Decree No. 01/2014/ND-CP On Foreign Investors Purchasing Shares of Vietnamese Credit Institutions

 DECREE

Regarding foreign investors purchasing shares of Vietnamese credit institutionsof Vietnamese credit institutions

Based on the Law on the Organization of the Government dated December 25, 2001;

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

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

Pursuant to the Enterprise Law dated November 29, 2005;

Pursuant to the Securities Law dated June 29, 2006 and the Law Amending and Supplementing Certain Articles of the Securities Law dated November 24, 2010;

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

The Government issues the Decree on foreign investors purchasing shares of Vietnamese credit institutions,

PART I
GENERAL PROVISIONS

This Decree stipulates conditions, procedures for purchasing shares, the maximum aggregate shareholding limit of foreign investors, the maximum shareholding ratio of a single foreign investor in a Vietnamese credit institution; conditions for Vietnamese credit institutions selling shares to foreign investors.

Article 2. Applicability

1. Joint-stock credit organizations and credit organizations transitioning their legal form to joint-stock credit organizations (referred to as Vietnamese credit organizations).

2. Foreign investors.

3. Other organizations and individuals related to foreign investors purchasing shares of Vietnamese credit organizations.

Article 3. Explanation of Terms

In this Decree, the following terms shall be understood as follows:

1. Joint-stock credit institution is a credit institution established and organized in the form of a joint-stock company, including: Joint-stock commercial banks, joint-stock financial companies, joint-stock leasing companies.

2. Credit institution converting its legal form into a joint-stock credit institution is a credit institution currently undergoing conversion from operating under the form of a limited liability company to operating under the form of a joint-stock company.

3. Foreign investors include foreign organizations and foreign individuals.

a) Organizations established and operating under foreign laws and branches of these organizations outside and inside Vietnam.

b) Organizations, closed-end funds, member funds, securities investment companies established and operating in Vietnam with a foreign participation capital ratio exceeding 49%.

6. Strategic foreign investor is a foreign organization with financial capacity and a written commitment from an authorized person regarding long-term interest binding with a Vietnamese credit institution and support for the Vietnamese credit institution to transfer modern technology; develop banking products and services; enhance financial capacity, management, and operation.

7. Shareholding includes direct and indirect ownership.

Article 4. Currency Used in Share Purchase and Sale Transactions

The currency used in share purchase and sale transactions by foreign investors at Vietnamese credit institutions shall be the Vietnamese Dong.

Article 5. Participation in Management at Vietnamese Credit Institutions

1. The participation and appointment of representatives to join the Board of Directors at a Vietnamese credit institution shall be carried out in accordance with the provisions of the Law on Credit Institutions and related laws.

2. Foreign investors may participate and appoint representatives to join the Board of Directors at a Vietnamese credit institution, except for the following cases:

a) A foreign investor participating, appointing representatives to join the board of directors of another credit institution which is a subsidiary of the Vietnamese credit institution in which the foreign investor participates and appoints representatives to join the board of directors.

b) A foreign investor participating, appointing representatives to join the board of directors at a weak joint-stock credit institution for restructuring according to a plan approved by the State Bank of Vietnam.

Chapter II
SPECIFIC PROVISIONS

Section 1

FORMS, RATIOS, PROCEDURES FOR PURCHASING SHARES

Article 6. Forms of Share Purchase for Foreign Investors

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

3. Foreign investors purchase shares when a credit institution changes its legal form to become a joint-stock credit institution.

Article 7. Shareholding Ratio for Foreign Investors

1. The shareholding ratio of an individual foreigner shall not exceed 5% of the charter capital of a Vietnamese credit institution.

2. The shareholding ratio of a foreign organization shall not exceed 15% of the charter capital of a Vietnamese credit institution, except as provided for in Clause 3 of this Article.

3. The shareholding ratio of a strategic foreign investor shall not exceed 20% of the charter capital of a Vietnamese credit institution.

4. The combined shareholding ratio of a foreign investor and related parties of such foreign investor shall not exceed 20% of the charter capital of a Vietnamese credit institution.

8. When converting convertible bonds of Vietnamese credit institutions into stocks, foreign investors must comply with the shareholding ratio and ownership conditions as prescribed in this Decree.

Article 8. Competence, Procedure, Formalities and Documents for Foreign Investors Purchasing Shares of Vietnamese Credit Institutions

1. In cases where purchasing shares leads to ownership of 10% or more of the charter capital; purchasing shares and becoming a foreign strategic investor of a Vietnamese credit institution:

a) A Vietnamese credit institution (for credit institutions whose shares have not been listed) or a foreign organization (for credit institutions whose shares have been listed) prepares and submits the application directly or through postal service or electronic network to the State Bank of Vietnam for approval before conducting the transaction.

b) Within 40 days from the date of receiving complete valid applications, based on the conditions stipulated in Articles 9 and 10 of this Decree, the State Bank of Vietnam examines and decides in writing to approve or disapprove the purchase of shares by foreign organizations. If disapproved, the State Bank of Vietnam must specify the reasons.

2. In the case of purchasing shares leading to a shareholding ratio of 5% or more of the charter capital and purchasing additional shares when a foreign organization already holds 5% or more of the charter capital of a Vietnamese credit institution, except for the cases prescribed in Clause 1 of this Article, the foreign investor shall follow the procedures and formalities prescribed in Clause 2 of Article 29 of the Law on Credit Institutions.

3. Other cases of purchasing shares, excluding those stipulated in Clauses 1 and 2 of this Article:

a) A foreign investor purchasing shares of a Vietnamese credit institution whose shares have not been listed prepares and submits the application directly or through postal service to the Vietnamese credit institution for decision to ensure compliance with the provisions of Article 7 of this Decree.

Within 20 days from the date of receiving complete valid documents, the Vietnamese credit institution must respond in writing to the foreign investor. In case of disapproval, the Vietnamese credit institution must clearly state the reasons.

Within 20 days from the date of receiving complete valid applications, the Vietnamese credit institution must respond in writing to the foreign investor. If disapproved, the Vietnamese credit institution must specify the reasons.

b) A foreign investor may purchase shares of a listed joint-stock credit institution in accordance with the provisions of the law on securities and the securities market and must comply with the provisions of Article 7 of this Decree.

4. The State Bank of Vietnam shall specify the procedures, formalities, and documents for foreign investors purchasing shares of Vietnamese credit institutions as stipulated in Clauses 1 and 2 of this Article.

Section 2

CONDITIONS FOR SHARE OWNERSHIP

Article 9. Conditions for Foreign Organizations Purchasing Shares Leading to Ownership of 10% or More of the Charter Capital of Vietnamese Credit Institutions

1. Ranked at least stable or equivalent by reputable international credit rating agencies.

2. Possess sufficient financial resources to purchase shares, as determined by the audited financial report of the immediately preceding year before submitting the application, and lawful capital for share purchases in accordance with the law.

3. The purchase of shares does not affect the safety and stability of the Vietnamese credit institution system; does not create monopolies or restrict competition within the Vietnamese credit institution system.

4. Not seriously violate monetary, banking, securities, and stock market laws of the country where the foreign investor's main office is located and Vietnam within a period of 12 months prior to the submission of the share purchase application.

5. Have total assets of at least 10 billion US dollars for foreign investors who are banks, financial companies, or financial leasing companies, or have a minimum registered capital of 1 billion US dollars for other foreign investors in the year immediately preceding the year of submitting the share purchase application.

Article 10. Conditions for foreign organizations to purchase shares and become foreign strategic investors

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

2. Be a foreign bank, foreign financial company, or foreign financial leasing company permitted to conduct banking activities according to the laws of the country where their main office is located. A foreign financial company can only be a strategic investor in a Vietnamese financial company. A foreign financial leasing company can only be a strategic investor in a Vietnamese financial leasing company.

3. Having at least five years of international experience in the field of finance and banking.

4. Having a minimum total asset equivalent to twenty billion US dollars in the year immediately preceding the year of submitting the application to purchase shares.

5. Provide a clear commitment letter and plan regarding long-term interest binding with Vietnamese credit institutions, supporting Vietnamese credit institutions to apply modern technology; develop banking products and services; enhance financial capacity, management, and operation.

6. Not owning ten percent or more of the charter capital of any other credit institution in Vietnam;

7. Committing or already owning ten percent or more of the charter capital of the Vietnamese credit institution that the foreign organization proposes to purchase shares and become a foreign strategic investor.

Section 3

VIETNAMESE CREDIT INSTITUTIONS SELLING SHARES

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

1. Credit institutions converting their legal form into joint-stock credit institutions must have a share privatization plan and a conversion plan approved by the competent authority according to the law, including a plan to sell shares to foreign investors.

For joint-stock credit institutions where the State owns more than 50% of the registered capital, the plans to increase registered capital and sell treasury shares shall comply with the regulations on state-owned enterprise financial management before being submitted to the General Meeting of Shareholders for approval.

Article 12. Price of selling shares to foreign investors

1. The price for selling shares to foreign investors of unlisted Vietnamese credit institutions shall be determined through auction or agreement.

2. The price for selling shares to foreign investors of listed joint-stock credit institutions shall be carried out in accordance with the regulations on securities and the stock market.

Article 13. Rights of foreign investors

Section 4 ||

RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS

2. They may repatriate investment income, income from purchasing shares, and proceeds from transferring shares after fully fulfilling their financial obligations under Vietnamese law.

1. Fully enjoy the rights of shareholders as stipulated by Vietnamese law, the Articles of Association of the joint-stock credit institution where the foreign investor purchases shares, and agreements consistent with Vietnamese law in the share purchase and sale contract between the foreign investor and the Vietnamese credit institution.

4. They shall be guaranteed by the Socialist Republic of Vietnam State their legitimate rights and interests in accordance with Vietnamese law and international treaties to which Vietnam is a party.

3. Be entitled to participate or appoint representatives to participate in the Board of Directors, Supervisory Board, and Management Board of the joint-stock credit institution according to the Articles of Association of the joint-stock credit institution where the foreign investor purchases shares and Vietnamese law.

4. Be guaranteed by the Socialist Republic of Vietnam State the lawful rights and interests according to Vietnamese law and international treaties to which Vietnam is a party.

Article 14. Obligations of foreign investors

1. Fully fulfill the obligations of shareholders as stipulated by Vietnamese law, the Articles of Association of the Vietnamese credit institution where the foreign investor purchases shares, and agreements consistent with Vietnamese law in the share purchase and sale contract between the foreign investor and the Vietnamese credit institution.

2. Ensure and be responsible for the legality of the source of funds used to purchase shares, the validity of the share purchase application, and the accuracy of the provided information and documents according to Vietnamese law.

3. Report fully and take responsibility for the accuracy of information about related parties holding shares, information about share ownership through related parties, and through entrusted investment in Vietnamese credit institutions where the foreign investor participates in purchasing shares.

4. Transfer the full amount of registered capital for purchasing shares in Vietnamese credit institutions according to the agreement in the share purchase and sale contract between the foreign investor and the Vietnamese credit institution and in compliance with the law.

5. Foreign strategic investors may not transfer their shares in Vietnamese credit institutions to other organizations or individuals for a minimum period of five years from the date they become strategic investors of Vietnamese credit institutions as recorded in the approval document of the State Bank of Vietnam.

7. Foreign investors purchasing shares of joint-stock credit institutions undergoing restructuring as stipulated in Clause 6, Article 7 of this Decree must develop a share purchase plan and a restructuring plan for weak credit institutions to submit to the State Bank of Vietnam for review and appraisal and to the Prime Minister for decision.

8. Comply with current regulations on foreign exchange management in Vietnam.

Chapter III
IMPLEMENTATION

Article 15. Responsibilities of State Management Agencies

1. The State Bank of Vietnam shall be responsible for:

a) Directing the implementation and inspecting, checking, and supervising the execution of the provisions stipulated in this Decree;

b) Providing information related to the purchase and sale of shares by foreign investors within its management scope to the Ministry of Finance for coordinated management as prescribed in this Decree.

2. The Ministry of Finance shall be responsible for:

a) Manage and guide foreign investors' purchase of shares of listed joint-stock credit institutions to ensure compliance with the shareholding ratio prescribed in this Decree and the regulations on securities and the stock market.

b) Providing information related to the purchase and sale of shares by foreign investors within its management scope to the State Bank of Vietnam for coordinated management as prescribed in this Decree.

Article 16. Responsibilities of Vietnamese Credit Organizations

1. Implement the sale of shares in accordance with the provisions stipulated in this Decree and relevant laws.

2. Disclose information in accordance with the law.

Article 17. Handling Violations

Any violation of the provisions of this Decree will be handled in accordance with the Decree on administrative penalties in the field of currency and banking activities.

Article 18. Effective Date

This Decree takes effect from February 20, 2014, and replaces Government Decree No. 69/2007/NĐ-CP dated April 20, 2007, on foreign investors purchasing shares of Vietnamese commercial banks.

Article 19. Implementation Provisions

The Minister; Heads of Ministries equivalent to Ministries; Heads of agencies under the Government; Chairmen of Provincial People's Committees, centrally governed cities; Chairmen of the Board of Directors, Chairmen of the Board of Members, and General Directors (Directors) of Vietnamese credit institutions; foreign investors; and related organizations and individuals are responsible for implementing this Decree./.