New Legal Framework for Vietnam’s Nascent Derivative Securities Market

The Law

On 5 May 2015, the Government issued Decree No. 42/2015/ND-CP on derivative securities and the derivative securities market, which is considered as the very first legal framework for the derivative securities market of Vietnam to come into operation in 2016.

This Decree recognizes futures contracts, options and forward contracts of which objects are underlying assets being securities and/or other assets used as the basis for fixing the value of the derivative securities as derivative securities. There will also be other kinds of derivative securities as recognized in accordance with guidelines of the Ministry of Finance. These newly recognized derivative securities may be traded on the derivative securities market as provided by the laws.

In principle, any organization or individual may invest in derivative securities on the derivatives market, except for certain organizations, such as securities companies, fund management companies, credit institutions and State-owned companies, which must satisfy certain requirements before investing in the market.

Furthermore, for the purpose of conducting derivative securities trading and/or providing derivative securities clearance and payment services, an organization will need to obtain a certificate of satisfaction of conditions for the respective activities issued by the State Securities Commission. To obtain this certificate, in general and subject to activities registered to be conducted, the organization must satisfy a number of conditions, such as financial conditions, i.e. minimum charter capital; conditions on business results, ratios of available capital, professional rules and/or relevant requirements to be provided by the Ministry of Finance; and other conditions as provided.

What does this mean for businesses?

Through there has been a legal framework for securities trading in Vietnam since the introduction of the Law on Securities (70/2006-QH11), Decree 42/2015/ND-CP allows for more diversified securities products in the Stock Exchange, thus boosting liquidity in the securities market which will be great news for businesses that are increasingly using the Stock Market as a capital channel. Accordingly, Decree 42/2015/ND-CP is expected to support the securities market of Vietnam, increase competitiveness and help to narrow the gap between securities market of Vietnam and of other countries all over the world.

Decree 42 will take effect on 1 July 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 or visit the website: Http://LNTpartners.com

The purchase of shares in Vietnamese credit institutions by foreign investors

Decree No.01/2014/ND-CP (“Decree 01”), which sets out regulations on the purchase of shares in Vietnamese credit institutions (“VCIs”) by foreign investors, was passed by the Government on 3 January 2014 and took effect on 20 February 2014.

The new Decree 01 replaces Decree No. 69/2007/ND-CP, which governed the same area.

Specifically, Decree 01 governs the acquisition of shares by foreign investors in joint-stock VCIs and VCIs undergoing equitization.

According to Decree 01, there are three forms of share acquisition:

  1. Purchase of shares in joint-stock VCIs;
  2. Purchase of shares in the event joint-stock VCIs sell their shares to increase charter capital or sell treasury shares; and
  3. Purchase of shares in the event VCIs transform their legal form into a joint-stock VCI.

Decree 01 further sets a limit on foreign ownership in VCIs, which varies from 5% to 30% of the VCI’s charter capital, depending on the type of investor (foreign individual, foreign organization or foreign strategic investor).

Decree 01 also lists out conditions that are applicable to foreign investors purchasing the shares when the resulting shareholding would be more than 10%, as well as general conditions against strategic investors. On the other side of the transaction, the Decree specifies conditions against VCIs for selling their shares.

Accordingly, Decree 01 sets out the relevant rights and obligations to which the foreign investors acquiring a VCI’s shares are entitled.

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