Regulations on consolidation and merger of funds in Vietnam

Regulations on consolidation and merger of funds in Vietnam (Internet image)

1. What is a private fund?

According to Clause 41, Article 4 of the Law on Securities 2019, a private fund means a securities investment fund that has 02 - 99 capital contributors who are all professional investors.

2. Regulations on consolidation and merger of funds in Vietnam

The consolidation and merger of funds in Vietnam according to Article 11 of Circular 98/2020/TT-BTC is as follows:

- At least 30 days before the General Meeting of Investors is convened, the fund management company shall provide investors with documents about the consolidation or merger of funds, including:

+ Consolidation or merger plan;

+ The draft of the consolidation or merger contract;

+ The audited annual financial statements or latest quarterly financial statements of consolidating funds or acquired funds;

+ The draft charter, prospectus (if any) and summary prospectus (if any) of the consolidated fund or acquiring fund.

- Within 10 days from the date on which the decision on consolidation or merger is approved by the General Meeting of Investors, the fund management company shall notify such decision to creditors.

Within 15 days from the receipt of the notification, creditors are entitled to request the fund to make payments.

After this time limit, if the fund management company receives no requests for payment from creditors, payment obligations will be fulfilled by the consolidated fund or acquiring fund.

- In case consolidating funds or acquired funds are managed by the same fund management company, costs of legal counseling, administrative expenses and costs of other services related to the consolidation or merger of funds shall not be accounted for as the fund’s expenses, unless otherwise decided by the General Meeting of Investors.

- The fund management company and the fund’s representative board shall:

+ Provide adequate, timely, accurate and truthful information about the consolidation or merger to investors;

+ Settle relevant rights, interests and obligations under agreements between relevant parties according to the voluntariness principle and in conformity with regulations of law;

+ Pay debts to creditors at their request. Payments to creditors that send request the fund as prescribed in Clause 2 of this Article must be completed by the effective date of the certificate of registration of fund establishment to the consolidated fund or acquiring fund.

- The consolidation or merger date is the date on which the decision on consolidation or merge is approved by the General Meeting of Investors.

From the date on which SSC issues a decision on consolidation or merger, the fund management company, custodian bank and supervisory bank (if any) shall:

+ Receive transfer of records, receipts, securities portfolio and other assets, and other documents relating to consolidating funds or acquired funds;

+ Ensure that the consolidated fund or acquiring fund shall inherit all rights and lawful interests, and be responsible for financial obligations, debts, including tax debts, and other financial obligations to the State;

Continue performing economic contracts of consolidating funds or acquired funds;

+ Complete procedures for registration of the consolidated fund’s or acquiring fund’s ownership of assets transferred from consolidating funds or acquired funds in accordance with relevant laws;

+ Perform obligations on behalf of the consolidated fund or acquiring fund in accordance with regulations of relevant laws.

- Depending on terms and conditions of the consolidation or merger contract, and the consolidation or merger plan, the fund may combine switching of fund certificates and cash payment. The value of cash payment for a fund certificate shall not exceed 10% of the NAV per fund certificate calculated at the consolidation or merger date.

- Within 07 working days from the consolidation or merger date, the fund management company shall disclose information about that consolidation or merger. Information to be disclosed includes:

+ The consolidation or merger date;

+ Rules for determination of NAV per fund certificate of consolidating funds or acquired funds at the consolidation or merger date; fund certificate switching ratio; ratio of cash payment per fund certificate (if any).

- From the effective date of the certificate of registration of fund establishment of the consolidated fund or acquiring fund:

+ Consolidating funds or acquired funds cease to exist, and the consolidated fund or acquiring fund inherits all assets, debts, rights and lawful interests, and other obligations from consolidating funds or acquired funds;

+ Investors of consolidating funds or acquired funds shall receive assets in the form of fund certificates of the consolidated fund or acquiring fund according to the switching ratio determined on the consolidation or merger date;

+ Fund certificates of consolidating funds or acquired funds are canceled.

3. Regulations on dissolution of private funds in Vietnam

The dissolution of private funds according to Article 12 of Circular 98/2020/TT-BTC is as follows:

- The General Meeting of Investors shall vote on the dissolution date. From the dissolution date, the fund management company, custodian bank and supervisory bank (if any) shall not:

+ Make investments or purchase assets for the fund;

+ Convert unsecured debts into debts secured with the fund’s assets;

+ Give or donate the fund’s assets;

+ Finalize contracts in which the value of the fund’s obligations is greater than that of the other party; or pay debts to the creditors who are also the fund’s debtors without offsetting;

+ Perform other transactions for the purpose of illegally liquidating the fund’s assets.

- The assets of a fund undergoing dissolution include:

+ The fund’s assets and asset rights existing at the time of compulsory dissolution;

+ Profits, assets and asset rights to be acquired by the fund from transactions confirmed before it is compulsorily dissolved;

+ Assets put up as collateral for fulfillment of the fund’s obligations. If the collateral is used for paying secured debts and the value of the collateral exceeds the amounts payable, the excess is considered the fund's assets.

- The General Meeting of Investors shall designate an accredited audit organization or maintain the current fund’s representative board to inspect, assess and supervise the liquidation and distribution of the fund’s assets.

- The fund management company or custodian bank, supervisory bank (if the fund management company is not available) shall carry out the liquidation and distribution of assets to investors according to the plan approved by the General Meeting of Investors.

The time limit for liquidation or distribution of assets to investors shall comply with the dissolution plan but not exceed 02 years from the dissolution date.

After this time limit, the fund management company or custodian bank, supervisory bank (if any) shall return the investment portfolio to investors according to Clause 6 of Article 12 of Circular 98/2020/TT-BTC.

During the liquidation of assets, management fees, supervision fees and other costs shall be paid according to the schedule of service fees approved by the General Meeting of Investors.

- When carrying out the liquidation of assets, the fund management company or custodian bank, supervisory bank (if any) shall ensure the followings:

+ Listed or registered securities shall be liquidated through the SE’s trading system;

+ The liquidation of assets other than listed or registered securities must be approved by an independent audit organization or the fund’s representative board as prescribed in Clause 3 of Article 12 of Circular 98/2020/TT-BTC.

- The fund management company or custodian bank, supervisory bank (if any) shall return the investment portfolio to investors in proportion to their holdings. The investment portfolio shall be returned to investors according to the following principle:

+ The fund is able to fulfill its payment obligations according to regulations and order in Points a, b Clause 4 Article 104 of the Law on securities;

+ The investment portfolio returned to investors must sufficiently have the same assets and structure as the fund’s portfolio;

+ The transfer of assets that are registered and deposited securities to investors shall be carried out the fund management company or custodian bank, supervisory bank (if any) according to VSDCC’s guidelines.

With regard to assets of which the ownership must be registered, the fund management company or custodian bank, supervisory bank (if any) shall request investment-receiving organizations, issuers and organizations managing shareholder registers to carry out registration of asset ownership for investors.

The return of investment portfolio is considered complete when investors’ ownership of assets has been successfully registered.

- Asset liquidation results must be certified by the custodian bank, supervisory bank (if any) and/or the fund management company, and approved by an independent audit organization or the fund’s representative board (if any) in charge of supervising the asset liquidation.

- From the dissolution date to the date of completion of the dissolution, the fund management company shall send monthly reports to SSC and provide investors with NAVs, reports on assets and investment portfolio of the fund according to the forms in Appendix IX and Appendix X enclosed with Circular 98/2020/TT-BTC.

Appendix IX

Appendix X

- The fund management company or custodian bank, supervisory bank (if any) and relevant entities shall be responsible for the accuracy, truthfulness and adequacy of the report on dissolution results.

In case the report on dissolution results contains incorrect information or forged documents, the fund management company, custodian bank, supervisory bank (if any) and relevant entities shall bear joint responsibility for unpaid debts and personal responsibility for the consequences that occur within 05 years from the day on which the report on dissolution results is sent to SSC.

Quoc Dat

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