Joint Circular No. 13/TTLB guiding the engagement of management organizations to manage business operations of foreign-invested enterprises.

JOINT MINISTERIAL GUIDELINE

On engaging management organizations to manage business operationsof foreign-invested enterprises

Pursuant to the Law on Foreign Investment in Vietnam adopted by the National Assembly of the Socialist Republic of Vietnam on November 12, 1996;

Pursuant to Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam;

Pursuant to Decree No. 75/CP dated November 1, 1995 of the Government stipulating the functions, tasks, and organizational structure of the Ministry of Planning and Investment;

Pursuant to Decree No. 178/CP dated October 28, 1994 of the Government stipulating the tasks, authorities, and organizational structure of the Ministry of Finance,

The Ministry of Planning and Investment and the Ministry of Finance hereby issue this Joint Ministerial Guideline to guide the engagement of management organizations to manage business operations of foreign-invested enterprises as follows:

For office premises of agencies and units under the Ministry of Public Security and the Ministry of Defense, they shall be implemented according to separate guidelines issued by the Ministry of Public Security and the Ministry of Defense after consultation with the Ministry of Finance.

1.1. This Guideline regulates the engagement of management organizations to manage the business activities of foreign-invested enterprises including joint ventures and wholly foreign-owned enterprises (hereinafter referred to as enterprises).

1.2. Engaging a management organization to manage business operations of an enterprise involves managing and operating the enterprise's facilities during its business operations.

1.3. Foreign-invested enterprises that engage management organizations must meet the following conditions:

Engaging a management organization must be based on the enterprise's need for business management and the potential to generate business efficiency from such engagement.

Enterprises engaging management organizations shall only apply to the following business sectors: hotels, offices, rental apartments, golf courses, sports clubs, entertainment venues, hospitals, schools, and other business sectors requiring specialized management skills requested by the enterprise.

Engaging a management organization to manage business operations shall not alter or negatively impact the project's operational objectives and the interests of the Socialist Republic of Vietnam as stipulated in the Investment License.

II. MANAGEMENT CONTRACT

2.1. Engaging a management organization to manage business operations of an enterprise shall be carried out through a management contract signed between the enterprise and the management organization. Signing the management contract must be decided by the Board of Directors of the enterprise (for joint ventures) or the investor (for wholly foreign-owned enterprises).

2.2. The term of the Management Contract shall be agreed upon by the enterprise and the management organization and specified in the Management Contract, but shall not exceed ten years from the date the Contract becomes effective. In necessary cases, the parties may request an extension and submit it to the investment license issuing authority for review and approval.

The Management Contract shall only take effect after being approved by the investment license issuing authority.

2.3. The contents of the Management Contract shall be agreed upon by the parties, but must at least include the following main items:

Name, address, business objectives, and scope of operations of the Enterprise;

Name, address, and business activity certificate of the Management Organization;

Responsibilities of the enterprise and the Management Organization;

Relationships between the General Director, Deputy General Director of the enterprise with the management organization and the Managing Director or heads of departments appointed by the management organization to directly manage during business operations;

Principles regarding financial income and expenditure and bank account usage;

Recruitment and utilization of labor;

Number of foreign employees appointed by the Management Organization and related costs for salaries, accommodation, travel, leave, etc., of these employees. Training and development plans for Vietnamese employees to replace them;

Duration of effectiveness of the Contract. Cases of terminating the contract before expiration;

4.2. The management organization operates under the name, seal, and bank account of the enterprise. The management organization is assigned tasks and receives fees as stipulated in the Management Contract, while being responsible to the enterprise and Vietnamese law for performing its rights and obligations as prescribed in the Management Contract.

4.3. The management organization must fulfill its financial obligations to the Socialist Republic of Vietnam according to current Vietnamese law. The enterprise is responsible for withholding taxes payable by the management organization and submitting those amounts on behalf of the management organization to the Socialist Republic of Vietnam.

4.4. The Management Contract must be submitted to the investment license issuing authority for review and approval. The submission package includes:

Application for approval of the Management Contract.

One original copy of the Management Contract in Vietnamese and one in a commonly used foreign language, along with any consultancy, service, sign, or name contracts (if applicable).

Minutes of the Board of Directors' meeting approving the Management Contract (for joint ventures) or the opinion of the investor (for wholly foreign-owned enterprises).

Documentation confirming the legal status, experience, reputation, and management capability of the Management Organization.

4.5. The time limit for the investment license issuing authority to examine and approve the Management Contract is thirty days from the date of receipt of complete and valid documents. If approval is not granted within this period, the investment license issuing authority will notify the enterprise and the management organization in writing, stating the reasons for rejecting the Management Contract.

4.6. In all cases, the enterprise is responsible for all activities of the management organization before Vietnamese law concerning matters related to management activities mentioned in the Management Contract. The management organization is directly responsible to Vietnamese law for its activities outside the scope of the Management Contract.

4.7. The General Director and Deputy General Director of the enterprise have the responsibility to support and supervise the activities of the management organization, and to recommend the Board of Directors or the investor to handle breaches of contract by the management organization.

4.8. During operation, if the management organization seriously violates Vietnamese laws, regulations of the Investment License, and the Management Contract, the investment license issuing authority has the right to issue a decision to terminate the legal effect of the Management Contract.

4. 9. All disputes between the management organization and enterprises, and disputes between the management organization and other enterprises in Vietnam shall be resolved in accordance with the current provisions of Vietnamese law.

V. IMPLEMENTATION

5. 1. Management contracts of enterprises that have been approved by the State Committee for Cooperation and Investment previously or by the Ministry of Planning and Investment currently do not need to be resubmitted to the Ministry of Planning and Investment, except in cases where there are adjustments, amendments, or supplements to the management contracts.

In cases where management contracts were signed before this Circular took effect but have not yet been approved by the Ministry of Planning and Investment or the investment permit issuing authority, they must comply with the provisions of this Circular.

5. 2. For enterprises whose investment permits are issued by provincial People's Committees, city People's Committees, or Industrial Park Management Boards, Export Processing Zone Management Boards at the delegated level, after reviewing and approving the management contracts, the provincial People's Committee, city People's Committee, or Industrial Park Management Board, Export Processing Zone Management Board must send one copy to the Ministry of Planning and Investment.

5. 3. This Circular takes effect from October 23, 1997. All previous regulations on hiring management organizations are hereby invalidated.