Set up a financial company in Vietnam

A financial company is a type of non-bank credit business organization with the function of conducting the use of various capital sources to carry out currency-related activities, playing an important role in contributing to the national economy. Therefore, the conditions and order and procedures to set up a financial company are being interested by many individuals as well as businesses.

Legal basis

• WTO, CPTPP
• Enterprise Law 2020.
• Investment Law 2020
• Law on Credit Institutions 2010, amended and supplemented in 2017.
• Circular 30/2015/TT-NHNN 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.

Market access conditions for foreign investors

According to WTO commitments

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, cession of 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
• Securities

For the industry group “Insurance and insurance-related services”, based on Vietnam’s Schedule of commitments on services in the WTO, Vietnam has removed market access restrictions for foreign investors setting up financial companies in Vietnam.

Before January 1, 2008, 100% foreign-invested insurers were not allowed to provide compulsory insurance services, including civil liability insurance of motor vehicle owners for third persons, construction and installation insurance, oil and gas works and works likely to endanger public security and the environment. This restriction will be lifted on January 1, 2008.

For the “Banking and other financial services” sector, Vietnam has no market access restrictions, except:

• Form of establishment:
• For foreign commercial banks: representative offices, branches of foreign commercial banks, joint-venture commercial banksin which the capital contribution of foreign parties does not exceed 50% of the charter capital of joint-venture banks, joint venture financial leasing companies, 100% foreign-invested financial leasing companies, joint venture finance companies and 100% foreign-invested finance companies and since April 1, 2007 are allowed to establish banks with 100% foreign invested capital.
• For foreign financial companies: representative offices, joint venture finance companies, 100% foreign-invested finance companies, joint venture finance leasing companies and 100% foreign-invested financial leasing companies.
• For foreign financial leasing companies: representative offices, joint venture finance leasing companies and 100% foreign-invested financial leasing companies.
• Conditions on contributed capital
• The participation of 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 joint-stock commercial bank of Vietnam must not exceed 30% of the charter capital of the bank, unless otherwise provided for by Vietnamese law or permitted by the competent authorities of Vietnam.
• Foreign commercial bank branches are not allowed to open transaction points other than their branch headquarters.
• 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, however makes reservations to all current incompatible measures at the central and regional levels for the industry group “Financial services provided by non-financial institutions,  except for the provision and transfer of financial information and financial advisory services”, i.e. when investors participate in the domestic market, they must meet general regulations for investors of all nationalities and specific regulations for foreign investors (Annex NCM-I)

Conditions to set up a financial company in Vietnam

Pursuant to Article 6 of the Law on Credit Institutions stipulating the organizational form of a credit institution, a financial company with 100% foreign capital shall be established and organized in the form of a limited liability company.

In addition to the general conditions for domestic credit institutions, 100% foreign-owned financial companies need to meet the following separate conditions:

• The foreign credit institution may conduct banking activities in accordance with the laws of the country where the foreign credit institution’s head office is located.
• The activity proposed to be permitted to be carried out in Vietnam must be the activity that the foreign credit institution is currently permitted to carry out in the country where the foreign credit institution’s head office is located.
• Foreign credit institutions must have healthy operations, satisfy conditions on total assets, financial situation and safety ratios as prescribed by the State Bank.
• Foreign credit institutions must make written commitments to provide financial, technological, administrative, operating and operational support when establishing a 100% foreign-owned financial company; ensure that these organizations maintain the real 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 competent authority of the foreign country has signed an agreement with the State Bank on inspection and supervision of banking activities, exchange of information on bank safety supervision and has a written commitment to consolidate supervision in accordance with international practices for the operation of the foreign credit institution.

Conditions for founding shareholders

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

Shareholders are individuals

• Vietnamese nationality, having full civil act capacity as prescribed by law.
• Not falling into the cases of being prohibited from establishing an enterprise in accordance with the provisions of law.

Shareholders are organizations

• Established in accordance with the provisions of Vietnamese law.
• Business is profitable for 03 consecutive years before applying for a license.
• Fulfill all tax and social insurance obligations as prescribed until the date of submission.

Note

For organizations being Vietnamese enterprises (except commercial banks), the following conditions must be met:

• The minimum ownership capital is VND 500 billion
• Total assets are at least VND 1,000 billion in the 3 fiscal years preceding the application date.

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

Conditions on the owner

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 shall use state assets to establish their own profit-making business enterprises; his unit.
• Officers, civil servants, public servants.
• Officers, non-commissioned officers, professional soldiers; defense workers and officials in agencies; units of the Vietnam People’s Army; professional officers and non-commissioned officers; police workers in agencies; units of the People’s Police of Vietnam; except for persons appointed as authorized representatives to manage the State’s capital contribution at the enterprise or management at the State enterprise.
• Professional leaders and managers in state-owned enterprises; except for persons appointed as authorized representatives to manage the State’s capital contribution in other enterprises.
• Persons who have lost civil act capacity or have limited civil act capacity; people with difficulties in perception, mastery of behavior; minors.
• The organization has no legal status.
• The person is being examined for criminal liability; detained; are serving prison sentences, are serving administrative handling measures at compulsory detoxification establishments; compulsory educational institutions; or are prohibited by the Court from holding office, practicing certain professions or doing certain jobs; other cases as prescribed by the Bankruptcy Law and the Law on Anti-Corruption.
• Organizations that are commercial legal entities are prohibited from doing business; it is forbidden to operate in certain areas in accordance with the provisions of the Criminal Code.

Conditions on the type of business

In accordance with the law, financial companies are structured in two types as follows:

• Joint-stock non-bank credit institutions – this is a popular type because of its advantages in raising capital and developing models.
• Non-bank credit institutions limited liability

Capital conditions

Non-bank credit institutions need to satisfy the conditions on legal capital as prescribed by the Government from time to time.

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

Business line conditions when setting up a financial company

Pursuant to Clause 1, Article 108 of the Law on Credit Institutions, financial companies need to satisfy the following conditions:

• Banking activities of financial companies must be stated in the establishment and operation licenses issued by the State Bank (hereinafter referred to as the licenses)
• Have qualified staff; professional capacity, facilities; technology, means; equipment and internal regulations prescribed by law for carrying out banking activities are stated in the license
• Having a contingent of qualified and professionally competent staff; facilities; technology; Means, equipment and internal regulations on foreign exchange management
• Fully satisfy 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 have been stipulated in Article 92 of the Law on Securities 2006, amended and supplemented in 2010.
• Comply with regulations related to account valuation, reporting in Articles 88 and 89 of the applicable securities law.
• Comply with obligations of public securities companies, specified in Clause 2, Article 27, Law on Securities 2006, amended and supplemented in 2010.

Procedures to set up a Vietnam capital finance company

Step 1: Drafting a financial investment business registration dossier

Financial services business registration dossiers are regulated by law. With the financial investment company model, the following specific documents are required:

• An application for registration of financial investment business, according to the form.
• Draft of the enterprise’s charter and minutes of cooperation of the decision on establishment of the company: clearly stating the contents, mode of operation, area of operation, benefits to the economy; In particular, determine the specific operation plan for the first 3 years.
• List and curriculum vitae (according to the form) of professional diplomas and certificates of founding members, members of the Board of Directors, members of the Supervisory Board and General Director (Director) of financial companies. Documents certifying shareholders/ capital contributors: valid citizen identity card/ passport.
• Charter capital contribution plan, list and commitment on charter capital contribution level of capital contributors.
• Copy of practice license, with securities enterprises self-managing capital.
• Financial position and relevant information about major shareholders. For major shareholders being enterprises, the documents to be submitted include:
• Establishment decision;
• Current charter;
• Certificate of the competent authority on the amount of charter capital and the actual capital amount in the current year;
• Document appointing a legal entity representative of the enterprise;
• Financial balance sheet, profit and loss results have been audited and reported on operation in the last 3 years.

Step 2: Submit the application at the business registration office, provincial Department of Planning and Investment.

Bring the enterprise registration dossier to the Business Registration Office of the Department of Planning and Investment. After that, enterprises wait for 3-5 days to receive an enterprise registration license.

In case the application is invalid, the enterprise will be answered in writing by the Department of Planning and Investment.

Step 3: Get the business registration license result

The representative will receive the business registration results after 3-5 working days after the business registration office receives the complete and accurate dossier. In case of missing or incorrect dossiers, they will be responded in writing to the department to return the results, helping the unit complete and supplement.

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

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

If you need advice on financial company set up services, please contact Viet An Law Firm for the best support.