BACKGROUND

This article provides a summary of important changes related to the implementation of employee stock ownership plans (ESOPs) for foreign entities operating in Vietnam.

On 28 June 2024, the State Bank of Vietnam (SBV) released Circular No. 23/2024/TT-NHNN (Circular 23), which amends Circular No. 10/2016/TT-NHNN (Circular 10) with various important changes related to the implementation of ESOP for foreign entities operating in Vietnam, including:

– Stock bonuses requiring outbound cash remittance are now prohibited: Under Circular 23, while the option for direct stock bonuses remains the same as Circular 10, any ESOP option requiring outbound cash remittance is now prohibited. This revision aligns with the government's goal to control foreign currency outflows while providing flexibility for companies to attract talent with different employee benefits schemes.

– The requirement to register ESOP implementation with the SBV is now abolished: From the effective date of Circular 23, which is set for 12 August 2024, if an ESOP scheme satisfies the general regulatory conditions, it can be adopted without registration with the SBV in Vietnam.  This is a welcome development that helps to remove the administrative burden for companies.

– Reporting frequency for ESOP activities is increased and enhanced: The quarterly reporting obligation to SBV under Circular 10 has now been changed to monthly reporting obligations under Circular 23. It is also mandatory to submit both electronic and hard copies of the report to the SBV. Companies — particularly those with large-scale ESOPs — may have to allocate more resources to ensure compliance with the reporting obligations.

WHAT DOES IT MEAN FOR YOUR COMPANY?

Review ESOP Structures: Assess your company’s existing ESOP schemes to ensure they comply with the new regulations and explore alternative schemes that align with these requirements.

Streamline Reporting Processes: Adapt to the shift to monthly reporting by evaluating your company’s reporting processes and allocating resources to meet the new requirements effectively.

Consult Regulatory Experts: Collaborate with legal and financial advisors who specialize in Vietnamese regulations to ensure that your company’s ESOP implementation adheres to the latest updates.

HOW CAN A&M HELP?

At A&M, we provide extensive support to businesses in navigating the new regulations introduced by Circular 23. Our services include reviewing and restructuring ESOP schemes to ensure compliance with the updated regulations, while also minimizing potential tax leakages during implementation.

We would be pleased to speak to you if you would like to understand the implications of Circular 23 on your ESOPs. Feel free to reach out to us.