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Issue 5, Volume 6, 2013

BANKING – TAX – FINANCE ........................................................................................ 2

1. New interest rate for investment credit loan, export credit loan of

the state ...................................................................................................................... 2

2. Scheme of handling bad debts of credit institutions system and

establishment of Vietnam Assets Management Company ......................................... 2

3. Decree 54 on investment credit and export credit ...................................................... 4

4. Loans for housing assistance ...................................................................................... 5

5. Clarifying the term “affiliate” under Circular 121/2012/TT-BTC ............................. 6

CORPORATE COMPLIANCE ......................................................................................... 7

6. Extending the statute of limitations for re-registration of

enterprises and business scope of non-reregistered enterprises. ................................. 7

7. Ministry’s guidelines on conditions for listing shares of companies

formed after the consolidation or merger ................................................................... 8

8. Licenses of telecommunication services .................................................................. 10

9. Lists of drugs and vaccines, biological products, microorganisms

and chemicals that used in veterinary treatment allowed for use and

distribution in Vietnam ............................................................................................ 11

10. Lottery business operation ....................................................................................... 12

LABOUR ......................................................................................................................... 13

11. Legal framework for labour outsourcing.................................................................. 13

12. New Decree detailing the new Labour Code on wages ............................................ 15

13. New guidelines on labour dispute settlement and strikes under the

labour code 2012 ...................................................................................................... 16

14. Guidance on the new Labour Code regarding working hours,

breaks, and occupational hygiene and safety ........................................................... 17

15. Government’s Decree 44/2013/ND-CP on labor contracts ...................................... 19

INFRASTRUCTURE ...................................................................................................... 20

16. Urban Design ........................................................................................................... 20

DISPUTE RESOLUTION ............................................................................................... 21

17. Determination of administrative decisions – subject to filing of

administrative lawsuit .............................................................................................. 21

FIRM NEWS ................................................................................................................... 23

1. LNT & Partners to be in charge of the Policy Roundup of the

Vietnam Investment Review .................................................................................... 23

2. LNT & Partners becomes an Outlook sponsor of the M&A

Vietnam Forum 2013 ............................................................................................... 23

3. LNT & Partners obtains ruling from the State Securities

Commission of Vietnam regarding corporate guarantees and

shareholder loans under Circular No. 121/2012/TT-BTC ........................................ 24

4. LNT & Partners is seeking a ruling from the Supreme Court

regarding interpretation of “administrative decisions” that are

subject to filing of an administrative lawsuit ........................................................... 24

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BANKING – TAX – FINANCE

1. New interest rate for investment credit loan, export credit loan of the

state

On the 04 June 2013, the Ministry of Finance

passed Circular no. 77/2013/TT-BTC imposing

new interest rate for investment credit loan, export

credit loan of the state and the difference of the

interest rate calculated for post-investment

support. Circular 77 effectively replaces Circular

no. 09/2013/TT-BTC and Circular 104/2012/TT-

BTC.

In details, the interest rate of State investment

credit loan in Vietnam dong is reduced from 12%

per year to 11.4% per year. The interest rate for

export credit loan also enjoyed a reduction,

dropping from 10.2%/year to 9.3%/year. The

difference of the interest rate calculated for post-

investment support for the loan project in Vietnam

dong remained 2.4%/year.

This Circular’s target is to remove or at least

reduce difficulties for business production. In fact,

during the economic crisis, many enterprises went

out of business along with several frozen project.

Clearly, the Ministry of Finance is seeking to

support the market, making Vietnam a more

desirable investment destination.

This Circular comes into effect from the date of issue.

2. Scheme of handling bad debts of credit institutions system and

establishment of Vietnam Assets Management Company

On 31 May 2013, the Prime Minister has approved

one of the most important schemes regarding the

banking, finance industries in the recent years.

Vietnam became increasingly concerned with bad

debts over the past few years. Such debt, along

with the world wide economic downturn, has

made significant impact on the country’s

economy. Decision 843/QD – TTg is a long

awaited decision that approved the scheme of

“handling bad debts of credit institutions system”

and Vietnam Assets Management Company

(VAMC) shall be established accordingly.

Handling bad debts of credit institutions system

The objective of the Scheme is clearly defined: to

expand credit grant at rational rates, to contribute

in removing difficulties for business production, to

promote economic growth and stabilize macro-

economy; improve the liquidation and increase the

safety, healthy and effective operation of credit

institutions, currency market.

This part of the scheme imposed several solutions

to handle bad debts and prevent limit the

increasing of bad debts in the future. Suggested

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solutions include: strict control and reduction on

operational expenses, transferring debts into

capital etc.

The Scheme made several detailed solutions on

mechanism and policy to various Ministries. The

State Bank of Vietnam was requested to conduct

investigation and closely supervise the

restructuring of bad debts by credit institutions.

Concurrently, local departments of Planning and

Investment is requested to accelerate disbursement

progress for projects with capital from the State

budget. The Ministry of Finance shall assume the

responsibility to encourage business development

by accelerating improvement of infrastructures

and facilities. Furthermore, a 50% reduction in

land rents shall be applicable to economic

organizations, households and individuals who

rented land from the State and the payable rents

(as prescribed in Decree 121/2010/ND-CP) were

doubled in comparison with the payable rate in

2010 (as prescribed in policies prior to Decree

121/2010/ND-CP). In case where land rents after

being reduced are still more than twice in

comparison with payable land rents of 2010, they

will be further reduced land rents till the level

equal to twice payable land rents in 2010.

Furthermore amendments and supplementing

regulations guiding on procedures for reduction of

land rents must be made in more simple way and

favourable direction for implementation.

VAMC

VAMC shall be established to be a 100% state-

owned enterprise, subject to the state management,

directs inspection and monitoring from the State

Bank of Vietnam. The Charter Capital of VAMC

is 500 billion VND and can be adjusted when

necessary.

VAMC is scheduled to start operations in the

second quarter of this year. It will issue special

bonds to buy debts from banks. The bonds will be

issued in Vietnam Dong with the term of 5 year at

maximum and the coupon rate of zero per cent.

The lenders can use such bonds as collateral to

borrow from central bank. Enterprises selling

debts to VAMC will be able to take out new loans

from banks.

The Asset Management Company shall buy the

bad debts with the following conditions:

a) The credit institution’s bad debts

including the ones in activities of credit granting,

purchase of corporate bonds, trusted purchase of

corporate bonds and trusted credit granting and

other activities as prescribed by the State Bank.

b) Bad debts with collateral;

c) Bad debts and collateral must be legal

with valid documents and papers;

d) Loan customer still exists;

e) The balance of bad loans or outstanding of

loan customer is not lower than the level

prescribed by the State Bank.

VAMC’s priority is to support loan customers. As

the owner of the loan, they can adjust the term of

debt payment term, time limit for debt payment in

conformity with production and business

conditions of loan customers. Other measures for

supporting loan customers include: adjusting

interest of purchased loan in conformity with

solvency of loan customers and market conditions

or reducing partly or exempting whole interest

amounts which are overdue for payment.

VAMC reserved the rights of the owner/secured

party with respect to loan customers, obligors to

pay debt and the securers with the aim to recover

debts and collateral such as: urging, requesting for

debt payment or suing the loan customers at court

or filing an application to request Court to

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implement procedures for bankruptcy as

prescribed by law and so forth.

The State aims to reduce the rate of bad debt in

credit institutions to below 3%. Any Credit

institutions with bad debts rate higher than 3%

shall either be inspected by the State Bank or be

requested to hire an independent audit company or

valuation company to reassess the quality and

value of its assets, equity capital, and charter

capital. Based on the result of inspection,

independent audit or valuation, the credit

institution shall sell bad debts to VAMC to ensure

a safe bad debt ratio, make provisions, and comply

with the adequacy ratios as prescribed by the State

bank; restructure itself according to a plan

approved by the State bank.

On the basis of result of valuation of asset and

inspection, the credit organizations may apply the

following measures:

Selling bad debts to the VAMC so that the rate of

bad debt/total outstanding debt does not exceed

3%

Credit institutions must set up adequate provision

for risks while ensuring to meet adequacy ratio

prescribed by the State Bank

Restructuring the credit institutions by plan

approved by the State Bank.

What to expect from the establishment of VAMC

is strongly debated over. Many economists believe

this solution shall only have positive effect in the

short run. After the term of the special bonds

(maximum of 5 years) unresolved loan must be

bought back by credit institutions. In other words,

credit institutions’ bad debt situation would remain

unchanged, or possibly turn worse with more debts

in hand; unless within five years the loan

customers can make payments to the debts.

3. Decree 54 on investment credit and export credit

On 22 May 2013, the Government has issued the

Decree 54/2013/ND-CP (“Decree 54” or the

“Decree”) to supplement the Decree 75/2011/ND-

CP on investment credit and export credit of the

State.

Firstly, the Decree widens the scope of borrowers,

accordingly the enterprises which needs loan to

buy livestock feed for export fisheries can apply

for export credit. The maximum loan amount for

such enterprises come up to 85% of the value of

the plan on buying livestock feed for export

fisheries, which has been approved by the Vietnam

Development Bank (VDB); however, each loan

does not exceed 15% of real charter capital of

VDB. Each loan term shall depend on the loan

recovery capability of each plan, which does not

exceed 12 months. The particular loan amount,

loan term of each plan shall be decided by the

General Director of VDB.

Secondly, the Decree also adds an article on

extending loan. If a project meets the following

conditions, the loan term shall be extended up to

(a) 15 years, if:

i. the project is on electricity

production, cement production,

steel production, clean water

supply, environment;

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ii. the project is classified in A, B

group; and

iii. the investor suffers from loss in

2011 and 2012, unable to balance

capital to return loan as in the

credit agreement with VDB.

(b) 36 months, if:

i. the borrower operation is exporting

vegetable, fishery;

ii. The borrower suffers from loss in

2011 and 2012, unable to balance

capital to return loan as in the

credit agreement with VDB.

Details on dossiers, procedures to extend loan term

and decision for extension of loan term of each

project will be provided or made by the VDB.

This Decree took effect from the date of issue.

4. Loans for housing assistance

On 15 May 2013, the State Bank of Vietnam

issued Circular No. 11/2013/TT-NHNN

stipulating provision of supporting loans for

housing (“Loans”) in order to implement the

Government’s Resolution No. 02/NQ-CP dated

January 07, 2013.

i. The Circular specifies list of the State-

owned banks allowed to provide Loans

as lenders, including:

ii. The Vietnam Bank For Agriculture

and Rural Development

(AGRIBANK);

iii. The Bank for Investment and

Development of Vietnam JSC (BIDV);

iv. The Vietnam Joint Stock Commercial

Bank for Industry and Trade

(VietinBank);

v. The Joint Stock Commercial Bank for

Foreign Trade of Vietnam

(Vietcombank); and

vi. The Mekong Housing Bank (MHB).

Pursuant to Circular 11, investors who invest in

social housing construction projects or have social

housing construction projects converted from

commercial housing projects (“Applicable

Projects”) must satisfy all following conditions in

order to be granted with Loans:

i. Being investors who own the

Applicable Projects as announced by

the Ministry of Construction in each

period;

ii. Having the minimum capital as

specified by the lender but not

exceeding than 30% of total

investment level of the Applicable

Project;

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iii. Making representation that the investor

has not received any supporting loans

from the bank to implement the

Applicable Project; and

iv. Loans must be used for paying unpaid

expenses of Applicable Projects

(excluded tax liabilities) which have

been arisen as from 7 January 2013.

In addition to the aforementioned conditions, the

investors must fulfill the conditions as prescribed

in the Circular 07/2013/TT-BXD recently passed

by the Ministry of Construction dated 15 May

2013.

Interest rate of Loans which must not exceed (6%)

six percent will be reviewed annually by the State

Bank of Vietnam. Interest rate applied in 2013 will

be 6%. The applicable term of Loans will be (5)

five years.

Circular 11 comes into effect on June 01, 2013.

5. Clarifying the term “affiliate” under Circular 121/2012/TT-BTC

The recently passed Circular 121/2012/TT-BTC

on 26 July 2012 regarding corporate management

applicable to public companies has stirred

confusion among investors. The term, “affiliated

persons”, in section 3, Article 24 of the Circular is

often the source of this confusion: “…Public

companies must not grant loans or guarantees to

their shareholders and affiliated persons.” It was

unclear as to which “persons” are affiliated. In

other words, are such “affiliated persons”

affiliated to (i) public companies, and/or (ii)

shareholders of public companies? Can affiliated

companies of a public company obtain loans and

guarantees from these public companies?

The term “affiliated persons” or “affiliates” were

defined in the Law on Securities to include:

a) Fathers, adoptive fathers, mothers,

adoptive mothers, spouses, children,

adopted children or blood siblings of

individuals;

b) Organizations of which individuals are

staff members, directors or general

directors, or owners of over ten percent

of outstanding voting stocks;

c) Members of boards of directors or

boards of control, directors or general

directors, deputy directors or deputy

general directors, and other

management titles of such

organizations;

d) Persons who, in relations with others,

directly or indirectly control or are

controlled by the latter, or submit,

together with the latter, to the same

control;

e) Parent companies and affiliate

companies; or

f) Contractual relations in which one

party represents the other party.

However, according to an interpretation by the

State Securities Commission of Vietnam, this

clause should be understood that shareholders of

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public companies and affiliates of such

shareholders cannot obtain any loans or guarantees

from the public companies.

This means that affiliated companies of public

companies, provided that they are not affiliated to

any shareholder of such company, can obtain loans

and guarantee from their mother company.

CORPORATE COMPLIANCE

6. Extending the statute of limitations for re-registration of enterprises

and business scope of non-reregistered enterprises.

On the 20 June 2013, The National Assembly

passed Law no. 37/2013/QH13 amending and

supplementing Clause 2 of Article 170 of the Law

on Enterprises.

Originally, foreign-invested enterprises established

before the effective date of the Law on Enterprises

must either re-register within two years as from

the effective date of the Law on Enterprises or

otherwise carry on with business activities within

the business lines and the duration stipulated in the

investment licenses. In other words, if foreign-

invested enterprises fail to re-register within two

years from the date which the Law on Enterprises

takes effect, they must file for dissolution when

the durations stated in their investment licenses

expire.

Law no.37 demolished the two-year threshold.

Foreign-invested enterprises established prior to 1

July 2006, and expired operational duration as

prescribed in the investment licenses after 1 July

2006, have not filed for enterprise dissolution and

wish to continue operation, now can re-register

prior to 1 February 2014. In this case, the re-

registration takes effect on the expiry date of

operation stated in the investment licenses.

For foreign-invested enterprises which opted for

not making re-registration, they can now expand

their business lines according to the new law. As

long as such adjustments and supplements do not

change the operational duration stated in the

original investment certificate, re-registration is

unnecessary. Such adjustment and

supplementation of business lines shall comply

with the existing provisions of law at time of

adjustment and supplementation. In case that

expansions of business line lead to a change in

operational duration, those enterprises must re-

register before 1 February 2014.

Law no. 37 filled in the loop-hole of the Law on

Enterprises. Many foreign invested enterprises

now can continue their operation in Vietnam for

many years to come. However, we have to wait for

guiding Decrees on the new Law, as detailed

procedures for re-registration are to be provided

by the Government.

This Law takes effect on 01 August 2013

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7. Ministry’s guidelines on conditions for listing shares of companies

formed after the consolidation or merger

On 29 May 2013, the Ministry of Finance passed

Circular No. 73/2013/TT-BTC to provide

guidelines for listing shares of joint stock

companies formed after the consolidation or

merger.

In general, it is obviously to see that conditions for

securities listing at the Hochiminh Stock Exchange

(HOSE) and the Hanoi Stock Exchange (HNX)

under this Circular already provided under the

Government’s Decree No. 58/2012/ND-CP dated

20 July 2012. Accordingly, a joint stock company

applies for listing its securities must meet the

conditions as follows:

Conditions (1) At the time of listing,

having its paid-up charter capital of VND

120 billion or more (if listing at HOSE) or

the paid-up charter capital of VND 30

billion or more (if listing at HNX)

according to the company’s accounting

book;

Conditions (2) Having operated as a

joint stock company for at least 2 years (if

listing at HOSE) or for at least 1 year (if

listing at HNX) by the time of listing; the

rate of after-tax profit of return on equity

(ROE) of at least 5% in the latest year,

and being profitable in 2 consecutive

years preceding the year of listing; there is

no overdue debt for more than 1 year;

there is no accumulated loss by the year of

listing; complying with laws and

regulations on accounting and financial

reporting;

Conditions (3) Publicizing all debts

due to the company of members of the

Management Board, the Controlling

Board, Director or General Director,

Deputy Director or Deputy General

Director, Chief Accountant, major

shareholders and their related persons;

Conditions (4) At least 20% of its

voting shares owned by at least 300 minor

shareholders;

Conditions (5) The following persons

must undertake to hold 100% of their

shares for 6 months from the date of

listing, and 50% of their shares for the

next 6 months (excluding the State-owned

shares which are represented by them):

a) Shareholders whose ownership

represented by members of the

Management Board, Controlling

Board, Director (or General Director),

Deputy Director (or Deputy General

Director), and Chief Accountant of the

company; and

b) Major shareholders are related to

members of the Management Board,

Controlling Board, Director (or

General Director), Deputy Director

(or Deputy General Director), and

Chief Accountant of the company.

Conditions (6) Duly registering for

listing as prescribed.

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However, the Circular 73 provides how to apply

such above conditions with respect to companies

formed in the case of consolidating or merging

(the “incorporated company”). In particular:

Circumstance (1) In the case of

consolidating 2 listing companies or more

The incorporated company must meet the

conditions (1), (3), (4), (5), and (6) as above. It is

required to apply for the listing registration within

3 months from the date of its business registration

certificate.

Circumstance (2) In the case of

consolidating 2 companies or more, in

which there are at least 1 listing company

and at least 1 non-listing company:

The incorporated company must meet the

conditions (1), (3), (4), (5), and (6) as above.

In addition, the non-listing companies must

meet the condition (2) as above. The

incorporated company is required to apply for

the listing registration within 3 months from

the date of its business registration certificate.

Circumstance (3) In the case of

consolidating 2 companies or more which

are all non-listing companies:

The incorporated company must meet all

conditions from (1) to (6) as above.

Circumstance (4) In the case of merging

companies in which the absorbed

companies and surviving companies are all

listing companies:

The incorporated company must proceed to amend

the listing registration.

Circumstance (5) In the case that the

surviving company is listing company and

the absorbed company is non-listing

company:

The incorporated company will be allowed to

register the supplemental listing with respect to the

exchange shares of the absorbed company when:

i. The absorbed company meets the

Condition (2) as above; or

ii. If the absorbed company cannot meet

the Condition (2), it must have the

ROE rate of at least 5% according to

the audited annual consolidated

financial statement or the audited

semi-annual consolidated financial

statement (to be prepared after the date

of merger) of the incorporated

company, or the positive ROE rate

according to the audited annual

consolidated financial statement (to be

prepared after the date of merger) and

larger than the ROE rate of the

surviving company according to its

audited financial statement in the latest

year; or

iii. If the absorbed company and the ROE

rate of the incorporated company do

not meet the (i) and (ii), then the

additional shares to be issued in

proportion to the absorbed company’s

capital will merely be listed after 1

year from the date of business

registration certificate of the

incorporated company.

Circumstance (6) In the case that the

surviving company is non-listing company:

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The incorporated company must meet all

conditions from (1) to (6) as above.

Moreover, the Circular 73 provides set of dossiers,

and also templates of application dossiers for

listing registration of incorporated companies, but

detailed procedures will be provided by the HOSE

and HNX.

This Circular comes into effect from 15 July 2013.

8. Licenses of telecommunication services

On 13 May 2013, the Ministry of Information and

Communications promulgated Circular No.

12/2013/TT-BTTTT (“Circular 12”) providing

instructions on license of telecommunication

services.

Pursuant to Circular 12, enterprises providing

telecommunication services (“Provider”) must

have (i) a license for establishing a public

telecommunication network (“Establishment

License”) and/or (ii) a license for providing

telecommunication services (“Service License”).

Particularly, Service License is required for all

Providers; meanwhile, Establishment License is

required only to those who provide services with

network infrastructure. Dossiers for issuing the

Establishment License and Service License can be

consolidated such that these two licenses can be

obtained at once.

The Circular stipulates various requirements

regarding financial capacity, organization, human

resource, technique, business method, and

infrastructure safety to obtain Establishment

License and Service License.

In the course of business, Providers must amend

the Service License due to:

(i) change in the their names;

(ii) change in the scale of the terrestrial

public telecommunications network

within the area or country;

(iii) supplement new telecommunication

services to the Service License,

whereby the competent authority to

license these services is the authority

that issued the existing license; and

(iv) Suspend licensed telecommunications

service.

Notwithstanding, the following changes must be

notified to the Vietnam Telecommunication

Authority without amending Service License:

(i) Change in the address of providers;

(ii) Change in the legal representative of

providers;

(iii) Change in the charter capital or

investment capital providing that these

changes comply with the requirements

on legal capital; and

(iv) Change in the contribution ratios

between investors, providing that the

requirements of foreign investment

and requirements of ownership

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prescribed by applicable laws are still

fulfilled.

Provider is required to obtain a new Service

License due to:

(i) a change in the investors of the

Providers;

(ii) a division, separation, consolidation,

merger or transformation of the

Provider;

(iii) a change in the scale of the network

within a province, area, or country;

(iv) a change in demand for

telecommunication numbers or radio

frequencies, whereby the feasibility of

the distribution of telecommunication

numbers and radio frequencies must be

determined accordingly; and

(v) The supplement of new

telecommunication services to the

Service License, and the competent

authority to license these services is

not the authority that issued the

existing license.

Providers who had obtained a license for

establishing a public telecommunications network

and providing telecommunications services or the

license for providing telecommunications services

before the effective date of Decree No.

25/2011/ND-CP must apply to replace these

licenses with the Establishment License or the

Service License.

Circular 12 comes into effect from 1 July 2013.

9. Lists of drugs and vaccines, biological products, microorganisms and

chemicals that used in veterinary treatment allowed for use and

distribution in Vietnam

On 31 May 2013, the Ministry of Agriculture and

Rural Development promulgated Circular No.

28/2013/TT-BNNPTNT published list of drugs

and vaccines, biological products,

microorganisms, and chemicals used in veterinary

treatment that are allowed for use and distribution

in Vietnam. Under this circular, the list is

classified into categories for products to be (i)

produced domestically, (ii) repackaged, and (iii)

imported from various countries.

The list is created based on registration of

enterprises according to details of each product. In

the case of change in composition, formula,

pharmaceuticals, way of taking drugs,

manufacturing method or process resulting in

change of product quality, such products must be

re-registered with the Department of Animal

Health, Department of Aquaculture in accordance

with the Ordinance of Veterinary Medicine

no.18/2004/PL-UBTVQH11 dated 29 April 2004

and Decree 33/2005/ND-CP dated 15 March 2005.

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This Circular replaces the following circulars:

a. Circular 31/2011/TT-BNNPTNT dated

21 April 2011 of the Ministry of

Agriculture and Rural Development;

b. Circular 32/2011/TT-BNNPTNT dated

21 April 2011 of the Ministry of

Agriculture and Rural Development;

c. Circular 77/2011/TT-BNNPTNT dated

4 November 2011 of the Ministry of

Agriculture and Rural Development;

d. Circular 15/2012/TT-BNNPTNT dated

30 March 2012 of the Ministry of

Agriculture and Rural Development;

and

e. Circular 58/2012/TT-BNNPTNT dated

7 November 2012 of the Ministry of

Agriculture and Rural Development.

The Circular 08 comes into effect as of 15 July 2013.

10. Lottery business operation

On 04 June 2013, the Ministry of Finance issued

Circular 75/2013/TT-BTC detailing on lottery

business operation, which replaces Circular

65/2007/TT-BTC dated 18 June 2007.

Organizations issuing lottery tickets shall be

entitled to issue 3 kinds of lottery products

including conventional lottery (5-digit or 6-digit

ticket), bingo lottery and instant result lottery. For

each kind, lottery tickets shall comply with the par

values permitted to publish. The lottery tickets

shall only be distributed to customers directly or

through lottery agents. Other ways of distributing

lottery tickets are prohibited, including selling via

telephone (landline or mobile), electrical devices,

internet and other communication means.

Pursuant to this Circular, lottery agents can be

operated by individuals or organizations bounding

by written agreement with lottery companies.

Particularly, agent of a lottery company being an

organization must be:

(i) Being economic organization that are

duly established and operate in

Vietnam;

(ii) Having no contributed capital from

Chairmen, General Managers or

Managers, Deputy General Managers

or Deputy Managers, Chief

Accountants or staff taking in charge

of accounting matters, Controllers,

heads and deputy heads of operational

departments of such lottery company

or other lottery companies based in the

same geographical area;

(iii) Having no contributed capital from

spouses, fathers, adoptive fathers,

mothers, adoptive mothers, children,

adoptive children, siblings or adoptive

siblings of Chairmen, General

Managers or Managers, Deputy

General Managers or Deputy

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Managers, Chief Accountants or staff

taking in charge of accounting matters,

Controllers, heads and deputy heads of

operational departments of such lottery

company or other lottery companies

based in the same geographical area;

(iv) Complying with requirements on

payment representation in accordance

with laws on secured transactions in

order to ensure its payment liability for

such lottery company;

(v) Making commitments to fully comply

with regulations passed by such lottery

company.

Payments for lottery tickets must be fully paid to

lottery companies by agents when:

(i) Agents receives lottery tickets; or

(ii) Within a time limit as follows,

provided that agents are required to

make secured transactions with lottery

companies in accordance with laws on

secured transactions:

With respect to conventional

lottery or bingo lottery: within the

21 days from the date of issue;

With respect to instant lottery:

once a month or more than once a

month, agents must make

payments of all tickets sold in such

period.

Furthermore, the promotional activities are

prohibited, including:

(i) Reducing the sale price of lottery

tickets;

(ii) Giving lottery tickets free of charge;

(iii) Giving gifts in kinds, in cash or being

vouchers/coupons so that giving

benefits to customers;

(iv) Increasing value of prizes more than

the value prescribed by the State in

rules of participation in winning prizes

and rate of paying prizes;

(v) Selling lottery tickets alongside reward

programs; and

(vi) Other ways of promotion.

This circular will become effective from 01 October, 2013.

LABOUR

11. Legal framework for labour outsourcing

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On 22 May 2013, the Government promulgated

Decree No. 55/2013/ND-CP (“Decree”),

stipulating license for labour outsourcing and

conditions for operating this service.

In reality, demand of labor outsourcing

commenced a long time ago. However, the Labor

Code 2007 did not have any regulations for this

operation. Until the National Assembly approved

the Labor Code 2012, enterprises are allowed to

provide this kind of service, provided that the

following conditions must be met:

1) Service provider must have VND 2

million as legal capital during its

operation

This condition is proved by (i) Documents

evidencing the capital contribution of the

owners (i.e. minutes of capital contribution of

the founding members with respect to joint

stock company or multiple members limited

liability company; decision of capital

allocation of owner of single member limited

liability company, investment capital register

of owner of private enterprise or single

member limited liability company in which it

owner being individual); and (ii) a

confirmation letter issued by the commercial

bank to which the provider transfers

contributed capital in the case of contribution

in cash, or a valid certificate on contributed

assets to be issued by an organization based in

Vietnam which is licensed to carry out price

valuation in the case of contribution in assets.

In the event that the provider is established by

a joint venture between local party and foreign

party, the foreign party must be specialized in

labour outsourcing business from 5 years and

more, possess its capital and total assets

valued at VND 10 billion or more, and be

certified by an authority of home country that

it has not committed any violations against the

laws of home country or other related

countries.

2) Further, service provider is required

to maintain a deposit of VND 2

million

Service providers must maintain in its bank

account a deposit of VND 2 million during

operation of labour outsourcing service. They

will be granted with a certificate upon the full

remittance of deposit.

The deposit will be used to pay remuneration

or compensation to the outsourced employees

in the case that service provider breaches

labour contract entered into with such

employees or legal rights and interests of

employees are violated as prescribed in Article

20 of the Decree.

3) Offices and head of service provider

The Decree provides that location of service

provider such as head office, branches, and

representative offices must be stable for at

least 02 years. In addition, head of service

provider must be specialized in labour

outsourcing from 3 years and more. In the

period of 3 consecutive years before the

application for labour outsourcing service,

they must not work as heads of enterprises

whose business registration certificates were

withdrawn or they did not commit again acts

of forging dossiers applying for grant, re-grant

of Enterprise registration certificate, dossiers

applying for grant, re-grant or extension of

license for the labor leasing operation.

4) List of works to be allowed for

outsourcing

At present, enterprises are merely allowed to

outsource employees with respect to jobs

15

listed in this Decree. The list will be reviewed

by the Ministry of Labour, Invalids and Social

Affairs for the Prime Minister’s approval later.

There are also some restrictions imposed to

outsourcing activities. Accordingly, service

provider must not outsource each employee to a

client more than 12 months. In addition, this

service is prohibited between service provider and

its affiliate (i.e. Mother Company, subsidiary, or

within economic group).

This Decree takes effect on 15 July 2013.

12. New Decree detailing the new Labour Code on wages

On 14 May 2013, the Government promulgated

Decree No. 49/2013/ND-CP (“Decree”) providing

functions, tasks and organizational structure of the

National Wage Council as prescribed in Article

92(2), and principles for formulation of wage

scales, payroll and labor norms as prescribed in

Article 93(1) of the Labor Code. This Decree

repeals the Decree No. 114/2002/ND-CP dated 31

December 2002, and the Decree No.

205/2004/ND-CP dated 14 December 2004.

The multiple of the wage scale is the different

coefficient of the wage level for work or title

requiring the highest technical qualifications as

compared to the work or title requiring the lowest

technical qualifications, the number of grades of

the wage scale and payroll depends on the

complexity of the management and work or title

requirements. The gap between two consecutive

wage grades must at least 5%.

The starting salary of each work or title in the

wage scale and payroll will be decided by the

enterprises on the basis of the complexity of work

or title corresponding to the qualifications, skills,

duties, and experience to implement work or title,

in which:

(i) The lowest wage level of the simplest

work or title in normal labor

conditions shall be not lower than the

region-based minimum wage level

prescribed by the Government;

(ii) The lowest wage level of the work or

title requiring laborers to have to be

received vocational training (including

laborers trained by enterprises

themselves) must be at least 7% higher

than the region-based minimum wage

levels prescribed by the Government;

(iii) The wage level of work or title with

the heavy, hazardous and dangerous

labor conditions must be at least 5%

higher; work or title with the special

heavy, hazardous and dangerous labor

conditions must be at least 7% higher

than the wage level of work or title

having the equivalent complexity but

working in normal labor conditions.

This Decree takes effect on 1 July 2013.

However, its provisions will be applied as from 1 May 2013.

16

13. New guidelines on labour dispute settlement and strikes under the

labour code 2012

On 10 May 2013, the Government promulgated

Decree 46/2013/ND-CP guiding a number of

articles of the Labour Code regarding labour

disputes (“Decree 46”). Decree 46 provides

standards and competences to appoint labour

conciliators; postponement and suspensions of

strikes, and resolution to rights and benefits of

labor collectives in such cases.

According to Decree 46, a labour conciliator is

appointed by the President of the provincial

People’s Committee based on the labour

conciliator’s self-registration or the introduction of

the Division of Labours, Invalids, and Social

Affairs or trade unions at district level. In

accordance with Article 4 of Decree 46, a labour

conciliator must satisfy the following

requirements:

(i) Being Vietnamese citizens, having full

legal capacity for civil acts, good

health and ethics;

(ii) Not being prosecuted for criminal

liability or serving sentence;

(iii) Having knowledge about labour law

and related laws; and

(iv) Having 3 years of experience working

in areas relating to labour and having

skills in conciliation of labour disputes.

During the process of labour conciliation, the

labour conciliator shall be entitled to the same

allowance as those of jurors participating in court.

Furthermore, Decree 46 also provides regulations

regarding postponement and suspension of strikes.

In particularly, the President of the provincial

People’s Committee will issue a decision to

postpone the strike which has been scheduled by

the Trade Union Executive Committee or suspend

the strikes which are happening in certain cases

provided in Article 8 of Decree 46.

During the period of the strike postponement or

suspension, the labour arbitration council will still

conduct the labour conciliation in accordance with

the Labour Code. In the event that the conciliation

is unsuccessful or the time limit for postponing or

suspending the strike expires, the Trade Union

Executive Committee may continue the strike

upon a 5-day prior notice to the employer, the

provincial Department of Labours, Invalids, and

Social Affairs and provincial trade union.

In addition to Decree 46, Decree 41/2013/ND-CP

issued by the Government on 8 May 2013

stipulates the implementation of Article 220 of the

Labour Code on the list of enterprises and

organizations using laborers which may not go on

strike and the settlement of requests of labour

collectives with respect to such employers

(“Decree 41”).

Particularly, employers using laborers which may

not go on strike comprise enterprises, agencies and

organizations employing laborers as prescribed by

the labour law and operating in sectors and fields

that are essential to the national economy under

which strikes may threaten security, national

defense, health and public order, including:

Power production with large capacity, electronic

transmission and moderation of the national

electrical system;

17

(i) Oil and gas exploration and

extraction; production and provision

of gas;

(ii) Assurance of aviation safety,

maritime safety;

(iii) Provision of telecommunication

system infrastructure; postal services

for state agencies;

(iv) Provision of clean water, drainage

and environmental hygiene in central-

affiliated cities; and

(v) Direct services for national security

and defense.

However, the employer must immediately remedy

its violation and execute any obligations upon the

request made by the Trade Union Executive

Committee relating to the employees’ rights. If the

request is in relation to the employees’ interest, the

settlement of such request will be implemented as

follows:

The employer must hold a meeting for collective

negotiation between the employer and the Trade

Union Executive Committee with the participation

of labour conciliators.

If the collective negotiation is unsuccessful, either

party will be entitled to request labour conciliation

by the Labour Arbitration Council.

If a party does not successfully implement the

minutes of conciliation or the conciliation by the

Labour Arbitration Council is not successful,

either party may propose the Department of

Labour, Invalids and Social Affairs to report to the

President of the People’s Committee for final

settlement.

Decree 46 shall take effect from 1 July 2013 and Decree 41 shall take effect from 23 June 2013.

14. Guidance on the new Labour Code regarding working hours, breaks,

and occupational hygiene and safety

Following the enactment of the new Labour Code,

on 10 May 2013, the Government issued detailed

guidelines regarding working hours, rest breaks at

work, and occupational safety and hygiene under

Decree no. 45/2013/ND-CP. This Decree repeals

Decree 195/CP dated 31 December 1994, Decree

109/2002/ND-CP dated 27 December 2002 on

working hours and rest breaks, Decree 06/CP

dated 20 January 1995, and Decree 110/2002/ND-

CP dated 27 December 2002 on occupational

hygiene and safety.

Working hours

The new Decree provides similar provisions that

those under the repealed decrees regarding periods

included in paid working hours. However, paid

working hours will now further include two

periods: (i) time for meeting or training of part-

time union cadres at the request of the superior

trade union, and (ii) shortened working hours of at

least 1 hour per day for elderly employees in the

last year before their retirement.

In addition, Article 5 of the Decree provides in

detail that the rest time of 30 minutes during an 8-

hour shift (in normal conditions) or during a 6-

hour shift (in special cases) is included in the

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normal working hours (i.e., not working hours at

night time or overtime).

Overtime

It is easier and simpler when employers are not

required to obtain consent from the relevant

Ministries or People’s Committee to extend

overtime working hours from 200 hours to 300

hours (as stipulated in the repealed decrees).

Instead, by a notice served to the provincial

Department of Labour, Invalids, and Social

Affairs, enterprises involved in the following cases

may arrange their employees to work overtime

from 200 hours to 300 hours per year:

(i) Production or export processing of

textiles, garments, leather, shoes,

agricultural, forestry and fishery

products;

(ii) Production or provision of electricity,

telecommunication service, oil

refinery, water supply and sewerage;

and

(iii) Other urgent cases in which works

cannot be delayed.

Occupational safety and hygiene

One of the highlights in this new Decree is the

provisions regarding the engagement of elderly

employees in heavy, hazardous and dangerous

works. In particular, employers are allowed to

employ elderly employees for such works if the

following conditions are fully satisfied:

(i) The employees have considerable

experience and skills with at least 15

years of seniority, and have been

accredited with vocational

qualifications or recognized as

craftsmen under Vietnamese law;

(ii) The employees have good health in

accordance with the health standards

prescribed by the Ministry of Health;

(iii) The employment is on an irregular

basis with each employment term not

exceeding 5 years in total;

(iv) Medical checks are given at least twice

a year;

(v) The employer must assign at least 1

co-worker who is not an elderly

employee;

(vi) Positions of heavy, hazardous and

dangerous works, and particular

conditions will be specified later by

the Ministries.

Furthermore, the Decree also establishes a

legal framework for enterprises providing

technical inspection services related to

occupational safety. These enterprises will

assess and verify whether an inspected object

is safe in accordance with the relevant

19

technical standards and regulations.

Accordingly, any devices, equipment or other

materials on which strict requirements for

occupational safety are imposed must be assessed

and verified initially and periodically by such

enterprises before use. However, an operating

license for this kind of enterprise will be granted

by various authorities including the Ministry of

Industry and Trade, the Ministry of Transport, the

Ministry of Science and Technology, the Ministry

of Construction, the Ministry of Information and

Communications, the Ministry of National

Defense, and the Ministry of Labour, Invalids, and

Social Affairs depending on the type of devices,

equipment or materials on which the inspection

enterprise will carry out the inspection.

This Decree comes into effect from 1 July 2013

15. Government’s Decree 44/2013/ND-CP on labor contracts

On 10 May 2013, the Government issued Decree

No. 44/2013/ND-CP detailing the implementation

of a number of articles of the current Labor Code

regarding labor contracts (the “Decree”).

According to the Decree, when an employee enters

into labor contracts with more than one employer

and both of them are subject to compulsory social

insurance and unemployment insurance, the

employee and the employer of the first contract

shall be responsible for participation in

compulsory social insurance and unemployment

insurance. Meanwhile the parties to the contract

with the highest salary shall be responsible for

participating in compulsory health insurance.

Employers of remaining contracts must pay the

amounts equal to premiums of these compulsory

insurances belong to their responsibilities to the

employee together with the salary.

If employees suffer occupational accidents or

occupational diseases during the course of work

under labor contracts with employers who do not

participate in the compulsory social insurance and

health insurance for employees, those employers

shall be responsible for:

(i) paying expenses for first-aid until the

employees are treated to a stable

condition;

(ii) paying full salary under the labor

contract for the treatment period;

(iii) paying compensation or allowance to

the employees depending on the extent

of their reduced working capacity; and

(iv) notifying in writing the other

employers about the health status of

the employees concerned.

In the treatment duration, employers are not

entitled to unilaterally terminate the labor

contracts with employees suffering occupational

accidents, occupational illness, except case

specified in Article 38.1(b) of the Labor Code.

The Decree will take effect on 01 July 2013.

20

INFRASTRUCTURE

16. Urban Design

From 27 June 2013, both foreign and domestic

organizations and individuals engaging in

activities of urban design in Vietnam are required

to comply with Circular 06/2013/TT-BXH,

which has been issued by the Ministry of

Construction on 13 May 2013.

This Circular provides guidelines on the urban

design in the general planning, subdivision

planning, detailed planning, and separate urban

design schemes.

Urban designs in general planning schemes aim

to determine architectural and urban landscape

areas, as well as spatial organizations.

Specifically, the design will determine the (i)

existing inner city, (ii) tentative areas for new

development, (iii) areas of natural and artificial

landscape, (iv) areas for preservation, and (v)

particular areas. Accordingly, each area will have

its urban image and architectural space oriented on

the basis of its nature and development objective.

The design also includes spatial organization of

downtowns, urban gateways, main spatial axes,

major squares, urban focal points, trees and water

surfaces.

For subdivision planning scheme, the urban

designs will determine maximum criteria for

setbacks and landscape of the downtown along

main roads, open spaces, and urban focal points.

Meanwhile, urban designs in detailed planning

schemes will specify details regarding (i) focal

points in the planned areas, (ii) height of

construction works, (iii) setbacks of construction

works on each street and intersection, (iv) the

mainstream of shapes, colours, and architectural

form of the architectural works, and (v) system of

trees, water surfaces and squares.

Under the Circular, there are certain requirements

on producing separate urban designs schemes for

street blocks and neighbourhoods:

a) The design will stipulate tasks and the

design scheme for approval by the

provincial Departments of

Construction or the Departments of

Planning and Architecture (for Hanoi

and Ho Chi Minh City);

b) Organizations or individuals engaging

in urban design activities must have

full capacity in accordance with

Decree 37/2010/ND-CP dated 7 April

2010;

c) The managing architect of the separate

urban design scheme is required to

have experience in designing

architecture for construction works and

preservation of heritages and relics (in

areas having heritages, relics, or other

ancient architectural works).

In addition to provisions regarding the contents of

each type of design, the Circular also stipulates the

following conditions:

1) The description must fully include the

aforementioned contents of the design

21

as required by the Circular, and be in

consistent with the drawings;

2) The drawings and models must comply

with rates 1/5000, 1/2000, 1/1000,

1/500, 1/200 provided by the Circular

for each type of design.

This Circular comes into effect from 27 June 2013.

DISPUTE RESOLUTION

17. Determination of administrative decisions – subject to filing of

administrative lawsuit

The Law on Complaints (effective from 1 July

2012) and the Law on Administrative

Proceedings (effective from 1 July 2011)

recognize the citizen’s rights of filing a claim or

lawsuit against State authorities for

administrative decisions. Particularly:

a) Making administrative claim:

maximum of 2 stages, in which:

(i) First stage: the claim will be

brought to the authority that

issued the initial decision (e.g.,

sanctioning decision) (the

“Initial Decision”). Outcome:

the claimant will receive the

first settlement decision (the

“1st Settlement Decision”),

and

(ii) Second stage: the claimant will

make a claim to the superior of

the authority issuing the 1st

Settlement Decision. Outcome:

the claimant will receive the

second settlement decision (the

“2nd Settlement Decision”).

b) Pursuing administrative lawsuit at

Courts in accordance with laws on

administrative proceeding.

Notwithstanding the above, there are

discrepancies with regard to interpreting

administrative decisions, especially Settlement

Decisions between laws on administrative

claims and laws on administrative proceedings.

Article 40 of the Law on Complaints provides

that contents of the 2nd Settlement Decision

have a “conclusion that the claim is true wholly

or partly, or wholly false”. Particularly:

In the event that the claim is wholly or partly

true: the 2nd Settlement Decision will demand

the authority issuing the Initial Decision to

amend or annul such Initial Decision partly or

completely; or

In the event that the claim is completely false:

the 2nd Settlement Decision will request the

claimant, and other person having relevant rights

22

and obligations to fully implement the Initial

Decision.

Therefore, in no cases may the 2nd Settlement

Decision amend or supplement the contents of

the 1st Settlement Decision.

However, pursuant to Resolution No. 02/2011

providing guidelines for the Law on

Administrative Proceedings passed by the

Judges’ Council, an “administrative decision”

has the following features:

a) Formality: a decision in writing or

another similar formality (e.g. notice,

dispatch, and so forth);

b) Issuing authority: the State

authorities or officers of such

authorities;

c) Scope of application: applicable to

one or a number of specific subjects;

d) Content: on a specific issue related to

administrative management of the

State by which the claimant assumes

that his/her legal rights and interest

are violated, including:

(i) Administrative decision to

resolve or settle specific issues

related to administrative

management of State;

(ii) Administrative decision which

is made after the claim and to

amend, supplement, repeal,

annul partly or completely the

administrative decision as

stated in item (i) above.

Such conflict between the Law on Complaints

and Resolution No. 02 creates an adverse impact

on the citizenship rights of filing an

administrative lawsuit as follows:

According to the interpretation of Resolution

No. 02, only the Initial Decision and the

Settlement Decision amending, supplementing

and repealing the Initial Decision is considered a

subject of an administrative lawsuit. This

understanding will lead to two consequences:

a) Consequence 1:

In accordance with the claim procedure in

Article 7 of the Law on Complaints, the

right of filing an administrative lawsuit

arises when (i) the statute of limitations for

resolving the claim by the State authorities

expires without any Settlement Decision, or

(ii) the claimant does not consent to the 1st

Settlement Decision.

However, the Initial Decision and the 1st

Settlement Decision are issued by the same

authority; therefore, there is a number of

possibilities that the 1st Settlement Decision

upholds the positions of the Initial Decision.

As a result, the claimant cannot file a claim

for the 1st Settlement Decision without

giving consent to it.

Hence, the claimant only has the right to

make a claim for the second stage to the

superior.

b) Consequence 2:

If the claim is concluded to be completely

false at the second stage and is not

recognized by the authority, the 2nd

Settlement Decision will uphold the

positions of the 1st Settlement Decision and

23

the Initial Decision will not be considered a

subject of an administrative lawsuit.

There are many cases where the claimant

looks forward to the issue of the 2nd

Settlement Decision before bringing it to

court. Therefore, if the 2nd Settlement

Decision is issued after the prescribed time

limit, and the 1st Settlement Decision and

the Initial Decision positions remain, the

legal right of claimant will be forfeited as:

(i) The statute of limitations for

bringing the lawsuit against the

1st Settlement Decision has

expired because the 2nd

Settlement Decision was issued

after the prescribed time limit;

and

(ii) The 2nd Settlement Decision is

not considered a subject of an

administrative lawsuit according

to the interpretation of

Resolution No. 02.

It is supposed that the 1st Settlement Decision

maintaining the position of the Initial Decision,

and the 2nd Settlement Decision maintaining the

position of the 1st Settlement Decision should

be considered a subject of an administrative

lawsuit as this understanding will ensure and

facilitate the citizen’s right of pursuing lawsuits

in accordance with the Law on Complaints and

the Law on Administrative Proceedings.

FIRM NEWS

1. LNT & Partners to be in charge of the Policy Roundup of the Vietnam

Investment Review

From the end of July 2013, we will officially be in

charge of the Policy Roundup column of the

Vietnam Investment Review, the official press

office of the Ministry of Planning and Investment.

As Vietnam’s economic and legal landscape

becomes increasingly dynamic, we understand that

investors and businesses are often concerned with

the uncertainty and lack of information

surrounding these changes. Therefore, together

with VIR, we now bring our clients and VIR’s

readers with the most up to date and relevant news

on legal changes, as well provide practical advice

on how these changes may affect you.

2. LNT & Partners becomes an Outlook sponsor of the M&A Vietnam

Forum 2013

We are delighted to announce our official

sponsorship for the M&A Vietnam Forum 2013,

the largest M&A forum in the country. The forum

will be held on 8 August 2013 under the support

24

from the Ministry of Planning and Investment.

Together with our strong experience in M&A,

opinions from leaders of relevant ministries and

expertise of M&A consultants, we anticipate this

forum to become of the most insightful yet. For

our clients and attendees of the forum, we hope to

provide you with practical information and open

opportunities to vast potential market that is

Vietnam.

3. LNT & Partners obtains ruling from the State Securities Commission of

Vietnam regarding corporate guarantees and shareholder loans under

Circular No. 121/2012/TT-BTC

Recently, all eyes have been focused on the

contentiously uncertain Circular No.

121/2012/TT-BTC, which was passed on 26 July

2012 and concerns corporate management

applicable to public companies. The source of the

uncertainty arises from the term “affiliated

persons” in Article 24(3) of the circular, which

requires that “…public companies must not grant

loans or guarantees to their shareholders and

affiliated persons.”

Investors are left puzzled over the provision’s

scope of application, as there is no indication as to

whether these “affiliated persons” are affiliated to

(i) public companies, and/or (ii) shareholders of

public companies. If the interpretation of (i) is

adopted, public companies are exposed to a would

whereby its project finance would not be feasible

because of a lack of corporate guarantee or

shareholders’ subordinated debts. Therefore, it is

only expected that the correct interpretation should

be (ii).

Due to this ambiguity, we sought a ruling from the

State authorities and obtained an official position

of the State Securities Commission of Vietnam.

For an in-depth look into this ruling, please refer

to our article in Item 5 of this issue of Vietnam

Legal Briefing.

4. LNT & Partners is seeking a ruling from the Supreme Court regarding

interpretation of “administrative decisions” that are subject to filing of an

administrative lawsuit

Despite its advances to support enterprises’ rights

on filing a claim or lawsuit against State

authorities for administrative decisions, the Law

on Complaints (effective from 1 July 2012), the

Law on Administrative Proceedings (effective

from 1 July 2011), and Resolution No. 02/2011 are

not without flaws.

We have observed discrepancies with regard to the

interpretation of administrative decisions between

the Law on Complaints and Resolution No.

02/2011. We have also identified two significant

consequences of the current two-stage proceedings

of an administrative claim under the Law on

Complaints and the Law on Administrative

Proceedings. Without amendment, these issues

have the potential to compromise the civil rights of

claimants. Therefore, we have been seeking

rulings from the Supreme Court to resolve these

matters, and anticipate a response very soon.

For a detailed analysis on this matter, please refer

to our article in Item 17 of this issue of Vietnam

Legal Briefing.

25

Disclaimer

The material contained in this legal briefing is provided for general

information purposes only and does not contain a comprehensive analysis of

each item described. This briefing and the information contained herein are

not a substitute for the recipient’s independent evaluation and analysis of the

relevant documents. Readers should seek professional advice specific to their

situation. No liability is accepted for acts or omission taken in reliance upon

the contents hereof.