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Conditions for enterprises’ acquisition and redemption of capital at joint-venture banks
The State Bank of Vietnam has released a draft circular amending Circular 40 of 2011, specifying conditions for enterprises to acquire or redeem capital contributions at joint-venture banks if fully meeting the law-prescribed conditions.

The State Bank of Vietnam (SBV) has released a draft circular amending Circular 40 of 2011, specifying conditions for enterprises to acquire or redeem capital contributions at joint-venture banks if fully meeting the law-prescribed conditions.

As explained by the SBV, while Circular 40 has no provision allowing enterprises to acquire or redeem capital contributions at joint-venture banks, the Central Bank’s Circular 30 of 2015 contains provisions permitting Vietnamese enterprises to contribute capital to limited-liability non-bank credit institutions. Hence, it is necessary to specify conditions so as to enable enterprises’ acquisition and redemption of capital contributions at joint-venture banks.

Conducting banking transactions at the Vietnam-Russia Joint-Venture Bank__Photo: Internet

Accordingly, to be permitted to acquire or redeem capital at a joint-venture bank, an enterprise (other than a bank) must satisfy the following conditions:

(i) Being a legal entity established under Vietnamese or foreign law and committing not to use capital mobilized or borrowed from other institutions or individuals for capital contribution;

(ii) Not being a founding shareholder, an owner, a founding member or a strategic shareholder of another credit institution;

(iii) Having fulfilled its tax and social insurance obligations up to the time of submitting a dossier of request for approval of the acquisition of capital;

(iv) Having earned profits in five years preceding the year of submission of the dossier of request; and,

(v) Possessing an equity of at least VND 200 billion and total assets of at least VND 400 billion in three years preceding the year of dossier submission, if wishing to contribute an amount of up to 1 percent of the charter capital of the venture bank, or an equity of at least VND 1 trillion and total assets of at least VND 2 trillion, if the capital contribution is between over 1 percent and less than 5 percent of the charter capital of the joint-venture bank.

In case the enterprise operates in a line of business which is subject to a requirement on the legal capital, the amount of equity left after subtracting the legal capital must be at least equal to the to-be-contributed capital under commitment. Data on equity and total assets would be taken from the enterprise’s audited financial statement of the year preceeding the year of submission of a dossier of request for approval of the acquisition of capital.

If the enterprise is a SOE, it must obtain a written approval from a competent authority in accordance with law.

As for businesses licensed to operate in banking, securities and insurance sectors, specialized laws would apply.- (VLLF)

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