CIRCULAR

GUIDING THE REGULATION ON FOREIGN INVESTORS' CONTRIBUTION OF CAPITAL TO, AND PURCHASE OF SHARES FROM, VIETNAMESE ENTERPRISES

Pursuant to the Government's Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
Pursuant to the Prime Minister's Decision No. 88/2009/QD-TTg of June 18, 2009, promulgating the Regulation on foreign investors’ contribution of capital to, and purchase of shares from, Vietnamese enterprises;
The Ministry of Finance guides a number of provisions of the Regulation on foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Subjects of regulation

1. Foreign organizations:

a/ Organizations established and operating under foreign laws and their overseas and Vietnam-based subsidiaries.

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c/ Investment funds and securities investment companies with a foreign holding rate of over 49% of charter capital.

2. Foreign individuals who do not hold
Vietnamese citizenship and reside overseas or in Vietnam.

Individual investors who hold both Vietnamese and foreign citizenship shall be considered domestic investors, unless otherwise provided by for law.

3. Representatives of foreign investors defined in Clauses 1 and 2, Article 3. Chapter I of this Circular.

4. Vietnamese enterprises specified in Clause 2, Article 2 of the Regulation on foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises, issued together with the Prime Minister's Decision No. 88/2009/QD-TTg of June 18, 2009 (below referred to as the Regulation issued together with Decision No. 88/2009/QD-TTg).

5. Shareholders holding shares in joint-stock companies; capital-contributing members in limited liability companies; partners and capital-contributing members in partnerships; and owners of private enterprises.

Article 2. Scope of regulation

1. This Circular guides the process of foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises in the forms provided in Clause 1 and Items a, c and d, Clause 2, Article 4 of the Regulation issued together with Decision No. 88/2009/QD-TTg (excluding the purchase of shares from public companies listed or unlisted on the Stock Exchange).

2. Foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises operating in certain sectors subject to specialized laws or commitments in treaties to which Vietnam is a contracting party which are different from provisions of this Circular comply with such specialized laws or treaties.

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4. Foreign investors' purchase of IPO shares of equitized enterprises with 100% state capital shall comply with the current law on transformation of enterprises with 100% state capital into joint-stock companies.

5. Foreign investors' investment activities not regulated by this Circular include activities prescribed in Clause 4. Article 1 of the Regulation issued together with Decision No. 88/2009/QD-TTg. Particularly, the level of foreign investors1 capital contribution or share purchase must comply with Article 3 of the Regulation issued together with Decision No. 88/2009/QD-TTg.

Article 3. Representatives of foreign investors and persons directly conducting transactions of capital contribution and share purchase for foreign investors

1. Competent representatives of a foreign organization:

a/ Chairperson of the Board of Directors or director general (director) of the foreign organization.

b/ Competent persons as prescribed by the charter of the foreign organization to sign application dossiers and fulfill procedures for capital contribution and share purchase and to perform relevant tasks within the scope of competence assigned to them.

c/ Persons authorized in writing by the chairperson of the Board of Directors or the director general (director) of the foreign organization.

2. A foreign investor may, via authorization documents (authorization contracts, entrustment contracts or investment designation contracts). authorize a transaction representative in Vietnam to carry out the contribution of capital to, or purchase of shares from, Vietnamese enterprises on the principles prescribed Clause 1 and Point 2.2. Clause 2, Article 4, Chapter II of this Circular,

Transaction representatives in Vietnam of a foreign investor include:

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b/ An individual holding Vietnamese citizenship or being a foreigner residing in Vietnam who satisfies the following conditions: having the full civil act capacity, not currently serving a prison sentence or prohibited by a court from practicing business; having working experience in the financial investment or banking sector; and having a practice certificate relevant to the provision of capital contribution or share purchase services (securities brokerage practice certificate, financial analysis practice certificate, fund management practice certificates); and not concurrently working in any of the representative institutions prescribed in Item a, Clause 2 of this Article (below referred to as the representative individual in Vietnam).

3. Persons directly conducting transactions are persons who directly conduct transactions related to foreign investors' contribution of capital to, and purchase of shares from, Vietnamese enterprises.

a/ The person directly conducting transactions of capital contribution to, or share purchase from, Vietnamese enterprises for a foreign organization is the competent representative of such foreign organization; or the person assigned by its representative institution in Vietnam (in case of authorization to a representative institution) to conduct transactions of capital contribution or share purchase.

b/ The person directly conducting transactions of capital contribution to. or share purchase from, Vietnamese enterprises for a foreign individual is that foreign individual; his/her representative individual in Vietnam (in case of authorization to a representative individual); or the person assigned by his/her representative institution Vietnam (in case of authorization to a representative institution) to conduct transactions of capital contribution and share purchase.

Chapter II

PRINCIPLES AND CONDITIONS ON FOREIGN INVESTORS' CAPITAL CONTRIBUTION OR SHARE PURCHASE

Article 4. Principles on capital contribution and share purchase

1. For foreign investors who both participate in Vietnam's securities market and contribute capital to. or purchase shares from, Vietnamese enterprises which are not public companies: the procedures and process for the contribution of capital to. or purchase of shares from, Vietnamese enterprises (both public and non-public) comply with current regulations on operations of foreign investors in the Vietnam's securities market (the Finance Minister's Decision No. 121/2008/QD-BTC of December 24. 2008) and this Circular.

2. Foreign investors who do not participate in Vietnam's securities market may make investment in the following forms:

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2.2. Foreign organizations and foreign individuals authorize, via authorization documents, transaction representatives in Vietnam as specified in Clause 2, Article 3, Chapter I of this Circular to carry out activities of capital contribution to, and share purchase from, Vietnamese enterprises as follows:

a/ A foreign organization specified in Item a or b. Clause 1. Article 1, Chapter I of this Circular may authorize only representative institutions in Vietnam but not representative individuals in Vietnam.

b/ A foreign organization specified in Item c. Clause 1, Article 1, Chapter I of this Circular may not authorize any representative institutions or individuals in Vietnam.

c/ A foreign individual may authorize a representative institution or individual in Vietnam. The representative individual in Vietnam of a foreign individual may only carry out activities of capital contribution or share purchase for that foreign individual in the name of that foreign individual.

3. The level of capital contributed or share purchased (including the capital portion acquired from the purchase of the right to additionally contribute capital, share option rights or warrants) by foreign investors to/from Vietnamese enterprises (including those purchased from capital-contributing members or shareholders) must comply with the holding rates prescribed in Article 3 of the Regulation issued together with Decision No. 88/2009/QD-TTg.

Article 5. Conditions on contribution of capital to, or purchase of shares from. Vietnamese enterprises (applicable to foreign investors who do not participate in Vietnam's securities market)

1. For a foreign institutional investor:

1.1. Having an investment capital account opened at a commercial bank in Vietnam. All activities of purchasing and selling shares, transferring contributed capital portions, collecting and using dividends and divided profits, remitting money abroad and other activities related to investment in Vietnamese enterprises shall be carried out via this account. The opening, closing, use and management of investment capital accounts must comply with relevant laws.

1.2. Having the following documents:

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- A lawful copy of its establishment and operation license or business registration certificate or equivalent papers issued by a competent management authority of the country in which it has been established or has made business registration; or the tax registration certificate issued by the tax office of the locality in which it has been established or has made its business registration; or the license for establishing a branch in Vietnam (if having Vietnam-based branches).

- In case of authorizing a representative institution in Vietnam: A lawful copy of the document made by the foreign investor to authorize a representative institution in Vietnam and a lawful copy of the business registration certificate of that representative institution are required.

- Documents related to the person directly conducting transactions.

b/ For a foreign investor specified in Item b, Clause 1, Article 1, Chapter I of this Circular:

- A lawful copy of its business registration certificate or investment certificate, in case the investment certificate is also the business registration certificate.

- In case of granting authorization to a representative institution in Vietnam: A lawful copy of the document made by the foreign investor to grant authorization to a representative institution in Vietnam and a lawful copy of the business registration certificate of that representative institution are required.

- Documents related to the person directly conducting transactions.

c/ For a foreign investor specified in Item c. Clause 1, Article 1, Chapter I of this Circular:

- A lawful copy of the business registration certificate, for securities companies; the business registration certificate, for fund management companies, or documents related to the establishment of securities investment funds.

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2. For a foreign individual investor:

2.1. Having an investment capital account opened at a commercial bank in Vietnam. All activities of purchasing and selling shares, transferring contributed capital portions, collecting and using dividends and divided profits, remitting money abroad and other activities related to investment in Vietnamese enterprises shall be carried out via this account. The opening, closing, use and management of investment capital accounts must comply with relevant laws.

2.2. Having the following documents:

- The judicial record (certified and consularly legalized) and a lawful copy of his/her valid passport.

- In case of authorizing a representative in Vietnam: A lawful copy of the document made by the foreign investor to authorize a representative in Vietnam, a lawful copy of the business registration certificate of the representative (if the representative is an institution) and documents related to the person directly conducting transactions are required.

3. Documents related to the person directly conducting transactions:

3.1. For Vietnamese persons:

a/ An information sheet on the person directly conducting transactions, certified by a competent authority (the local administration or the agency or organization in which this person is working), containing the following details:

- Personal details: name, age, gender, nationality, permanent residence registration, place of residence, address, telephone number, professional qualification, working place and position.

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b/ A lawful copy of the identity card or valid passport.

3.2. For foreigners residing in Vietnam:

a/ An information sheet on the person directly conducting transactions, which is certified and consularly legalized, containing the following details:

- Personal details: name, age, gender, nationality, permanent residence, place of permanent residence registration, place of habitation in Vietnam, place of habitation in a foreign country, address, telephone number, professional qualification, working place and position.

- The scope of assigned jobs, powers and responsibilities and other relevant contents.

b/ The judicial record (certified and consularly legalized) and a lawful copy of the valid passport.

3.3. In case the person directly conducting transactions is a representative individual in Vietnam: the information sheet must also contain details corresponding to the conditions specified in Item b. Clause 2, Article 3, Chapter I of this Circular and a lawful copy of any of the practice certificates relevant to the provision of capital contribution or share purchase services are required.

4. In addition to the conditions prescribed in Clauses 1, 2 and 3 of this Article, foreign investors shall satisfy:

- Conditions applicable to foreign investors when contributing capital to, or purchasing shares from, Vietnamese enterprises operating in sectors or trades subject to conditional business or requiring practice certificates.

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Chapter III

FORMS OF FOREIGN INVESTORS' CONTRIBUTION OF CAPITAL TO, OR PURCHASE OF SHARES FROM, VIETNAMESE ENTERPRISES

Article 6. Forms of capital contribution to limited liability companies

1. A foreign investor may acquire the contributed capital portion or the right to contribute capital of a member of a limited liability company with two or more members or contribute capital to a limited liability company with two or more members to become a new member of such company.

2. A foreign investor may acquire part of the contributed capital portion of a one-member limited liability company or contribute capital to a one-member limited liability company to transform this company into a limited liability company with two or more members and become a member of such company.

3. A foreign investor may acquire the whole charter capital of the owner of a one-member limited liability company to become the new owner of such company.

4. Two or more foreign investors may acquire the whole charter capital of the owner of a one-member limited liability company to transform this company into a limited liability company with two or more members and become new owners of such company.

5. A foreign investor may acquire the whole charter capital of members of a limited liability company with two or more members to transform this company into a one-member limited liability company and become the new owner of such company.

6. Several investors may acquire part of the contributed capital portion of or pool capital to a one-member limited liability company or a limited liability company with two or more members to transform this company into a joint-stock company and become shareholders of such joint-stock company.

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1. A foreign investor (institutional or individual) may acquire the capital portion or the right to contribute capital of a capital-contributing member in a partnership or contribute capital to a partnership to become a new capital-contributing member of such partnership.

2. A foreign individual investor may acquire the capital portion or the right to contribute capital of a partner in a partnership or contribute capital to a partnership to become a new partner, after obtaining the consent of other partners.

Article 8. Forms of capital contribution to private enterprises

1. A foreign investor may acquire part of the capital of the owner of a private enterprise to transform this private enterprise into a limited liability company with two or more members and become a member of such company.

2. A foreign investor may contribute capital with the owner of a private enterprise to transform this private enterprise into a limited-liability company with two or more members and become a member of such company.

Article 9. Forms of share purchase

1. A foreign investor may purchase shares during the initial offering to shareholders other than founding shareholders of a joint-stock company.

2. A foreign investor may purchase shares allowed for sale, treasury stocks and additionally issued shares of a joint-stock company.

3. A foreign investor may acquire shares or share options from existing shareholders of a joint-stock company, including ordinary shares of founding shareholders, after obtaining the consent of the Shareholders' General Meeting in order to become a founding shareholder of such joint-stock company.

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5. One foreign investor may acquire the whole volume of shares from existing shareholders of a joint-stock company in order to transform this company into a one-member limited liability company and become the new owner of such company.

Chapter IV

CAPITAL CONTRIBUTION AND SHARE PURCHASE

Article 10. Cases of receiving capital contributed by, and selling shares to, foreign investors

A Vietnamese enterprise may receive capital contributed by. or sell shares to, foreign investors:

1. When it increases its charter capital, expands its operation and attracts foreign investors with financial capacity and business administration skills; investors that transfer new technologies, supply raw materials and help develop outlet markets; or when investors that share long-term interests with the enterprise want to become strategic investors of the enterprise.

2. When it changes its capital ownership structure by:

a/ Transferring (selling) part of the contributed capital portion (for limited liability companies, partnerships and private enterprises).

b/ Selling shares on initial offering to shareholders other than founding shareholders, shares from the volume of shares allowed for sale and treasury stocks (for joint-stock companies).

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3. When it undergoes transformation in the forms provided in Articles 6. 8 and 9, Chapter III of this Circular.

4. When capital-contributing members or shareholders currently owning shares sell their capital portions for their personal objectives and needs or under decision of the enterprise's competent authorities to serve its operation objectives.

Article 11. Competence to decide on the receipt of capital contributed by. or sale of shares to, foreign investors

1. For limited liability companies with two or more members and partnerships:

1.1. In case the enterprise increases its capital and/or transfers part of its capital: the chairperson of the Members' Council or the director general (general) of the company (according to the company charter) shall elaborate a plan on the raising of capital and/or transfer of part of the capital, covering the receipt of capital contributed by foreign investors, and submit this plan to the Members' Council for approval.

1.2. Capital-contributing members of a limited liability company with two or more members may transfer their capital portions (including the right to additionally contribute capital when the company increases its charter capital) to other persons, including foreign investors, after they have requested the company or offered other members to acquire their capital portions, but the company or other members refuse to acquire or fully acquire these capital portions under Articles 43. 44 and 45 of the Enterprise Law.

1.3 Capital-contributing members of a partnership may transfer their capital portions, including the right to additionally contribute capital (when the company increases its charter capital) to others, including foreign investors.

1.4. Partners of a partnership may only transfer part or whole of their capital portions to others, including foreign individuals, after obtaining the consent of other partners.

2. For one-member limited liability companies: The general director (director) (according to the company charter) shall elaborate and submit to the company owner a plan on the raising of capital and/or transfer of part of the capital, covering the receipt of capital contributed by foreign investors.

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3. For private enterprises: The owner of a private enterprise may decide on and take responsibility for the sale of part of the capital to, or raising of capital from, foreign investors according to law.

4. For operating joint-stock companies:

4.1. In case of additionally issuing stocks to increase charter capital: the Board of Directors or the general director (director) of the company shall elaborate a plan on additional issuance of stocks to increase charter capital, covering the sale of shares to foreign investors, and submit this plan to the Shareholders' General Meeting or the Board of Directors (according to the Enterprise Law and the company charter) for approval.

4.2. In case of selling shares in an initial offering to shareholders other than founding shareholders, shares from the volume of shares allowed for sale or treasury stocks:

a/ If the company charter stipulates a foreign holding rate in accordance with Article 3 of the Regulation issued together with Decision No. 88/ 2009/QD-TTg: the Board of Directors or the general director (director) of the company (according to the company charter) shall assign a functional unit to elaborate a plan on the sale of shares to foreign investors. The Board of Directors or the general director (director) of the company (according to the company charter) to decide on the plan, assuring the foreign holding rate stated in the company charter.

b/ If the company charter does not stipulate a foreign holding rate: Based on the enterprise's operation requirements and charter, the Board of Directors shall elaborate a plan on the sale of shares to foreign investors and submit it to the Shareholders' General Meeting for decision; or the company's general director (director) shall elaborate a plan on the sale of shares to foreign investors and submit it to the Board of Directors for decision to assure the foreign holding rate prescribed in Article 3 of the Regulation issued together with Decision No. 88/2009/QD-TTg.

4.3. For ordinary shareholders and founding shareholders:

a/ Ordinary shareholders may transfer their shares (including the right to additionally purchase shares when the company increases its charter capital) to other shareholders and persons other than shareholders, including foreign investors.

b/ For founding shareholders:

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- Past the 3-year time limit after the company is granted the business registration certificate, founding shareholders may transfer their ordinary shares to persons other than founding shareholders, including foreign investors.

c/ The transfer of shares to foreign investors by ordinary shareholders and founding shareholders must ensure compliance with the foreign holding rate prescribed in Article 3 of the Regulation issued together with Decision No. 88/2(X)9/QD-TTg.

4.4. Foreign investors may purchase shares with preferred dividends, redeemable preferred shares and other preferred shares (including cases of purchasing these shares from preferred shareholders) when the company charter so Stipulates or when the Shareholders' General Meeting issues a decision thereon.

5. For state-invested Vietnamese enterprises

The competence to decide on the increase or decrease of the state capital portion and responsibilities of the representative of the state capital portion when enterprises receive capital contributed by. or sell shares to. foreign investors complies with relevant laws.

Article 12. Plans on the raising of capital and/ or transfer of part of the capital or sale of shares of Vietnamese enterprises to foreign investors

Depending on the practical situation and requirements of the enterprise concerned, the plan on the raising of capital and/or transfer of part of the capital or sale of shares (below referred to as the plan) to be submitted to the enterprise's competent authority for approval must contain some additional details relating to foreign investors as follows:

1. The projected foreign holding rate; the capital portion projected to be transferred (sold) to foreign investors; the volume and types of shares projected to be sold to foreign investors.

2. The mode projected to be applicable to foreign investors: auction, direct negotiation or bidding.

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2.2. Direct negotiation and bidding:

a/ Direct negotiation shall be applied on the basis of preliminary negotiation with foreign investors on the capital contribution or share purchase (including negotiations with entities projected to become strategic investors).

b/ Bidding shall be applied when there are two or more investors registering for capital contribution or share purchase and. the enterprise fails to select investors after conducting direct negotiation.

c/ The plan on direct negotiation or bidding must additionally contain the following details:

- Information on foreign investors currently participating in preliminary negotiations: their names, addresses, charter capital (for institutional investors), their relationship with the enterprise and other enterprises in their production and business activities (regarding the supply of raw materials, sale of products, transfer of technologies or brands); and investors recommended to be selected as strategic investors among negotiating partners.

- In case there are two or more foreign investors: Assessment of each investor's influence on the enterprise if making investment in the enterprise and recommendations on the selection of investors (strategic investors) which serve as a ground for the enterprise's competent authority to make decision thereon.

3. In case of increasing charter capital in the form of increasing the capital portions of existing members or shareholders: The plan must clearly state the transfer of the right to contribute capital of existing members or share options of existing shareholders to foreign investors.

4. The projected proceeds from capital raising or transfer of capital portions; the projected selling price of shares to foreign investors.

5. The mode of payment projected to be applied to foreign investors: payment in cash, a freely convertible foreign currency or other lawful assets. In case of capital contribution or share purchase in a foreign currency or other assets, the plan must state the method for converting that foreign currency into Vietnam dong or the method for valuating assets in accordance to Article 5 of the Regulation issued together with Decision No. 88/2009/QD-TTg.

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Article 13. Disclosure of information before and after the receipt of contributed capital or sale of shares

1. In case of auction: At least 7 days before an auction for sale of shares to. or the receipt of capital contributed by. foreign investors is organized, the Vietnamese enterprise concerned shall complete the disclosure of information at its head office, the place at which the auction is to be organized and in the mass media. To-be-disclosed information covers the following principal details: name and address of the enterprise; the volume of to-be-sold shares/to-be-received capital; necessary information on the enterprise's business operation, capital and funds in the reporting year and two preceding years; conditions for participation in the auction; mode of payment and other relevant matters.

Auction results must be publicized within 5 working days after the auction is completed.

2. In case of applying the mode of direct negotiation or bidding: The enterprise's authority competent to approve the plan may decide on the method and content of information disclosure before the direct negotiation or bidding and after obtaining its results but must ensure publicity and transparency in accordance with law.

Article 14. Capital contribution and share purchase

1. Contribution of capital to, or purchase of shares from, Vietnamese enterprises:

a/ Through auction or bidding: On the basis of the plan approved by a competent authority of the Vietnamese enterprise and auction and bidding regulations, foreign investors shall provide documents specified in Article 5, Chapter II of this Circular and other documents as required under auction and bidding regulations to the auction or bidding organizers for the latter to organize the auction for capital portions or shares.

- In case of auction: The transfer price of the capital portion or the selling price of shares to foreign investors is the winning price as prescribed in the Auction Regulation. For strategic investors, it is the average winning price or a price different from the average winning price decided by the authority competent to approve the plan which, however, must not be lower than the book value of the contributed capital portion or shares at the time of approving the plan.

- In case of bidding: The transfer price of the capital portion or the selling price of shares to foreign investors (including strategic investors) is the winning price as prescribed in the Bidding Regulation.

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The transfer price of the capital portion or the selling price of shares to foreign investors (including strategic investors) is the price decided by the enterprise's authority competent to approve the plan which, however, must not be lower than the market price at the time of sale or the book value of the capital portion or shares at the time of approving the plan, in case the market price cannot be determined.

c/ The mode and form of payment and the rights and interests of foreign investors upon capital contribution or share purchase comply with the plan approved by the enterprise's competent authority and relevant laws.

2. Acquisition of capital portions from capital-contributing members and purchase of shares from shareholders

a/ Foreign investors may acquire capital portions and the right to additionally contribute capital or purchase shares or share option rights through negotiation with capital-contributing members or shareholders. The selling price applicable to foreign investors must not be lower than the selling price currently applicable to domestic investors.

b/ When carrying out procedures for acquiring the capital portion and the right to additionally contribute capital from capital-contributing members or purchasing shares or share option rights from shareholders, foreign investors shall provide to the Vietnamese enterprise having members transferring their capital portions or shareholders transferring their shares documents as prescribed in Article 5. Chapter II of this Circular and other dossiers and documents as required by the enterprise.

c/ The mode and form of payment, transfer expenses and the rights and interests of foreign investors upon acquisition of capital portions or the right to additionally contribute capital or purchase of shares or share option rights comply with the enterprise's regulations and relevant laws.

d/ When transferring their capital portions or selling shares to foreign investors, capital-contributing members or shareholders shall fulfill their responsibilities and obligations under the enterprise's regulations and relevant laws.

3. In case a foreign investor contributes capital or purchases shares in a foreign currency or other assets, the conversion of that foreign currency into Vietnam dong or the valuation of such assets comply with the plan approved by the enterprise's competent authority-Foreign investors who contribute capital in assets shall carry out procedures for transfer of the ownership right over such assets under Article 29 of the Enterprise Law.

Article 15. Responsibilities of foreign investors and Vietnamese enterprises after the capital contribution or share purchase is completed

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Chapter V

ORGANIZATION OF IMPLEMENTATION

Article 16. Effect and implementation responsibilities

1. This Circular takes effect 45 days after the date of its signing.

2. Individuals and organizations defined in Article 1 and concerned individuals and organizations shall implement this Circular.

3. Any problems arising in the course of implementation should be reported to the Ministry of Finance for study and settlement.-

FOR THE MINISTER OF FINANCE
DEPUTY MINISTER




Tran Van Hieu

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