On 31 December 2018, the State Bank of Vietnam (the "SBV") issued Circular No. 51/2018/TT-NHNN ("Circular No. 51") on the conditions, dossiers, orders and procedures for the approval of capital contribution or share purchase of credit institutions. Circular No. 51 will take effect from 01 March 2019.

Circular No. 51 does not apply to capital contribution and share purchase to establish credit institutions.

A broad overview of some key provisions of Circular No. 51 are as follows:

1. Capital contribution and share purchase that require approval

Circular No. 51 requires commercial banks to seek approval for the following types of capital contribution and share purchase:

  • to establish, acquire domestic subsidiaries or affiliate companies operating in securities underwriting, securities brokerage; management and distribution of securities investment fund certificates, securities investment portfolio management and stock trading, insurance, local currency exchange for overseas Vietnamese, foreign exchange trading, gold trading, intermediary payment services and credit information; or to acquire domestic subsidiaries or affiliate companies operating in financial leasing, factoring, consumer credit, issuance of credit cards;
  • to establish, acquire domestic subsidiaries or affiliate companies operating in debt and asset trading;
  • into other domestic enterprises operating in businesses other than insurance, securities, local currency exchange for overseas Vietnamese, foreign exchange trading, gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services, and credit information; and
  • in the form of debt conversion into capital contribution portions for handling bad debt of commercial banks in domestic enterprises operating in businesses other than insurance, securities, local currency exchange for overseas Vietnamese, foreign exchange trading, gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services, and credit information.

Commercial banks must satisfy certain conditions to contribute capital and purchase shares. The specific conditions vary depending on the type of capital contribution and share purchase.

Finance companies may also contribute capital and purchase shares to establish and acquire domestic subsidiaries or affiliate companies operating in insurance, securities, and debts and assets trading, subject to the same requirements as commercial banks.

2. General requirements on procedures and dossier components

Circular No. 51 prescribes a single procedure for approval. However, the specific requirements for dossier components varies depending on the type of capital contribution and share purchase, generally comprising a request letter, relevant corporate approvals, equity capital investment proposal and the enterprise registration certificate of the target enterprise, as the case may be.

Circular No. 51 requires the submission of two dossiers in Vietnamese. Any component of the dossier that is issued, notarized or certified by competent foreign agencies must be consular legalized (except for circumstances of consular legalization exemption) in accordance with Vietnamese laws and translated into Vietnamese with the translation being notarized or signature being authenticated in accordance with Vietnam laws and regulations. Any component of the dossier part made in copies must be (i) copies issued from the originals, (ii) certified copies, or (iii) submitted with the originals.

The dossier must be submitted directly or by post to the SBV through the Banking Inspection and Supervision Agency.

3. Termination of previous legal documents

Once Circular No. 51 takes effect, it will terminate the effect of:

  • Circular No. 04/1999/TT-NHNN of the SBV on the establishment of securities companies by commercial banks;
  • Decision No. 1389/2001/QD-NHNN of the SBV on the establishment of debt and asset trading companies under commercial banks;
  • Decision No. 951/2003/Q-NHNN of the SBV on the establishment of local currency exchange for overseas Vietnamese companies under State and People's joint stock commercial banks;
  • Circular No. 24/2011/TT-NHNN of the SBV on the implementation of plans to simplify administrative procedures in establishment and operation of banks; and
  • Article 2 of Circular No. 29/2015/TT-NHNN of the SBV amending a number of legislative documents guiding the dossier component with certified copies.