SECURITIES INVESTMENT PROCEDURES IN VIETNAM

Vietnam has been and will continue to be, an attractive investment destination for foreign investors. Foreign direct investment in Vietnam reached an all-time high of nearly US$12 billion in 2015 and continues to show strong signs of growth. In recent years, the legal landscape for doing business in Vietnam has changed significantly with the introduction of new laws, including the key laws on enterprise and investment. Securities investment is one of the conditional investment sectors according to the new Law on Enterprise 2020. To invest this kind of special asset, an appropriate procedure shall be taken. In this Article, Doanh Tri Law Firm will make a guide for security investment for foreign entities.

I. Legal basis

- Law on Securities 2019 No. 54/2019/QH14;

- Law on Enterprise 2020 No. 59/2020/QH14;

- Law on Investment 2020 No. 61/2020/QH14;

- Decree 155/2020 /ND-CP Detailing The Implementation Of A Number Of Articles Of The Securities Law;

- Decree 151/2018/ND-CP Amendments To Some Decrees On Business Conditions Under The Management Of The Ministry Of Finance;

- Circular 05/2014/TT-NHNN Guiding The Opening And Use Of Indirectly- Invested Capital Accounts For Implementation Of Foreign Indirect Investment Activities In Vietnam;

- Foreign Account Tax Compliance Act of America.

II. Procedure of investment in Vietnam securities market

In order to invest in Vietnamese securities, foreign investors must complete the following steps:

(1). Open custody accounts including securities and cash accounts (Indirect Investment Capital Account with a licensed commercial bank in Vietnam);

(2). Obtain a Securities Trading Code, which is used to monitor foreign ownership limits;

(3). Open trading account

Step 1: Open custody accounts including securities and cash accounts ( Indirect Investment Capital Account with a licensed commercial bank in Vietnam)

Foreign investors who wish to purchase shares on Ho Chi Minh City Stock Exchange (HOSE), the Hanoi Stock Exchange (HNX), or UPCOM must open a custody securities account at a custodian member of Vietnam Securities Depository to hold securities on behalf of foreign investors

Indirect Investment Capital Account (IICA)

 In accordance with Circular 05/TT-NHNN dated 12 March 2014 (“Circular 05”), all foreign indirect investment activities are required to be processed through one Vietnamese Dong (VND) cash account opened at an authorized bank (commercial bank or branch of a foreign bank licensed for FX trading and FX services). That account is named Indirect Investment Capital Account (IICA). This account is used for the purpose of trading both listed and unlisted securities. Securities trading may only be executed in VND, but clients can have multiple foreign currency cash accounts. The most common foreign currency account use USD. The balance of IICA could not be used for placing CBD term deposits and saving deposits with banks. Dividend/ interest income and capital gains can be freely repatriated with the provision of supporting documents proving that the money had been remitted to and invested in the Vietnamese market and evidence/ clearance from the tax office that all tax obligations have been fulfilled.

The procedure of opening an IICA account is up to specific bank regulations.

The reference required documents are following:

1. Trading account opening contract

2. Copy of Certificate of Incorporation

3. Copy of Charter/ Memorandum & Articles of Association (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

4. Copy of Resolution Appointing the General Director, Director or Chief Representative, authorized signatories (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

5. Copy of Passports of authorized signatories and individuals who hold 10% or more of the company (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

6. Copy of Ownership structure (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

7. FATCA (Foreign Account Tax Compliance Act)

8. Copy of Other operation forms (Fax, POA, Brokerage appointment, etc.)

Step 2: Obtaining a Securities Trading Code

1. A foreign investor may register one (01) securities trading code with the Vietnam Securities Depository.

2. Foreign securities companies shall be issued two (02) trading codes: one (01) code for self-employment account and one (01) code for brokerage account held by brokerage companies.

3. Fund management companies or branches of offshore fund management companies that provide entrusted asset management service for foreign investors shall be granted one (01) trading code certificate by Vietnam’s Securities Depository.

4. Foreign investment funds or foreign organizations put under the Multiple Investment Managers Fund (MIMF)’s management, investing organizations of foreign governments, or intergovernmental organizations of international investments, shall be entitled to register multiple trading codes.

The custody member of the investors will be in charge of applying for registering a Securities Trading Code (STC) on behalf of investors.

Within one (01) working day of receipt of information declared by depository members, the Vietnam Securities Depository shall issue and send an electronic confirmation of securities trading codes to foreign investors through depository members on the online code registration system. In case of rejection, the Vietnam Security Depository should send their written response and clearly state reasons for this via the system;

Foreign investors shall proceed to complete the procedure for opening securities trading accounts and can start their investing activities immediately after being granted securities trading codes in the form of electronic confirmation issued by the Vietnam Securities Depository.

Within a permitted duration of ten (10) working days of receipt of trading codes, the Vietnam Securities Depository shall issue the certificate of trading codes to foreign investors (through depository members).

Required documents:

1. True copy of valid passports or other personal status documents (applicable to individuals) (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

2. True copy of Certificate of Incorporation (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

3. True copy of Charter or partnership agreement/ Articles of incorporation/ Fund Charter (notarized and consular-legalized at the Vietnamese Embassy or original sighted by the Bank’s staff)

4. Securities Trading Code Application Form (STC)

5. Power of attorney for trading code applying

Step 3: Opening a securities trading account (This step will be done by foreign companies by choosing their own Security Company).

The above information is about the "Securities Investment procedures in Vietnam". For more information and advice on this issue, please contact Doanh Tri Law Firm directly via:

Hotline: (+84) 911.233.955 - (024) 6293 8326

Email: [email protected]

Doanh Tri Law Firm is pleased to accompany our Customers!