Amending regulations on awarding shares in indirect foreign portfolio investment activities

1. The definition ‘’Organization executing the program that awards shares issued in foreign nation’’ is amended in Article 3, Circular 10/2016/TT-NHNN

Circular 10/2016/TT-NHNN guiding certain contents in the Government’s decree No. 135/2015/ND-CP dated December 31st, 2015 providing for regulations on foreign portfolio investment (Circular 10) issued on June 29th, 2016 has regulations on the definition of presence of foreign organizations in Vietnam in Clause 3, Article 3 as follows: “Organization executing the program that awards shares issued in foreign nation refers to a commercial presence of foreign organization in Vietnam…”

Regarding the above-mentioned definition, the State Bank proposes amendments to ensure compliance with the actual situations that arise during the implementation of regulations when bonus share programs of foreign organizations in reality often for subsidiaries and affiliated companies directly or indirectly owned by the foreign organizations. The specific amendment content drafted by the State Bank is as follows: “The organization implementing the program that awards shares issued in foreign nations refers to a commercial presence in Vietnam and is directly or indirectly owned by a foreign organization, including: economic organizations with foreign investment capital, branches, representative offices, executive offices of foreign parties in business cooperation contracts and other forms of presence according to the provisions of law (hereinafter referred to as the organization implementing the share awarding program) may participate in the share awarding program of the Foreign organization. 

2. Circular 10/2016/TT-NHNN supplementing regulations on implementation principles related to the purpose of the share awarding program

During the process of reviewing and confirming registration documents, realizing that the purpose of the share awarding program is not to encourage and engage employees, so draft Circular 10 supplements regulations on cases where an employee can/not participate in the share awarding program, specifically:

  1. Vietnamese employees are eligible to participate in the share awarding program issued by foreign organizations to motivate, encourage, and engage employees with achievements, dedication, and long-term commitment to the organization.
  2. Vietnamese employees are not allowed to participate in the share awarding program issued by foreign organizations with the purpose and nature of being an investment abroad to offer shares to increase capital and support payment accounts for foreign organizations.

Download the legal update as a PDF here.

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