Conditions for establishing a financial company in Vietnam

A financial company is a type of non-banking credit business organization with the function of using different capital sources to carry out monetary-related activities, playing an important role in the contributing to the national economy. Therefore, the conditions and procedures to establish a financial company are being interested by many individuals as well as businesses.

Legal basis

• WTO, CPTPP.
• Law on Enterprise 2020.
• Law on Investment 2020.
• Law on Credit Institutions 2010, amended and supplemented in 2017.
• Circular 30/2015/TT-NHNN is amended and supplemented in Circular 15/2016/TT-NHNN, Circular 05/2023/TT-NHNN, Circular 01/2019/TT-NHNN.
• Circular No. 04/2010/TT-NHNN stipulating the merger, consolidation and acquisition of credit institutions, amended and supplemented by Circular 36/2015/TT-NHNN.

Conditions of market access for foreign investors

According to WTO

According to Vietnam’s commitments in the WTO, Vietnam is open to foreign investors to access the financial services market in Vietnam for the following sub-sectors:

• Insurance and insurance-related services, including Original Insurance; Reinsurance, ceding reinsurance; Insurance intermediaries (such as insurance brokers and insurance agents); Insurance support services (such as consulting, actuarial services, risk assessment and claims settlement).
• Banking and other financial services
• Stock

For the industry group “Insurance and insurance-related services”, according to Vietnam’s Schedule of Service Commitments in the WTO, Vietnam has removed market access restrictions for foreign investors in addition to establishing a financial company in Vietnam.

For the industry group “Banking and other financial services”, Vietnam does not restrict market access, except:

• Form of establishment:
• For foreign commercial banks: representative offices, branches of foreign commercial banks, joint-venture commercial banks in which the capital contribution of foreign parties does not exceed 50% of the bank’s charter capital joint ventures, joint venture finance leasing companies, 100% foreign invested financial leasing companies, joint venture finance companies and 100% foreign invested finance companies and from 1/ April 2007 was allowed to establish a bank with 100% foreign investment capital.
• For foreign financial companies: representative offices, joint venture finance companies, 100% foreign owned finance companies, joint venture finance leasing companies and 100 financial leasing companies % Foreign investment capital.
• For foreign financial leasing companies: representative offices, joint venture finance leasing companies and 100% foreign invested financial leasing companies.
• Conditions on contributed capital
• Shareholding by foreign credit institutions in equitized Vietnamese state-owned commercial banks may be restricted by national law.
• Form of share purchase: the total number of shares held by foreign natural and legal entities in each Vietnamese joint-stock commercial bank must not exceed 30% of the bank’s charter capital, unless Vietnamese law Nam has other regulations or is permitted by a competent authority of Vietnam.
• Branches of foreign commercial banks are not allowed to open transaction points other than their branch offices.
• Since accession, foreign credit institutions are allowed to issue credit cards on the basis of national treatment

According to CPTPP

Vietnam does not restrict market access for foreign investors in the financial sector, but makes reservations with all current incompatible measures at the central and regional levels for industry groups. Financial services provided by non-financial organizations, excluding the provision and transmission of financial information and financial advisory services”, that is, when investors participating in the domestic market must meet the applicable regulations for investors of all nationalities and specific regulations for foreign investors (Annex NCM-I)

Conditions for establishing a financial company under Vietnamese law

Pursuant to Article 6 of the Law on Credit Institutions providing for the organizational form of a credit institution, a 100% foreign-owned financial company may be established and organized in the form of a limited liability company.

In addition to the general conditions for domestic credit institutions, a 100% foreign-owned financial company needs to meet the following specific conditions:

• A foreign credit institution is permitted to conduct banking activities in accordance with the laws of the country where the foreign credit institution is headquartered.
• The activity expected to be carried out in Vietnam must be the activity that the foreign credit institution is currently permitted to conduct in the country where the foreign credit institution’s head office is located.
• Foreign credit institutions must have healthy operations, meet the conditions on total assets, financial situation, and safety ratios as prescribed by the State Bank.
• The foreign credit institution must have a written commitment to support in finance, technology, administration, administration and operation when establishing a 100% foreign-owned financial company; ensure these institutions maintain the actual value of their charter capital not lower than the legal capital level and comply with the provisions on safety assurance of the Law on Credit Institutions.
• The foreign competent authority has signed an agreement with the State Bank on banking inspection and supervision, exchanging information on banking safety supervision and has made a written commitment to consolidated supervision according to regulations. international practices for operations of foreign credit institutions.

Conditions for founding shareholders

Pursuant to Clause 2, Article 11 of Circular 30/2015/TT-NHNN, the conditions for founding shareholders are specified very clearly. Specifically:

Shareholders are individuals

• Vietnamese nationality, full civil act capacity as prescribed by law.
• Not falling into the cases that are prohibited from establishing an enterprise according to the provisions of law.

Shareholders are organizations

• Established in accordance with the laws of Vietnam.
• Profitable business for 03 consecutive years before applying for a license.
• Fully fulfill the tax and social insurance obligations as prescribed by the date of application submission.

Note

Organizations that are Vietnamese enterprises (except commercial banks) need to ensure the following conditions:

• Minimum equity is VND 500 billion
• Total assets of at least VND 1,000 billion in 03 consecutive financial years before the date of application submission.

The organization is a commercial bank, the minimum total assets to be guaranteed is VND 100,000 billion and a number of other specific conditions.

Conditions for the owner of company

Owners of financial companies are not prohibited from establishing or participating in enterprises, according to Clause 2, Article 17 of the Enterprise Law 2020 as follows:

• State agencies and units of the people’s armed forces use state assets to establish business enterprises for their own profit; unit.
• Cadres, civil servants, and public employees.
• Officers, non-commissioned officers, professional soldiers; defense workers and officers in agencies; units of the Vietnam People’s Army; professional officers and non-commissioned officers; police workers in agencies; units of the Vietnam People’s Public Security; except for the person appointed as an authorized representative to manage the State’s capital contribution in the enterprise or in the State enterprise.
• Professional leaders and managers in state-owned enterprises; except for the person appointed as an authorized representative to manage the State’s capital contribution in other enterprises.
• Persons who have lost their civil act capacity or have limited civil act capacity; people with difficulties in cognition and behavior control; Minors.
• The organization has no legal personality.
• Persons being examined for penal liability; detained; are serving prison sentences, are serving administrative handling measures at compulsory detoxification establishments; compulsory educational institutions; or are banned by the Court from holding certain posts, practicing certain professions or doing certain jobs; other cases as prescribed by the Law on Bankruptcy and the Law on Anti-corruption.
• Organizations that are commercial legal entities are prohibited from doing business; prohibited from operating in certain fields according to the provisions of the Penal Code.

Conditions on the type of business

According to the provisions of law, financial companies are structured in two types as follows:

• Joint stock non-bank credit institution. This is a popular type because of its advantages in capital mobilization and model development.
• Limited liability non-banking credit institution

Capital conditions

Non-bank credit institutions need to meet the legal capital requirements as prescribed by the government from time to time.

• Enterprises with a minimum capital of 500 billion VND; for the group, it will have to have a minimum capital of 1000 billion dong and must have a commitment to support the financial company.
• Profitable business activities in the year immediately preceding the year of establishment of the financial company.
• Contributed capital must be the capital portion minus the difference of investment projects and debts.

Conditions when establishing a financial company

Pursuant to Clause 1, Article 108 of the Law on Credit Institutions, a financial company needs to meet the following conditions:

• The banking activities of a financial company must be recorded in the establishment and operation license issued by the State Bank (hereinafter referred to as the License for short).
• Having a team of qualified staff; professional capacity, facilities; technology, means; equipment and internal regulations as prescribed by law to carry out banking activities as stated in the License
• Having a team of qualified and professional staff; infrastructure; technology; means, equipment and internal regulations on foreign exchange management
• Fully satisfy the professional conditions for banking activities prescribed by the State Bank.

Note:

Securities investment enterprises need to comply with the following regulations:

• Restrictions on securities investment were stipulated in Article 92 of the Securities Law 2006, as amended and supplemented in 2010.
• Comply with regulations related to account valuation, reported in articles 88 and 89, current securities law.
• Comply with the obligations of a public securities company, as provided for in Clause 2, Article 27 of the Securities Law 2006, as amended in 2010.

Procedures for establishing a financial company in Vietnam

Step 1: Prepare financial investment business registration documents

Financial service business registration documents are prescribed by law. With a financial investment company model, the following specific documents are required:

• Application for registration of financial investment business, according to the form.
• The draft of the enterprise’s charter and the minutes of meeting the decision on establishment of the company: clearly stating the content, mode of operation, area of operation, benefits for the economy; in which, determine the specific operation plan for the first 3 years.
• List, curriculum vitae (according to form) of diplomas and certificates of expertise of founding members, members of the Board of Directors, members of the Supervisory Board and the General Director (Director) of the financial company. Certificate of shareholder/contributor: valid passport/citizen identification.
• Charter capital contribution plan, list and commitment on the amount of charter capital contribution of capital contributors.
• A copy of the license to practice, with the securities enterprise self-managing capital.
• Financial position and relevant information about major shareholders. For major corporate shareholders, the documents to be submitted include:
• Decide to establish;
• Company Charter;
• Certification of the competent authority of the current year’s charter capital and actual capital;
• A document appointing a legal representative of the enterprise;
• Audited financial balance sheet, profit and loss results and operation report for the last 3 years.

Step 2 : Submit the application at the business registration office, provincial investment planning department.

Bring the business registration documents to the Business Registration Office of the Department of Planning and Investment. After that, the business waits 3-5 days to receive the business registration license.

In case the application is not valid, the enterprise will receive a written reply from the Department of Planning and Investment.

Step 3 : Get the results of the business registration license

The representative will receive the business registration result after 3-5 working days, since the business registration office receives the complete and accurate dossier. In case the dossier is incomplete or has incorrect information, it will be replied in writing at the result return department, helping the unit to complete and supplement.

Note : Circular 05/2023/TT-NHNN amends Circular 30/2015/TT-NHNN with some notable contents as follows:

• Amending and supplementing regulations on dossiers, order and procedures for granting operation licenses of non-banking credit institutions
• Amending and supplementing regulations for founding shareholders of non-banking credit institutions
• Amending and supplementing regulations for owners and founding members
• Amending and supplementing regulations on method of sending Charter to the State Bank
• Supplementing, replacing and abolishing a number of words, phrases and points of Circular 30/2015/TT-NHNN

If you need advice on the service of setting up a financial company, please contact Viet An Law Firm for the best support.