What are the requirements for increase in charter capital of insurers in Vietnam? What is the application for approval of principle to increase charter capital?
- What are the requirements for increase in charter capital of insurers in Vietnam?
- What is the application for approval of principle to increase charter capital of insurers in Vietnam?
- What is the application for the process of increasing capital which is submitted to the Ministry of Finance of Vietnam?
What are the requirements for increase in charter capital of insurers in Vietnam?
Pursuant to the provisions of Clause 1, Article 19, Decree 46/2023/ND-CP stipulates the requirements for increase in charter capital of insurers as follows:
Increase in charter capital of insurers, reinsurers, foreign branches in Vietnam
1. If an insurer, reinsurer, or foreign branch in Vietnam seeks to increase their charter capital, they must meet the following requirements:
a) The increase in charter capital or allocated capital shall be made in Vietnamese Dong;
b) Shareholders, capital contributors, and parent companies of insurers, reinsurers, and foreign branches in Vietnam are not permitted to supplement their charter capital or allocated capital through loan capital or investment trust capital from other organizations or individuals.
c) After charter capital is increased, the insurer or reinsurer must still satisfy the requirements pertaining to shareholder structure specified in Article 66 of the Law on Insurance Business for joint-stock companies.
With respect to joint-stock companies established before January 1, 2023, they must satisfy the mentioned requirements pertaining to shareholder structure from January 1, 2026.
d) If the insurer or reinsurer increases its charter capital through capital contributions from new shareholders or capital contributors, these new shareholders and capital contributors must satisfy the conditions prescribed in Clauses 1 and 2, Article 64 and Article 65 of the Law on Insurance Business.
According to the above provisions, if an insurer in Vietnam seeks to increase its charter capital, it must meet the following requirements:
- The increase in charter capital or allocated capital shall be made in Vietnamese Dong;
- Shareholders, capital contributors, and parent companies of insurers, reinsurers, and foreign branches in Vietnam are not permitted to supplement their charter capital or allocated capital through loan capital or investment trust capital from other organizations or individuals.
- After charter capital is increased, the insurer or reinsurer must still satisfy the requirements pertaining to shareholder structure for joint-stock companies from January 1, 2026.
+ There must be at least two shareholders that are entities and each of which meets the following conditions:
++ Their equity contribution must make up at least 10% of the charter capital of the insurance company or the reinsurance company-to-be;
++ The conditions specified in Article 65 of the Law on Insurance Business 2022 must be satisfied;
+ An individual shareholder's equity contribution shall not exceed 10% of the charter capital of the insurance company or reinsurance company-to-be.
- If the insurer or reinsurer increases its charter capital through capital contributions from new shareholders or capital contributors, these new shareholders and capital contributors must satisfy the conditions:
+ Licensing conditions concerning founding shareholders or members:
++ In order to obtain business licences or permits, entities and persons applying for these licenses or permits must have the rights of business incorporation and management in Vietnam under the Corporate Law;
++ In order to obtain business licences or permits, entities applying for these licenses or permits need to have legal personality and is operating in Vietnam; if each entity makes at least 10% of capital contribution, they must ensure that they generate profits within 03 consecutive fiscal years immediately before the date of submission of application packages for these licenses or permits, and must meet financial conditions in accordance with the Government’s regulations;
++ In order to obtain business licences or permits, insurers and reinsurers previously licensed for their establishment and operation in Vietnam that contribute capital to set up insurance companies; new reinsurers must generate business profits during 03 consecutive years immediately before the date of submission of application packages for these licenses and permits, and must meet the prudential ratio or the minimum required capital requirement specified herein.
+ Licensing conditions concerning capital or assets:
++ The amount of Vietnamese-dong contribution to the charter capital must not be less than the minimum required amount of charter capital under the Government’s regulations;
++ Founding shareholders and capital-contributing members shall not be allowed to contribute borrowed funds or funds or assets held in trust for other entities and persons for equity participation purposes.
+ Conditions of members contributing capital to establish insurance limited liability companies and reinsurance limited liability companies according to Article 65 of the Law on Insurance Business 2022.
What are the requirements for increase in charter capital of insurers in Vietnam? What is the application for approval of principle to increase charter capital?
What is the application for approval of principle to increase charter capital of insurers in Vietnam?
Pursuant to the provisions of Clause 2, Article 19 of Decree 46/2023/ND-CP stipulating the application for Ministry of Finance's approval of principle to increase charter capital (for insurers, reinsurers) or increase allocated capital (for foreign branches in Vietnam) includes the following:
- An application form for change of charter capital or allocated capital, provided in Appendix III to Decree 46/2023/ND-CP;
- A competent authority's document as prescribed in the company's charter (for insurer or reinsurer) or Regulation on organization and operation (for foreign branch in Vietnam) on the increase of charter capital (or allocated capital). This document must specify the increased amount, method, and time for capital increase;
- Plan for mobilization and use of charter capital or allocated capital;
- List of capital contributors of the insurer or reinsurer (for limited liability company) or shareholders (for joint-stock company) expected to own at least 10% of the charter capital of the insurer or reinsurer after increasing capital; documentation proving that the new shareholders and capital contributors satisfy the requirements specified in Articles 64 and 65 of the Law on Insurance Business 2022.
Note: This provision does not apply to the case of increasing charter capital by the method of securities public offering, securities offering of listed and public joint-stock companies.
What is the application for the process of increasing capital which is submitted to the Ministry of Finance of Vietnam?
Pursuant to the provisions of Clause 5, Article 19 of Decree 46/2023/ND-CP stipulating application for the process of increasing capital which is submitted to the Ministry of Finance include:
- A summary report on the results of the increase in charter capital (or allocated capital) under the capital change plan approved by the Ministry of Finance;
- The bank's certification that either the shareholders (or capital contributors) have fully paid the additional capital to the insurer, reinsurer, or the foreign non-life insurer, foreign reinsurer has provided sufficient additional capital for the foreign branch in Vietnam (in case of capital increase) into a blocked account; or the Vietnam Securities Depository and Clearing Corporation’s certification of additional registration of securities if the charter capital is increased through the issuance of bonus shares from the share capital surplus;
- Documents specified in point d clause 2 of this Article in case of increasing charter capital by the method of securities public offering, securities offering of listed and public joint-stock companies.
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