This section provides details on specific rules that contain guidelines protecting both resident and foreign investors.
Investor Participation
Retail Investors
Foreign individuals and organizations planning to trade at the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Securities Trading Center (HASTC) must first apply for a securities transaction code through a securities custody member. Once the code has been issued, the investor may open a securities transaction account with a member securities company. A foreign currency account and a Vietnamese dong account must also be opened with a foreign custodian bank for the exchange and remittance of capital and profits.
General guidelines for opening a securities transaction account for foreign investors are outlined in the securities company manual, which is linked below.
Foreign Investors
Foreign individuals and organizations may hold an unlimited amount of bonds in circulation in Viet Nam’s securities market.
The purchase and sale of securities by foreign investors must be conducted via securities companies. Foreign investors who wish to purchase securities using foreign currencies remitted from abroad or held in foreign currency accounts in Viet Nam must transfer the foreign currency into a special demand deposit account of a securities company maintained at a licensed bank. The foreign currency must be sold to the bank for Vietnamese dong to buy securities. Foreign investors may repurchase the foreign currency for repatriation after all tax obligations have been fulfilled. (Decision No. 1550/2004/QN-NHNN dated 6 December 2004).
Profit remittance is allowed at the end of the fiscal year on a one-off basis, provided that a tariff balance sheet is submitted to relevant authorities and tax payments have been settled. (Circular 124, December 2004)
Highlights of relevant legislation and guidelines for prospective foreign investors in Viet Nam’s securities market can be found by following the links provided below. The full text of relevant legislation will be posted on this site as they are made available.
Professional Service Providers
The links below lead to directories of professional service firms in Viet Nam.
Investor Protection
Bondholder Rights
The Ordinance on Negotiable Instruments and the Law on Bankruptcy stipulate the basic provisions concerning the rights of bondholders.
The Ordinance on Negotiable Instruments states that the payee has the legal right to claim payment when a negotiable instrument matures but is not paid as agreed upon. The payee also has the right to initiate a lawsuit if the debt remains unpaid even after a notice to the issuer has been served (Articles 38 and 44 of the Ordinance).
Under the Law on Bankruptcy, creditors may be able to recover unsettled debt through conciliation measures agreed upon by the enterprise and the creditors. These measures must include a debt payment schedule. However, if no conciliation measures are agreed upon or if the reorganization of the enterprise is unsuccessful, the enterprise may be declared bankrupt. In this case, the remaining property value of the enterprise (after mortgaged assets are appropriated to secured creditors) will be divided according to the preferential order stipulated in Article 39 of the Law on Bankruptcy (Articles 20, 36, 38, 39).
Bond documents (e.g., prospectus, term sheets, subscription agreement) may also contain covenants and relevant default clauses, specific to the bond issue, that provide additional protection to the bondholders.
The Asia Pacific Restructuring and Insolvency Guide 2006, which is linked below, provides information on creditor rights in Viet Nam.
Prevention of Fraud
The State Securities Commission (SSC) of Viet Nam enforces laws on prohibited and restricted practices such as insider trading, disclosing false or misleading information, and market manipulation.
Decree 161/2004/ND-CP stipulates provisions on penalties for administrative violations in the field of securities and securities markets, including public offering, trading, settlement, and disclosure of information. The decree also specifies the forms of penalties and measures of correction for identified violations.
The Viet Nam National Assembly released the revised Securities Law in 2007 to attract more investors and raise additional capital.
A new Investment Law came into effect in July 2006. The law aims to level the playing field for domestic and foreign investors, although various sectors remain off limits to foreign investors.
The International Monetary Fund’s (IMF) Annual Report on Exchange Arrangements and Exchange Restrictions for Viet Nam, available only in hard copy, discusses cross-border restrictions.
Capital Inflow
Nonresidents are allowed to purchase certificates of deposit, treasury bills, and bonds. Nonresidents may purchase up to 49% of a company’s equity.
Nonresidents must open an account at a permitted foreign bank and foreign investors must open Vietnamese dong-denominated securities trading accounts and securities custody accounts with a foreign custody agent.
Capital Outflow
Resident investors cannot invest in shares and bonds abroad. Institutional investors are allowed to invest in securities issued locally by nonresidents, but are not allowed to invest in those held abroad.
Foreign investors are required to open a Vietnamese dong-denominated securities trading account and a securities custody account with a foreign custody agent. They may only transfer investment capital abroad one year after the securities trading account was opened.
For more details on foreign investor regulations, please refer to the link below on Viet Nam’s new Investment Law.
Viet Nam maintains a managed floating exchange rate regime for the Vietnamese dong. For US dollars, the State Bank of Viet Nam (SBV) uses the average exchange rate in the interbank market during the previous business day as the official rate. Banks may then use the exchange rate within 3% on either side of the SBV-quoted rate.
Most regulations concerning movement and use of foreign currency in Viet Nam are in the Decree on Foreign Exchange Management, which is linked below. The decree sets out rules for the opening and use of foreign currency accounts for residents and nonresidents, purchasing and transferring foreign currency, and carrying foreign currency or Vietnamese dong bank notes in or out of Viet Nam.
A summary of relevant regulations is also available in the Annual Report on Exchange Arrangements and Exchange Restrictions 2007, published by the International Monetary Fund. The report is only available in hard copy.
Import and Export of Currencies
Individuals must declare to customs the import or export of Vietnamese dong in excess of VND15 million. Foreign currency imports or exports by individuals in excess of USD7,000 (or an equivalent amount in another foreign currency) must be declared upon arrival and/or departure. SBV permission is required.
Domestic and Foreign Currency Accounts
Residents and nonresidents are allowed to hold domestic or foreign currency accounts locally or abroad upon submission of necessary documents and the approval of SBV.
Borrowing and Lending
Domestic and foreign borrowing and lending among residents and nonresidents are subject to SBV registration and approval. Resident credit institutions are allowed to provide loans in accordance with the regulations of SBV.