In the context of globalization and the increasing process of international integration of Vietnam today, it has created favorable conditions for domestic and foreign investors to choose different types of investment. Especially, the outward portfolio investment activities of domestic investors and one of the types of outward portfolio investment currently being interested by domestic individual investors is buying shares of the company foreign in Vietnam, because the foreign stock market is a potential market and becoming increasingly attractive to investors. So, how is outward portfolio investment understood? Can individual investors buy shares of foreign companies in Vietnam? Understanding this issue, we would like to send you the advice below to share with you the useful legal provisions:
Outward portfolio investment refers to an activity of making an overseas investment in the forms of purchasing and selling securities, valuable papers or investing through securities investment funds or financial intermediaries in foreign nations[1].
An investor who is an individual of Vietnamese nationality is only allowed to make outward portfolio investments by participating a program that awards shares issued in foreign nations[2]. This means that the program of a foreign organization, which is established under foreign laws, has a presence in Vietnam, awards shares to employees working in foreign organizations in Vietnam[3].
The program that awards shares issued in foreign nations to Vietnamese employees shall be only executed by a share awarding program-executing organization after the registration thereof has been confirmed by the State Bank[4]. Organization executing the program that awards shares issued in foreign nation refers to a commercial presence of foreign organization in Vietnam, which is an economic organization possessing foreign investment, branch, representative office or executive office of a foreign party in business cooperation contract[5].
Therefore, individuals with Vietnamese nationality who are living and working in Vietnam are not allowed to invest in the type of purchasing shares of foreign companies in Vietnam, except for individuals Vietnamese nationals being an employee of a foreign organization in Vietnam, this individual is entitled to make the outward portfolio investments in the type of participating in the program awarding shares issued in foreign nations through the program-executing organization. This is completely legal by law of Vietnam.
According to Article 9 of Circular 10/2016/TT-NHNN, awarding forms in the program for awarding shares issued in foreign countries includes two forms: (i) Award actual shares; and Award share options with special rights, depending on each specific case that the foreign organization decides to choose.
Currently in Vietnam, the stock bonus program for employees working on companies listed on the stock market is commonly known as “ESOP Stock Issuance” with ESOP, which stands for English phrase. – Employee Stock Ownership Plan or a preferred stock issue program for employees. Often the stock price purchased under this Program is very low compared to the market price of the stock and is rewarded on the basis of the employee’s efforts.
According to Article 11 of Circular 10/2016/TT-NHNN, procedures for registration of execution of program awarding shares issued in foreign nations is as follows:
- Step 1: The share awarding program-executing organization shall, directly or by post, submit 01 (one) set of application in Vietnamese language for registration of execution of program awarding shares issued in foreign nations to the State Bank.
- Step 2: Within 05 (five) working days from the date on which the application is received, the State Bank shall grant a written request for modification or supplementation if the application is invalid or insufficient.
- Step 3: Within 15 (fifteen) working days from the date on which the valid application is received, the State Bank shall confirm the registration of execution of the program that awards shares issued in foreign nations to Vietnamese employees.
Therefore, the time for the State Bank to confirm the registration of execution of the program that awards shares issued in foreign nations to Vietnamese employees is 15 (fifteen) working days from the date of receiving a valid dossier as stated below.
The composition of dossier to registration of execution of program awarding shares issued in foreign nations includes[6]:
- The written registration of execution of program awarding shares issued in foreign nations (using the form);
- Documents proving legal status of relevant foreign organization;
- Copy of investment registration certificate or operation registration certificate of executive office or permit for establishment of branch/representative office of foreign organization in Vietnam or other document with equivalent legal effect;
- Written detailed description of the program awarding shares issued in foreign nations;
- List of Vietnamese employees who are eligible for participating in the program awarding shares issued in foreign nations.
In addition, a share awarding program-executing organization should pay attention to the following points:
- After the State Bank has confirmed the registration of execution of the program awarding shares issued in foreign nations, the share awarding program-executing organization must 01 (one) program-executing account to collect and make payments[7];
- Earnings from sale of shares and/or share options of Vietnamese employees, dividends and other lawful incomes in foreign currency must be transferred to Vietnamese employees via the program-executing account laid down as required by law[8];
- The execution of share awarding program must comply with regulations on foreign exchange management, payment of personal income tax and other relevant laws [9];
- Before terminating operations in Vietnam, if any, the share awarding program-executing organization must sell awarded shares and awarded share options, and transfer the entire earnings to Vietnamese employees who participate in the program awarding shares issued in foreign nations [10].
If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.
This article is for general information only and is not a substitute for legal advice.
[1] Clause 1 Article 3 Decree 135/2015/ND-CP
[2] Clause 1 Article 5 Decree 135/2015/NĐ-CP
[3] Clause 14 Article 3 Decree 135/2015/NĐ-CP
[4] Clause 1 Article 8 Circular 10/2016/TT-NHNN
[5] Clause 3 Article 3 Circular 10/2016/TT-NHNN
[6] Clause 1 Article 11 Circular 10/2016/TT-NHNN
[7] Clause 1 Article 12 Circular 10/2016/TT-NHNN
[8] Clause 2 Article 8 Circular 10/2016/TT-NHNN
[9] Clause 3 Article 8 Circular 10/2016/TT-NHNN
[10] Clause 4 Article 11 Circular 10/2016/TT-NHNN
