Amendments to Law on Enterprises, Practical Notes on Company’s Dual Legal Representative Regime and Government’s Detailed Guidance on Implementing Investment Regulations in Vietnam

July 7, 2022
I. AMENDMENT OF THE LAW ON ENTERPRISES AND PRACTICAL NOTE ON COMPANY’S DUAL LEGAL REPRESENTATIVE REGIME On 11 January 2022, the National Assembly adopted Law No. 03/2022/QH15 on amendments and supplements to a number of articles of Public Investment Law, Law on Public-Private Partnership Investment, Law on Investment, Law on Residential Housing, Law on Bidding, Electricity Law, Law on Enterprises, Special Consumption Tax Law, and Law on Enforcement of Civil Judgment (collectively, the “New Amendment Law”). The New Amendment Law took effect on 1 March 2022. Vote-counting method at General Meeting of Shareholders (“GMS”)  1. Vote-counting method at General Meeting of Shareholders (“GMS”) Previously, Article 148 of the Law on Enterprises provided that the voting threshold of shareholders at a meeting of the GMS was determined based on the number of votes of all participating shareholders, regardless of whether these shareholders cast their votes or not. However, under the New Amendment Law, such voting threshold is now determined based on the number of votes of participating shareholders who cast their votes. 2. Requisite signature for effectiveness of the meeting’s minutes of Members’ Council (“MC”) or Board of Director (“BOD”) Pursuant to a former provision of the Law on Enterprises, the meeting minutes of MC (with respect to a limited liability company) or BOD (with respect to a joint stock company) require signatures of the chairman of the meeting and the person who prepares the meeting minutes. However, their refusal to sign did not invalidate the meeting minutes as long as other members attending the meeting have all signed the meeting minutes. This provision could result in a circumstance that any member of...

Cybersecurity Law and the Practice of Preventing Cyber Fraud in Vietnam

July 7, 2022
Concurrently with the rest of the World, online transactions over the internet have become commonplace in Vietnam and continue to expand its reach to all aspects of business. The banking and retail sectors are just two of the major industries that currently rely, at least in part, on remote transactions. This evolution also has a dark side with the development of cybercrime where a victim is fraudulently induced to provide personal or private information that the cybercriminal utilizes to appropriate assets. In this Insight, Le & Tran explores the recent developments and progression of cybersecurity law and data retention in Vietnam. Further, the regulations are applied to the real world and useful advice is provided to assist you in following the law and protecting the information of your business and your clients/customers. Existing cyber fraud situation in Vietnam Along with the development of communication networks and information technology (IT) applications, fraud conducted through the internet has grown substantially, both in quantity and sophistication. Although the authorities and media have repeatedly warned people about these fraudulent actions, the continuous evolution of methods and modus operandi of cybercriminals, combined with intimate knowledge of their victims’ hopes and desires, enables them to scam large sums of money nationwide. Cyber fraud in the past mainly consisted of scams that would target those connecting online, persons establishing friendships, or would request money transfers from victims in order to receive gifts at customs. In addition, it was common to hack social media accounts or impersonate relatives or acquaintances to ask for money or mobile scratch cards. The fraud that exists nowadays has become much more...

Enforcing a Non-compete Agreement for Employment Contracts in Vietnam

July 7, 2022
In today’s business environment, foreign companies operating in Vietnam often include a non-competition provision or agreement in their labor contracts with their employees. However, as this type of provision is somewhat rare in Vietnam as well as being unfamiliar to Vietnamese administrative agencies and Courts, there are few persons with knowledge of the effects and implications of such a provision. Therefore, in this Insight, we would like to share with you our knowledge and experience with regard to (i) the definition of what constitutes a non-compete agreement in employment, (ii) why non-compete agreements are typically compulsory provisions in most labor contracts of foreign companies operating in Vietnam (though Vietnam law does not require or regulate them), and (iii) how non-compete agreements are applied and interpreted in the context of Vietnam law. Definition of a Non-Compete Agreement During the formation and development of a company, a significant amount of useful information is collected, developed and secured by the company. This may consist of information concerning customer relationships, products, trade secrets, business know-how, price, etc. (Confidential Information). A recruited employee’s access to Confidential Information is dependent on their position and job duties with the company. A potential risk is that the employees will use such Confidential Information to create benefits for themselves, such as: Disclosure of the Confidential Information to competing companies for illicit benefits; or Employees may establish or participate in a competing company operating along the same business lines as the former company and use the Confidential Information that they obtained to compete with the business operations of the former company. For instance, the employee may use the information...

M&A Risk in Vietnam – Can Share Deals and Asset Deals be Used Interchangeably?

June 20, 2022
Share deals and asset deals In a typical M&A operation, shares or assets of the target company may be assigned from the seller to the buyer. In a share deal, the buyer’s aim is to become one of the owners or the new owner of the target company by acquiring part or the whole of its equity capital. In an asset deal, the buyer acquires assets of the target company and is not, in principle, to have any stakes in its ownership. Both share deals and asset deals are legally recognised by the Law on Investment, Law on Enterprises and relevant regulations in Vietnam. Quite often in practice, however, share deals and asset deals are interchangeable: the parties would go for a share deal if they discovered an asset deal to be complicated or time-consuming. From the view of the buyers and sellers, share and asset deals are equally valid and lawful options for them to structure their deals, depending on which one will provide them with the largest benefits. Such practice may be observed in Vietnam, although, statistically, share deals outnumber asset deals. By contrast, it appears that the relevant State authorities, especially the courts, are somehow very reluctant to accept such business practice. Risks in M&A deals arise therefrom. A conservative judicial precedent In August 2020, in a case adjudicated on appeal by the High Court in Ho Chi Minh City, the target company was a one-member limited liability company wholly owned by the plaintiff (the Company). On 10 June 2014, the plaintiff and the respondent signed a capital contribution agreement (the CCA) whereby they agreed to...

Enforcement of Foreign Courts’ Judgements and Arbitral Awards in Vietnam

June 16, 2022
Vietnam’s Code of Civil Procedure (CCP) provides that before any judgement, decision or foreign arbitral award of a foreign court or arbitration center (foreign court judgements or arbitral awards) to take effect in Vietnam, it is required to be approved by the Vietnamese Court and must be recognized and enforceable under the laws of Vietnam. However, not all foreign court judgements or arbitral awards of said description will be accepted and considered  by the Courts in Vietnam. Whether or not a particular judgement or arbitral award will be taken into consideration award depends on existing international treaties or diplomatic relations between Vietnam and the relevant nations. In principle, the Vietnamese Court will only recognize and enforce foreign court judgements or arbitral awards that are: In accordance with the provisions of international treaties signed and participated in by Vietnam; Based on a reciprocal agreement; and Compliant with the laws of Vietnam. The Vietnam Ministry of Justice has recently published a database regarding the recognition and enforcement of foreign court judgements or arbitral awards in Vietnam from 2012 to September 30, 2019, (the Database), which indicates that only 49% of foreign court judgements or arbitral awards will be recognized and enforced in Vietnam. This figure sheds light on the alarmingly low rate of recognition and enforcement of foreign court judgements or arbitral awards in Vietnam. There are two possible reasons behind this low rate of recognition.  First, the foreign court or arbitration center may be of inadequate quality or has violated dispute resolution procedural regulations. A second reason to consider is that some provisions that frame the recognition and enforcement of...