Lawyer in Vietnam Oliver Massmann Legal Update September 2016

1. Decision No. 1675/QD-TTg of the Prime Minister approving the project on strengthening the sanctioning of violations on land management and use until 2020 (“Decision 1675”)

Issuance date: 29 August 2016 Effective date: 29 August 2016 Decision 1675 approves the “Project on strengthening the sanctioning of violations on land management and use until 2020”, with below contents: (i) Improving qualifications for inspection agencies in land management;

(ii) Organizing for receipt and processing information on violations on land law; (iii) Organizing for inspection, sanctioning the violations on land management and use. Specific

inspection schedule is as follows:

- 2016: Focusing on inspecting the compliance with law on land management of the district level People’s Committees.

- 2017: Focusing on inspecting the implementing administrative procedures in the field of

land at all levels. - 2018: Focusing on inspecting land use and management in industrial parks, industrial

complexes, economic zones. - 2019: Focusing on inspecting land use and management in business establishments

outside industrial parks. - 2020: Focusing on inspecting the compliance with land law in the management and use

of rice arable land.

(iv) Analyzing and making recommendations to complete the land law system. 2. Resolution 03/2016/NQ-HDTP issued by the council of justices of the supreme people’s

court guiding the implementation of a number of articles of the Law on Bankruptcy (“Resolution 03”)

Issuance date: 26 August 2016 Effective date: 16 September 2016 Resolution 03 is to provide further definitions of the statutory terms under Law on Bankruptcy As such, overseas assets refer to the assets as defined under Civil Code which are located outside the territory of the Socialist Republic of Vietnam at the time when the petition for commencement of bankruptcy proceedings is handled by the relevant court. Also, overseas entities involved in bankruptcy proceedings will consist of:

(i) Individuals who are not present in Vietnam at the time the petition for commencement of

bankruptcy proceedings is handled by the relevant court; or (ii) Legal entities that do not have head offices, branches, representative offices or representatives

under the laws of Vietnam at the time the petition for commencement of bankruptcy proceedings is handled by the relevant court.

In principle, complicated bankruptcy cases shall be handled by the provincials court rather than district-level courts. A such, Resolution 03 is to provide clarifications how to define a complicated bankruptcy case, namely, the enterprise and/or the co-operative in question must: (i) have at least three hundred (300) employees, or has its charter capital of at least

VND100,000,000,000; (ii) be a credit institution, or a business or co-operative providing public utility products and

services, or a business servicing national defense and security as defined in laws; (iii) be a state corporation or a foreign-invested enterprises; (iv) have debts guaranteed by the Government or get involved in the implementation of

international treaties to which the Socialist Republic of Vietnam is a signatory, or written agreements on investment with foreign agencies or institutions;

(v) have a transaction subject to any claim for being declared invalid as referred to in Article 59 of

the Law on Bankruptcy. Also important, it is worth noting that judges may refer to the Court’s bankruptcy decision, which has been already in force, or case precedents which are analogous to the case currently being handled, in order to ensure the consistent application of laws to the handling of bankruptcy cases.

3. Directive No. 02/CT-BKHĐT issued by Ministry of Planning and Investment implementing the

plan on eco-social development in 2016 and the 5-year plan during 2016-2020 (“Directive 02”) Issuance date: 06 September 2016 Effective date: 23 September 2016 Regarding the attraction of direct investment from offshore investors, learning from cases of Formasa, these following requirements are expressly addressed under the Directive 02:

(i) The investment attraction must be carefully selected; projects with backward technology or

causing environment pollution shall not be licensed. (ii) Competent authorities must fully comply with the process of appraisal for grant of investment

registration certificates, investment approval decisions and relevant licenses/ permits for foreign direct investment projects.

(iii) The operation of projects must be strictly inspected and supervised. Specifically, the operations of foreign direct investment projects which violate laws on environment shall be subject to suspension or even termination.

The construction investment of waste, waste water treatment methods shall be strictly inspected and supervised in the industrial parks. For the purpose of this, the treatment methods of waste and waste water in industrial parks shall be permitted to mobilize ODA or PPP funds. In addition, a number of legal instruments with respect to industrial parks, economic zones shall be researched and improved. Concurrently, proposal on new models e.g. ecological industrial parks, supporting industrial parks; service-urban-industrial parks shall be shortly promulgated. Regarding bidding management, the contractor selection procedure shall be hastened for avoidance of negatively cumbersome obstacles. 4. Circular No. 128/2016/TT-BTC issued by Ministry of Finance providing the export duty

exemption and reduction for environment-friendly products and products from waste recycling and treatment prescribed in Government’s Decree 19/2015/ND-CP detailing a number of articles of the Law on Environmental Protection (“Circular 128”)

Issuance date: 09 August 2016 Effective date: 23 September 2016 The production of environment-friendly products which are recorded in the export tariff schedule and sealed with Vietnam Green Mark by the Ministry of Natural Resource and Environment shall be subject to export duty exemption from 01 April 2015 under Government’s Decree No. 19/2015/ND-CP. Putting that aside, products made from recycling and waste settlement activities which are recorded in the export tariff schedule and certificated by the competent agencies shall be reduced fifty per cent (50%) of export duty amounts. In case the export duty amounts after reduction are less than the statutory minimum rate regulated by the Standing Committee of the National Assembly then the minimum rate shall be applied. 5. Official Letter No. 7080/VPCP-KTTH of the Government Office on Corporate Income Tax (CIT)

incentives applied to software production enterprises (“Official Letter 7080”) Issuance date: 15 August 2016 Effective date: 15 August 2016 According to this Official Letter 7080, the Government Office approves the Ministry of Finance’s recommendation on CIT incentives applied to software production enterprises. 6. Official Letter No. 6466/NHNN-TT of the Governor of the State Bank on improving the

solutions for risk and fraud prevention in payment (“Official Letter 6466”) Issuance date: 29 August 2016 Effective date: 29 August 2016

According to this Official Letter 6466, the Governor of the State Bank requests payment service providing organizations, Vietnam Bank Association, bank inspection agencies, provincial branches of the State Bank to improve the solutions for risk and fraud prevention in payment. Specifically: (i) Regarding the payment service providing organizations: to review, analyze their whole process,

procedure, documents and agreements on open and use of payment accounts. In case there are risks, frauds, to report to the State Bank and other related authorities and to keep clients updated.

(ii) Regarding Inspection Agencies and provincial branches of the State Bank: to update the

periodical inspection schedules with the new content of inspection on IT. 7. Official Letter No. 6960/NHNN-TTGSNH of the State Bank on reorganizing new loans used for

debt prepayment and/or providing credit in the form rollover loans from credit institutions, other foreign bank branches (“Official Letter 6960”)

Issuance date: 16 September 2016 Effective date: 16 September 2016 Under this Official Letter 6960, credit institutions and branches of foreign banks have to stop providing new loans for debt prepayment and/or providing credit in the form of rollover loans as instructed under Official Letter No. 7059/NHNN-TTGSNH dated 26 September 2014 of the Governor of the State Bank. 8. Official Letter No. 5318/UBND-KT issued by People’s Committee of Hanoi City on arrangement

and equitization of state-enterprises within Hanoi City for the period of 2016-2020 Issuance date: 13 September 2016 Effective date: 13 September 2016 During the period of 2016-2020, Hanoi People’s Committee proposes to equitize total sixteen (16) wholly state-owned enterprises within the scope of Hanoi City. As such, the equitization procedure must be public and transparent with respect to the quantity of state-owned enterprises to be equitized, business and manufacture status, financial status, the state ownership rate of each enterprise in question for the purpose of facilitating investors with interest. Also, employment-related issues in connection with restructure plan (e.g. redundancy, retrenchment) must be in compliance with labor laws. 9. Draft new Anti - Corruption Law Issuance date: 15 September 2016 Please see below some key changes/new provisions of the draft new Anti – Corruption Law: (i) “Responsibilities of enterprises” is added under Article 10 of the Draft Law: enterprises are

responsible for implementing anti-corruption regulations, timely inform the corruption acts and coordinate with competent authorities to verify, conclude and handle corruption.

(ii) “Press conference and Speak before public” is added under Article 16 of the Draft Law:

The Government, Supreme People’s Court, Supreme People’s Procuracy, State Audit Office; Departments under the Government, President’s Office; National Assembly Office, Provincial People’s Committee must hold press conference periodically and speak before public in accordance with law. With regards to matters related to organization and operation of office, organization which draw public attention, such office/organization must hold extraordinary press conference or get its spokesman provided information.

(iii) “Conflict of Interests” is added under Section 4 of the Draft Law (Articles 28 -32). Conflict of interests is circumstance where the person in charge’s performing or not performing his obligations may bring interests to himself or his family. If the person in charge knows or must know about his conflict of interests, he shall be responsible to report to his direct manager.

Public companies, credit institutions, investment funds must provide and implement the conflict of interests control internally (Article 32 of Draft Law)

(iv) Draft Law provides a new chapter on Assets and Income Transparency and Control. Deputies to the National Assembly and People’s Councils, officials holding positions as from deputy head of division in People’s Committee of districts, Secretary, Deputy Secretary, Chairman, Deputy Chairman of People’s Committee, people who work in public companies, credit institutions… must enumerate their assets and incomes. In case their actual assets and incomes are bigger than ones enumerated, the competent authorities shall request tax authority to collect taxes applied on the discrepancy between actual assets and incomes and the ones enumerated; initiate a law suit before courts.

(v) A new section of “Anti-corruption at social organizations” is added (Articles 108 and 109).

Chairman, General Secretary, Chief Accountant of a social organization must enumerate their assets and incomes.

(vi) Draft Law provides a new chapter on “Forming a healthy and anti-corruption business culture” (Articles 110-113)

Enterprises are liable to issue and implement a code of ethics internally in order to form a healthy and anti-corruption business culture. In its charter and operation policy, the enterprise is responsible to provide its internal control mechanism to prevent conflict of interests, bribery, abuse of powers and other corruption acts. Chairman of Board of Directors, members of Board of Directors, General Director, Directors, Head of Inspection Committee, Chief Accountant of a public company, credit institution, investment fund must enumerate their assets and incomes. Enterprises are liable to issue their policy on control of their management staff’s assets and incomes control.

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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC. THANK YOU !