Requirements for the delegation of outward portfolio investment in Vietnam

Requirements for the delegation of outward portfolio investment in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is outward portfolio investment trust?

According to Clause 4, Article 3 of Decree 135/2015/ND-CP, outward portfolio investment trust refers that an economic organization (referred to as a delegating organization) entrusts capital in foreign currency to a domestic organization permitted to be delegated for investments (referred to as a delegated organization) and the latter conduct outward portfolio investments through investment trust contracts.

Investment trust contract is a written agreement between a delegating organization and a delegated organization on the delegating organization's entrustment of capital in foreign currency for the delegated organization to make outward portfolio investments.

(Clause 5, Article 3 of Decree 135/2015/ND-CP)

2. Requirements for the delegation of outward portfolio investment in Vietnam

Requirements for the delegation of outward portfolio investment specified in Article 20 of Decree 135/2015/ND-CP (amended in Decree 16/2019/ND-CP), are as follows:

- Gain profit in 03 consecutive years preceding the year when outward portfolio investments are delegated. Such profit shall be shown in the financial statements audited by independent auditing firms and bearing only unqualified opinions according to regulations adopted by the Ministry of Finance (this regulation does not apply to securities investment funds and securities investment companies)

- Fulfill all financial duties for the Government and incur no tax debts against the government's treasury;

- Possess documents evidencing that the foreign currency in accounts for outward portfolio investment trust has been self-gained.

- Have outward portfolio investment plans ratified by authorized bodies of economic organizations (general shareholders’ meeting, board of directors, member council and equivalents) or other authorized bodies according to the laws.

- Abide by the laws on the management and use of state capitals (for delegating organizations that are economic organizations with state-owned capital).

3. Entities eligible for delegating outward portfolio investments in Vietnam

Economic organizations are only allowed to make outward portfolio investments through investment trusts by delegating the organizations permitted to be delegated to make investments according to Article 21 of Decree 135/2015/ND-CP, except for the entities as defined in Section 4, Article 19 of Decree 135/2015/ND-CP.

Specifically, organizations that are allowed to receive investment trusts include: fund management companies and commercial banks.

(Article 18 of Decree 135/2015/ND-CP)

4. Principles for outward portfolio investment trust in Vietnam

According to Article 19 of Decree 135/2015/ND-CP, the principles for outward portfolio investment trust in Vietnam are as follows:

- Delegating organizations are only allowed to delegate outward portfolio investments into the instruments of investment as defined in Article 8 of this Decree.

- The delegation of outward portfolio investments must be executed into investment trust contracts that ought to specify the amount of trust money, term of delegation, investment instruments, rights and duties of the parties according to this Decree and relevant laws.

- The currency for outward portfolio investment trust must be foreign.

- If proprietary traders receive a certificate of outward portfolio investment registration from authorized bodies and the effect of such certificate remains valid, proprietary traders are not allowed to delegate outward portfolio investments to trust organizations.

5. Basis for determining the limit of trusteeship for outward portfolio investments in Vietnam

Each year, Vietnam State Bank confirms trust organizations' registration of trust limit on the basis of:

- Total limit of annual outward portfolio investments approved by the Prime Minister;

- The capital size of trust organizations that are commercial banks, or the size of trust assets of trust organizations that are fund management companies;

- The proprietary trading limit registered with and confirmed by Vietnam State Bank (if any);

- Trust organizations' performances of holding trusteeship for outward portfolio investments in previous years;

- The conjuncture of the micro economy and monetary policies and targets from time to time.

(Article 28 of Decree 135/2015/ND-CP)

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