The COVID-19 outbreak has had an unprecedented impact on enterprises operating in Vietnam. Faced with a myriad of practical and legal hurdles, businesses have seen their operations hampered or even put a full stop. The resulting difficulties cover a broad spectrum of issues, ranging from the disruption of supply chains to contracts, labor, payments, taxes, etc.
This article provides an overview of the key measures taken by the Government of Vietnam, the Supreme People’s Court (SPC), and other regulatory agencies to alleviate the impacts of the crisis on enterprises and employees. In particular, the following documents will be discussed:
- Directives No. 02/2020/CT-CA and No. 141A/TANDTC-VP of the SPC respectively dated 10 March 2020 and 23 April 2020 regarding the prevention of the COVID-19 outbreak within the People’s Court system (Directive 02 and Directive 141A)
- Official Letter No. 1916/UBCK-GSDC of the State Securities Commission of Vietnam dated 20 March 2020 regarding the organization of the annual general meeting of shareholders in 2020 (OL 1916)
- Official Letter 1064/LĐTBXH-QHLĐTL of the Ministry of Labor dated 25 March 2020 providing guidance on the payment of salaries to employees during the work stoppage related to the COVID-19 epidemic (OL 1064);
- Notification No. 5277/TB-SHTT of the Ministry of Science and Technology dated 31 March 2020 on the extension of time limit for intellectual property applications (Notification 5277);
- Decree No. 41/2020/ND-CP of the Government on the extension of time for the payment of taxes and land rent (Decree 41); and
- Government Resolution No. 42/NQ-CP dated 09 April 2020 regarding solutions to support people facing difficulties due to the Covid-19 outbreak (Resolution 42).
Directives 02 and 141A
Under Directive 02, the SPC issued a number of directives applicable to all courts in Vietnam. These include the temporary suspension of:
- The receipt of hard-copy documents at court headquarters;
- The issuance of procedural documents in hard copy;
- The opening of a new court hearing; and
- The conduct of court hearings for which “the time limit for settlement” under the applicable procedural law has not expired.
For cases where the “time limit for settlement” has expired, the proceedings would move forward but subject to several health and security restrictions.
The SPC also encouraged courts to use electronic means or mail for the submission of documents and to promote online dispute resolution. The initial period of application for these measures,30 March 2020, was extended until 22 April 2020, in line with lockdown measures applicable during this time.
On 23 April 2020, the SPC issued Directive 141A pursuant to which it ordered court officials and employees back to work, instructing the resumption of paused cases.
It further specified that hearings should be scheduled on weekends to make for lost time. It also stated that priority should be given to cases (i) where the time limit for trial and settlement is close to expiring, (ii) related to COVID-19 prevention, (iii) in service of local political duties, or (iv) serious cases of public interest.
The SPC further confirmed that social distancing measures would still be implemented in the courts until 31 May 2020.
Accordingly, only informed and summoned persons will be allowed to participate in the hearings, and gatherings of more than 20 people in a room court are prohibited. Courts located in high-risk areas will still be subject to additional measures.
Under the 2014 Law on Enterprise (LOE), joint-stock companies, including public ones, are required to hold their annual general meeting (AGM) within 4 months from the end of the financial year.
Pursuant to OL 1916, public companies which are not in a position to comply with this requirement may request a 2-month extension from their business registration agency.
In this context, OL 1916 invites public companies to consider organizing virtual AGMs in lieu of in-person meetings. While virtual AGMs are authorized under the LOE, companies should still ensure that they comply with other applicable statutory requirements as well as with the contents of their charter and internal regulations.
If this matter is not addressed in the charter and internal regulations, then specific provisions should be added to provide detailed guidance on matters such as shareholder participation, quorum, and voting.
These amendments should be prepared by the board of management of a company and approved by its general meeting of shareholders.
The downturn caused by the COVID-19 outbreak has created labor issues for many enterprises that were forced to suspend employees. OL1064 confirms that the payment of salaries to suspended employees should follow the provisions of Article 98(3) of the Labor Code.
Pursuant to this article, suspended employees and employers should attempt to agree on the salary to be paid during the period of suspension, which cannot be lower than the regional minimum wage.
This provision applies to the following individuals: (i) foreign workers who were not allowed to return to the enterprise for work at the request of a competent authority; (ii) employees who stopped working during the quarantine period at the request of a competent authority; (iii) employees who stopped working because their enterprise or division is inoperable as a result of their the employer or co-workers being put in quarantine period or not having returned to work.
OL 1064 also invites affected employers to consider the temporary appointment of employees to tasks other than those set out in their employment contracts, as authorized under Article 31 of the Labor Code. OL1064 further provides that employers who were forced to scale down their production and reduce their workforce as a result of the COVID-19 outbreak may unilaterally terminate employment contracts, subject to compliance with the requirements of Articles 38 and 44 of the Labor Code. These provisions set out the employer’s obligations with respect to, inter alia, the provision of a notice, the establishment of a labor utilization plan, and the payment of the job-loss allowance.
Pursuant to Notification 5277, “all procedures for the registration of industrial property rights” falling due between 30 March 2020 and 30 April 2020 were automatically extended until 30 May 2020. These include the filing of claims for priority rights, responses to decisions or notifications of IP Vietnam, requests for the annuities or renewal of protection titles, appeals, or opposition, as well as the provision of supplemental documents and the payment of all fees and charges.
To obtain an extension of time for an application other than those mentioned above, applicants must demonstrate the occurrence of a force majeure event or an objective obstacle, in accordance with Article 9.4 and 9.5 of Circular No.01/2007/TT-BKHCN as amended by Circular No.16/2016/TT-BKHCN.
Under Decree 41, the Government granted an extension of time for the payment of various taxes and land rents.
The beneficiaries of this measure include enterprises and individuals engaged in the followed sectors: agriculture, forestry, fishery, industrial production and manufacturing, construction, warehousing and storage, labor services, tourism, sports, entertainment, media, and other fields.
For enterprises, the tax relief package includes a 5-month extension of time for the payment of:
- The value-added tax falling due between March and June 2020;
- The corporate income tax due for the remaining 2019 tax period and the first two quarters of 2020; and
- The land rent due for the first half of 2020 (the grace period starting on 31 May 2020).
Under Resolution 42, the Government put in place a financial support program for employers and employees affected by the COVID-19 outbreak. The beneficiaries of this program are the following:
|No.||Groups of supported beneficiaries||Financial support (VND)||Period of support|
|1.||Employees who are put on unpaid leave or whose labor contracts have been suspended for 1 month or longer due to the struggles faced by their employer because of the Covid-19 pandemic.||1,800,000/person/ month||Subject to the duration of the suspension or unpaid leave, starting from 1 April 2020 but for no more than 3 months|
|2.||-Employees whose labor contracts been terminated but are ineligible for unemployment benefits– Employees who have no labor contracts and lost their jobs||1,000,000/person/month||No more than 3 months (from April to June 2020)|
|3.||Enterprises that paid at least 50% of the salary allowance due under Article 98(3) of the Labor Code to employees who have been suspended from their work as a result of the pandemic (i.e. at least the regional minimum wage, see discussion on OL 1064 above), for the period from April to June 2020.||Loans from the Vietnam Bank for Social Policies, with no collaterals and at a 0% interest rate, covering up to 50% of the regional minimum salary due to each employee, based on the actual payment period but for no more than 3 months.||The loan has a maximum of 12 months.|
In addition to the above, financial support is also offered to other groups entitled to “preferential and social protection” such as household businesses with an annual tax return of less than VND 100 million per year, individuals with meritorious services to the revolution who receive a monthly stipend, social security beneficiaries and poor households.
The measures discussed in this article attest to the proactive response of the Vietnamese government and institutions to the economic difficulties created by the COVID-19 pandemic. They are likely to evolve and change depending on the development of the crisis in the near future. Affected businesses should seek to obtain legal advice as to how they can take full advantage of the relief offered by such measures.