A government decree has been drafted for the purpose of regulating the purchase by foreign investors of shares in Vietnamese credit institutions whose shares are not yet listed on a stock exchange ("Decree").
When shares of a Vietnamese credit institution are listed, foreign investors shall be permitted to purchase shares in such credit institution in accordance with the law on securities and securities market and must comply with the share ownership ratio stipulated in the Decree.
The applicable entities are:
- Vietnamese credit institutions comprised of: (i) State commercial banks undergoing equitisation; (ii) commercial shareholding banks; (iii) State finance companies undergoing equitisation; (iv) finance shareholding companies; (v) State finance leasing companies undergoing equitisation; and (vi) finance leasing companies;
- foreign investors; and
- other organizations and individuals affiliated with a foreign investor who purchases shares in a Vietnamese credit institution.
Vietnamese dong shall be the currency used in transactions of purchase by and sale of shares to foreign investors in Vietnamese credit institutions. A Vietnamese credit institution may make its own decision on the share ownership ratio of a foreign investor in the institution, provided that the following principles are observed:
- The total level of shareholding of all foreign investors (including existing foreign shareholders) and affiliated persons of such foreign investors shall not exceed 30 percent of the charter capital of any one Vietnamese credit institution
- The level of shareholding of any one foreign investor not being a foreign credit institution and affiliated persons of such foreign investor shall not exceed 5 percent of the charter capital of any one Vietnamese credit institution
- The level of shareholding of any one foreign credit institution and affiliated persons of such foreign credit institution shall not exceed 10 percent of the charter capital of any one Vietnamese credit institution
- The level of shareholding by a foreign strategic investor and affiliated persons of such foreign strategic investor shall not exceed 15 percent of the charter capital of any one Vietnamese credit institution. As defined in the Decree, a foreign strategic investor means; (i) a reputable foreign credit institution with financial capacity and the ability to provide assistance to a Vietnamese credit institution during the development of banking products and services; (ii) raising managerial and executive capability and applying modern technology; and which has strategic advantages connected with the strategy for development of the Vietnamese credit institution and which satisfies the specific criteria stipulated by the Vietnamese credit institution
In special cases, based on a proposal of the Governor of the State Bank, the Prime Minister may make a decision permitting the level of shareholding of any one foreign strategic investor and affiliated persons of such foreign strategic investor to exceed 15 percent, but in no case to exceed 20 percent of the charter capital of any one Vietnamese credit institution
- Where a foreign credit institution holds convertible bonds which are then converted into shares, the foregoing share ownership ratios must be ensured
- The total level of shareholding of all foreign credit institutions in any one State commercial bank undergoing equitisation shall be the same as the total level of shareholding of Vietnamese credit institutions in such State commercial bank
A foreign credit institution shall be permitted to be a foreign strategic investor in only one Vietnamese financial institution and to participate in the board of management of no more than two Vietnamese credit institutions.
Among other things, a Vietnamese credit institution which sells shares to a foreign investor must have charter capital of at least VND 1,000 billion and any foreign credit institution purchasing shares in a Vietnamese credit institution must have minimum total assets equivalent to USD 20 billion in the year prior to the year of registration for the purchase of shares.
The Governor of the State Bank shall provide its written approval for the purchase by a foreign investor of shares in a Vietnamese credit institution in accordance with the provisions of the Decree and other relevant laws.
After obtaining written approval from the Governor of the State Bank for the foreign investor to purchase the shares, the concerned Vietnamese credit institution must publish a notice in the mass media about the sale of shares to the foreign investor and organize implementation of the sale of shares in strict accordance with law.
For inquiries related to this Client Alert, please contact:
Dao Nguyen (firstname.lastname@example.org)
Thinh Dan (email@example.com)