Monthly Legal Update - February, 2010

• New regulations on the merger, consolidation and acquisition of credit institutions

On February 11th, 2010 the Governor of the State Bank of Vietnam (SBV) issued the Circular No. 04/2010/TT-NHNN permitting banks, finance companies, finance lease companies and cooperative credit organizations to merge, consolidate and acquire other credit organizations. Circular 04 aims to replace the obsolete regulations under Decision No.241/1998/QĐ-NHNN dated July 15th, 1998 on the same issue.

Under Circular 04 the merger, consolidation and acquisition of credit institutions are allowed under certain forms. Banks are allowed to merge with, consolidate into or acquire other kinds of credit institution, but finance companies and finance lease companies are allowed to merge with or consolidate into companies of the same kind. Particularly regarding the acquisition, banks may only acquire finance companies, finance lease companies or finance companies acquire finance lease companies.

One of the conditions for the merger, consolidation or acquisition to proceed is the exclusion of economic concentration as stipulated by the Law on Competition. The involved credit institutions shall jointly prepare a proposal which must not be contrary to contents of the signed contract. Besides, the surviving credit organization must meet the legal capital condition.

Procedurally SBV will consult opinions of the SBV branch, the local People's Committee and other specialized agencies under SBV regarding the application dossier submitted to it. If approved in principle, the involved credit organizations must agree on the changed contents of the proposal and re-submit it to SBV for an official approval. After that, the disappearing entity shall complete the withdrawal of its business license, while the surviving entity shall implement business registration, public announcement and opening ceremony, etc.

Circular 04 prohibits any form of disposal of the credit institution's assets during the appraisal process.

Circular 04 takes effect 45 days from the signing date.

• Certificate of Free Sale

For the first time provisions on the Certificate of Free Sale (CFS) for Vietnam export products and requirements as to CFS for import products to be circulated in Vietnam have been officially issued under the Decision No. 10/2010/QD-TTg of Prime Minister dated February 02nd, 2010, effectively from May 1st, 2010. Accordingly CFS is defined as a certificate granted by the competent authority of an exporting country to its exporters certifying that products specified in the certificate are manufactured and sold freely in that country.

For Vietnam export products, following request of the applicant being a trader, a manufacturer or their authorized representatives, CFS may be issued upon satisfaction of two conditions, namely (i) having a request from a trader, and (ii) the announced standards of the products are in compliance with the prevailing law. Furthermore, the applicant shall have to register its trader information for the first time applying for a CFS.

There are minimum contents required for CFS for both import and export products such as name of the issuing authority; reference number; issuing date; name of products being granted CFS; category and group of products being granted CFS; name and address of products' manufacturer; a phase of "products are manufactured and sold freely in the manufacturing country"; name and position of the signer of the certificate and the seal of the issuing authority, etc.

The list of import products requiring CFS as a basis to grant other certificates and the respective CFS issuing authorities is attached as Schedule I therein.

• New regulation on credit information business

On February 12th, 2010, the Government issued the Decree No. 10/2010/ND-CP on credit information activity. The Decree governs credit information companies (CICs), credit institutions, borrowers, and all related organizations and individuals.

To conduct credit information business CICs must satisfy various conditions including, inter alia, having sufficient information infrastructure; having minimum charter capital of 30 billion VND; committing not to carry out any other business lines except credit information business; having commitments to provide credit information of at least 20 commercial banks, etc.
Within 12 months from the effective date this Decree, all enterprises engaging in credit information business must satisfy the said conditions and apply for the certificate from the State Bank of Vietnam. This Decree shall take effect from April 15th, 2010.

• Detailed procedures regarding changes on organization and operation of commercial banks in Vietnam

Following the Government's Decree No.59/2009/ND-CP dated July 16th, 2009 on organization and operation of commercial banks (CBs), the State Bank of Vietnam (SBV) on February 26th, 2010 issued the Circular No.06/2010/TT-NHNN providing further guidelines on registration of changes on organization and operation of CBs. Principally, all changes regarding organization and operation of CBs shall need to be examined and approved in writing by the Governor of SBV. If CBs move its office to another city or province it must get the consent of the provincial SBV and the People's Committee of the current location and the new location. It is further noted that any appointment or change on members of Board of Management, Inspection Committee, General Director, Vice General Director and Chief Accountant (applicable to CBs having more than 50% charter capital owned by the State) must be notified to the competent SBV and approved in writing by the Governor.

Additionally, this Circular stipulates the conditions and procedures where CBs increase its charter capital, redeem shares or register capital assignment.

Circular 06 will take effect from April 25th, 2010.