New Rules for Utilizing Bank Accounts of RO

New Rules for Utilizing Bank Accounts of RO

Circular No. 32/2016 / TT-NHNN on guiding the opening and utilizing bank accounts at organizations providing payment services stipulates that organizations without legal person status such as households, private companies, law firms and Representative Offices of foreign enterprises are not eligible to open bank accounts.

The opening bank accounts of unincorporated entities were closed prior to the effective date of Circular 32, before 1 March 2018.

From the viewpoint of state agencies

Relation to previous laws

Circular 32 is issued after the National Assembly adopts the Civil Code 2015 and the  Article 1 of the Civil Code 2015, effective from 01/01/2017. The subject of civil relations only consists of individuals and legal entities. Therefore, Circular 32 bases on ensuring compliance with the Civil Code 2015 on subjects in civil relations. For organizations without legal entity, as defined in the Civil Code 2015, are not the subject of civil relations. Thus, they do not qualify as independent subjects participating in open relations and using payment accounts at payment service suppliers which are essentially contractual relationships.

Limitation of subjects

The limitation of subjects participating in open transactions, use of payment accounts only include individuals and legal entities as provided for in the Civil Code 2015. Regulations on those transactions in the Circular 32 is in full compliance with the one in the Civil Code 2015. It is necessary to limit the risk to the parties as well as ensure those transactions not invalidated due to violations of the Civil Code 2015.

Detailed rules

The payment accounts of non-corporate organizations before the effective date of Circular 32 really exist. In order to limit disturbance in the operation, Circular 32 provides detailed guidance on the order and procedures for carrying out the transitional processing of these payment accounts. Specifically, Circular 32 stipulates the responsibilities of banks and branches of foreign banks as follows:

Firstly, reviewing records, contracts for the opening and use of bank accounts of customers being unincorporated organizations;

Secondly, within 3 months from the effective date of Circular 32, inform customers :

  • The conversion of the existing account to the form of an individual payment account or a joint payment account. (in cases accounts belong to many individuals);
  • The time limit for completing the conversion of accounts;
  • The handling thereof after the end of the conversion period.

Thirdly, within 12 months from the effective date of Circular 32,  complete the renewal  to convert, if requested by the customer;

Fourthly, after 12 months from the effective date of Circular 32, closing accounts of unincorporated organizations not completed the transformation.

Reasons and implications:

  1. There will be millions of organizations involving who will spend money to close accounts and do other relevant procedures thereafter.
  2. Under the Constitution of 2013, the law subject is “citizen” and “organization”. In another word, the legal person identifies the highest legal status of the legal subject as “organization”. Unlike the Civil Code 2005’s subjects including “individuals, legal persons and other subjects”, the Civil Code 2015 recognizes only two types of entities, human. This change is considered a “great revolution” in the legal field and has caused unforeseen disturbances.
  3. The underlying reason for this regulation is very clear and intentional from the Civil Code 2015. It seeks to remove 5 million individual business households and cooperative groups from the scope of the regulation. Therefore, these subjects have to go into companies.
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