Your Snapshot of Key Legal Developments in Asia
Issue 1 - Jan/Feb/Mar 2014
- Royal Kram No. NS/RK/0114/006 on Promulgating the Law on Geographical Indication Mark of Products
- Instruction No. 151 GDT on Tax Determination of Expense Interest Rate
- Notification No. 215 GDT on Procedure for Filing a Request Letter to Cease Business Operations and for Tax Clearance
- Letter No. 418 LMUPC/LO on Commencing the Implementation of Inter-ministerial Prakas No. 30 LMUPC/MOJ on Registration Procedure of Real Rights under the Civil Code ("Prakas 30")
- Protection from Harassment Bill 2014
- Court of Appeal Sets out Approach for Assessing what Constitutes Tax Avoidance
- What Does an "All Reasonable Endeavours" Clause Require You to Do?
- SGX Regulatory Enhancements to Strengthen Securities Market
- Law on Land No. 45/2013/QH13
- Law on Employment No. 38/2013/QH13
- Law on Bidding No. 43/2013/QH13
- Decree No. 01/2014/ND-CP on foreign investors' purchase of shares of Vietnamese credit institutions
Virtual currencies – a growing need to regulate?
Virtual currencies ("VCs") are non-physical stores of value that can be exchanged for goods and services at places that accept them. There is no central bank that issues them; instead, they are operated under VC schemes, either maintained by a centralised VC operator, or by a community of VC users. Typically traded electronically, VCs may be used to purchase products and services and may be transferred from one user to another. They are not denominated in fiat currency, such as the US dollar, but can be purchased using such currencies. Examples of VCs include WebMoney and Perfect Money (centralised VC schemes) and Bitcoin, Litecoin and Namecoin (decentralised VC schemes).
Probably the most widely-recognised example of VC is the bitcoin. The bitcoins came into existence around 2009 but it was not until 2013 that public interest in them grew stronger. The central banks of countries such as China and Thailand have made recent headlines with their cautious stance against the bitcoin.
In December 2013, the People's Bank of China prohibited Chinese financial institutions from handling transactions involving bitcoins, stating that the bitcoin had no legal status and should not be used as a currency. BTC China, the then-largest bitcoin exchange in terms of trading volume, was adversely affected by this prohibition, temporarily ceasing to accept trades denominated in yuan. Since then, BTC China has resumed trading, and the Chinese bitcoin market showed signs of revival when another major bitcoin exchange, Japan-based Mt Gox, closed down in February 2014.
The bitcoins also had a similar wary reception in Thailand. When Bitcoin Co. Ltd attempted to apply for a licence to operate a bitcoin exchange in Thailand, the Bank of Thailand stated that due to a lack of existing applicable laws, capital controls and the fact that the bitcoin "straddles multiple financial facets", bitcoin activities are considered illegal in Thailand.
The Internal Revenue Service ("IRS") of the United States recently issued a notice which provides that virtual currency is treated as property (not currency) for US federal tax purposes. Hence, general tax principles that apply to property transactions would apply to transactions using virtual currency. The Internal Revenue Authority of Singapore ("IRAS") has an advisory on tax treatment of VCs on its website, and also appears to treat VCs as property for income tax purpose.
Investors and purchasers of VCs should be aware of the associated risks. With VCs being a nascent technological development and many competitors entering the market, it is not uncommon for VC operators to suddenly close down due to financial difficulties, or government intervention or prohibition. When this happens, as in the case of Liberty Reserve or more recently, Mt Gox, users of that VC exchange may suffer losses to the value of their currency or be entirely unable to recover the value of the monies altogether. Also, in decentralised VC schemes like Bitcoin, the price of the currency is not fixed and can fluctuate unpredictably within a short period of time. In addition to consumer risks, money laundering and terrorist financing risks are also associated with this new currency, because of the ease of converting real currency into virtual and back again without the need for know-your-customer checks.
It is because of these inherent risks that financial regulators have started to look into how to regulate VCs. In New York, the Department of Financial Services announced that it plans to impose capital requirements, a regulatory framework for consumer investment in VCs, and even a "BitLicence" requirement. In Singapore, the Monetary Authority of Singapore ("MAS") has moved from merely cautioning consumers on using bitcoin to "consider[ing] additional measures to address the risks posed by virtual currencies and their intermediaries". On 13 March 2014, MAS announced that it will be introducing rules to regulate VC intermediaries, making Singapore one of the first countries in the world to do so.
VCs are developing rapidly and their popularity is also increasing. It is only a matter of time before government regulators step in with regulations. However, due to the fact that it is a completely new invention with characteristics which have not been encountered before in traditional currencies, it will be challenging for the regulators to adapt the current financial regulatory measures to apply to it, and will be interesting to see how they will do so.
Royal Kram No. NS/RK/0114/006 on Promulgating the Law on Geographical Indication Mark of Products
On 20 January 2014, the Royal Palace issued a Royal Kram to promulgate the new Law on Geographical Indication Mark of Products, which relates to the protection of IP rights in Cambodia.
This Law sets out the proper registration procedure for Product Mark identifying the place where the product was produced. The objective of this Law is to protect the IP of the producers, as well as to conserve national identity and to promote knowledge and capacity to produce by the traditional way.
This Law gives full authority to the Ministry of Commerce to manage and be responsible for the registration of Product Marks. It also covers the registration of any foreign geographical indication Product Marks in Cambodia.
Instruction No. 151 GDT on Tax Determination of Expense Interest Rate
On 22 January 2014, the General Department of Taxation ("GDT") issued another Instruction relating to the Tax Determination of Interest Rate of Loans to partially supersede Instruction No. 1707 GDT on Tax Determination of Loans dated 2 October 2013. However, Instruction No. 151 preserves some of the provisions of Instruction No. 1707.
The preserved provisions concern the determination of withholding tax, maintaining that all taxation units ("Units") shall not apply deemed interest on loans upon which no interest expense has been recorded. Similar to the determination of profit tax, the Units shall not treat such loans as deemed subsidies.
Importantly, the new Instruction No. 151 has set out an interest rate benchmark limiting the interest rate of loans to: (i) a maximum of 120% of the market rate for loans from any unrelated person, and (ii) a maximum rate equal to the market rate for loans obtained from a related person. Moreover, the GDT must be notified of the existence of the loan no later than 30 days after the making of such loan. The notification must include the attachment of the loan agreement itself and other related documents. If any company fails to notify the GDT, the loan shall be considered as a gain in the assets of the company, which shall be taxable as profit tax.
Notification No. 215 GDT on Procedure for Filing a Request Letter to Cease Business Operations and for Tax Clearance
This Notification, issued on 28 January 2014, sets out the procedure for the termination of business operations and for applications for Tax Clearance. The procedure applies to all Directors, Managers or Shareholders of companies which are subject to Large-Scale and Medium-Scale Tax Paying, and have their registered address in Phnom Penh.
A company which wishes to cease its business operations shall pay Stamp Duty Tax in the amount of KHR 1,000,000 (one million riels) to the account of the GDT and fill in all information as required in the application form of the Tax Administration. The company must attach the required documents, such as a Letter of Request to Cease the Business Operations, an original copy of the latest Certificate of Patent Tax, an original copy of the Certificate of VAT, a copy of the MOA and/or Certificate of Incorporation of the company, the last 3 months of Monthly Tax Filing, the latest Annual Tax Filing, the Notification Letter of Tax Redetermination for the Financial Year, and the Receipt of Payment of Stamp Duty Tax.
A company which wishes to apply for Tax Clearance shall clearly mention the Financial Year for which the company would like to clear its tax with the GDT in its Letter of Request and in its Notification Letter of Tax Redetermination for the Financial Year. In the Letter of Request, the company shall mention its name (in both Khmer and English language), Tax Identification Number, current address of the company, contact number of the company and ID card or valid passport of directors, managers or shareholders of the company.
Letter No. 418 LMUPC/LO on Commencing the Implementation of Inter-ministerial Prakas No. 30 LMUPC/MOJ on Registration Procedure of Real Rights under the Civil Code ("Prakas 30")
On 25 February 2014, the Phnom Penh Municipal Office of Land Management, Urban Planning and Construction and Cadastral ("Phnom Penh Municipal Land Office") issued a letter to notify the Head of Cadastral Office, Head of Technical Cadastral and Geographic and all Heads of Land Management, Urban Planning, Construction and Land Offices that the Phnom Penh Municipal Land Office intends to start the implementation of the registration procedures of real rights as stipulated in the Prakas 30, jointly issued by the Ministry of Land Management, Urban Planning and Construction and the Ministry of Justice on 29 January 2013, starting from 15 March 2014.
Prakas 30 was issued to ensure the correct and efficient registration of transactions relating to real property in compliance with the Civil Code. It applies only to land which has had its ownership lawfully registered and land for which a Certificate of Possessory Right (or Certificate of Possessory and Enjoyment Right) has been lawfully issued.
Prakas 30 applies to the following categories of registration:
- Transfer, change, correction and extinguishment of ownership;
- Creation, transfer, change, correction and extinguishment of perpetual lease, usufruct, statutory liens, rights over pledge and hypothec; and
- Creation, change, correction and extinguishment of easement right.
China Promulgates Measures to Promote Fair and Open Access to Oil and Gas Pipeline Networks
The China National Energy Administration (the "NEA") promulgated the Measures for Regulation of Fair and Open Access to Oil and Gas Pipeline Networks (油气管网设施公平开放监管办法(试行)) (the "Measures") on 13 February 2014. The Measures, which came into effect on the same day, are a trial version with a validity period of 5 years. As the construction and operation of oil and gas pipelines in China have been dominated by the state-owned enterprises, the Measures demonstrate that China has taken a major step forward in liberalising its oil and gas market.
According to the Measures, operators of oil and gas pipeline networks and facilities (the "Operators") shall equally open its oil and gas pipeline networks and facilities to third parties if they have surplus capacity. However, the Measures do not define or provide any detailed standards for defining the "surplus capacity".
The Measures also provide that the third parties may access not only the pipelines of crude oil, refined oil and natural gas but also the supporting facilities related to conveyance, storage, gasification, liquefaction and compression of oil and gas. The third parties, which may be the Operators, the upstream users of the Operators (for example, the oil and gas production enterprises and trading enterprises) and the downstream users (for example, the oil and gas retailers and end users) shall all be incorporated in China. The third parties shall file the application for the access to the oil and gas pipeline networks and facilities with the Operators directly. Where the Operators refuse to open the oil and gas pipeline networks and facilities, their refusal and the statements of relevant reasons shall be copied to the NEA. In addition, the NEA may play a role of "coordination and mediation" in the disputes between the parties.
Recent Competition Law Developments
The Komisi Pengawas Persaingan Usaha ("KPPU") (or Indonesian Competition Commission) has been active in investigations over alleged cartels in the food commodities industry. Commodities markets in beef, soybean, rice and corn, amongst others, have been investigated in the past two years and these are still ongoing. KPPU is also starting investigations into the energy, transportation and other industries that have crucial impact on the economy. Two recently-concluded investigations are in the garlic commodities market and sea cargo transportation industry. In both cases, KPPU issued a firm decision that a cartel existed and imposed fines on the reported undertakings involved in the cartels.
Apart from domestic investigations, KPPU also aims to look at competition investigations over foreign transactions or allegations that may affect the Indonesian market. To strengthen its ability to investigate, the KPPU has signed Memorandums of Understanding with government bodies such as the Corruption Eradication Commission, the Indonesian Telecommunication Regulation Body, and in due time, the Ministry of Internal Affairs.
In terms of competition law legislation, KPPU have proposed amendments to the Law No. 5 of 1999 regarding the Prohibition of Monopolistic Practices and Unfair Business Competition (Indonesian Competition Law or "ICL"). The amendment proposal is expected to be agreed to by Parliament, as stated by the Chairman of the Committee on Amendment of Law No. 5 recently. Though it has not been amended yet, there has been positive progress during the proceedings up to this moment. For example, Parliament has agreed that the amendments will include a change from a mandatory post-merger notification scheme to a compulsory pre-merger notification scheme, and expansion of the notifiable merger requirement to include establishment of new joint venture and merger by way of assets acquisitions, once the transactions have met the prescribed threshold. In relation to cartel investigations, KPPU will have the authority to apply leniency measures to co-operating parties, and will be empowered to exert more pressure on any relevant party to cooperate in investigations by imposing criminal sanctions for any obstruction.
Parliament has also agreed to expand KPPU's authority to supervise not only the application of the ICL, but to regulate the competition regime of Indonesia as a whole. As a consequence, KPPU is empowered to use products of Law other than the ICL as long as they are relevant to competition. With this development, businesses can expect a stronger and stricter application of the ICL by KPPU in the coming years.
IDX Amends Equity Securities Listing RulesThe Indonesia Stock Exchange ("IDX") recently amended Rule No. I-A 2004 on the Listing of Equity Securities other than Shares issued by Listed Companies (the "Previous Rule") through the issuance of IDX Rule No. I-A 2014 (the "Amended Rule"). Effective as of 30 January 2014, the Amended Rule introduces a number of significant changes to the Previous Rule. The changes are wide-ranging and affect the initial listing requirements, the continuing obligations of listed companies and transfers of listing from the Development Board to the Main Board. Some of these changes are highlighted below.
For initial listings, the definition of "free float" has been revised to refer to the portion of shares held by neither the controlling shareholder nor principal shareholders (the previous definition referred to the portion of shares held by the non-controlling shareholders), and there are revised free float requirements for both the Primary Board and Development Board. The new free float measures are intended to increase market liquidity and boost trading activity.
For continuing obligations, one of the controversial changes relates to the maximum number of terms that may be served by independent commissioners and independent directors (previously known as "unaffiliated directors"). The Amended Rule states that independent commissioners and directors may serve a maximum of two consecutive terms in office. Companies have expressed their concerns as to this new limitation, as it would limit the amount of time that an independent commissioner or director could stay in his post. The Chairman of the Financial Services Authority ("OJK") has recently indicated that the OJK would discuss these concerns with the IDX, while emphasising that there is a need for a restriction of terms to maintain the impartiality of the independent commissioners and directors.
In relation to transfer of listings, under the Previous Rule, if a listed company wished to transfer its listing to the Primary Board, it had to submit a transfer request to the IDX, accompanied by the relevant documents to show fulfilment of the transfer requirements. Under the Amended Rule, the IDX has the authority to transfer a listing from the Development Board to the Primary Board without the necessity of a transfer request, based on the IDX’s own assessment of the company’s fulfilment of the transfer requirements.
Amended Labour Law Permits Employers to Employ More Foreign Workers
An amendment to the labour law has allowed businesses to employ more foreigners. Employers can now hire foreign physical labourers up to 15 percent of their total pool of workers, up from 10 percent stipulated in the old law. White-collar workplaces can also now employ foreign workers up to 25 percent of their staff, up from 20 percent under the old law.
The decision to allow businesses to import more foreign workers comes following reports indicating labour shortages in both skilled and unskilled positions in Laos.
The amendment to the labour law also granted mothers of newborn babies a longer maternity leave period of 3 ½ months, up from the three months provided for in the old law. The extended maternity leave is in line with the recommendations of the International Labour Organisation Convention, to which Laos is a signatory.
The amended law was passed in February during the National Assembly's 6th ordinary session.
Malaysian Companies Bill 2013
The Companies Commission of Malaysia released on 2 July 2013 a consultation draft of the much anticipated Companies Bill 2013 ("Bill"). The Bill seeks to reduce regulatory burden, compliance costs and provide greater flexibility for companies. One of the key areas that the Bill aims to address is Malaysia's corporate governance regime.
The Bill proposes to make it compulsory for remuneration of directors in public company to be approved at a general meeting. For private companies, the Bill stipulates that the Board of Directors ("Board") may approve the remuneration and other benefits of the directors, but the shareholders must first be notified prior to its approval. In the event that a prescribed percentage of the shareholders consider such remuneration as not fair to the company, they may require the Board to pass a resolution to approve the payment.
There are also some proposed changes in so far as payment to any director by way of compensation or consideration for loss of office or retirement, or payment in connection with the transfer of any undertaking or property of the company is concerned. Currently, the particulars of such proposed payments must be disclosed to the shareholders, who must approve such proposal at a general meeting. This position has been adopted in the Bill, with a qualification that the directors and substantial shareholders who have an interest in the payment are disqualified from voting on the resolution approving or disapproving the payment.
Changes in relation to transactions involving directors are also being suggested. The restriction on directors from effecting any: (i) acquisition of an undertaking or property of substantial value, or (ii) disposal of a substantial portion of the company’s undertaking or property, unless it is approved at a general meeting, has been maintained in the Bill. The addition that the Bill brings is that it defines “substantial value” and “substantial portion” as having the same value prescribed in the Capital Market and Services Act 2007 and Main Market Listing Requirements in the case of public companies. Public Companies will need to seek shareholder approval at a general meeting for transactions with a percentage ratio of 25% or more. The percentage ratio is based on a list of calculations laid down in the Listing Requirements, such as (i) the value of the assets subjected to the transaction compared to the net assets of the company; (ii) net profits attrituble to the assets in question compared to the net profits of the company; or (iii) the aggregate value of the consideration compared with the net assets of the company. As for private companies, a transaction will be caught by this restriction if it exceeds 25% of the company’s total assets, total net profit or issued share capital, whichever is the highest.
On the disclosure of directors' interest, the Bill will now require interests in the shares or debenture of a company: (i) of the spouse; and (ii) of a child or stepchild of a director, to be treated as an interest in the contract that necessitates disclosure. The present Companies Act does not require disclosure under these circumstances.
Good corporate governance is essential to continued business growth and investor confidence in Malaysia. With Malaysia looking to build on its continued recovery from the 2008 global financial crisis, the replacement of its present 49-year-old Act is indeed timely. The Bill puts emphasis on a robust corporate governance regime, and its proposal for better transparency and accountability amongst Malaysian companies is certainly cause for encouragement. Needless to say, the Bill places Malaysia in the right direction to maintain its competitive edge in the region.
New Anti-Corruption Law Passed
The Elimination of Corruption and Bribery Law ("ECBL") was passed in Myanmar on 7 August 2013 and entered into force on 17 September 2013. The Suppression of Corruption Act 1948 ("SOCA") was repealed as a result. Together with the provisions in the Penal Code 1861 as well as the Control of Money Laundering Law 2002, the ECBL forms the legislative framework addressing the prevention of corruption in Myanmar.
The ECBL seeks to address the bribery of persons within a political post or with public authority in Myanmar, as well as penalise persons who engage in the bribery of such persons. Such persons conceivably include members of Myanmar’s Parliament, Ministers, Deputy Ministers, as well as officials from government departments and foreign government departments.
Under the ECBL, a bribe is considered to be any monies, materials, gifts, services or other illegal benefit provided or accepted without consideration or fair value. There is no exemption for facilitation payments so potentially "tea monies", which may in practice be paid to junior bureaucrats or government officials in Myanmar, are potentially illegal. Stiffer penalties have also been introduced in the ECBL, with persons guilty of bribery offences liable to imprisonment of up to 15 years and / or a fine. On that note, it is interesting to see how this concept of "bribe" will be interpreted and applied in the local context, given that gifts are not uncommon in the Myanmar culture.
The ECBL would be enforced by the Anti-Corruption Commission ("ACC"), with the composition of the Anti-Corruption Commission having only recently been nominated. The members of the ACC mostly comprise former high-ranking government officials, with the proposed Chairman of the ACC being U Mya Win, a former military officer. Other members of the ACC comprise former ambassadors, former military officers, former Director Generals from the Ministry of Foreign Affairs and Ministry of National Planning and Economic Development, and former Directors from the Audit Office.
The passing of the ECBL appears to send a clear message that the Myanmar Government is directing efforts towards eradicating bribery and corruption, with the ECBL drafted with a view to align Myanmar’s anti-corruption legislation with current international standards. It remains to be seen how successful enforcement of the ECBL would be, given the continued existence of corruption risks in Myanmar.
Separately, in recognition of Myanmar's ongoing democratic reforms and efforts to eliminate corruption, the US Office of Foreign Assets Control ("OFAC") has gradually eased its sanctions against Myanmar through the issuance of several General Licences and Executive Orders. Further information relating to existing US Sanctions can be found in the OFAC publication on FAQs regarding US sanctions in Myanmar, which has been updated as of 1st April 2014.
In particular, US companies investing in Myanmar may wish to take note of Burma General Licence 19 which authorises US persons to deal with four specified banks listed on the OFAC's Specially Designated Nationals and Blocked Persons List ("SDN list") within certain terms and conditions. US investors may need to deal with these four SDN listed banks when applying for operational licences and permits in Myanmar and when making payments to designated accounts of local regulators. Nonetheless, US persons are still generally prohibited from dealing with SDN listed persons and entities unless authorised by the OFAC.
Protection from Harassment Bill 2014
The Protection From Harassment Bill was passed by Parliament on 13 March 2014. The legislation seeks to enhance the protection of persons against harassment and anti-social behaviour such as cyber bullying and unlawful stalking, by providing a range of self-help and civil remedies as well as imposing criminal liability on perpetrators who engage in such behaviour.
Most of the offences relating to harassment and anti-social behaviour are currently covered by the Miscellaneous Offences (Public Order and Nuisance) Act (Cap 184) ("MOA"). When enacted, the new Protection From Harassment Act ("Act") will extend these offences as well as introduce a new one, unlawful stalking, under a consolidated legislation. With this, the corresponding offences in the MOA will be repealed, and the common law tort of harassment will be abolished. The intention of this is so that no civil proceedings will be brought for harassment except under the new Act when it is passed.
The offences and penalties under the Act are covered in sections 3 to 10. Apart from the criminal sanctions, various civil remedies are provided for in sections 11 to 13 of the Act.
For an overview of the structure of the Protection From Harrassment Bill, please refer to our Firm's update.
Court of Appeal Sets out Approach for Assessing what Constitutes Tax AvoidanceSection 33 of the Income Tax Act ("Act") contains a general anti-avoidance rule ("GAAR") which enables the Comptroller of Income Tax to disregard the legal form of transactions in certain circumstances to counteract any impermissible tax advantage obtained by a taxpayer. The construction and application of the GAAR, as well as the ambit of the Comptroller’s power to counteract the tax advantage, was considered in the recent Court of Appeal decision of Comptroller of Income Tax v AQQ and another appeal  SGCA 15. This is a landmark decision as it marks the first time that the GAAR is considered by the highest court since its enactment in its current form 26 years ago.
Briefly, the Court of Appeal held that the GAAR should be applied as follows:
(a) the Court will first consider whether a transactional arrangement prima facie falls within the threshold limbs of section 33(1) of the Act such that the taxpayer has derived a tax advantage, i.e. whether the purpose or effect of the arrangement is to alter the incidence of tax, relieve a liability to pay tax, or reduce or avoid any liability imposed or would have otherwise been imposed;
(b) if any of the threshold limbs of section 33(1) of the Act is satisfied, the Court will then consider whether the statutory exception in s33(3)(b) applies; and
(c) if the statutory exception in section 33(3)(b) of the Act does not apply, the Court would ascertain whether the tax advantage was legitimate, in that it arose from a specific provision in the Act, the use of that specific provision was within Parliament’s intended scope and the legal form and resulting tax effect of such use was within the contemplation and purpose of Parliament.
Please click here to refer to our Firm's update on this Court of Appeal decision.
What Does an "All Reasonable Endeavours" Clause Require You to Do?
"Reasonable endeavours" or "best endeavours" clauses have become an increasingly common feature of contracts in Singapore. However, such "endeavours" clauses are far from certain, and questions remain as to what exactly parties are required to do under these provisions. In KS Energy Services Ltd v BR Energy (M) Sdn Bhd  SGCA 16, the Singapore Court of Appeal had the opportunity to clarify the content of "endeavours" clauses.
The case involved a provision which required the Appellant to use "all reasonable endeavours" to procure an oil rig by a certain date. Although the Appellant failed to procure the oil rig in time, the Court held that the "all reasonable endeavours" clause had not been breached, as the Appellant had in fact taken all reasonable steps that could be expected of it in getting the third party to complete construction of the oil rig.
Importantly, in reaching this decision, the Court of Appeal examined the existing case law on the topic and laid out the applicable test for determining whether an "endeavours" clause has been fulfilled, as well as the guidelines and principles that parties should observe when working under an “endeavours” clause.
Our Firm's summary of the case can be accessed at the link here.
SGX Regulatory Enhancements to Strengthen Securities Market
The Singapore Exchange Limited ("SGX") has enhanced its regulatory regime for the maintenance of orderly, fair and transparent trading in its securities markets. The changes, which are targeted at heightening SGX's surveillance of trading activities, took effect on 3 March 2014. They comprise the following measures:
SGX will enhance its public query process by providing guidance and examples of what could be the possible causes of unusual trading activity and the company’s response will now need to be approved by the company’s board of directors;
SGX will issue a “Trade with Caution” announcement when companies are unable to sufficiently explain the unusual trading activity; and
A new requirement for companies to notify SGX of discussions or negotiations which are likely to lead to a takeover, reverse takeover or very substantial acquisition and to also maintain a list of persons privy to such transaction.
These measures are applicable to both Mainboard and Catalist listed securities. Companies which have securities listed on the SGX should take note of these developments, especially in relation to responses and notifications which they need to make to SGX.
For a summary of what these measures entail as well as some preliminary observations on their effect, please refer to the update here.
Watch this space for more updates in the next edition
Law on Land No. 45/2013/QH13
On November 29 2013, the National Assembly ratified the Law on Land No. 45/2013/QH13 (the "Law on Land"). Notably, the Law on Land introduces provisions protecting the rights and interests of land users, as well as increasing transparency in the State's authority to deal with land.
Some of the significant provisions of the Law on Land are as follows:
- Chapter 2 stipulates the rights and obligations of the State with respect to land users, including the obligation to provide guarantees and information.
- Chapter 4 introduces new mechanisms to promote transparency in land use planning, and provides guarantees for land users in the planning process.
- Chapter 5 governs the subjects and assignees of land leased from the State, as well as the conditions for investment projects on such land.
- Chapter 6 defines the instances in which the State may withdraw and recover land, particularly where the rights and interests of land users are negatively affected. The chapter also sets out regulations for compensation and resettlement.
- Chapter 8 introduces more transparent measures in land management by explicitly outlining land financing, land prices, and the basis for calculating land use levy and land prices.
- Chapter 11 details the rights and obligations of land users, and sets out a new, transparent information system that allows for effective public monitoring.
The Law on Land 2013 shall take effect on 1 July 2014.
Law on Employment No. 38/2013/QH13
On 12 December 2013, the Office of the President announced the President's Order No. 14/2013/L- CTN proclaiming the Law on Employment (the "Law on Employment") ratified by the National Assembly, which is set to take effect from 1 January 2015. This marks the first legislation relating to employment in Vietnam.
Some of the significant provisions are as follows:
- The Law on Employment sets out various policies aimed at supporting the creation of employment for workers such as preferential credit policy, supporting policies for employment relocation in rural areas, and policies on public employments, etc.
- Databases of information on the labour market are to be created and managed by government agencies, which is expected to contribute to the development of competition, transparency and consistency in the labour market.
- The Law on Employment sets out the assessment and grant of National Vocational Skill Certificates, which are aimed at accrediting vocational skill levels according to employees’ qualifications.
- To facilitate the operation and organisation of employment services, employment services organisations are to be developed.
- Unemployment insurance policies are to be regulated so as to modify the existing policies under the Law of Social Insurance.
In addition, on January 16, 2014, the Government issued Decree No. 03/2014/ND-CP, detailing the process for the recruitment of Vietnamese employees working for Vietnamese employers, and working in industrial zones, economic processing zones, high tech and economic zones.
Law on Bidding No. 43/2013/QH13
On 26 November 2013, the National Assembly approved and announced the Law on Bidding No. 43/2013 QH13 (the "Law on Bidding"), which replaces the Law on Bidding No. 61/2005/QH11. The new law is aimed at ensuring the independence and competitiveness of the bidding and tendering process, and is set to take effect from 1 July 2014.
The Law on Bidding sets out simplified administrative procedures for bidding, and provides a number of methods to evaluate tender documents. The new law also allows investors to organise and select contractors through online services, specifically through the national tendering network.
Under the Law on Bidding, tenderers or entities involving in the domestic supply of goods are entitled to enjoy preferential treatment. In addition, new regulations on centralised procurement are partly aimed at supporting and encouraging domestic production.
The Law on Bidding further states that contracts are to be in lump sum form. If contractors choose to use unit price contract or time-based contract, they will have justify their choice and prove that it is the more appropriate form of contract.
Decree No. 01/2014/ND-CP on foreign investors' purchase of shares of Vietnamese credit institutions
On 3 January 2014, the Government of Vietnam issued Decree No. 01/2014/ND-CP on foreign investors' purchase of shares of Vietnamese credit institutions ("Decree 01"), replacing Decree No. 69/2007/ND-CP. Decree 01 took effect on 10 February 2014.
Decree 01 has opened the door to more opportunities for foreign investors, increasing the maximum shareholding percentage for foreign investors in Vietnamese banks in certain situations. Foreign investors are also allowed to participate in the Managing Board of Vietnamese credit institutions, subject to certain limitations.
Notably, Decree 01 stipulates certain conditions for a foreign organisation to purchase shares where such purchase would lead to a shareholding level of 10% or more of charter capital in a Vietnamese credit institution, as well as conditions for foreign organisations to purchase shares and become foreign strategic investors. The conditions include being ranked by international credit-ranking organisations, having full financial capacity to purchase the shares, having total assets amounting to at least US$10 billion, and that the share purchase will not affect the stability of the Vietnamese credit institution system.