Right after Vietnam’s Tet (Lunar New Year) holiday, we would like to update you on some recent regulations relating to financial transactions of enterprises in Vietnam and a new decree guiding the implementation of the Labor Code which may affect labor management of your companies.
Restriction of using cash in enterprises’ financial transactions
The Ministry of Finance of Vietnam issued Circular 09/2015/TT-BTC dated 29 January 2015 (“Circular 09”) guiding financial transactions by enterprises as regulated by Article 6 of Decree 222/2013/ND dated 31 December 2013 of the Government on payments made by cash.
Circular 09 prescribes the forms of payment for contribution of capital and transfer of capital contribution portions. Enterprises shall not use cash (including notes and coins issued by State Bank of Vietnam) as payment in the transactions of contribution of capital and transfer of capital contribution portions. When carrying out such transactions, enterprises shall use the following forms of payment:
- Payment by cheque;
- Payment by payment orders or authorized transfer; or
- Other non-cash payment in accordance with current regulations.
Similarly, enterprises which are not credit institutions shall make payment when lending, borrowing and making repayment to one another in the same manner as described above.
Transactions of enterprises of contribution of capital to and transfer of capital contribution portions in kind (i.e. consideration other than money) shall be in accordance with the law on enterprises.
Likewise, when enterprises which are not credit institutions use assets (other than money) lend to each other or borrow from each other (including loan repayment, or offset or transfer of debts and liabilities); they shall do so in accordance with the law on enterprises.
Circular 09 shall become effective on 17 March 2015.
Further guidance for certain provisions of the Labor Code
The Government of Vietnam issued Decree No. 05/2015/ND-CP (“Decree 05”) dated 12 January 2015 providing guidance on a number of articles in the Labor Code of Vietnam. Please see below a summary of some key points of Decree 05.
Mandatory contents of a labor contract
Decree 05 further specifies the main contents which must be included in a labor contract (Article 4). This requirement is not totally new as already required by Labor Code 2012 on broadly similar terms. Decree 05 also provides guidance on how an employer that is an entity can delegate authorization to sign labor contracts and prescribes that a specific form issued by the Ministry of Labor, Invalids and Social Affairs (MOLISA) must be used by delegation by the legal representative of the employer. We note that the MOLISA is yet to have issued such a form.
Notification by the employer prior the completion of the probation period
The employer is now required to notify the employee about the employee’s performance during the probation period at least 3 days prior to the completion date of the probation period, and the parties have to sign a labor contract if the probation requirements have been met (Article 7).
Unilateral termination of labor contract by the employer and provisions relating to transfer of company’s assets
Article 12 of Decree 05 provides further guidance as compared to Labor Code 2012, Article 38 on the cases where the employer is entitled to unilaterally terminate a labor contract, namely company restructuring, technology change and economic reasons. The Decree elaborates on the concept of “economic reasons” as a ground for unilateral termination of employment by the employer provided in the Labor Code: “economic crisis or recession” and “implementation of the State’s policies when restructuring the economy or implementation of commitments to international treaties”. This remains however vague, and thus, it is not clear how the authorities and courts will interpret the law when an employer argues that “economic reasons” justify the unilateral termination of a labor contract.
If a labor contract is terminated by the employer on the grounds of restructuring, technological change or economic reasons, the employer must only pay retrenchment allowance rather than both severance allowance and retrenchment allowance. This clarification is welcome as the point has been debated in light of the provisions of the Labor Code. The Decree also provides detailed guidance for the determination of the working period to calculate severance allowances and retrenchment allowances.
In case of transfer of a company’s assets where the law requires that the employees have the right to have their labor contracts transferred the former employer must prepare a labor usage plan and pay a retrenchment allowance to the employees whose labor contracts are terminated.
Internal Labor Rules
Decree 05 sets out certain matters that must be dealt with in an employer’s internal labor rules and its procedures for handling labor disciplines. Disciplinary hearings can only be organised when all the required participants are present, including the enterprise’s trade union, or the federal labor at district level in cases the enterprise does not have trade union. After three convocations, if any of the required attendants fails to show up, the meeting shall proceed without further delay. All the attendees shall sign the meeting minutes and if some of the attendees refuse to sign the minutes, the minutes must record the reason for such absence of signature.
Decree 05 became effective on 1 March 2015 and replaced Decree 196/CP/1994 guiding the Labor code on collective bargaining labor agreements, Decree 93/2002/ND-CP amending Decree 196/CP/1994, Decree 41/CP/1995 guiding the Labor Code on labor discipline and material liabilities, Decree 33/2003/ND-CP amending Decree 41/CP/1995, Decree 11/2008/ND-CP on the compensation for illegal strikes detrimental to employers.
Enhance the legal framework for the investors to invest under the form of PPP
With the effectiveness on 10 April 2015, Decree No. 15/2015/ND-CP (“Decree 15”) issued on 14 February 2015 will replace Decree No. 108/2009/ND-CP (and its amendment), and Decision No. 71/2010/QD-TTg to regulate the investment under the form of public-private partnership (“PPP”), which is expected to widen the pathway of cooperation between the state authorities and the private investors.
Apart from the cooperation forms of build - operate -transfer (BOT); build - transfer - operate (BTO) and build - transfer (BT) as provided in the previous regulations, the investors are provided with the options to cooperate with the state authorities under the forms of build - own - operate (BOO); build – transfer – Lease (BTL); build – lease – transfer (BLT); operation – management (O&M) contracts.
Furthermore, given a wider choice of investment cooperation’s forms, the investors also will be entitled to access a wider areas of investment, not only transportation infrastructure, electricity, water, health, the environment, but also education, training, vocational training, culture, sports, commercial infrastructure, science and technology, economic zones, industrial parks, and other areas as decided by the Minister of Vietnam. Where the investors wish to propose an investment project with the authorities, the confusion on the conditions of investment under Decree 108 is now released under Decree 15 with the guidance on the conformity with the plan of development, investment areas, ability to absorb the investment capital, technology, etc.
Along with the other benefits that Decree 15 might bring to the private investors case by case, it is seen that the investors receives more and clear incentives by Decree 15 than before in general. As example, the investors may bear less risks than before with a higher proportion of state’s investment, without being limited to the percentage of 49% as provided in Decree 108.
On many publications, the investors express their expectation on the operation of Decree 15 in practice.