Decree No. 81/2008/ND-CP Amending and Supplementing Certain Provisions of Decree No. 79/2002/ND-CP dated October 4, 2002 of the Government on the Organization and Operation of Financial Companies

DECREE

Amending and supplementing some articles of Decree No. 79/2002/NĐ-CP dated October 4, 2002 of the Government on the organization and operation of Financial Companies

Regarding financial companies

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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 No. 01/1997/QH10 dated December 12, 1997 and the Law amending and supplementing certain articles of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

Pursuant to the Law on Credit Organizations No. 02/1997/QH10 dated December 12, 1997 and the Law amending and supplementing certain articles of the Law on Credit Organizations No. 20/2004/QH11 dated June 15, 2004;

Pursuant to the Enterprise Law No. 60/2005/QH11 dated December 29, 2005;

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

DECREE:

Article 1. Amending and supplementing some articles of Decree No. 79/2002/NĐ-CP dated October 4, 2002 of the Government on the organization and operation of Financial Companies, as follows:

1. Clause 2 shall be amended and supplemented as follows:

Article 2. Definition of Financial Company

1. A Financial Company is a non-bank credit organization with the function of using its own capital, raised capital, and other sources of capital to provide loans, invest, supply financial and monetary consulting services, and perform other services as prescribed by law, but not including payment services and receiving deposits for less than one year.

2. Financial Companies include comprehensive Financial Companies that carry out all functions and operations as prescribed, and specialized Financial Companies mainly operating in certain fields such as consumer credit or credit card issuance and other activities as prescribed by law, this Decree, and guidelines of the State Bank of Vietnam.

2. Article 3 shall be amended and supplemented as follows:

Article 3. Forms of establishment

1. Financial Companies may be established and operate in Vietnam in the following forms:

a) Limited liability joint-stock Financial Company with two or more shareholders.

b) Limited liability single-member Financial Company.

c) Joint-stock Financial Company.

2. The transfer of ownership and change of form (type) of Financial Company shall be carried out according to the regulations of the State Bank of Vietnam.

3. Supplementing Clauses 3, 4, 5, 6, 7, 8, and 9 to Article 6 as follows:

Article 6. Explanation of Terms

3. Foreign Credit Organization includes banks, Financial Companies, and financial groups established under foreign laws.

4. Joint Venture Financial Company is a Financial Company established in Vietnam through the contribution of Vietnamese parties (including one or more Vietnamese credit organizations or enterprises) and foreign parties (including one or more foreign credit organizations) based on a joint venture agreement, wherein the foreign party's contribution does not exceed 49% of the charter capital of the Financial Company, and the Vietnamese enterprise's contribution does not exceed 30% of the Vietnamese party's total contribution. A Joint Venture Financial Company is established in the form of a limited liability joint-stock company with two or more shareholders.

5. 100% Foreign Capital Financial Company is a Financial Company established in Vietnam with 100% of the charter capital belonging to one or more foreign credit organizations. A 100% Foreign Capital Financial Company is established in the form of a limited liability company.

6. Consumer Credit is a form of providing credit to individuals through transactions such as installment purchases, credit card issuance, and lending cash as prescribed by the State Bank of Vietnam.

7. Country of origin For foreign credit organizations, it refers to the country where the foreign credit organization is established.

8. Subsidiary Company: a company is considered a subsidiary of a Financial Company if it falls into one of the following cases:

a) More than 50% of the charter capital belongs to the Financial Company.

b) The appointment of the majority or all members of the Board of Directors and General Manager (Director) of the company is within the decision-making authority of the Financial Company.

c) The amendment and supplementation of the Articles of Association of the company is within the decision-making authority of the Financial Company.

4. Clause 2 of Article 8 is amended as follows:

Article 8. Conditions for Issuing License

2. In addition to the conditions stated in Clause 1 of this Article, foreign credit organizations in Joint Venture Financial Companies or 100% Foreign Capital Financial Companies must meet the following conditions:

a) They must be permitted to establish and operate in Vietnam by the competent authority according to the laws of their home country.

b) Their total assets must exceed 10 billion US dollars at the end of the previous year before submitting the application, except in cases where the Bilateral Investment Agreement between Vietnam and their home country provides otherwise.

5. Replacing Articles 14, 15, and 16 with new Articles 14, 15, and 16 as follows:

Article 14. Opening Branches, Representative Offices, and Establishing Subsidiaries

1. The opening and termination of domestic and foreign branches and representative offices of Financial Companies must be approved in writing by the State Bank of Vietnam. The conditions, procedures for opening and terminating branches and representative offices of Financial Companies are applied according to Article 33 of the Law on Credit Organizations and guidelines of the State Bank of Vietnam.

2. Financial Companies may establish subsidiaries to operate in certain financial, banking, insurance, and securities fields. The establishment of subsidiaries by Financial Companies shall be carried out according to the regulations of the State Bank of Vietnam.

- Article 15.

1. Board of Directors

a) The Board of Directors has the function of managing the Financial Company, having full power to act on behalf of the Financial Company to decide and implement the rights and obligations of the Financial Company, except for matters within the authority of the Shareholders' Meeting (for Joint-Stock Financial Companies) or the owner (for Limited Liability Single-Member Financial Companies) or the contributing members (for Limited Liability Joint-Stock Companies with two or more shareholders).

b) The Board of Directors must have a minimum of three members, consisting of reputable and professionally ethical individuals with knowledge of financial and banking activities. The Chairman and other members of the Board of Directors may not delegate their duties and powers to non-members of the Board of Directors.

c) The term of the Board of Directors and members of the Board of Directors is from three to five years, as specifically provided for in the Company's Charter. In cases where a member of the Board of Directors is elected to fill a vacancy or replace a member who has been relieved of duty or dismissed during their term, the term of that member shall be the remaining period of the term of the Board of Directors. Members of the Board of Directors may be re-elected for an unlimited number of terms and may be relieved of duty or dismissed at any time according to the decision of the competent authority that appointed or designated them.

d) The Board of Directors uses the seal of the Finance Company to perform its duties.

2. Supervisory Board

a) The Supervisory Board is responsible for auditing financial activities; monitoring compliance with accounting regulations, safety in the operations of the Finance Company, conducting internal audits periodically and in specific areas to accurately assess business operations and the financial status of the Finance Company.

b) The Supervisory Board must have a minimum of three members, including one Chairperson and at least half of the members must be full-time. Members of the Supervisory Board must meet the professional qualifications and ethical standards set forth by the State Bank.

c) The Supervisory Board has a support staff and may use the internal audit and control system of the Finance Company to carry out its tasks.

d) The term of the Supervisory Board and its members is from three to five years, as specifically provided for in the Company's Charter. In cases where a member is elected to fill a vacancy or replace a member who has been relieved of duty or dismissed within their term, the term of that member shall be the remaining period of the term of the Supervisory Board. Members of the Supervisory Board may be re-elected for an unlimited number of terms.

3. General Director (Director)

a) The Board of Directors appoints one of its members as the General Director (Director) or hires a General Director (Director). The General Director (Director) of the Finance Company is responsible to the Board of Directors for managing daily operations in accordance with the duties and powers stipulated in this Decree and other laws. The General Director (Director) is the legal representative of the Finance Company, except in cases where the Company's Charter provides otherwise.

b) The term of the General Director (Director) does not exceed five years, as specifically provided for in the Company's Charter. The General Director (Director) may be reappointed for an unlimited number of terms.

c) The General Director (Director) and Deputy General Director (Deputy Director) of the Finance Company must meet the criteria specified in Clause 2, Article 39 of the Law on Credit Organizations.

d) The General Director (Director) of the Finance Company is not permitted to be the General Director (Director) or Chairman of the Board of another credit organization, except in cases where that organization is a subsidiary of the Finance Company.

đ) The Board of Directors specifies in detail the structure, functions, and responsibilities of the support staff for the General Director (Director).

- Article 16. The State Bank shall provide detailed guidance on the functions, duties, powers, procedures for electing, appointing, relieving of duty, and approving members of the Board of Directors, Supervisory Board, and General Director (Director) of the Finance Company.

6. Repeal Clause 2 and supplement Clause 5 of Article 17 as follows:

"Article 17. Forms of capital raising

2. Issuing bonds, deposit certificates, and other securities with a term of one year or more to raise funds from domestic and foreign organizations and individuals in accordance with the provisions of the State Bank of Vietnam.

5. For specialized finance companies operating in consumer lending and card sectors, they do not implement the capital raising forms mentioned in Clause 1 of this Article.

7. Supplement Clause 4 of Article 18 as follows:

"Article 18. Lending

4. For specialized finance companies:

a) Companies operating in the consumer lending sector are allowed to:

- Provide consumer credit in the form of installment loans, issuing credit cards, and lending cash;

- Supply financial, banking, monetary, and investment advisory services related to consumption to customers;

- Other forms as prescribed by the State Bank.

b) Companies operating in the card sector shall comply with the provisions of Government Decree No. 64/2001/NĐ-CP dated September 20, 2001, on payment transactions through service providers and guidelines of the State Bank, wherein revenue from issuing credit cards must account for no less than 70% of the company's revenue.

8. Replace Clause 1 of Article 25 as follows:

"Article 25. Business activities that require approval from competent state authoritiesForeign exchange activities: The Finance Company is allowed to provide certain foreign exchange services in accordance with the law and guidelines of the State Bank of Vietnam.

Article 2. Implementation Provisions

1. This Decree takes effect fifteen days after its publication in the Official Gazette.

2. The State Bank of Vietnam and relevant ministries and agencies are responsible for guiding the implementation of this Decree.

3. Ministers, Heads of ministerial-level agencies, Heads of agencies under the Government, Chairpersons of provincial People's Committees directly under the Central Government are responsible for implementing this Decree./.