Vietnam – Simplify Offshore Investment: Circular 23 Enhancing ESOP Implementation
On 28 June 2024, the State Bank of Vietnam (“SBV”) issued Circular No. 23/2024/TT-NHNN (“Circular 23”), amending Circular No. 10/2016/TT-NHNN (“Circular 10”), to provide updated and detailed guidance on the provisions in Decree No. 135/2015/ND-CP (“Decree 135”) related to offshore indirect investment. Circular 23, which will take effect on 12 August 2024, introduces significant changes, particularly concerning offshore indirect investment activities of Vietnamese employees participating in the offshore employee’s stock ownership plans (the “ESOP”).
The goal of Circular 23 is to streamline administrative procedures in line with the Government’s strategy, making it easier and faster for organizations to implement the ESOP with less expense. This facilitates the attraction of foreign capital flows from around the world into Vietnam through its ESOP and diversifies foreign currency revenues into Vietnam.
Expanded Entities for ESOP Implementation
Circular 23 expands the definition of “Organization implementing offshore issued bonus share plans”. Previously, this definition only included foreign organizations with a commercial presence in Vietnam, such as foreign-invested economic organizations, branches, representative offices, or operating offices of foreign parties to a business cooperation contract. The new adjustment now also applies to economic organizations that have relationships with foreign organizations through ownership of shares, capital contributions, or other forms as specified by Vietnamese law.
This change recognizes that the ESOP of foreign organizations is implemented not only by their commercial presence in Vietnam but also by their subsidiaries and associates owned by foreign organizations, even if their entities do not have a commercial presence in Vietnam. This adjustment Indochine Counsel | Special Alert | July 2024 Page 2 aligns with global integration trends, allowing Vietnamese employees to participate in the ESOP offered by foreign enterprises and organizations.
Abolishing SBV Approval Requirement
Circular 23 eliminates the requirement for obtaining approval for the ESOP from the SBV (the “Approval”) before implementing the ESOP. Previously, organizations implementing the ESOPs had to follow steps including (i) registering and submitting related documents to the SBV to receive the Approval, and (ii) after receiving the Approval, the organization implementing the ESOP would open a transaction account at a commercial licensed bank in Vietnam to conduct transactions as per regulations. Under the new regulations, the obtaining the Approval is no longer necessary. Consequently, the organization implementing the ESOP needs to open a transaction account at a commercial license bank to carry out the transactions as per regulations.
For further information, please contact:
Le Thi Khanh Hoan, Indochine Counsel
hoan.le@indochinecounsel.com
