How Non-voting Depositary Receipt Work?

Decree No. 60/2015/ND-CP (Decree 60) amending and supplementing a number of articles of Decree No. 58/2012/ND-CP issued by the Government on May 26th, 2015 has lifted foreign ownership limit of the public enterprises (with conditions) and permitted enterprises operating in all sectors and areas without restriction on foreign ownership to self-set out limits of foreign ownership. 

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Although the Government has been facilitating foreign investor investing in the Vietnam stock market as well as Vietnam enterprises whom raise capital, the foreign investors still faced a number of challenges. The Decree 60 has taken effect since September 1st, 2015, but most public companies did not lift their foreign ownership limit over 51%. One of the reasons is that, the enterprises with 51% foreign ownership shall meet the statutory conditions and therefore have to follow the investment procedures applicable to foreign investors in accordance with the Law on Investment, Law on Securities and other guiding legislations. Having said that, Vietnam enterprises with over 51% foreign ownership shall be treated as foreign investor. These requirements shall significantly impact on business plans and procedures that an enterprise must comply and restrict them from doing business in some sectors. Accordingly, the daily purchase and sale of shares by foreign investors around the threshold of 51% of the charter capital makes it difficult to determine the legal status of an enterprise.

In order to facilitate the attraction of foreign capital inflows, the Government has been reviewing acceptance of non-voting depositary receipt (NVDR). The promulgation of the Enterprise Law 2020 effective from January 1st, 2021, initially recognized NVDR. Ordinary shares used as underlying assets to issue NVDR are called as underlying ordinary shares. Non-voting depository receipts have interest and obligations proportional to the underlying ordinary shares, excepting for voting rights. NVDR is a negotiable financial instrument issued by a third party which is a subsidiary of the Stock Exchange (Issuing Organization). The Issuing Organization will then hand over to investors all financial benefits attached stocks such as dividends, rights offering. This is a solution from other country that helps foreign investors to invest in public enterprises, even they such enterprises reached limit boundary of foreign ownership. NVDR can be converted into ordinary shares in case the public company has not yet reached foreign ownership limit.

ANT Lawyers - a Law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or service request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.

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How Non-voting Depositary Receipt Work?

Decree No. 60/2015/ND-CP (Decree 60) amending and supplementing a number of articles of Decree No. 58/2012/ND-CP issued by the Government on May 26th, 2015 has lifted foreign ownership limit of the public enterprises (with conditions) and permitted enterprises operating in all sectors and areas without restriction on foreign ownership to self-set out limits of foreign ownership.

Finance Dispute Law Firm in Vietnam

Although the Government has been facilitating foreign investor investing in the Vietnam stock market as well as Vietnam enterprises whom raise capital, the foreign investors still faced a number of challenges. The Decree 60 has taken effect since September 1st, 2015, but most public companies did not lift their foreign ownership limit over 51%. One of the reasons is that, the enterprises with 51% foreign ownership shall meet the statutory conditions and therefore have to follow the investment procedures applicable to foreign investors in accordance with the Law on Investment, Law on Securities and other guiding legislations. Having said that, Vietnam enterprises with over 51% foreign ownership shall be treated as foreign investor. These requirements shall significantly impact on business plans and procedures that an enterprise must comply and restrict them from doing business in some sectors. Accordingly, the daily purchase and sale of shares by foreign investors around the threshold of 51% of the charter capital makes it difficult to determine the legal status of an enterprise.

In order to facilitate the attraction of foreign capital inflows, the Government has been reviewing acceptance of non-voting depositary receipt (NVDR). The promulgation of the Enterprise Law 2020 effective from January 1st, 2021, initially recognized NVDR. Ordinary shares used as underlying assets to issue NVDR are called as underlying ordinary shares. Non-voting depository receipts have interest and obligations proportional to the underlying ordinary shares, excepting for voting rights. NVDR is a negotiable financial instrument issued by a third party which is a subsidiary of the Stock Exchange (Issuing Organization). The Issuing Organization will then hand over to investors all financial benefits attached stocks such as dividends, rights offering. This is a solution from other country that helps foreign investors to invest in public enterprises, even they such enterprises reached limit boundary of foreign ownership. NVDR can be converted into ordinary shares in case the public company has not yet reached foreign ownership limit.

ANT Lawyers - a Law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or service request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.

 

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The Cases of Transferring Money from Vietnam Abroad

In the context of international economic integration, more and more foreign investors are coming and investing in Vietnam. Besides, many Vietnamese individuals and organizations have also implemented many investment activities, living, traveling… abroad. Therefore, there are needs to transfer money fromVietnam abroad. According to the provisions of Vietnamese laws on foreign exchange management, domestic individuals and organizations are allowed to transfer money  abroad in the following cases:

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For individuals being Vietnamese citizens, they are entitled to buy, transfer or bring foreign currencies overseas according to the State Bank’s regulations for the following purposes: to study and receive medical treatment abroad; traveling; business trip; visiting abroad; to pay charges and fees to foreign countries; allowances for relatives members living abroad; transfer of inheritance money to overseas heirs; transfer money in case of permanent residence abroad; One-way money transfer for other legitimate needs.

For enterprises, they are allowed to transfer money abroad when performing the following cases: Carrying out payment and transferring money related to the import or export of goods and/or services; payment of payments and remittances related to commercial credits and short-term bank loans; make payments and transfers related to direct and indirect investment income; transfer money when being allowed to reduce direct investment capital; payment of debts and interest of foreign loans; make one-way money transfers; payment and other remittance according to regulations of the State Bank of Vietnam.

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