manual records to public companies regarding increasing the percentage of ownership of foreign investors as stipulated in Decree No. 60/2015/ND-CP.

Circular No. 123 is expected to create favorable conditions for foreign investors in securities market of Vietnam. It can help listed companies in mobilizing capital from foreign investors.

With the issuance of Circular No. 123, an important reform shall be inherently created. Not only does the reform improve the attractiveness of Vietnamese stock market in comparison to other neighboring stock markets to facilitate foreign investors to enter in the Vietnamese stock markets but also the effort will go hand-in-hand with the regulations allowing foreign investors to obtain more ownership in accordance with Decree 60/2015 that will enter into force on 01 September 2015. Circular No. 123 shall also contribute to forming an attractive stock market for foreign investors.

 

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 us or visit the website: Http://LNTpartners.com

Satisfy Demand for Securities Investment by Foreign Investors

Content of the new Law

On 26 June 2015 the Government issued Decree No. 60/2015/ND-CP (“Decree 60”) amending and supplementing certain provisions of Decree No. 58/2012/ND-CP, on the detailing and guiding the implementation of selected provisions of this, and the Law on Securities, which is considered as good news to foreign investors, since the long-awaited provisions will allow for majority ownership and control of public companies by foreign investors.

In this Decree, the foreign ownership ratio is extended to the Vietnamese securities market. Currently, a foreign investor may purchase up to 49% of total shares of a public joint stock company (JSC) or a listed company.  Beginning on the 1st of September 2015, this general restriction will be removed and instead, the new restriction will be subject to the WTO commitments or other specific domestic laws (e.g., the 30% cap in the banking sector). If there is a specific restriction under domestic law that has yet to be specified, then the rule of thumb is 49%.

When there is no restriction under domestic law (e.g., for production companies, or distribution companies), then there is no limit for the foreign shareholding ratio. This rule also applies to equitized SOEs, with the aim of attracting more foreign investment in the privatization program.

As for securities companies (or investment banks), those who are eligible to establish 100% foreign owned securities companies are allowed to buy up to 100% equity of local securities companies. Those who are not eligible can acquire up to 51% total shares.

Decree 60 also lifts all restrictions to foreign investors to purchase bonds. With respect to share certificates or derivative products of stocks of JSCs, the restriction will be relaxed as mentioned above. For this purpose, open funds or securities funds that have foreign shareholding more than 51% equity will be deemed as foreign investors. Decree 60 also addresses many other functions of foreign investment in public companies, along with other key aspects related to securities investment for foreigners.

Implications for Foreign Investors

The Decree is expected to act as a catalyst for more foreign investment in the private and State-owned sectors in Vietnam. It is intended to add vitality to the Vietnam securities markets and an extra boost to the equitization of State enterprises, as part of a plan to upgrade Vietnam from “frontier” market classification to “emerging” market classification at MSCI. It is reported that the shares with strongest liquidity on the Vietnamese stock exchanges are shares of issuers for which the 49% foreign equity quota has been used up. As such, the Decree is expected to act as an impetus to further foreign investment in Vietnam’s capital markets, both in equity and in debt markets

The Decree takes effect on September 1, 2015, and replaces Prime Minister Decision No. 55/2009/QD-TTg (15 April 2009) on the ratio of foreign investor’s participating on the Viet Nam securities market.

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 us or visit the website: Http://LNTpartners.com