Circular 04 provides a list of transactions to which it applies that reads much like a mix and match puzzle. Commercial banks, finance companies and associated credit institutions can be merged into a bank. A finance company can merge with a finance company. A financial leasing company can merge with a financial leasing company. And so on and so forth. The most notable exception is that Circular 04 does not stipulates the acquisition of one bank by another bank.

Any merger, consolidation, or acquisition that takes place under the regulations in Circular 04 must be guided by five overarching principles, principles that are prominently discussed in the legislation and warrant paraphrasing here:

(i)                   Principle of Agreement: The parties must reach agreement on the rights and obligations as between the parties and such agreement must strictly comply with applicable law;

(ii)                 Principle to protect clients: any participating credit institution must ensure against any adverse impacts on the rights and interests of the clients of that institution, particularly the rights of depositors;

(iii)                Principle of Confidentiality: The board of management, general director and other related individuals of participating credit institutions must protect the confidentiality of information so that participating credit institutions can continue to operate without interruption during the period of the transaction;

(iv)                Principle of Information provision: During the process of conducting the transaction, the board of management of credit institutions must promptly complete and accurately report information. All information files and dates must be maintained in an honest, accurate and non-misleading manner; and

(v)                  Principle of Decision-making: the decision-makers of participating credit institutions must pass any decisions in accordance with applicable law, e.g., conduct of meetings and voting procedures.

As of Circular 04, credit institutions may now hire consultancy services to assist the process, provided that consultants are properly licensed and have no conflict of interests with any of the other participating credit institutions.

Circular 04 stipulates that within 15 days of the final decision on the transaction, the participating credit institutions must publicly announce in three consecutive issues of a nationwide daily newspaper the merger, consolidation or acquisition of a credit institution. Announcement of the transaction must also be sent to creditors and employees within 15 days of the final decision on the transaction.

The SBV governor has authority to approve the merger, consolidation and acquisition of credit institutions. Circular 04 takes effect on 29 March 2010 and replaces Decision 241/1998/QD/NHNN5, dated 15 July 1998.

(*) Please contact the author at hoan.le@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.