The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.

This summary is, necessarily, selective and is no substitute for detailed legal advice.

1. The law governing Insurance Companies ("ICs") and Insurance Booking Companies ("IBCs") is contained in --

- Decree IOOCP of 18 December 1993- on Insurance Business ( "Decree 100")
- Circular No. 46 TC- CDTC of 30 May 1994- containing provisions to implement Decree 100 ("Circular 46")
- Circular No. 45 TC- CDTC- on Financial Management of Insurance ( "Circular 45")

2. Foreign ICs and IBCs may not operate in Vietnam without a Licence, but are permitted to invest in Vietnam by way of Joint Venture, Wholly Foreign Owned Enterprise or Branch. Application should be made to The Ministry of Finance as the regulatory body for insurance matters.

3. Circular 46 states the types of organisations to whom preference will be given when making an application , i.e. those

- where the home country of the Organisation has significant investments in Vietnam;

- where the organisation applying is major, with a good reputation, and has clients which are investors in Vietnam;

- where the Organisation already has a Representative Office in Vietnam;

- where the Organisation intends to set up a Joint Venture with a domestic insurance enterprise.

4. Foreign organisations investing in Vietnam must obtain an Investment Licence in the usual way. Additionally they require a certificate from the Ministry of Finance indicating that all criteria for the operation of an insurance business have been fulfilled (a "Certificate of Compliance") .

5. Application should be made, first, for i Certificate of Compliance, and thereafter for an Investment Licence.

If the Organisation has not obtained an Investment Licence, commenced operations and complied with any conditions attached to the Certificate of Compliance within 12 months of the date of issue, the Certificate will be withdrawn and a fresh application will have to be submitted.

6. Circular 46 sets out the documentation that must be submitted in making an application for a Certificate of Compliance, which includes

- Proposed Charter of the Organisation;

- A 5 year Business Plan;

- Details of the rules, conditions clauses premiums, commission to be applied to the proposed services;

- qualifications of the proposed manager;

- a copy of the licence to operate in aid accounts for the preceding 3 years from the organisations home country; (for a Joint Venture the proposed Joint Venture Contract will also have to be submitted as well as the Vietnamese partner's accounts for the last 3 years).

7. The business of an IC may cover both life and non-life categories of insurance. If an Organisation undertakes both, separate accounts must be maintained for each.

Non life categories of insurance permitted are set out in Decree 100 and range from property and car insurance on the one hand to insurance's such as cargo and business loss insurance on the other. An IC may reinsure for other insurance companies. Where it does so for an overseas insurance Organisation, part of the liability must be reinsured with the National Reinsurance Company of Vietnam. in accordance with guidelines issued by the Ministry of Finance.

8. Insurance Agents are permitted. These must be Vietnamese citizens who have as a minimum, completed secondary school education and have no criminal record.

They must be registered with the Ministry of Finance. An agent contracted by one company may not work for another, without the permission of his original principal, and provided no conflict of interest arises.

9. The minimum legal capital of a foreign insurance organisation is fixed under Decree 100 as follows

- for a Joint Venture Company providing Insurance services- US$ 2 million

- for a Branch or Wholly Owned Foreign Enterprise- US$ 5 million
providing Insurance Services

- for a Joint Venture Company providing Insurance Broking- US$ 100,000

- for a Branch or Wholly Owned Foreign Enterprise- US$ 300,000 providing Insurance Broking Services

10. Within 15 days of commencement of operations an IC must lodge a Security Deposit with a Bank in Vietnam. The security deposit may not form part of the legal capital of the IC. For a Joint Venture the security deposit required is US$ 200,000, and for either a branch or a Wholly Foreign Owned Enterprise, US$ I million.

An IC is entitled to receive interest on the Security Deposit, but it may not be withdrawn without the written consent of the Ministry of Finance.

11. An IC must ensure that at all times it has an appropriate solvency margin, i.e. "sufficient funds" to meet its liabilities as prescribed by law.

12. The Ministry of Finance may inspect any insurance business at any time or call upon it to lodge a report upon its operations. This is in addition to the ordinary reporting requirements which require quarterly and annual reports to be filed.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".