Decree No. 01/2014/ND-CP issued by The Government on 03/01/2014 promulgating foreign investors' purchase of shares of Vietnamese credit institutions (“Decree 01”) replaced Decree No. 69/2007/ND-CP dated 20/04/2007 (“Decree 69”). The new Decree has promulgated several remarkable changes as follows:

  1. Expanding the scope of application

The first remarkable point of this Decree is the expansion of the scope of application which covers credit institutions rather than commercial banks only as stipulated in Decree 69. Decree 01 adds financial joint stock companies, financial leasing companies and credit institutions transforming the legal form into joint-stock credit institutions to the list of organizations eligible to sell shares to foreign investors. This helps increase opportunities for foreign investors in Vietnam.

  1. Increase  shareholding percentage  of  foreign investor  in credit institution

In addition, proportion of shares owned by foreign investors in Decree 01 has been significantly increased compared to the previous Decree 69. Accordingly, shareholding percentage of a foreign individual shall not exceed 5% and foreign organization shall not exceed 15% of charter capital of a Vietnamese credit institution (as for a foreign strategic investor, shareholding percentage shall not exceed 20% of charter capital of a Vietnamese credit institution). Total shareholding level of foreign investors shall not exceed 30% of charter capital of a Vietnamese commercial bank (exceptions may be given by the Prime Minister to weak credit institutions for restructuring purposes on a case- by-case basis.

  1. Tighening conditions for a foreign organization to purchase shares that lead the shareholding level to be 10% and to become foreign strategic investors

The new Decree also stipulates the relatively tight conditions for a foreign organization to purchase shares that lead the shareholding level to be 10% or more of charter capital of a Vietnamese credit institution and for foreign organizations to purchase shares and become foreign strategic investors. Accordingly, the general conditions for foreign investors are: (i) Being ranked by international prestige credit-rating organizations from the stable level or equivalent upwards; (ii) Having full financial source to purchase share which is defined under financial statement audited independently of year preceding year of submission of dossier and a lawful capital source for share purchase as prescribed by law; (iii) The share purchase does not cause influence to the safety, stability of the Vietnamese credit institution system; does not create the exclusivity or limit the competition in the Vietnamese credit institution system; (iv) Not violating seriously law on monetary, banking, securities and securities market of country where foreign investor is headquartered and law of Vietnam within 12 months until submission of dossier of share purchase.

Besides, strategic foreign investor shall not own 10% or more of charter capital at any other credit institution in Vietnam.

This Decree takes effect on February 20, 2014.