Monthly Legal Update - March, 2010

• Financial Management Regulation regarding Stock Exchange, Securities Depository

Financial Management Regulation regarding Ho Chi Minh Stock Exchange, Hanoi Stock Exchange and Vietnam Securities Depository (hereinafter referred as "Stock Exchange and Securities Depository") has been stipulated in the newly born Circular No. 29/2010/TT-BTC of Ministry of Finance (MOF) on March 04. Under this Circular, Stock Exchange and Securities Depository are State owned legal entities under the form of single member limited company. The MOF shall act as the owner's representative.

The capital structure of those shall be similar to commercial companies but under safer requirements. The Board of Management shall report to MOF to decide the method of capital mobilization. Certain assets such as the main transaction system, information system, building, equipments, etc are required to be insured.

Any mortgage of their asset with the value of twenty percent (20%) or more of total booking assets' value shall be decided by the MOF. This principle also applies the same to the transfer, liquidation of assets.

• Detailed regulation on State Compensation Law

On 3 March 2010 the Government issued Decree No. 16/2010/ND-CP promulgating and providing the guidelines on a number of articles of the Law on State's Liability to Pay Compensation. Accordingly, the State only compensates for the damages causes directly by the failure to perform duties or power of civil servants in accordance with the regulations of Law. In case of having force majeure and imperative situations, the compensation liability will not be applied.

This Decree sets out the mechanism for the State to seek the reimbursement from the civil servants who caused damages but not reaching the criminal liability. Total reimbursement shall not excess 36 months of salary.

The State body who is liable to compensate is the body directly managing that civil servant. This Decree also extends the subjects to entitle the compensation.

• New decree on property auction

On 04 March 2010, the Government issued the Decree No. 17/2010/ND-CP on property auction ("Decree 17") which replaces the Decree No. 05/2005/ND-CP dated 18 January 2005 on the principles and procedures for property auction; auctioneers; property-auctioning organizations and State management over property auction operations.

Decree 17 provides material amendments and supplementations. It clearly provides for properties to which the auction procedure is applied. To improve the quality and the profession of auctioneers, Decree 17 also regulates minimally and more specifically the qualifications for auctioneers and their liabilities. An auctioneer must be a bachelor of law or of economics and must pass an auctioneer training course.

Besides, Decree 17 clearly specifies the types of property auction organizations, raising the thresholds of deposits which was maximum 5% of the reserve price under the previous regulation to now a range of 1% to maximum 15% of the reserve price.

One of the new remarkable points of this Decree 17 is the disposition to restrict the collusions in property auctions. If a bidder refused to buy the auctioned property, deposit shall belong to the property owner. Simultaneously, the auctioned property shall also be sold to the bidder of immediate lower price if the total value of immediate lower price plus the deposit is not lower than the price of the refused bidder.
This Decree takes effect from 01 July 2010.

• Long or medium-term loan with negotiable interest

On 26/2/2009, the State Bank of Vietnam issued Circular 07/2010/TT-NHNN, effectively on signing date, guiding for the VND loans with negotiable interest.

Accordingly, the long or medium term loans for business activities and development investment are permitted to apply negotiable interest.

Negotiable interest may be also applied to borrowers who are individuals or households for repairing house, buying resident house, buying household devices, or for traveling.

The State Bank of Viet Nam also requires credit institutions to control the lending activities with negotiable interest in respect of credit limitation and permitted loan domain in order to ensure its safety ratios and other its statutory operation criteria.