Bonus shares issued abroad under Vietnamese law

Indirect overseas investment has become the choice of many enterprises in the trend of market expansion and investment to obtain additional benefits. Some multinational corporations and enterprises also have policies to have bonus shares issued abroad to employees in various countries to both enhance promotion and ensure employees’ rights.”

This article focuses on the conditions for indirect overseas investment through bonus shares issued abroad under the laws of Vietnam.

1. Which organizations allow to implement stock award programs issued abroad?

Circular 23/2024/TT-NHNN, effective from 12 August 2024, stipulates that organizations eligible to implement stock award programs issued abroad must be established and operating in Vietnam, including:

• Foreign organizations with a commercial presence in Vietnam include Foreign-invested economic organizations; Branches; Representative offices; and Operating offices of foreign investors in business cooperation contracts;
• Economic organizations having relationships with foreign organizations. These relationships are formed through shareholding, capital contributions, or other forms as stipulated by the laws of Vietnam.

From the above regulations, enterprises should note that the organization implementing the stock award program issued abroad and the organization with the stock award program issued abroad are different. Accordingly, the organization with the stock award program issued abroad is established and operated under foreign law.

The specific example to understand these two types of organizations:

Company A, established and operating under the laws of Singapore, is listed in Singapore. Company A has established a Representative Office in Ho Chi Minh City, Vietnam. In 2023, Company A implemented a stock award program issued by Company A for Vietnamese employees working at the aforementioned Representative Office. Accordingly, Company A is the organization with the stock award program issued abroad, while the Representative Office in Ho Chi Minh City, Vietnam, is the organization implementing the stock award program issued abroad.

2. Subjects of indirect overseas investment through stock awards issued abroad

Currently, the laws of Vietnam only recognize a single subject allowed to indirectly invest abroad in the form of participating in a stock award program issued abroad: Vietnamese nationals working at the organization implementing the stock award program issued abroad. As seen in the example of Section 1, the subject of indirect overseas investment through stock awards issued abroad is Vietnamese employees working at Company A’s Representative Office in Ho Chi Minh City, Vietnam.

Accordingly, Vietnamese employees are entitled to receive foreign currency. Subsequently, this foreign currency comes from dividends and other legitimate income generated by the stock award program. Moreover, this program account is a foreign currency payment account opened by the organization implementing the stock award program at a licensed credit institution. Finally, the entire process follows the indirect overseas investment plan approved by the Prime Minister.

3. Forms of indirect overseas investment through stock awards issued abroad

• Direct stock awards;
• Other forms of stock awards abroad that do not generate overseas cash flow.

4. Procedures for implementing indirect overseas investment through stock awards issued abroad

Investors must comply with regulations on registering indirect overseas investments as specified in legislation and follow guidance from competent authorities. Furthermore, the adjustments in Circular 23/2024/TT-NHNN will soon take effect. Therefore, enterprises should pay attention to the changes in the overseas investment registration dossier composition. Alternatively, enterprises can contact PLF Law Firm for detailed advice.

Thus, the Vietnamese government demonstrates its awareness of the latest investment trends by implementing these above regulations. The Vietnamese government aims to ensure a legal framework through these regulatory adjustments. Moreover, this framework will cover indirect overseas investment activities including stock award programs issued abroad for Vietnamese employees. In summary, these steps also demonstrate a commitment to protecting the rights of Vietnamese employees working for foreign-affiliated organizations.

Indirect overseas investment through stock awards has emerged as a strategic tool for businesses seeking global expansion and employee retention. Contact PLF Law Firm today via email at inquiry@plf.vn or +84913 902 906  to receive a free 30-Initial Minute Consultation.