Monthly Legal Briefing

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Monthly Legal Briefing Edition 1 April 2014 Banking & Finance Corporate Dispute Resolution Intellectual Property Real Estate & Infrastructure Banking & Finance 1. Decree No.

01/2014/TTLT-NHNN-BXD-BTP-BTNMT on procedure of mortgaging houses formed in the future page 4 Key contact Dr. Net Le Net.le@LNTpartners.com Mr. Huy Do Huy.do@LNTpartners.com 3. Circular No.

1 Monthly Legal Briefing Edition 1 April 2014 Banking & Finance Corporate Dispute Resolution Intellectual Property Real Estate & Infrastructure Banking & Finance 1. Decree No. 26/2014/ND-CP on organizing and operating the inspection and monitoring of the banking sector page 3 2. Joint Circular No. 01/2014/TTLT-NHNN-BXD-BTP-BTNMT on procedure of mortgaging houses formed in the future page 4 Key contact Dr. Net Le Net.le@LNTpartners.com Mr. Huy Do Huy.do@LNTpartners.com 3. Circular No. 41/2014/TT-BTC - Financial regime for Vietnam Deposit Insurance page 4 4. Circular No. 47/2014/TT-BTC on loan guarantees of small and medium sized enterprises from commercial banks page 5 Key contact Ms. Quyen Hoang Quyen.hoang@LNTpartners.com Mr. Hong Bui Hong.bui@LNTpartners.com Corporate Decree No. 30/2014/ND-CP on business conditions of marine transport and marine transport support services page 6 Corporate - Compliance 1. Circular No. 04/2014/TT-BXD guiding construction-related judicial assessments page 7 Corporate / Tax Decision No. 1100/QD-TCHQ on extension procedures for tax payments and overdue penalties on exported and imported goods page 8 1

2 Key contact Mr. Huy Do Dr. Tuan Nguyen Intellectual Property/ Pharmaceutical Decision No. 1129/QD-BYT correcting Circular No. 37/2013/TT- BYT on making bidding dossiers to purchase drugs by medical establishments page 9 2

3 Banking & Finance 1. Decree No. 26/2014/ND-CP on organizing and operating the inspection and monitoring of the banking sector On 7 April 2014, the Prime Minister passed Decree No. 26/2014/ND-CP providing regulations on the organization and operation of the inspection and monitoring of the banking sector ( Decree 26 ). Regulations on the organization and operation of the Inspection, Monitoring Bank Most significantly, Decree 26 has legalized and systemized all regulations providing the inspection and monitoring of the banking sector which have previously been regulated in multiple laws and regulations. Furthermore, Decree 26 alters the organizational structure of the State Bank of Vietnam s ( SBV ) inspection department, whereby the inspection and monitoring system will be implemented systematically from the state to the provincial government. Accordingly, the inspection and monitoring department will be a governmental inspection authority directly under the SBV, and the inspection and monitoring branch of the SBV will be established within the structure of the provincial state bank. The common function of these departments is to assist the Director of the SBV to conduct administrative inspections, monitor banks, settle petitions and claims, prevent corruption and deposit insurance. Under the new provisions, the tasks of the inspection and monitoring of the banking sector have been widened to include four stages of credit institution management: (i) licensing, (ii) regulation of security of banks, (iii) monitoring and inspection; and (iv) sanctioning of violations. The provisions are a first step towards implementing effective international standards of inspection and monitoring of the Basel Committee, which requires a combination of compliance inspection and risk monitoring. Decree 26 affirms the requirement for designating and approving the annual inspection plan to be applied for the whole system. In addition, an inspection program can take up to 70 days (compared to the maximum 45 days of a standard period) under the Prime Minister s decision. Particularly, the inspectors and monitors of the banking system can request an independent audit where necessary. Decree 26 has created a stepping stone towards improving the inspection and monitoring of the banking system, providing tools for restructuring and settling bad debts, and achieving stability within credit institutions. Decree 26 will come into effect from 1 June 2014 and will replace Decree No. 91/1999/ND-CP dated 4 September

4 2. Joint Circular No. 01/2014/TTLT-NHNN-BXD-BTP- BTNMT on procedure of mortgaging houses formed in the future Guiding procedure to mortgage house which is formed sin future under Decree No. 71/2010/ND- CP guiding to implement housing law On 25 April 2014, the State Bank of Vietnam, the Ministry of Construction, the Ministry of Justice and the Ministry of Natural Resources and Environment issued Joint Circular No. 01/2014/TTLT- NHNN-BXD-BTP-BTNMT ( Circular 01 ) guiding procedures for mortgaging houses in the future according to Decree No. No 71/2010/ND-CP guiding the implementation of the Housing Law (the Decree 71 ). Circular 01 provides details of the procedures to mortgage houses of organizations and individuals formed in the future (including mortgage procedures, notarization of mortgage contracts and mortgage registration). It applies to loans taken from credit institutions to purchase houses in residential housing development projects and urban construction investment projects of real estate trading enterprises ( Housing Development Projects ). Circular 01 provides specific conditions that future houses need to satisfy in order to be mortgaged. The value of the mortgaged house must be agreed by the two parties and based on a determined value at the time of executing the house purchasing contract. The notarization and registration of security transactions are compulsory for this mortgage contract, and the detailed procedures of Circular 01 have now clarified previous uncertainties under Decree 71. It is worth noting that the mortgagor can mortgage future houses to only one credit institution for housing loans. If the Housing Development Project is mortgaged as a guarantee for another civil obligation, the real estate trading enterprise must apply for registration procedures to change the registered mortgaged assets (withdrawal of collateral) before selling the house. Circular 01 takes effect from 16 June 2014 and replaces Joint Circular No. 05/2007/TTLT-BTP-BXD-BTNMT-NHNN dated 21 May Circular No. 41/2014/TT-BTC - Financial regime for Vietnam Deposit Insurance Regulations on financial regime for Deposit Insurance Vietnam On 08 April 2014, the Ministry of Finance issued Circular No. 41/2014/TT-BTC regulating the financial regime for Vietnam Deposit Insurance ( Circular 41 ). Circular 41 provides that Vietnam Deposit Insurance is a state financial institution with 100% of its charter capital owned by the State. It has legal capacity and its own seal and separate account. Vietnam Deposit Insurance will be a not-for-profit institution that aims to ensure capital security and self-financing. Revenue of Vietnam Deposit Insurance will be exempt from tax. 4

5 Vietnam Insurance Deposit can procure and invest in fixed assets for its operation, provided that the residual value of the fixed assets do not exceed 30% of its charter capital and that the book value of the development investment fund is fulfilled. A professional reserve fund is used to pay for insurance proceeds for depositors in accordance with deposit insurance regulations. Circular 41 also regulates the details of sources of operational capital, asset management regime, revenues and expenses, accounting, statistics, audits and financial planning of Vietnam Deposit Insurance. Circular 41 took effect from 25 May 2014 and replaced Circular No. 62/2008/TT-BTC. 4. Circular No. 47/2014/TT-BTC on loan guarantees of small and medium sized enterprises from commercial banks Guiding to implement Decision 03/2011/QD-TTg regulations guarantees for small and medium enterprise to borrow on loans at Commercial Banks On 22 April 2014, the Minister of Finance passed Circular No. 47/2014/TT-BTC guiding some contents of Decision No. 03/2011/QD- TTg dated 10 January 2011 issuing regulations on loan guarantees of small and medium sized enterprises from commercial banks ( Circular 47 ). For enterprises to be provided with a loan guarantee, the relevant conditions are as follows: (i) There must be written consent to the loan by the commercial bank and the enterprise must have an effective investment project and be capable of fully repaying the loan capital. (ii) The enterprise must have a minimum 15% of its equity invested in the investment project and the total investment is into fixed assets. Such fund must be reflected in its financial statement for the most recent month or quarter with the submission time. (iii) The enterprise must not have any bad debts with a credit institution and Vietnam Development Bank ( VDB ) at the time of applying for the guarantee (the bad debts are categorized under Group 3 to Group 5 under the provision of State Bank of Vietnam). Regarding the scope of loan guarantees, VDB may guarantee a part or the whole of the loan borrowed by the enterprise from a commercial bank (maximum 85% of the total project investment capital), excluding working capital. Regarding the term and compulsory interest of the debt, if VDB pays the debt, the enterprise will have a compulsory debt recorded for VDB. The compulsory interest of this debt is 150% of the loan interest for the term applied to economic organizations of the commercial bank receiving a loan guarantee for a similar tenor at the time of this compulsory debt. When the debt becomes due, if the enterprise does not repay the debt in full or is unable to repay the debt, VDB may, on the basis that the enterprise is in temporary financial difficulty, make a decision as to its 5

competence to handle risks and decide the restructuring of debts, the dealing of guaranteed assets and the dealing of risky guarantees under VDB s proposal.

6 competence to handle risks and decide the restructuring of debts, the dealing of guaranteed assets and the dealing of risky guarantees under VDB s proposal. Circular 47 shall take effect from 06 June For more information about any of these legal briefs, please contact the authors: Dr. Net Le Tel: Emai: Net.le@LNTpartners.com Mr. Huy Do Tel: Emai: Huy.do@LNTpartners.com Corporate Decree No. 30/2014/ND-CP on business conditions of marine transport and marine transport support services Regulations on business conditions of marine transportation and support marine transportation services On 14 April 2014, the Government issued Decree No. 30/2014/ND-CP ( Decree 30 ) governing the business conditions of marine transport and marine transport support services. According to Decree 30, from 1July 2014, entities engaged in the marine transport business in Vietnam must establish marine transport business enterprises as prescribed by law and they must be granted the necessary licenses for this business. Decree 30 also stipulates conditions for this license to be obtained: 1. The enterprise must register its marine transport business; have professional units to perform tasks such as managing marine safety and security as prescribed by the International Safety Management (ISM) Code (for international routes, the ISPS Code), exploiting sea boats and implementing legal work in enterprises under law; have capital or other assets of at least VND20 billion for international marine transport business and VND5 million for domestic marine transport business. 2. The enterprise must comply with other conditions under Decree 30 regarding people who are appointed in certain positions involving operating seagoing vessels, supervising safety or security management systems. 6

7 Decree 30 also provides that foreign organizations and individuals are entitled to establish joint venture enterprises to provide sea shipping agency services or sea shipping towage services, but the proportion of capital contribution by foreign investors must not exceed 49% of the enterprise s charter capital. Decree 30 will come into effect from 1 July 2014 and will replace Decree No. 115/2007/ND-CP. Corporate - Compliance 1. Circular No. 04/2014/TT-BXD guiding construction-related judicial assessments Guidance on judicial expertise in the construction investment activities On 22 April 2014, the Ministry of Construction passed Circular No. 04/2014/TT-BXD ( Circular 04 ) guiding some contents on judicial assessment in construction investment activities. Circular 04 defines conditions for assessors/assessment organizations, guides the order and procedures for publishing the assessor s information and conducting the assessment, and specifies expenses for construction-related judicial assessments conducted by the assessors. According to Circular 04, judicial assessment includes assessment of legal compliance in construction activities, quality of construction and costs of the construction investment, project value and other related costs. In addition, Circular 04 also classifies individual judicial assessors as including construction judicial assessors (including case-by-case assessors), construction-related judicial organizations, and case-by-case judicial assessment and construction-related judicial offices. One key provision governing assessors is that an individual must have at least 5 years of practical experience in the field of assessment and must possess professional training certificates in the related field. Institutional assessors must have capacity to perform works in the related areas and individuals responsible for the assessment must meet the above credentials. The judicial assessment office must be set up and granted a license under the provisions of the Judicial Assessment Law. The order and procedures for judicial assessment include: Selecting the individuals or organizations to perform the assessment; Receiving the assessment requirements; Delivering and receiving the assessment object; Performing the assessment; Making a report of the assessment outcome and gathering other documents relating to judicial assessment records. Circular 04 will come into effect from 15 June 2014 and will replace Circular No. 35/2009/TT-BXD dated 5 October

8 Corporate - Tax Decision No. 1100/QD-TCHQ on extension procedures for tax payments and overdue penalties on exported and imported goods Process on extension of tax payment, tax late payment, penalty for goods exports, imports Decision No. 1100/QD-TCHQ dated 08 April 2014 of the General Department of Customs provides guidance on extension procedures for tax payments and overdue penalties on exported and imported goods ( Decision 1100 ). Under Decision 1100, the Local Office of Customs now has competence to allow the extension for the cases specified in points a, b and c of clause 1 of Article 31 of Decree No. 83/2013/ND-CP if the tax amount, interest on late payment or fine subject to extension arises at one Local Office of Customs. Some notable provisions for inspecting and processing documents at the Department of Customs are as follows: If the documents are incomplete or complete but not eligible for extension, the authority will make a request note, extension draft and return the documents to the taxpayer. If the documents are complete and eligible for extension, the authority will make a request note and extension draft. If more investigation is needed to conclude that the production cycle and materials storage last longer than 275 days, the authority will request an actual investigation. The processing duration will not exceed 10 business days from the date of receiving the documents eligible for extension. Decision 1100 took from 23 April 2014 and replaces Decision No. 2423/QD-TCHQ dated 27 November For more information about any of these legal briefs, please contact the authors: Ms. Quyen Hoang Tel: Emai: Quyen.hoang@LNTpartners.com Mr. Hong Bui Tel: Hong.bui@LNTpartners.com 8

Intellectual Property/ Pharmaceutical Decision No. 1129/QD-BYT correcting Circular No. 37/2013/TT- BYT on making bidding dossiers to purchase drugs by medical establishments Denial of Circular No.

Decision 1129 corrects Item 3, Article 11 of Circular 37 as follows: The former Article 11.

9 Intellectual Property/ Pharmaceutical Decision No. 1129/QD-BYT correcting Circular No. 37/2013/TT- BYT on making bidding dossiers to purchase drugs by medical establishments Denial of Circular No. 37/2013/TT-BYT guiding make Bidding dossiers to purchase drug in the medical facility On 2 April 2014, the Ministry of Health issued Decision No. 1129/QD- BYT to correct Circular No. 37/2013/TT-BYT. Decision 1129 corrects Item 3, Article 11 of Circular 37 as follows: The former Article 11.3: For bidding packages already approved before the effective day of this Circular, further compliance with Joint Circular No. 01/2012/TTLT dated June 28, 2012, of the Minister of Health guiding the elaboration of bidding dossiers for medicine purchases by medical establishments. The corrected Article 11.3: For bidding packages already set up in accordance with the plan submitted for approval before the effective day of this Circular, further compliance with Joint Circular No. 01/2012/TTLT dated June 28, 2012, of the Minister of Health guiding the elaboration of bidding dossiers for medicine purchases by medical establishments. Decision No. 1129/QD-BYT came into effect from its signing date and applies in parallel with Circular No. 37/2013/TT-BYT For more information about any of these legal briefs, please contact the authors: Mr. Huy Do Tel: Huy.do@LNTpartners.com Dr. Tuan Nguyen Tel: Tuan.nguyen@LNTpartners.com 9

10 For further information, please contact: Ho Chi Minh City Head Office Unit 03, Level 21, Bitexco Financial Tower No.02 Hai Trieu Street, District 1 Ho Chi Minh City, VIETNAM Tel: Fax: Hanoi Office Unit 08A, Level 2, International Centre 17 Ngo Quyen St., Hoan Kiem Dist. Hanoi, VIETNAM Tel: Fax: LNT & PARTNERS is a leading full-service independently ranked local law firm in Vietnam with offices in Ho Chi Minh City, Hanoi, Hong Kong, and San Francisco. The firm is among Vietnam s most prominent, representing a wide range of multinational and domestic clients, including Fortune Global 500 companies as well as well-known Vietnamese listed companies on a variety of business and investment matters. For more information about any of these legal briefs, please contact the individual authors or your usual LNT contact. Hong Kong Office (Affiliate) Two International Finance Centre Level 19, 8 Finance Street Central, Hong Kong CHINA Tel: Fax: San Francisco Office 101 California Street Suite 2710 San Francisco, CA USA Tel: Fax:

Monthly Legal Briefing

Monthly Legal Briefing Edition 1 September 2013 Banking & Finance Corporate Dispute Resolution Intellectual Property Real Estate& Infrastructure Key contact: Dr. Net Le Net.le@LNTpartners.com Mr. Huy Do