Under new exchange control rules, Vietnamese national employees will now be able to hold foreign shares acquired under an equity plan and remit funds out of Vietnam to purchase such shares.
On June 29, 2016, the State Bank of Vietnam or "SBV" issued Circular 10/2016/TT-NHNN which provides guidance on the implementation of a decree that allows Vietnamese employees working for affiliates of foreign companies in Vietnam to “implement indirect investments in plans issued abroad.” The official version of Circular 10 is pending publication in the Official Gazette and the new rules are expected to take effect as of August 13, 2016.
For companies offering (or considering offering) equity awards in Vietnam, the highlights of the new circular are:
- SBV approval is still required before offering equity awards in Vietnam
- Local employing entity (rather than the issuer) must obtain the SBV approval (whereas under the current approval process, the issuer must obtain the approval)
- Employees may hold shares of a foreign company and receive dividends paid on such shares
- Employees will be able to remit foreign currency out of Vietnam through the local employing entity to purchase shares of a foreign company
- All proceeds stemming from equity awards must continue to be repatriated to Vietnam
- All funds (e.g., purchase price, sale proceeds) must be remitted to / from Vietnam though a specific bank account opened by the local employing entity
- Local employing entity must submit quarterly reports, presumably tracking the transactions related to the offering of the plan in Vietnam
There are a number of items that we are clarifying with the SBV, including (i) the transitional rules for companies with an existing SBV approval, (ii) if and how the new rules will apply to foreign nationals in Vietnam, (iii) how the new rules will work for companies with more than one entity in Vietnam and (iv) the specific requirements for the new application process and the quarterly reports.
In the meantime, companies operating an equity plan in Vietnam with SBV approval should continue to operate the plan in accordance with such approval (e.g., continue to force sale of shares at vesting of RSUs, impose cashless exercise of options, etc.).