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Chamber of commerce: Vietnam Chamber of Commence and Industry 4th Floor, 9 Dao Duy Anh Str Hanoi Vietnam Tel: +84 4 574 3985 Fax: +84 4 574 3063 Email: vbfhn@hn.vnn.vn vibforum@vcci.com.vn Website: vibforum.vcci.com.vn Professional body: Hanoi Bar Association 39 Linh Lang Street Ba Dinh Hanoi Vietnam Email: doanluatsuhn@vnn.vn Web: www.luatsuhanoi.org.vn

Developments in securities legislation

Mark Fraser and Juniper Cheng Frasers Law Company Ho Chi Minh City

Securities Law 2010 wider reach

Mandatory offer rules

The past year has been interesting in terms of the development of the securities market in Vietnam with regulators addressing the need to develop regulations to match the growing numbers and increasing sophistication of investors. Investments in enterprises may be made through investment in limited liability companies or through the purchase of shares in joint stock companies. We examine here the development of regulations relating to shares and what this will mean for investors into the country. Currently, there are three ways in which foreign investors may hold shares in Vietnamese enterprises: (i) by purchasing shares in companies listed on one of Vietnams two stock exchanges; (ii) by purchasing shares in State owned enterprises (SOEs) in the course of being converted (equitised) into joint stock companies; or (iii) by purchasing shares in unlisted Vietnamese joint stock companies. There is a plethora of legislation governing investment in securities in Vietnam, but in 2010 the Government passed two important pieces of legislation with the goal of better regulating the operations of the share market. The Law on Securities No. 70 of 2006/QH11 (Securities Law 2006) was amended by the Law on Securities No 62 of 2010/QH12 (Securities Law 2010) which came into force on July 1 2011 and Decree 102/2010/NDCP (Decree 102) which came into force on November 15 2010.

In an attempt to create a new legislative framework for the securities market, the Securities Law 2010 sets out the situations in which offers to acquire must be undertaken publicly, as well as cases which are not required to offer publicly, (such as inheritance or transfer by court order). We note that the Law on Securities 2010 requires an investor holding 25% or more of the voting shares or investment fund certicates (IFCs) of a public company or a closed investment fund to make a public offer for the shares where: it purchases a further 5-10% of the currently circulating voting shares or IFCs of a public company or closed investment fund within the period of one year from the date of completion of the previous tranche; or it purchases a further 10% or more of the currently circulating voting shares of IFCs of a public company or closed investment fund. The mandatory offer process will also not apply in circumstances where the acquisition Share offerings is an assignment between companies in a corIn respect of public companies, the Law on porate group structure or where the relevant Securities 2010 also regulates private offers of acquisition is approved by a general meeting shares and convertible bonds issued by public of shareholders. companies. This is addressed by three main concepts: (i) limitations on the conditions for Decree 102 issue a private placement will generally be a Decree 102 generally aims more at enterprisplacement to less than 100 non-institutional es, yet is important from the perspective of investors which is not made via the mass understanding the securities regime in media (including the internet), (ii) limitations Vietnam by clarifying the forms of investment on the time for transfer after completion of into enterprises and the denitions of certain the private placement, shares and convertible terms. In recent years, there has been confubonds may not be transferred (save for certain sion about the denitions of charter capital limited circumstances) for at least one year; and the number of shares the company has and (iii) specifying the time for offerings the right to issue. Furthermore, a problem of private offerings of shares and offerings of phantom charter capital (i.e. shares that the convertible bonds must also be carried out at company has registered and issued, but are not actually paid up) has emerged. These least six months apart. points are obviously important for an investor into a joint stock company as it needs certainty as to what investment it is making and 2012 EDITION

The Securities Law 2010 broadens the denition of securities and brings unlisted company shares under its aegis. Under the Securities Law 2006, securities had been dened as evidence from an issuing organisation certifying the lawful rights and interests of an owner with respect to an asset or capital portion. In the denition, an issuing organisation was described as an organisation making a public issue of securities. Therefore, shares of nonpublic enterprises had not been considered to be securities. However, this changed with the Securities Law 2010 under which, an issuing organisation comprises all organisations conducting offers of securities. This means that non-public companies will also be considered to be issuing organisations and shares of such companies shall be considered to be securities. This will have an impact not only in terms of regulation but also related areas such as taxation, however, by creating a unied regime it simplies the market for investors.

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what capital input that company has actually received. Resolving this confusion, Decree 102 claries the denitions of Issuable Shares, Issued shares and Charter Capital: Issuable shares are dened as shares that have been authorised for issue by a general shareholders meeting. Issued shares are those which have been acquired (and paid for) by shareholders, while charter capital is dened as the total nominal value of issued shares. Charter capital at the time of registration of a shareholding company is dened as the total nominal value of the issued shares for which founding and subsequent shareholders have subscribed at the time of registration. These must be paid in full within 90 days from the date of issuance of the enterprise registration certicate. Where shareholders have committed to buy only a portion of the issuable shares the remainder may be offered for subscription for three years from the date of the enterprise registration certicate.

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Mergers and acquisitions

Recommended rms Tier 1 Baker & McKenzie Freshelds Bruckhaus Deringer Vilaf-Hong Duc YKVN Tier 2 Allens Arthur Robinson Frasers Law Company Mayer Brown JSM Tier 3 Audier & Partners Invest Consult Russin & Vecchi Tilleke + Gibbins Vietbid Vision & Associates

Project nance
Recommended rms Tier 1 Freshelds Bruckhaus Deringer Vilaf-Hong Duc YKVN Tier 2 Allens Arthur Robinson Baker & McKenzie Mayer Brown JSM Tier 3 Frasers Law Company LCT Lawyers

Banking and capital markets

Recommended rms Tier 1 Freshelds Bruckhaus Deringer Mayer Brown JSM Vilaf-Hong Duc YKVN Tier 2 Allens Arthur Robinson Baker & McKenzie Frasers Law Company Tier 3 Audier & Partners Gide Loyrette Nouel Russin & Vecchi Tilleke & Gibbins Vietbid Vision & Associates

Mergers and acquisition (M&A) deals in Vietnam have been on a sharp rise in the last few years. Deals involving M&A have proved an effective investment channel for enterprises in Vietnam both foreign and domestic, says a highly regarded partner. The past year has seen a number of strategic acquisitions of stakes in Vietnamese companies in the sectors of nancial services, natural resources, energy, telecommunications, food and beverage and real estate as well as the establishment of joint ventures. This is as a result of Vietnams commitments under the WTO where we need to provide that, subject to certain conditions, foreign companies and individuals are now allowed to fully acquire a local unlisted company. An increasing amount of M&A and outbound investment by Vietnamese companies has led to increasing activities within the nancial sector with the need for acquisition nancing. The State Bank of Vietnam requires that at least D3 trillion ($145 million) in capital is

held by Vietnamese banks, which has led to a need for expansion by domestic banks as they look to new activities and markets to raise capital. Big capital puts extreme pressure on the banks because more capital requires bigger prot and dividends for investors, says one observer. Furthermore, the banking and nance sector has anticipated the big difculties they will meet in 2011 with exchange rate uctuations, high interest rates and policies on credit restriction. All of these will place further pressure on the capital costs and the capital demand of banks. With growing bank credit we are seeing increased risks to the system, says a partner. It is believed Vietnams government is likely to lower the target for bank credit growth to almost 20% in 2011. Although the target is feasible, it is still too high with bank credit approaching GDP levels of 110% towards the end of last year, comments a partner. Bank credit already grew about 25% in 2010, exceeding the governments target of 23%. In addition, Vietnam had several years of high credit growth, especially in 2007 and 2009, including loans to large state-owned borrowers. Borrowing costs in Vietnam have also risen sharply. Vietnamese dong (D) lending rates have increased to 18% for a 12-month loan, from 12% one year ago, says a leading law rm partner. In contrast, the US dollar lending rates are notably lower at 6%, the partner adds. The wide differential has prompted many businesses to borrow in dollars instead of the dong. Those who generate revenues predominantly in dong, increase their exposure to foreign exchange risks and high ination in Vietnam in the past few years has also weakened condence in the currency. Adding to the systems credit vulnerabilities, ination in the country rose to above 12% year on year in January 2011 from just 7.1% in 2009. This was down in part to the governments loosening monetary policy in the second half of 2010 to support economic growth, and rising global commodity prices were responsible for the soaring ination. If ination continues to rise, the costs for businesses domestically or internationally will hinder borrowers debt servicing ability. At the same time its a catch-22 situation if the government is overzealous in tackling ination it could have a destabilising effect which undermines the condence in the banking system, comments a special foreign counsel.

Baker & McKenzie

Baker McKenzies extensive knowledge and comprehensive understanding of the Vietnamese law is what separates them from www.ir1000.com

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their competitors, says a client. With sometimes not too clear laws in Vietnam, they give us very commercially useful advice and a good understanding of the issues, even though these are new to both them and us. As one of the few international rms practicing in Vietnam, the teams international presence and strong ties with major investment banks, state-owned banks and insurance companies allowed them to play a key advisory role to Xangbo Management (Singapore) on a trade nance transaction, under the GSM 102 Programme. A key highlight last year saw the rm act for the borrower on a $400 million loan facility for the development and construction of the Cai Mep terminal in Hanoi. The team boasts a good combination of special international counsels and locally licensed practitioners. Frederick Burke is described as a highly regarded practitioner by one client, [he] understands clients expectations and is always able to deliver the desired outcome. Oanh Hoang Kim Nguyen is also well regarded in the market: A hard working lawyer with solid knowledge of securities and foreign investment laws, says one peer. Another notable highlight for the team was advising Nissan in a joint venture to set up Nissan Vietnam, which will allow the company to import and distribute their own products.
Leading lawyers
Frederick Burke James Lockett Oanh Hoang Kim Nguyen Yee Chung Seck

Proving the team is not a one-man band, Bui Thanh Tien is recommended by one peer as a very senior Vietnamese lawyer in Ho Chi Minh City in terms of knowledge and execution. The past year saw the team advise Singapore Technologies Telemedia in the acquisition of a strategic interest in Electricity of Vietnam Telecom. This signicant transaction is one of the rst large state-owned enterprise acquisitions in recent years. Another notable highlight was advising AES on the sale of a 30% interest in AESVCM Mong Duong Power to Posco. AES VCM owns the 1200MW Mong Duong 2 Power Project. The rm also advised the sale of a further 19% interest to China Investment Corporation, a state-owned investment agency in China.
Leading lawyers
Tien Thanh Bui Jerome Buzenet Tony Foster Milton Lawson

dation and dissolution of the two subsidiaries of Yokohama in Vietnam.

Leading lawyers
David Lim Dao Nguyen Hoang Anh Nguyen Mai Phuong Nguyen

Vilaf-Hong Duc
Vilaf-Hong Duc is extensively knowledgeable, has expertise and is innovative in providing advice on legal issues of Vietnam in relation to infrastructure projects, says a client. The rm in particular has well-established experience in working with international law rms such as Clifford Chance and others in large-scale projects. Dang Duong Anh is held in high regard by peers and clients alike: Partner Dang Duong Anh has knowledge and expertise in relation to the international practice in infrastructure projects, says a client who highly recommends Dang Duong Anh. The past year saw the rm advise the Chinese project sponsors in a joint venture with Vietnam National Coal - Mineral Industries Group in the development of Vinh Tan 1 2x600MW Coal Fired Power Plant on a BOT (build-operate-transfer) basis in Vietnam. The complexity and signicance of this project involved a government guarantee and undertaking secured from the beginning. The deal used a similar framework to the Phu My 2.2 and Phu My 3 Power Projects, which has been changed in many respects over the decade. The rm also advised Kohlberg Kravis Roberts (KKR) in acquiring a $159 million 10% equity stake in Masan Consumer, a subsidiary of Ma San Group and one of Vietnams largest private sector companies. This deal was Vietnams largest private equity deal to date and KKRs rst investment in Vietnam. The transaction was lled with complexity in the structure of certain special options, exit rights and exchange rights, which require sophisticated structuring due to Vietnams regulatory restrictions on corporate governance. Another notable highlight was advising Citibank as arranger on its $450 million unsecured export credit nancing provided to the PetroVietnam Nhon Trach 2 Power Project Company for the purchase of capital equipment from certain exporters. The deal is backed by the Ministry of Finance of Vietnams guarantee and supported by Euler Hermes KreditversicherungsAktiengesellschaft (Hermes) and Nippon Export and Investment Insurance (NEXI). 2012 EDITION

Mayer Brown JSM

Mayer Brown had another strong year and is becoming a major player in Vietnam, comments a rival. Id recommend Mayer Brown JSM. I dont believe there is a better banking team after working with them, says one client. Leading the team is Dao Nguyen, a highly regarded practitioner who is technically very strong and extremely knowledgeable and very methodical in her approach, according to one peer. The team acted as Vietnamese legal adviser to Vietinbank in connection with a $182 million equity and a $125 million subordinated debt investment by the International Finance Corporation (IFC) and its Capitalisation Fund in Vietinbank. Partner Hoang Anh Nguyen, one of the most underrated practitioners in banking and capital markets, according to one partner, led the team in assisting one of Vietnams largest private sector companies, Hoang Anh Gia Lai, to become the rst Vietnamese company to list overseas, with an offering of $57 million in global depositary receipts (GDR) on the LSE. Another highlight for the team was advising the Vietnam Posts and Telecommunication Group as the borrower on a $540 million syndicated loan agreement with BNP Paribas and Natixis as arrangers and other credit institutions. With Dao Nguyen possessing expertise in various eld, the team advised on the restructuring, merger and acquisition of assets, liqui-

Freshelds Bruckhaus Deringer

Freshelds Bruckhaus Deringer has good knowledge of Vietnam laws and regulations, a client says. With very little innovation possible in a Vietnam context, where clarications to legal interpretations may vary with individual government ofcers, they do very well, the same client adds. Freshelds partners and practitioners are able to understand requirements much faster, due to their long experience in handling corporate companies legal affairs in Vietnam, says another client. One of the standout practitioners is Tony Foster, who knows the system inside out and is able to distil that experience into something that very closely resembles wisdom, comments a rival. Tony is an absolutely outstanding individual and has a high level of integrity [and] incredible amount of knowledge, a client adds, Tony is an institution here; genuinely the best. www.ir1000.com

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Leading lawyers
Tran Anh Duc Nguyen Quang Hung Tran Tuan Phong

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In my view, they are top tier lawyers in their respective areas of practice, says a client. This rm once again retains its position in the rankings. Clearly a top tier law rm and have handled many landmark deals for clients in the market, comments a peer. The rm not afliated to any international law rm but is probably one of the best local rms in Vietnam, according to one peer. We treat them as our trusted advisors and friends, says a client, and praises Truong Nhat Quang as a very diligent, professional and sound advisor. A highlight last year was the rms advice to the lead managers BNP Paribas, Deutsche Bank and Morgan Stanley for the Rule 144A/Reg S bond issue by the PetroVietnam Group (PVN). This is the rst international bond issuance by a Vietnamese corporate with the deal raising a host of complex issues under Vietnamese law including necessary approvals and waivers on securities and foreign debt management. The team also advised BP on due diligence in regard to the Vietnamese assets sold by the company in the wake of the oil spill in the Gulf of Mexico. These energy assets were sold to TNK-BP, a Russian company in which BP was a joint venture party. Another notable highlight was advising Vietnams Ministry of Industry and Trade on all phases of the development of the Nghi Son II 2x600MW BOT (build-operate-transfer) coal-red power project in central Vietnam. The project is particularly signicant because the documents used will become a template for all future BOT coal-red power projects in Vietnam.
Leading lawyers
Nguyen Thi Dang Vu Dzung Duong Thu Ha Diep Hoai Nam Truong Nhat Quang

operator, handles the full range of corporate exercises, and is one of the pillars in banking, nance and mergers and acquisition transactions, comments a client. Nigel Russell is a very prolic funds management and project nance practitioner, according to another client, while Andrew Hilton is praised for his sound advice and diligent client service. The past year he led the team in advising TPG on its $35 million subscription to convertible bonds issued by Masan Group. Another notable highlight for the team was advising Commonwealth Bank of Australia in relation to its appointment by Vietnam International Bank (VIB) as a strategic foreign investor and its acquisition of a 20% stake in VIB.
Leading lawyers
Bill Magennis Thomas Miller Nigel Russell

Other ranked rms

Audier & Partners is excellent, very proactive, and invaluable in negotiating the often convoluted regulatory environment in Vietnam, says a client. The team has very good knowledge in Vietnam related matters, comments another. A notable highlight is advising Goldman Sachs in the subscription of US dollar denominated convertible bonds in a prominent listed infrastructure company. The team also advised Accor, a leading international company in the hotel industry sector for the development of a network of hotels throughout Vietnam under various global brands. This transaction required assisting on various corporate, construction and land issues under the complicated Vietnam land laws. LCT Lawyers is most often associated with real estate, development, and infrastructure projects in Vietnam, says a rival partner. Led by Le Net, one of Vietnams leading lawyers in real estate according to peers, the team has been growing from strength to strength. The team brokered the rst credit-linked note issuance in Vietnam on behalf of Vietcombank, based on $800 million in Vietnamese government-issued international bonds. This is the rst credit-linked note issuance in Vietnam regarding government issued international bonds Another highlight in the past year was advising the Peoples Committee of Ho Chi Minh City as local counsel on the East-West Highway project, Thu Thiem Tunnel and Water Improvement Project. These projects are valued at nearly $1 billion and marked one of the biggest Japanese ODA (Overseas Development Assistance) funded projects in Vietnam. Russin & Vecchi one of the oldest practices in the country is producing quality work with good technical knowledge and business acumen, says a client of the rms. Rising star Nguyen Huu Minh Nhut has been praised by both client and peers as being smart, responsive with good drafting skills and having a business sense. The past year saw the team advise on the sale of shares in Hanoi Liquor JSC (Halico) to strategic investor and global consumer goods company Diageo. The deal, valued $52 million, also involved a complex closing structure with different interlinked conditions, transactions and performance securities included. Another highlight was advising Nomura International, UBS, Barclays Capital, and Morgan Stanley with derivatives trading in form of an Isda master agreement and global market repurchase agreement (GRMA). www.ir1000.com

Frasers Law Company

Frasers Law Company is innovative in that they think of different options and different solutions, says a client. Quite a diversied team, says another client who adds that the team is not bound by the black letter of the law... it integrates active advice with commercial sense and risk assessments. Leading the team is partner Mark Fraser who is very experienced, very well strategically and the knowledge of Vietnam is really what he brings to the table, says a client. Justin Gisz is very proactive at responding to client needs and has good broad knowledge of all investment topics. Another client comments: the rm is familiar with local rules and regulations, the level of expertise and the update with the changes in local regulations is very comforting. The team acted for Nippon Steel Company (NSC), one of the worlds largest producers of steel and steel products in regard to the establishment of a $33 million welded steel spiral pipe joint venture in Vietnam. The project was signicant because it involved the formation of a joint venture between NSC and the largest Vietnam stateowned steel enterprise as well as some of the worlds largest steel trading houses.
Leading lawyers
Mark Frasers Justin Gisz Chris Robinson

Allens Arthur Robinson

Australian rm Allens Arthur Robinson has a deep knowledge of regulations and local corporate laws, says a rival law rm partner. Another partner praises the team for being very good in project nance and is seen as the go-to rm on the Vietnamese side of a transaction. One of the strengths in the team is the practices depth. Bill Magennis, a very good 2012 EDITION

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With no solid legal framework for trading derivatives in Vietnam, various issues needed to be addressed, such as, permissible types of derivative products, local counterparties authorization to trade derivatives, application of netting and setting-off provisions under the Isda master agreement and GRMA. Tilleke & Gibbins is excellent in terms of knowledge and expertise, with the ability to provide viable options when necessary, says a client. The banking and nance team has developed a solid reputation and has both clients and peers commenting that they are all very competent and seasoned professionals. I think they offer innovative solutions, says a peer. The team assisted Standard Chartered Bank (Vietnam) to re-compile the banks complete set of home loan documentation. The documentation set includes the facility agreements, mortgage agreements and triparty agreements between the bank, borrowers and real estate developers. Continuing its high quality advisory with creative and practical solutions, innovative on legal issues of Vietnam in relation to infrastructure projects in general the rm is climbing up the ranks in the Vietnam market. Vision & Associates is led by Pham Nghiem Xuan Bac, who specialises in foreign direct investment and insurance work, amongst many other areas, says a client. It is a multifaceted rm combining weighty commercial experience with many years of legal knowledge, says another. The past year saw the team advise a consortium of multi-national banks on a $500 million syndicated loan to a power project in Vietnam.

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2012 EDITION