In Vietnam, Social Fund is one of the most active bodies in supporting and encouraging community and social growth. Due to its significant social impact, the formation of social funds is currently in high demand. As of 15 January 2020, all issues related to Social Fund are governed by Decree 93/2019/ND-CP (“Decree 93”). In this article, we will provide an overview on how to set up a Social Fund under Decree 93.
What is Social Fund?
According to Decree 93, Social Fund is a non-governmental organization in which an individual or organization voluntarily contributes a certain amount of property for establishment or is established through a will, donation or donation of successful assets, having the purpose of organization and operation of supporting and encouraging the development of culture, education, health and physical education, sports, science, agriculture and rural development, not for profit, being licensed to operate and having its charter recognizedby the competent state authority.
Thus, Social Fund has the following characteristics:
- being a non-governmental organization;
- being established by an individual or organization who voluntarily contributes a certain amount of property for establishment or established through a will, donation or donation of successful assets;
- being organized and operated with the purpose of supporting and encouraging the development of culture, education, health and physical education, sports, science, agriculture and rural development, not for profit. To clarify, not for profit purposes means that profits earned during the operation are not distributed but only used for activities according to the recognized fund’s charter;
- being licensed to operate and having its charter recognized by the competent state authority.
Conditions for obtaining Social Fund establishment license
In order to obtain Social Fund establishment license, it’s necessary to be satisfied 04 conditions as below:
- Operating with the purpose of supporting and encouraging the development of culture, education, health and physical education, sports, science, technology, community, not for profit.
- Having founding members of Social Fund according to the provisions of law, specifically:
(i) Founding members must be Vietnamese citizens or organizations;
(ii) If the founding member is a Vietnamese citizen, he/she must have full capacity for civil acts and no previous criminal convictions;
(iii) If the founding member is a Vietnamese organization, it must be duly established and have its charter or document defining its functions and tasks; a resolution of its leadership or decision of its head on the establishment of fund, and a decision on appointment of a representative to act as a Social Fund’s founding member; in case of a foreign-invested organization, its representative who acts as a Social Fund’s founding member must be a Vietnamese citizen;
(iv) They have contributed assets to establish the fund as prescribed in law;
(v) If a founding member is subject to the management of a competent authority, a written approval from such competent authority must be obtained according to regulations on management of officials before submitting an application for establishment license and acknowledgment of the fund’s charter to the competent authority.
- The fund founding board has sufficient assets to contribute to the fund establishment as prescribed in Decree 93.
- Application for establishment as prescribed in Decree 93.
Are foreign citizens or organizations entitled to establish Social Fund?
Pursuant to Decree 93, foreign individuals and organizations are allowed to contribute their assets with Vietnamese citizens and organizations to establish a Social Fund in Vietnam. However, assets contribution of foreign individuals and organizations must not exceed 50% total value of the assets contributing to the establishment of Social Fund.
Additionally, such foreign citizens and organizations have to meet the following requirements:
- Committing to pay taxes and take responsibility for the lawfulness of the contributed assets;
- Committing to strictly comply with the law of Vietnam and Social Fund’s operation objectives;
- Having the contributing assets to establish the fund as prescribed in Decree 93.
Assets contributed to the establishment of Social Fund
Depending on subjects that contribute assets to fund and location of operation, the value of contributed assets converted into Vietnamese dong must assure:
- In case Social Fund operates nationwide or in more than one province: VND 6,500,000,000 (as for Social Fund established by Vietnamese citizens, organizations) or VND 8,700,000,000 (as for Social Fund established by foreign individuals, organizations and Vietnamese citizens, organizations);
- In case Social Fund operates within a province: VND 1,300,000,000 (as for Social Fund established by Vietnamese citizens, organizations) or VND 3,700,000,000 (as for Social Fund established by foreign individuals, organizations and Vietnamese citizens, organizations);
- In case Social Fund operates within a district: VND 130,000,000 (as for Social Fund established by Vietnamese citizens, organizations) or VND 1,200,000,000 (as for Social Fund established by foreign individuals, organizations and Vietnamese citizens, organizations);
- In case Social Fund operates within a commune: VND 25,000,000 (as for Social Fund established by Vietnamese citizens, organizations) or VND 620,000,000 (as for Social Fund established by foreign individuals, organizations and Vietnamese citizens, organizations).
Assets contributed to establish Social Fund may be the amount of money in Vietnamese dong and objects, foreign currencies, financial instruments and other property rights that converted into Vietnamese dong, in which, the amount of money in Vietnamese dong must account for at least 50% of the total value of Social Fund’s assets.
The ownership of assets contributed to the Social Fund must be transferred to the Social Fund within 45 working days from the date on which the Social Fund is granted an establishment license and has its charter recognized.
Application for establishment of Social Fund
Application dossier for the establishment of a Social Fund include:
- An application form for Social Fund’s establishment;
- The draft charter of Social Fund (refer to sample charter Circular 04/2020/TT-BNV);
- The written commitment on asset contribution made by Social Fund’s founding members or documents showing proof of assets contributed to Social Fund as prescribed in law;
- Curriculum vitae and criminal record of members of the Fund Founding Board and attached documents. Founding member is subject to the management of a competent authority must submit a written approval from such competent authority;
- Documents indicating the appointment of title holders of the Fund Founding Board;
- Documents certifying the planned head office of Social Fund: Generally, it can be Office Lease Agreement.
Procedures of issuance establishment license and recognizing Social Fund’s charter
Step 1: Draft and submit 01 set of complete application dossier to competent authority.
The competence of issuance of establishment license is as follows:
- The Minister of Home Affairs is competent to issue establishment licenses and written acknowledgements of charters for:
(i) Social Fund operates nationwide or in more than one province;
(ii) Social Fund that is established by foreign individuals, organizations and Vietnamese citizens and/or organizations within a province.
- Presidents of provincial-level People’s Committees are competent to issue establishment licenses and written acknowledgements of charters for:
(i) Social Fund operates within a province;
(ii) Social Fund that is established by foreign individuals, organizations and Vietnamese citizens, organizations within a district/commune.
Step 2: When receiving application dossier of Social Fund, the competent authority is responsible for making a receipt for the purpose of term determination for solving application.
Step 3: No later than 40 working days upon the receipt of valid application, the competent authority shall issue the establishment license and written acknowledgment of the fund’s charter.
However, please note that, in practice, the above term is the statutory time, the actual processing time may be extended due to the workload of the authority, objective reasons such as authorized personnel going on business trips or force majeure events.
Procedures that Social Fund must perform after its establishment license is granted and its charter is recognized
- Announcement of the establishment of Social Fund
Within 30 working days from the date of issuance of establishment license and charter acknowledgement, Social Fund must announce its establishment consecutively on 03 articles in written or electronic newspaper in central for Social Fund establishedpermitted by the Minister of Home Affairs; or in written or electronic newspaper in local for Social Fund established permitted by the President of the provincial People’s Committee.
- Having obtained written confirmation from the bank where the Social Fund registers to open an account that the amount that each founder commits to contribute to establish the fund is available in the account. For other assets, the Social Fund has completed procedures for transfer of ownership of assets as prescribed in Decree 93.
- Recognition of the fund’s eligibility for operation and recognition of members of the Fund Management Council
Within 45 working days from the date of being granted the establishment license, Social Fund is responsible for sending the prescribed dossier to the competent state agency for consideration and decision on recognition of Social Fund’s eligibility for operation.
Within 30 working days after receiving a complete and valid dossier, the competent authority shall issue a decision on recognition of Social Fund’s eligibility for operation and recognition of members of the Fund Management Council.
Note: This article is provided for reference purposes only and does not constitute legal advice. Depending
on each specific matter from time to time, the content presented above may no longer be appropriate. For
detailed advice, please contact LMP Lawyers.
