Circular 71/2001/TT-BTC

CIRCULAR No CIRCULAR No. 71/2001/TT-BTC OF AUGUST 28, 2001 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT�S DECREE No. 42/2001/ND-CP OF AUGUST 1, 2001 DETAILING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE INSURANCE BUSINESS LAW Pursuant to Insurance Business Law No. 24/2000/QH10 of December 9, 2000; Pursuant to the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law; Pursuant to the Government�s Decree No. 178/CP of October 28, 1994 defining the tasks, powers and organizational structure of the Ministry of Finance; The Ministry of Finance hereby provides the following detailed guidance: I. ESTABLISHMENT AND OPERATION OF INSURANCE ENTERPRISES AND INSURANCE BROKERAGE ENTERPRISES 1. Dossiers of application for establishment and operation licenses (hereinafter called licenses for short) 1.1 Dossiers of application for licenses of insurance enterprises shall comply with the provisions of Article 64 of the Insurance Business Law. Dossiers of application for licenses of insurance brokerage enterprises shall comply with the provisions of Clauses 1, 2, 3 and 4, Article 64 of the Insurance Business Law. 1.2 Dossiers of application for licenses of insurance enterprises and insurance brokerage enterprises shall be made in three sets each, including one set of original documents and two sets of copies. Dossiers of application for licenses of foreign-invested insurance enterprises or insurance brokerage enterprises shall be made in three sets, each consisting of one Vietnamese version and one English version. Of these three sets one consists of original documents and two others consist of copies. Organizations and individuals applying for licenses (hereinafter called investors for short) shall be accountable for the accuracy of their application dossiers. 1.3 Applications for licenses shall be made according to a set form and signed by the representatives at law or by persons authorized by the investors; 1.4 Apart from the papers mentioned at Point 1.1 above, depending on the forms of to-be-established enterprises, license application dossiers must also consist of the following documents: 1.4.1 For State insurance enterprises and State insurance brokerage enterprises: a/ Document of the agency that has decided on the establishment of the enterprise, approving the enterprise to conduct insurance business or insurance brokerage activities; b/ Written explanation on the source of capital for establishment of the insurance enterprise or insurance brokerage enterprise, certified by the competent body. 1.4.2 For joint-stock insurance companies, joint-stock insurance brokerage companies, insurance brokerage limited liability companies, private insurance brokerage enterprises and insurance brokerage partnerships: a/ Minutes of the investor�s meeting on the establishment of the joint-stock insurance company, joint-stock insurance brokerage company, insurance brokerage limited liability company, private insurance brokerage enterprise or insurance brokerage partnership; b/ The competent body�s written certification of the legality of the source of capital for the company establishment. 1.4.3 For foreign-invested insurance enterprises and insurance brokerage enterprises: a/ Charter of the foreign party to the joint venture or of the foreign investor (for insurance enterprises and insurance brokerage enterprises with 100% foreign capital); b/ Operation license of the foreign party to the joint venture or of the foreign investor (for insurance enterprises and insurance brokerage enterprises with 100% foreign capital). c/ Written certification of the foreign competent body permitting the foreign party to contribute capital to the joint venture or permitting the foreign investor to establish the insurance enterprise or the insurance brokerage enterprise with 100% foreign capital in Vietnam. In cases where the country where the foreign party or foreign investor is headquartered has no requirement for such written permission, there must be a proof thereof. d/ The joint venture insurance or insurance brokerage enterprise must have a document issued by the competent Vietnamese authority permitting it to participate in the joint venture; e/ Written explanation on the source of capital contributed by the Vietnamese party, certified by the competent body. 2. Procedures for receiving and handling dossiers of application for licenses 2.1 License application dossiers shall be received and examined by the Ministry of Finance on the following basis: 2.1.1 The number of dossier sets required to be submitted and the titles of documents which must be included in the dossier as prescribed; 2.1.2 The validity of the license application dossier; 2.1.3 Written certification of the legal status and financial situation of the investors. 2.2 Right after receiving the complete and valid dossiers, the Ministry of Finance shall issue to the investors or their authorized representatives the receipts thereof. 2.3 Within 60 days after receiving from the investors the complete license application dossiers, the Ministry of Finance shall decide to grant or refuse to grant licenses. In case of refusal, the Ministry of Finance shall issue written replies clearly explaining the reason therefor. In the process of appraising the license application dossiers, within 15 working days after receiving the complete and valid dossiers as prescribed at Point 2.1 above, the Ministry of Finance may, if deeming it necessary, send notices to the investors requesting them to supplement and/or amend their dossiers. The time limit for the investors to send written supplements and/or amendments to the license application dossiers is working 30 days after they receive the written requests of the Ministry of Finance. Past this time limit, including the extension time, if the investors fail to finalize the dossiers as requested, their license application dossiers shall be no longer valid for consideration. 2.4 Licenses shall be granted according to a set form. 3. Appraisal of license application dossiers 3.1 License application dossiers shall be appraised on the following grounds: 3.1.1 The Insurance Business Law and documents guiding the implementation thereof; 3.1.2 Other relevant law provisions. 3.2 Contents of appraisal of license application dossiers: 3.2.1 The appraisal of the investors� legal status and financial capabilities through: a/ Document on the establishment of the enterprise and its organization and operation charter (for investors being enterprises) or document(s) proving the legal status (for investors being individuals); b/ Audited financial statements of the three latest years (for investors being operating enterprises), showing the turnover, property value, annual profits; the investor�s capital mobilization capability; bank certification of money amount in the investor�s account (for investors being individuals); support from the parent company (if any); c/ Capital amount, deductions for professional reserves and reserve funds according to law provisions, investment activities and business plan of the to be-established insurance enterprise or insurance brokerage enterprise. 3.2.2 Appraisal of the compatibility of the establishment of the insurance enterprise or insurance brokerage enterprise with the socio-economic planning and benefits: a/ The compatibility of the license application dossier with the planning, plan and orientations for the development of the insurance market and financial market in Vietnam; b/ The compatibility of the enterprise�s establishment shall be examined in the following specific issues: - Assurance of a healthy development of the insurance market; - The national economy�s demands for the types of insurance products which the enterprise intends to deal in; - Examination of the possibility to raise the capacity of tapping the domestic insurance potential and the capacity of retaining insurance premiums on the market; the possibility to create jobs for laborers; - The process of integration and development of trade relations between Vietnam and other countries. 3.2.3 Professional appraisal of license application dossiers: a/ Insurance rules, terms and premium rates, which are formulated in accordance with current law provisions, ensure economic and technical feasibility and suit the socio-economic conditions as well as traditional customs and habits of Vietnam; b/ Encouraging the deployment of new insurance operations which the insurance enterprises currently operating on the market have not yet been able to carry out. 4. Licensing fee Within 7 days after being granted the establishment and operation licenses, insurance enterprises and insurance brokerage enterprises must pay a licensing fee being equal to 0.1% of legal capital according to the provisions in Article 4 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 on the financial regime applicable to insurance enterprises and insurance brokerage enterprises. 5. Amendment and supplementation of licenses The procedures for approval of amendments according to the provisions in Article 69 of the Insurance Business Law are specified as follows: 5.1 Change of the enterprise�s name: Insurance enterprises or insurance brokerage enterprises wishing to change their names must send to the Ministry of Finance applications for change of name, which are signed by the enterprises� representatives at law or competent persons, together with the written certifications by the enterprises� competent bodies or persons of the change of the enterprises� names; 5.2 Increase or decrease of the charter capital level of the insurance enterprises or insurance brokerage enterprises: Insurance enterprises or insurance brokerage enterprises wishing to change their charter capital levels must send to the Ministry of Finance: 5.2.1 Written explanation on the increase or decrease of the charter capital level, signed by the enterprise�s representative at law or competent person, explicitly stating the increased (or decreased) amount, the reason(s) therefor, the capital use plan and implementation schedule; 5.2.2 Written approval of the charter capital increase or decrease by the competent body or person of the enterprise; 5.2.3 Explanation on the financial source used for capital increase in case of increase of charter capital. 5.3 Opening, or termination of operation, of branches and/or representative offices 5.3.1 Dossiers of application for opening of branches and/or representative offices of insurance enterprises or insurance brokerage enterprises shall comply with the provisions in Articles 11 and 12 of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law. 5.3.2 Dossiers of application for opening of overseas branches and/or representative offices of insurance enterprises or insurance brokerage enterprises shall comply with the law provisions on overseas investment. 5.3.3 A dossier of application for termination of operation of a branch or representative office of the insurance enterprise or insurance brokerage enterprise consists of: - Application for termination of operation; - Report on the situation of operation of the branch or representative office in the latest three years. Where the branch or representative office has operated for less than three years, the situation of operation from the starting time should be reported; - Responsibilities and matters arising from the termination of operation. 5.4 Change of locations of head offices, branches or representative offices of insurance enterprises or insurance brokerage enterprises: Insurance enterprises or insurance brokerage enterprises wishing to change the locations of their head offices, branches or representative offices must send to the Ministry of Finance the applications therefor, signed by their representatives at law or competent persons. 5.5 Change of the operation contents, scope and duration The procedures and dossiers of application for change of the operation contents, scope and duration of insurance enterprises or insurance brokerage enterprises shall comply with the provisions of Article 13 of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law. 5.6 Transfer of shares and contributed capital amounts Dossiers of application for transfer of shares or contributed capital amounts accounting for 10% or more of charter capital must be made in one set and submitted to the Ministry of Finance, comprising the following documents: 5.6.1 Application for transfer of shares or contributed capital amounts accounting for 10% or more of charter capital, signed by the enterprise�s representative at law or competent persons, clearly stating the quantity and value of shares or percentage of the contributed capital to be transferred; the reason(s) for the transfer; 5.6.2 Information related to the organization(s) and/or individual(s) being transferees of the shares or contributed capital amounts; 5.6.3 Contract for transfer of shares or contributed capital amounts. 5.7 Change of the Managing Board chairmen or general directors (directors) 5.7.1 Within 15 days before issuing decisions to appoint or dismiss at the end of office term or at mid-term the Managing Board chairmen or general directors (directors) of the insurance enterprises or insurance brokerage enterprises, the Managing Board chairmen or persons authorized by the Managing Board chairmen must send written requests to the Ministry of Finance for approval of such changes. 5.7.2 A dossier of application for change of the Managing Board chairman or general director (directors) consists of: a/ Written request for approval of the change; b/ Proposed appointment or dismissal of personnel of the insurance enterprise or insurance brokerage enterprise; c/ Curricula vitae of the proposed appointees, certified by the Managing Board or competent person of the insurance enterprise or insurance brokerage enterprise; d/ Diplomas and certificates proving the qualifications and professional capabilities of the to be-appointed Managing Board chairman or general director (director); e/ Minutes of the meeting on the appointment or dismissal of the Managing Board chairman or general director (director) of the insurance enterprise or insurance brokerage enterprise (if any). 5.8 Separation, split, merger, consolidation, dissolution and transformation of enterprises The dossiers, procedures and time limit for settlement of requests for separation, split, merger, consolidation, dissolution and transformation of insurance enterprises or insurance brokerage enterprises shall comply with relevant law provisions. 5.9 Time limit for settlement of requests of amendment and/or supplementation of licenses Within 30 days after the Ministry of Finance receives the complete dossiers requesting the amendment and/or supplementation of licenses of the insurance enterprises or insurance brokerage enterprises as prescribed at Point 5.1 to Point 5.8, Part I of this Circular, it shall issue written replies to accept or refuse to accept the enterprises� requests. In cases of refusal, it must clearly state the reasons therefor in writing. In cases of acceptance, the Ministry of Finance shall issue adjusted licenses to the enterprises, made according to the set form. Adjusted licenses shall constitute an inseparable part of the insurance enterprises� establishment and operation licenses. II. INSURANCE EXPLOITATION 1. Registration of insurance rules, terms and premium rates of insurance products 1.1 The registration of insurance rules, terms and premium rates applicable to insurance products shall comply with the provisions at Clause 3, Article 18 of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law. 1.2 Insurance enterprises may only register the insurance rules, terms and premium rates for insurance products of insurance operations permitted for business as prescribed in their establishment and operation licenses (or certificates of eligibility and satisfaction of insurance business conditions) granted by the Ministry of Finance to them. 1.3 Insurance enterprises shall take responsibility for the contents and lawfulness of the insurance rules, terms and premium rates of their insurance products already registered with the Ministry of Finance. 1.4 When registering the insurance rules, terms and premium rates of their insurance products, the insurance enterprises must send to the Ministry of Finance the following documents: 1.4.1 Document requesting registration of insurance products, made according to a set form; 1.4.2 Insurance rules, terms and premium rates of insurance products, expected to be applied; 1.4.3 Within seven days after receiving all documents for registration of insurance rules, terms and premium rates, the Ministry of Finance shall have to make certification of the enterprises� completion of the procedures for registration of insurance rules, terms and premium rates. 2. Publicization of lists of insurance products Within the first 15 days of each quarter, the Ministry of Finance shall publicize the lists of insurance products which the insurance enterprises have been offering on the market by the time of publicization. The publicization of lists of insurance products shall be made by the Ministry of Finance on the mass media and such lists shall be sent to Vietnam Insurance Association and insurance enterprises established and operating lawfully in Vietnam. 3. Insurance commissions 3.1 Insurance enterprises may only pay insurance commissions from the amounts of actually collected insurance premiums at the insurance commission rates prescribed by the Ministry of Finance for each insurance operation to the subjects specified in Article 20 of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law. 3.2 Insurance commissions are amounts paid by insurance enterprises to insurance brokerage enterprises and insurance agents. Insurance enterprises may take initiative in using the insurance commissions for the following expenses: 3.2.1 Direct payment to insurance agents and insurance brokerage enterprises after these organizations and individuals bring about services for insurance enterprises to cover the following expenses: - Initial exploitation expenses (exploration, persuasion and introduction of customers); - Expenses for collection of insurance premiums; - Expenses for monitoring insurance contracts and persuading customers to maintain their insurance contracts. 3.2.2 Payment of insurance commissions in service of the management of agents, including: - Payment for managers of agents, who are not staff of the enterprises; - Payment to encourage agents to exploit in excess of the norms on turnover, quantity of insurance contracts and ensure a high percentage of continued insurance contracts; - Expenses for implementing a number of welfare policies and creating conditions for stabilizing agents� incomes. 3.3 The maximum rates of insurance commissions the insurance enterprises are permitted to pay to insurance agents shall accord with the tables of insurance commission rates applicable to each insurance operation in Appendix 4 - Table of maximum insurance commission rates applicable to non-life insurance operations and Appendix 5 - Table of maximum insurance commission rates applicable to life insurance operations, attached with this Circular. Insurance enterprises may base themselves on the practical business activities to adjust the insurance commission rates applicable to insurance products of the same insurance operation but not the insurance commissions for different insurance operations.