Decree No. 69/2007/ND-CP on foreign investors purchasing shares of unlisted commercial banks in Vietnam

DECREE

Regarding foreign investors purchasing shares of

commercial banks in Vietnam

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THE GOVERNMENT

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

Pursuant to the Law on the State Bank of Vietnam dated February 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam dated June 15, 2003;

Pursuant to the Law on Credit Institutions dated December 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated June 15, 2004;

Pursuant to the Enterprise Law dated November 29, 2005;

Pursuant to the Securities Law dated June 29, 2006;

Based on Vietnam's international commitments;

Considering the proposal of the Governor of the State Bank of Vietnam,

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Scope of application

1. This Decree stipulates the matter of foreign investors purchasing shares of commercial banks in Vietnam (hereinafter referred to as Vietnamese banks) that have not been listed on the stock market.

2. When Vietnamese banks list their shares on the stock market, foreign investors may purchase shares of Vietnamese banks in accordance with the provisions of the laws on securities and the securities market and must comply with the shareholding ratio prescribed in Article 4 of this Decree.

Article 2. Applicability

1. Vietnamese banks include:

a) State-owned commercial banks that have been corporatized;

b) Joint-stock commercial banks.

2. Foreign investors.

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

Article 3. Definitions

In this Decree, the following terms are understood as follows:

1. "Foreign investor" includes:

a) "Foreign organization" is an organization established under the laws of a foreign country and operating and conducting business abroad or in Vietnam;

b) "Foreign individual" is a person holding foreign nationality residing abroad or in Vietnam.

2. "Foreign credit institution" is a foreign organization, including: foreign banks, foreign finance companies, other foreign financial organizations mainly and regularly engaged in banking activities.

3. "Existing foreign shareholder" is a foreign investor who has been permitted by the State Bank of Vietnam to purchase shares and already owns shares at joint-stock commercial banks before this Decree takes effect.

The rights and obligations of existing foreign shareholders shall be implemented according to the regulations of the State Bank of Vietnam.

4. "Foreign strategic investor" is a reputable foreign credit institution with financial capacity and ability to support Vietnamese banks in developing banking products and services, enhancing management capabilities, governance, and applying modern technology; having strategic interests consistent with the development strategy of Vietnamese banks, meeting specific criteria set forth by Vietnamese banks.

5. Related persons of an organization or individual include:

a) The parent company of such organization, companies with the same parent company as such organization;

b) Persons or organizations managing the parent company, persons or organizations authorized to appoint managers of the parent company of such organization;

c) Subsidiaries or affiliated companies of such organization;

d) Managers, members of the Supervisory Board, persons or organizations authorized to appoint managers of such organization;

đ) Shareholders or groups of shareholders owning 10% or more of the total ordinary shares of such organization;

e) Spouse, father, adoptive father, mother, adoptive mother, child, adoptive child, brother, sister (and spouse of these persons) of managers, members of the Supervisory Board, shareholders owning 10% or more of the total ordinary shares of such organization;

g) Spouse, father, adoptive father, mother, adoptive mother, child, adoptive child, brother, sister (and spouse of these persons) of such individual;

h) Individuals authorized to represent those specified in points a, b, c, d, đ, e and g of this Clause for the authorizing persons and for the related persons of the authorizing persons and the authorized persons.

Article 4. Principles of share ownership for foreign investors

1. The total amount of share ownership of foreign investors (including existing foreign shareholders) and related persons of foreign investors shall not exceed 30% of the charter capital of a Vietnamese bank.

2. The amount of share ownership of a foreign investor who is not a foreign credit institution and related persons of such foreign investor shall not exceed 5% of the charter capital of a Vietnamese bank.

3. The amount of share ownership of a foreign credit institution and related persons of such foreign credit institution shall not exceed 10% of the charter capital of a Vietnamese bank.

4. The amount of share ownership of a foreign strategic investor and related persons of such foreign strategic investor shall not exceed 15% of the charter capital of a Vietnamese bank.

In special cases, the Prime Minister, based on the proposal of the State Bank of Vietnam, decides the amount of share ownership of a foreign strategic investor and related persons of such foreign strategic investor exceeding 15%, but not exceeding 20% of the charter capital of a Vietnamese bank.

5. In case a foreign credit institution holds convertible bonds, when converting bonds into shares, it must ensure the share ownership ratio as prescribed in Clauses 1, 2, 3, and 4 of this Article.

6. The total amount of share ownership of foreign credit institutions in a state-owned commercial bank that has been corporatized shall be treated as the total amount of share ownership of Vietnamese banks in that state-owned commercial bank. The Governor of the State Bank of Vietnam shall guide the implementation of this provision.

7. Vietnamese banks decide the share ownership ratio of foreign investors in the bank but not exceeding the ratios prescribed in this Article.

Article 5. Authority to approve foreign investors purchasing shares of Vietnamese banks

The Governor of the State Bank of Vietnam approves in writing foreign investors purchasing shares of Vietnamese banks in accordance with this Decree and other relevant laws.

Article 6. Participation in management at Vietnamese banks

1. A foreign credit institution can only be a strategic investor in one Vietnamese bank.

2. A foreign credit institution can only participate in the Board of Directors of no more than two Vietnamese banks.

Article 7. Currency used in transactions to buy and sell shares

The currency used in transactions for foreign investors buying and selling shares of Vietnamese banks is the Vietnamese Dong.

Chapter II

SPECIFIC PROVISIONS

Section 1

FORMS, PRICES, AUTHORITY TO DECIDE ON THE SALE OF SHARES TO FOREIGN INVESTORS

SELLING SHARES TO FOREIGN INVESTORS

Article 8. Forms of Selling Shares

1. State-owned commercial banks sell shares to foreign investors when implementing shareholding.

2. Joint-stock commercial banks sell shares to foreign investors when increasing their charter capital.

3. Shareholders of Vietnamese banks may transfer their shares to foreign investors who have been approved by competent authorities to purchase shares at that bank.

Article 9. Price of Selling Shares

1. The price of selling shares of state-owned commercial banks when implementing shareholding to foreign investors shall be determined through auction in accordance with current regulations.

2. The price of selling shares of joint-stock commercial banks to foreign investors shall be determined through auction or by agreement between the parties.

3. The price of transferring shares of shareholders of Vietnamese banks to foreign investors shall be determined by agreement between the parties.

Article 10. Authority to Decide on Share Sale Plans

1. State-owned commercial banks develop plans for shareholding, including the sale of shares to foreign investors, and submit them to the Prime Minister for approval.

2. Joint-stock commercial banks develop plans for increasing charter capital, including the sale of shares to foreign investors, and submit them to the General Meeting of Shareholders for decision.

3. Shareholders of Vietnamese banks decide on the transfer of their shares to foreign investors in accordance with the provisions of the law and the Charter of that Vietnamese bank.

Section 2

CONDITIONS FOR PURCHASING, SELLING, AND TRANSFERRING SHARES

Article 11. Conditions for Selling Shares

1. Vietnamese banks selling shares to foreign investors must meet the following conditions:

a) Minimum charter capital of 1,000 billion VND;

b) Sound financial condition, meeting relevant conditions of the State Bank of Vietnam;

c) Effective management, operation, inspection, supervision, and internal audit systems;

d) Not being penalized by competent authorities for violations of banking safety regulations within 24 months prior to the time the State Bank of Vietnam considers the matter.

2. For Vietnamese banks not meeting the conditions stipulated in Clause 1 of this Article, the State Bank of Vietnam may consider each specific case and submit it to the Prime Minister for a decision on the sale of shares of these banks to foreign investors.

Article 12. Foreign Credit Institutions Purchasing Shares of Vietnamese Banks Must Meet the Following Conditions:

1. Total assets of at least 20 billion USD in the year preceding the year of registration to purchase shares.

2. Experience in international operations in the banking sector.

3. Ranked by international credit rating organizations as having the ability to fulfill financial commitments and operate normally even under adverse economic conditions.

4. For strategic foreign investors, in addition to the conditions stipulated in Clauses 1, 2, and 3 of this Article, they must provide a commitment letter regarding support for the development of banking products and services, enhancing management capabilities, and applying modern technology at Vietnamese banks.

Article 13. Transfer of Shares

1. Strategic foreign investors and related parties are only permitted to transfer their shares to other organizations or individuals (both domestic and foreign) at least five years after becoming strategic foreign investors in a Vietnamese bank.

2. Foreign credit institutions and related parties holding 10% of the charter capital of a Vietnamese bank are only permitted to transfer their shares to other organizations or individuals (both domestic and foreign) at least three years after holding 10% of the charter capital of a Vietnamese bank.

Section 3

RIGHTS AND OBLIGATIONS OF FOREIGN INVESTORS

Article 14. Rights of Foreign Investors

1. Enjoy rights like other shareholders according to the Charter of the Vietnamese bank where the foreign investor purchases shares.

2. Convert income from purchasing shares and proceeds from transferring shares into foreign currency and transfer them out of the country after fulfilling all financial obligations as prescribed by Vietnamese law.

3. Participate in the Board of Directors, Supervisory Board, and Management Board of Vietnamese banks in accordance with the provisions of the law and the Charter of the Vietnamese bank where the foreign investor purchases shares.

4. Be guaranteed by the Socialist Republic of Vietnam to ensure other legitimate rights and interests as prescribed by Vietnamese law.

Article 15. Obligations of Foreign Investors

1. Fulfill all obligations as prescribed by Vietnamese law and the Charter of the Vietnamese bank where the foreign investor purchases shares.

2. Ensure the legality of the source of funds used to purchase shares and the validity of the application documents for purchasing shares as prescribed by Vietnamese law.

3. Deposit the full amount of registered capital for purchasing shares at a Vietnamese bank as prescribed by the State Bank of Vietnam.

4. Notify the State Bank of Vietnam of any changes related to their share capital at a Vietnamese bank.

Chapter III

IMPLEMENTING PROVISIONS

Article 16. Responsibilities of Vietnamese Banks

After receiving the approval document from the Governor of the State Bank of Vietnam for foreign investors to purchase shares, Vietnamese banks must announce the sale of shares to foreign investors in the media and organize the sale of shares in accordance with the law.

Article 17. Handling of violations

Any violation of the provisions of this Decree will be handled according to the severity and nature of the violation as prescribed by law.

Article 18. Effectiveness

This Decree shall take effect fifteen days after its publication in the Official Gazette.

Article 19. Implementation Guidance

1. The Governor of the State Bank of Vietnam is responsible for guiding the implementation of this Decree.

2. Ministers, Heads of Ministries equivalent to ministries, Heads of government agencies, Chairmen of provincial People's Committees directly under the central government, Chairmen of the Board of Directors, and General Managers (Directors) of Vietnamese banks are responsible for implementing this Decree./.