1. ASIA COUNSEL INSIGHTS
June 2022
Asia Counsel Insights provide an overview
of the key trending legal and business
issues in Vietnam and how they may
impact your business. Please enjoy your
read.
Deal Update:
• Advised certain shareholders of
Imexpharm, Vietnam’s listed drugs
manufacturer on their sale to SK.
• Advised Citigo Software Joint Stock
Company on its USD45 million
investment from KKR, Jungle
Ventures and Beacon Venture
Capital
Vietnam to become a member of
the cooperative.
The Draft Law provides that a
member of the co-operative can be
between 15-18 years old. However,
they cannot be involved in
management of the co-operative.
The organization structure of the
cooperative set out under the Draft
Law remains the same with the
Current Law, which includes:
• General meeting of member;
• Board of management;
• General director or Director; and
• Inspection committee or
Inspector.
Data Privacy
In 2021, the Ministry of Public Security
released the Draft Decree on
Personal Data Protection (“Draft
PDPD”). Though the Draft PDPD was
intended to take effect on 1
December 2021, it is still yet to be
enacted. Once issued, it will
supplement existing data privacy
laws to impose as number of more
stringent data requirements as
detailed below.
Investment in Cooperatives
We have seen an increasing number
of investment and loans made to
cooperatives in Vietnam. Below are
some notable proposed changes
under the second draft of the Law on
Cooperative Economic Organization
(“Draft Law”) compared to the current
Law on Cooperative 2012 (“Current
Law”).
Transfer or Sell the Capital Contribution
Under the Current Law, members of
the cooperative cannot transfer or
sell their capital contribution but the
Draft Law gives the members rights to
transfer the capital contribution
together with their respective rights,
which means that Draft Law is likely to
permit the members to use their
capital contribution as collateral for
security.
However, under both Current Law
and Draft Law, a foreign entity will still
be unable to become a member of
a cooperative entity.
Undivided Pool
The Draft Law introduces the
concept of “undivided pool”. The
undivided pool is the retained fund of
the cooperative and in any case,
including the case of dissolution or
bankruptcy of the cooperatives, the
undivided pool cannot be
redistributed to members in any form.
However, the undivided pool can be
used for investment and development
of the undivided assets, and as a
financial reserve.
The Draft Law also broadly provides
that upon the dissolution or
bankruptcy, the undivided pool and
undivided assets must be handed
over to the local authorities, and the
government then will issue further
guidance on this regulation.
Decree 193/2013/ND-CP elaborating
on the Current Law provides guidance
that certain undivided assets may be
used to pay debts in case of
dissolution or bankruptcy before being
handed over to local authorities.
Organization Structure of Cooperative
The Draft Law is stricter on foreign
participation in the cooperative since
it only allows individual being Vietnam
citizen to become member of the
cooperative. However, the Current
Law allows individual being Vietnam
citizen or foreigners legally residing in
About Asia Counsel
Asia Counsel is a dynamic international corporate and commercial law firm dedicated to serving clients in Vietnam. Our partners have over 14 years of
experience in working on complex and challenging matters in Vietnam. We are committed to helping clients achieve their business strategies and providing
outstanding legal services.
If you have any questions on any of the items discussed above, please do not hesitate to contact us.
Christian Schaefer
Partner
E christian@asia-counsel.com
Minh Duong
Managing Partner
E minh@asia-counsel.com
Asia Counsel Vietnam Law Company Limited, Unit 9.10, Level 9, Deutsches Haus, 33 Le Duan Boulevard, Ben Nghe Ward, District 1, Ho Chi Minh City
Ross Macleod
Partner
E ross@asia-counsel.com

2. ASIA COUNSEL INSIGHTS
June 2022
impact on holding companies that
borrow funds to finance the business of
operating companies (a common
investment structure in Vietnam).
Another key change under the Draft
Circular is the imposition of a strict limit
on the total outstanding medium to
long term loan amounts (foreign and
onshore) that a borrower can receive
for increasing its capital for business
activities (the limit equates to three
times the higher of the: (i) borrower
owner’s equity; or (ii) charter capital).
Further, if the purpose of receiving the
offshore loan is to restructure the
existing loan capital of the borrower,
then the limit of the new loan amount
must equal the principal and interest
balance of the existing offshore loan
to be restructured.
Exchange Rate Hedging
The Draft Circular intends to require
borrowers to apply foreign exchange
hedging for both: (i) short-term
offshore loans of more than USD
500,000; and (ii) medium to long term
offshore loans with any repayment
instalments of more than USD 500,000.
The minimum hedging value must be
30% of the disbursement amount (for
short term offshore loans) or 30% of the
instalment repayment amount (for
medium to long term offshore loans).
In case of the latter, the foreign
exchange hedging must be
conducted at least three months prior
to the repayment date of the relevant
instalment.
The grandfather clause of the Draft
Circular also specifies that offshore
loan agreements executed prior to
the date of the official Circular will also
be subject to the aforementioned
exchange rate hedging requirements
if: (i) the loan amount has not been
drawn down in full (for offshore short-
term loans); or (ii) the principal has not
been fully repaid (in case of medium
to long term offshore loans).
Collateral Enforcement Requirements
The Draft Circular further states that
borrowers must engage either a credit
institution or branch of a foreign bank
in Vietnam to act as a security
enforcement agent if: (i) the secured
assets are located within Vietnam;
and (ii) there is no agreement on the
mechanisms for the secured party to
take over the secured assets.
Data Processor Obligations
Under the Draft PDPD, personal
data processors will have to comply
with the following requirements
when processing personal data:
• Obtain consent from data
subjects on a voluntary basis and
in a format that can be printed
or copied in writing. Data subject
consent can be partial or
conditional, and withdrawn at
any time.
• Notifying data subjects of all
processing of personal data,
subject to certain exceptions.
• Registering with the Personal
Data Protection Commission
(PDPC) before processing
subject to certain exceptions.
• Registering with the Personal
Data Protection Commission
(PDPC) before: (i) processing
sensitive personal data; and (ii)
the cross-border transfer of
personal data.
Cross Border Data Transfers
The cross-border transfer of personal
data will only be permitted if:
(i) The consent of the relevant data
subject has been obtained;
(ii) The original data is stored in
Vietnam;
(iii) The data recipient country has
personal data protection
regulations which are at least on
par with the regulations of the
draft PDPD; and
(iv)Written approval from the PDPC
has been obtained.
If the above conditions cannot be
met, conditions (ii) and (iii) can be
replaced by a commitment from
the data processor to both protect
the data and apply measures to
protect the data. It is still unclear
however as to how these conditions
can specifically be fulfilled.
Given that there is no specific
timeline for the issuance of the Draft
PDPD and there are still
uncertainties on its implementation
in practice, many existing
companies in Vietnam, are
conducting preliminary internal
audits as well as examinations of
their internal policies in order to
comply with the Draft PDPD as
closely as possible.
Offshore Loan Requirements
The State Bank of Vietnam (“SBV”)
recently introduced a draft Circular on
10 May 2022 (“Draft Circular”), with the
aim to replace Circular 12/2014/TT-
NHNN dated 26 February 2014 of the SBV
regulating conditions for enterprises to
borrow non-Government guaranteed
offshore loans (“Circular 12”). The Draft
Circular proposed a number of
additional restrictions to lending
activities in Vietnam. Key proposed
changes under the Draft Circular, which
is now open for public comment, are
summarised below.
Borrowing Cost Caps
The Draft Circular proposes imposing
the following caps on borrowing costs
incurred from offshore foreign currency
loans: (i) reference interest rate plus 8%
per year; or (ii) if there is no reference
interest rate, a cap equal to the six
month SOFR rate (as published by CME
before the loan agreement) plus 8%
p.a.
For offshore loans made in Vietnamese
dong, the cap will be the interest rate
of the 10 year term bonds issued by the
Vietnamese Government plus 8% p.a.
Under the Draft Circular, the new
definition of borrowing cost explicitly
excludes the following factors: default
interest, commitment fees for not
utilising offshore loans as scheduled,
prepayment fees, exchange and
interest rate derivative fees, and
foreign contractor taxes.
Stricter Offshore Loan Uses
The Draft Circular also limits the use of
short term offshore loans to only
repaying other offshore short term
loans that are payable within 12
months from the date of the relevant
offshore loan agreement.
The Draft Circular also aims to prohibit
borrowers from using short term
offshore loans for the repayment of
onshore debts, securities trading,
equity and real estate acquisitions, as
well as receiving project transfers.
Regarding medium to long term
offshore loans, the Draft Circular
removes financing of the investment
projects of a borrower’s subsidiaries or
affiliates as a permitted loan use
purpose (which is currently allowed
under Circular 12). If this amendment is
retained, it would have a significant

3. ASIA COUNSEL INSIGHTS
June 2022
Under the New IB Law, insurance
enterprises are not allowed to directly
conduct real estate business, except
for the purchase, investment, and
ownership of real estate to be used as
their head-office, working place or
warehouse directly serving
professional activities, or leasing
unused business premises that are
under ownership or use of such
enterprises.
Insurance enterprises may hold real
estate as a result of the realisation of
bonds secured by real estate or the
deduction of receivables in real
estate but only within 3 years from the
date of realisation or deduction.
Thereafter such real estate must be
transferred or liquidated.
Separate Investment Management
The New IB Law also stipulates that
when investing abroad, insurance
and reinsurance enterprises must
separate their offshore investments.
They also must not use money and
assets of domestic insurance buyers to
cover losses and money shortfalls from
their foreign investment activities,
unless otherwise provided for by law.
Transition provisions
Valid insurance contracts entered
into before the effective date of the
New IB Law will continue to be
performed in accordance with law at
the time of entering into insurance
contracts, unless the parties to the
contract agree to amend and govern
their contract according to the New
IB Law.
Insurance agent certificates issued
before 1 January 2023 may continue
to be used until the end of 31
December 2025. Insurance
certificates, insurance brokerage
certificates and insurance auxiliary
certificates issued before the
effective date of the New IB Law may
continue to be used.
From 1 January 2023, insurance
enterprises will stop making payment
to the Protection Fund for the Insured.
Corporate Bond Trading
Circular No. 16/2021/TT-NHNN of the
SBV on corporate bond trading of
credit institutions and branches of
foreign banks (“Circular 16”) was
enacted on 15 January 2022 in
replacement of its predecessor,
Circular 22/2016/TT-NHNN of the SBV
(“Circular 22”).
Circular 16 reintroduced conditions
on corporate bonds qualified for
trading which were first proposed by
Circular 22 but abolished thereafter.
These conditions require that
corporate bonds: (i) are legitimately
issued in Vietnamese dong; (ii)
under the valid ownership of the
seller; (iii) have not reached their
maturity date; (iv) are not subject to
any disputes; (v) are allowed to be
traded; and (vi) are not subject to
any forward contract, or discount or
rediscount contract (except for
bonds purchased in an initial
offering).
Circular 16 further introduced two
new purposes for which banks are
not allowed to buy bonds, including:
(i) contributing capital or buying
shares in other enterprises; and (ii)
increasing the working capital of the
issuer (in addition to the purpose of
debt restructuring of the issuer as
already captured in Circular 22).
Another key obligation imposed by
Circular 16 is that within 12 months
after selling unlisted corporate
bonds, banks will not be allowed to:
(i) buy back the sold unlisted
corporate bonds; and/or (ii)
purchase unlisted corporate bonds
issued in the same batch/period as
the sold unlisted corporate bonds.
After this time limit has elapsed,
banks will only be entitled to buy
back sold unlisted corporate bonds
and/or purchase unlisted corporate
bonds issued in the same
batch/period as the sold unlisted
corporate bond if certain extra
conditions are satisfied (e.g. the
issuer has a sufficient credit rating).
New Minimum Wage
Decree 38/2022/ND-CP on the regional
minimum wages applicable to
employees working under labour
contracts (“Decree 38”) will become
effective on 1 July 2022 in replacement
of Decree 90/2019/ND-CP.
According to Decree 38, the
Government has increased the
regional-based minimum wage by 6
per cent for the employees who works
under labour contracts, specifically as
follows:
• Region I (such as Ha Noi city, Ho
Chi Minh city): VND 4,680,000
(approx. USD203.5) per month.
• Region II (such as Can Tho city,
Danang city, and Haiphong city):
VND 4,160,000 (approx.
USD108.85) per month
• Region III (such as Bac Ninh
province, Bac Giang province,
and Hai Duong province): VND
3,640,000 (approx. USD158.55) per
month
• Region IV: VND 3,250,000 (approx.
USD141.30) per month
Decree 38 also abolishes the
requirement that the regional-based
minimum wages for those who have
finished vocational training or
apprenticeship are increased by 7%.
Therefore, this requirement is no longer
compulsory for employers.
New Law on Insurance Business
On 16 June 2022, the National
Assembly of Vietnam passed the Law
on Insurance Business (Amended)
(“New IB Law”). The New IB Law, taking
effect from 1 January 2023 will entirely
replace the Law on Insurance No.
24/2000/QH10 and all of its
amendments.
The New IB Law regulates organization
and operation of insurance business;
rights and obligations of organizations
and individuals participating in
insurance; State management of
insurance business activities.
Restricted Investment in Real Estate