LEGAL UPDATE – AUGUST 2024 – New regulation on ESOP in Vietnam: Looser control?

Issue August 2024

Hai Ha
Partner

Phan Thi Minh
Senior Associate

Preface:

With effectiveness from 12 August 2024, implementation of the Employee Stock Ownership Plan in Vietnam shall no longer be required to register with the State Bank of Vietnam

Employee Stock Ownership Plan (ESOP) is a benefit policy for key employees working in multinational companies, in which employees will have a chance to become shareholders of holding companies by way of receiving bonus shares or purchasing shares with preferential terms. In Vietnam, ESOP issued by foreign companies to Vietnamese employees is regulated as a form of indirect foreign investment and subject to the foreign exchange control of the State Bank of Vietnam (SBV).

Implementation of ESOP issued by foreign companies to Vietnamese employees is currently governed by the Decree No. 135/2015/ND-CP of the Government and Circular No. 10/2016/TT-NHNN of the SBV (“Circular 10”). On 28 June 2024, the SBV issued the Circular No. 23/2024/TT-NHNN (“Circular 23”) to amend some provisions of the Circular 10 with respect to the ESOP implementation, which will be in force from 12 August 2024 and aims to release administrative burdens for local entities while maintaining strict foreign exchange management.

Release of registration requirement

The most significant change introduced by the Circular 23 is the removal of the requirement for registration of ESOP implementation with the SBV. Accordingly, ESOP-implementing local entities that implement the ESOP issued by foreign companies to Vietnamese employees will no longer be required to obtain SBV’s approval prior to ESOP implementation. However, the management of ESOP implementation will be mainly vested in local merchant banks where the ESOP-implementing accounts are opened. Pursuant to the Circular 23, banks may request the ESOP-implementing local entity to submit documents related to ESOP for their examination, including: (i) documents evidencing relations between the foreign company and the ESOP-implementing local entity; (ii) documents describing features of ESOP such as the share awarding form, vesting period, and list of Vietnamese participants; and (iii) other relevant documents. Thus, local banks may challenge the legality of ESOP and, at their sole discretion, refuse transactions to be conducted through ESOP-implementing accounts.

Tighten reporting obligation

The Circular 23 imposes a new requirement for local employers to file monthly reports on ESOP implementation status to the SBV, replacing the previous quarterly reporting requirement outlined in the Circular 10. These reports must be made in regulatory form, containing foreign currency amounts of dividends or proceeds from the sale of shares remitted to Vietnam for paying the local employees, and enclosed with the local banks’ acknowledgement. The deadline for filing reports is the 12th day of the month immediately following the reported month. Reports must be sent both electronically via email to the SBV’s designated email address (i.e., [email protected]) and in hard copy to the SBV’s office.

Restriction of transferring ESOP funds out of Vietnam

This restriction is not explicitly addressed in the existing provisions of the Circular 10. However, in practice, it is very difficult to get approval from the SBV for the awarding form of “stock option with preferential terms” as the remittance of money out of Vietnamese territory is strictly controlled by the SBV. Many ESOPs were refused or took a long time to explain, demonstrate to obtain SBV’s acceptance due to a viewpoint that ESOP may be considered as a method of mobilizing capital from Vietnamese employees.

Under the Circular 23, the transfer of ESOP funds out of Vietnam is clearly restricted. The Circular 23 clearly provides for two forms of share awarding, which are:

  • Directly awarding shares to the employees: The employees are awarded and own shares without any payment;
  • Other forms of awarding overseas shares without any cash outflows from Vietnam.

Accordingly, an employer may implement ESOP as long as no foreign currency is remitted out of Vietnam.

Outlook

With the restriction of transferring ESOP funds out of Vietnam, the State Bank of Vietnam loosens their control over ESOP implementation by removing the registration requirement as a precedent condition for launching ESOP for Vietnamese employees. The form of directly awarding stocks to the employees has become more straightforward, while the form of selling stocks to Vietnamese employees with payment originated from Vietnam is restricted.

Download pdf version

LEGAL UPDATE – AUGUST 2024 – LAW ON ELECTRONIC TRANSACTIONS 2023

Issue August 2024

Le Hong Phong
Partner

Nguyen Hoang Quan
Senior Associate

With the rapid growth of the digital economy, electronic transactions are becoming more common and increasingly important. This has presented the need for a sound legal framework to safeguard the legal rights and interests of parties in electronic transactions. Therefore, the Law on Electronic Transactions 2023 was promulgated on June 22, 2023 and took effect on July 01, 2024 with many new regulations and major adjustments that not only enlarge the current legal framework but also create more favorable and safer conditions for parties participating in electronic transactions. With an emphasis on personal data protection, authentication of electronic signatures and detailed regulations on electronic contracts, the new law promises many positive changes. This article aims to list out the key changes in the Law on Electronic Transactions 2023 along with its impacts and legal considerations for businesses and individuals.

A. NEW KEY HIGHLIGHTS OF THE LAW ON ELECTRONIC TRANSACTIONS 2023

1. Electronic Signatures

One of the highlights of the Law on Electronic Transactions 2023 is the provision on electronic signatures. To ensure its legality and security, electronic signatures must meet certain technical standards such as: security standards, authentication standards, traceability standards, and legal standards. Compared to past regulations, these new points are better oriented to improved security standards, specifically stipulating the implementation of two-factor authentication and strong encryption algorithms that will bolster the security of electronic signatures. This regulation also contributes to stricter identity verification, by mandating that electronic signatures be authenticated only by licensed authentication service providers after rigorous identity verification processes. Furthermore, the provisions of the Law on Electronic Transactions 2023 also improve the traceability of electronic signatures, by requiring that every electronic signing system keeps a record and stores signing history for transparency and verifiability. Finally, the new regulations clearly affirm that an electronic signature has equal legal status to a handwritten signature and shall thus be admissible in court.  In addition to new regulations on electronic signatures, the Law on Electronic Transactions 2023 also clearly stipulates that organizations providing electronic signature services must be licensed by a competent authority, and electronic signatures must be authenticated by these organizations to enjoy the same legal validity as hand-written signatures.

2. Data Protection and Privacy Rights

a. Data Management

The Law on Electronic Transactions 2023 sets out strict regulations on the collection, storage and processing of personal data to protect user privacy:

  • Data Collection: Organizations and businesses may only collect personal data with the user’s express consent, unless provided otherwise by the law.
  • Data Storage: Personal data must be stored securely, using encryption and security measures to prevent unauthorized access, loss or leakage of data.
  • Data Processing: The processing of personal data must comply with security principles, and may only be carried out for purposes that have been consented to by the user.

b. User Rights

Users have the right to access, modify and request the deletion of their personal data. Businesses must provide clear and convenient mechanisms for users to exercise these rights, ensuring personal data is thoroughly managed and protected.

3. Electronic Contracts

While regulations on electronic contracts have been in place since the Law on Electronic Transactions 2005, the formation of electronic contracts currently remains quite limited. This is partly due to a lack of specific guidelines for the formation of electronic contracts. Moreover, the formation of electronic contracts was previously based on mutual agreement between the parties, making it difficult to ensure the integrity of the contracts that were entered into. Compared to the provisions of the Law on Electronic Transactions 2005, which focused on establishing the legal basis for recognizing electronic contracts as having the same legal status as paper contracts, including regulations on the content and form of electronic contracts, the Law on Electronic Transactions 2023 expands and fleshes out the regulations on electronic contracts. This includes requirements for recording and storing transaction history, protecting data integrity, and mechanisms for dispute resolution.

a. Form and Content

An electronic contract must be in the form of an electronic document and must meet the same content requirements as a traditional paper contract. This includes basic terms, rights and obligations of parties and dispute resolution terms.

b. Legal Evidence

An electronic contract has the same legal status as a paper contract and can be admissible in court. This demands that every party strictly follow the signing and storage procedures of electronic contracts in order to preserve their legality.

B. IMPACT OF THE LAW ON ELECTRONIC TRANSACTIONS AND LEGAL  CONSIDERATIONS FOR INDIVIDUALS AND ORGANIZATIONS

As the Law on Electronic Transactions 2023 takes effect amid continuous development in the digital economy, businesses should focus on investing in technological security solutions, including two-factor authentication, data encryption and management systems for electronic signatures. This not only helps businesses comply with legal regulations but also protects them from cybersecurity risks. Additionally, businesses should establish and maintain data protection policies to ensure compliance with security regulations and customer privacy. This includes educating staff on new regulations and developing necessary security measures.

For individuals, it is necessary to raise awareness on the protection of personal information online. This includes using security measures such as two-factor authentication, taking care to not share personal data via unsecured channels and regularly assessing access rights to personal data. Users should be clearly informed of their rights to access, modify and delete personal data, as well as their rights to demand enterprises to exercise these rights. This contributes to the protection of individual rights and ensures that personal data is managed securely.

CONCLUSION

The Law on Electronic Transactions 2023 provides clear and detailed regulations about the protection of the rights and interests of parties participating in electronic transactions, and creates a safe and transparent digital business environment. New provisions on identity authentication, data protection and privacy rights, electronic signatures, and electronic contracts not only guarantee the legitimacy of transactions but also enhance trust among users in online activities. Businesses and individuals should fully comply with and implement these regulations to ensure the safety and efficiency of electronic transactions, thereby contributing to the sustained development of the digital economy of Vietnam.

Download pdf version

LEGAL UPDATE – AUGUST 2024 – NEW REGULATIONS OF 2023 HOUSING LAW ON THE MANAGEMENT AND USE OF APARTMENT BUILDINGS

Issue August 2024

Hai Ha
Partner

Nguyen T.Lien Lien
Associate

On June 29, 2024, the National Assembly adopted the Law No. 43/2024/QH15 on amendment and supplementation of a number of articles of the Land Law No. 31/2024/QH15, the Residential Housing Law No. 27/2023/QH15, the Law on Real Estate Business No. 29/2023/QH15, the Law on Credit Institutions No. 32/2024/QH15, among these, it notably highlights that the Residential Housing Law No. 27/2023/QH15 dated November 27, 2023 (the “2023 Housing Law”) comes into effect on August 01, 2024, five months earlier than its previous effective date. With the expectations and directives of the National Assembly to address the backlog of issues of the Residential Housing Law No. 65/2014/QH13 dated November 25, 2014 (the “2014 Housing Law”), the 2023 Housing Law codifies certain provisions from guidance documents and introduced numerous clearer regulations for the management of residential house construction investment projects. Regarding the management and use of apartment buildings, the 2023 Housing Law introduces the following new provisions:

Firstly, while the 2014 Housing Law only prohibits improper use of apartment buildings and encroachment upon common space, the 2023 Housing Law specifically categorizes prohibited acts in the management and use of apartment buildings, with several new prohibitions added.

Compared to the 2014 Housing Law, the 2023 Housing Law introduces numerous new prohibitions, aimed at enhancing the management and protection of the living environment of residents; specifically, the 2023 Housing Law acknowledges that failure to pay maintenance fees and misuse of operational management and maintenance fees are strictly prohibited acts. This provision ensures that the financial funds for the maintenance and operation of the apartment buildings are collected and used for the right purposes, thereby maintaining the quality and safety of the construction works, and protecting the interests of other apartment building owners who comply with regulations. The 2023 Housing Law also prohibits acts that affect the order and landscape of the apartment buildings, including painting, decorating the exterior in contravention of regulations on design, architecture, and keeping or releasing livestock or poultry, and slaughtering livestock within the apartment area, contributing to protecting the common living environment, ensuring order and aesthetic harmony, creating a civilized, clean and beautiful living environment for all apartment owners.

In addition, the 2023 Housing Law also strictly prohibits the division of apartments without the permission of competent state authorities (“State Authority”). This prohibition helps to ensure the structural safety of the apartment buildings, maintain consistency in the planning, prevent infrastructure overload, and address other safety issues during the use of apartment buildings.

Secondly, the Housing Law 2023 introduces a number of specific regulations in construction of parking spaces of apartment buildings, as well as codified a number of provisions in the Regulations on management and use of apartment buildings to ensure the legality in practical application and implementation.

Design of apartment buildings must allocate the area for each type of vehicle: While the 2014 Housing Law generally requires ensuring the construction of parking spaces in accordance with approved design and construction standards, the 2023 Housing Law codifies the provisions in the Regulations on management and use of apartment buildings, specifically detailing that parking spaces can be arranged in the basement levels or other areas inside or outside the apartment buildings. Additionally, the 2023 Housing Law requires the developers of investment projects of apartment building construction (referred to as the “Developer”) to allocate the area for each type of vehicle in the design of the apartment buildings. These specific requirements aim that the State Authority shall have a more comprehensive and accurate assessment of the quality and safety of the construction works, evaluate the impact of the apartment building project on the transportation system in the surrounding area, prevent Developer from changing the use purpose of designated parking areas contrary to the approved design, and ensure the common ownership and use of the apartment owners for parking space (aside from car parking space).

Regulations on charging area: In addition to the regulations on the allocation of separate parking spaces for each type of vehicle, the addition of requirements on charging area for electric motor vehicles to be arranged in compliance with the construction standards is a notable new point, demonstrating the preparation of the 2023 Housing Law for the development of new technologies, meeting the increasing social demand and trend for electric vehicles. However, this provision of the 2023 Housing Law is not yet sufficiently specific on whether all apartment buildings’ designs must include electric charging areas as a mandatory requirement or not. Given the current situation where residents charge electric vehicles haphazardly without ensuring fire safety and considering recent incidents of fires caused by explosions during charging, it is very urgent to provide explicit guidance and standards for designing electric charging areas in apartment buildings. Currently, the Ministry of Science and Technology has developed and issued 11 Vietnamese standards for electric vehicle charging stations (including 9 standards for charging stations and 2 standards for electric vehicle battery exchange); additionally, the Ministry is in the process of revising legal regulations and proposing additional 18 standards related to electric vehicle charging stations and associated electric equipment (as mentioned in Official Letter No. 149/BKHCN-TDC dated January 18, 2024 of the Ministry of Science and Technology). These standards provide clear guidelines and frameworks for Developer to implement and adhere to when constructing and designing electric charging areas within apartment buildings, ensuring the safety of property and lives of residents in these areas.

Developer is required to publicly disclose the investment costs for the construction of car parking spaces: The 2023 Housing Law clearly stipulates that in cases where apartment buyers do not purchase or rent a car parking space, this car parking space is under the management of the Developer and the investment cost for construction of these parking spaces shall not be included in the apartment selling price. Also, the 2023 Housing Law requires the Developer to publicly disclose the investment cost for constructing car parking spaces, to help the apartment buyers understand whether the composition of the apartment selling price paid includes the cost for the construction of car parking spaces. This regulation aims to address the practical issue where Developer of some residential housing projects designate car parking spaces as their private property without clearly specifying whether the investment costs for constructing these spaces are allocated into the apartment sale price for apartment buyers. However, there is a need for more specific guidelines on the timing and method for the Developer to publicly disclose the cost of construction of car parking spaces so that buyers can be informed before deciding to sign the apartment sale and purchase contract.

Thirdly, the 2023 Housing Law introduces a method to determine the area of loggia when determining the use area of apartments and other areas in the apartment buildings.

Accordingly, the area of the loggia is measured as the entire floor area from the inner edge of the common wall or the apartment partition walls. This specific regulation helps determine the accurate calculation method for the loggia area within apartments in the apartment, and reduces the Developer’s ambiguity in the calculation method to increase the area of the apartment when determining the selling or leasing price of apartments.

Simultaneously, under this provision, the 2023 Housing Law clearly stipulates the ownership right of equipment and components attached to the balcony and loggia of the apartment. In the event of equipment and components attached to balconies and loggias but are the parts of the vertical surface of the construction works according to the design documents, such equipment and components shall be determined as under the common ownership of the apartment buildings. This regulation facilitates both Developer and buyers in clearly distinguishing between private ownership and common ownership when equipment and components are attached to the parts under private ownership, addressing the ambiguity under the 2014 Housing Law where the definition of private ownership includes technical equipment systems exclusively used or attached to the apartment or to other areas of private ownership.

Fourthly, the 2023 Housing Law removes some additional costs from the service fee for management and operation of apartment building compared to the 2014 Housing Law. 

The 2023 Housing Law additionally excludes two types of fees from the service fee for management and operation of apartment building including (i) fee for purchasing fire and explosion insurance, and (ii) remuneration to the apartment building Management committee. This new provision aims at clearly separating the service fee for management and operation of apartment building from expenses related to the operations of the Management committee, whereby the Management Board’s remuneration will be decided by the apartment building general meeting and be separately contributed, to avoid affecting the decision-making, contribution, and use of the service fee for management and operation, and potential disputes related to the service fee for management and operation of apartment building.

The 2023 Housing Law also supplements the responsibility of the provincial-level People’s Committee in promulgating a framework for the service fee for management and operation of apartment buildings to serve as a reference for parties involved and in cases where an agreement on service fees cannot be reached, the service fee under such framework promulgated by the provincial-level People’s Committee will be applied.

Fifthly, the 2023 Housing Law adds specific regulations on the handover of infrastructure works in the apartment buildings area.

The 2014 Housing Law lacks of regulations on the handover of infrastructure works, and the timing and method for handing over infrastructure works from the Developer to the State Authority. The 2023 Housing Law adds specific regulations on this issue. Accordingly, in case of handing over infrastructure works according to the approved design/project policy, the infrastructure works must be handed over to the State Authority after the acceptance of the construction works and upon the request of the Developer. The handover process must be recorded in writing between the Developer and the State Authority. The provisions of Articles 157 and 158 of the 2023 Housing Law also clearly define the responsibility for the maintenance of technical infrastructure works; accordingly, in case the technical infrastructure works have not yet been handed over to the State Authority, the Developer remains obligated to maintain, manage and operate it according to the approved project specifications, ensuring that the works do not adversely affect the community and living environment of the apartment building residents.

The above contents represent notable new points introduced by the 2023 Housing Law concerning the management and use of apartment buildings, contributing to enhance clarity and transparency in the management of apartment buildings, increasing the responsibilities of involved parties, and contributing to a good, safe, and sustainable living environment for residents, and aligning with the National Assembly’s direction when enacting and promulgating the 2023 Housing Law. However, for these new regulations to be effectively implemented in practice and aligned with the realities in Vietnam, it is required to have specific implementation guidelines from the Government and relevant Ministries and agencies in the coming time.

Download pdf version

LEGAL UPDATE – FEBRUARY 2024 – GUIDANCE ON THE PRIVATE PLACEMENT OF CORPORATE BONDS IN DOMESTIC MARKET

Issue February 2024

Nguyen Thu Huyen
Partner 

Nguyen T. Thu Ha
Senior Associate

Corporate bonds are currently governed by the Decree No. 153/2020/ND-CP dated 31 December 2020 on the private placement of corporate bonds and trading of privately placed corporate bonds in the domestic market and offering of corporate bonds to the international market, as amended and supplemented by the Decree No. 65/2022/NĐ-CP and the Decree No. 08/2023/ND-CP (“Decree 153”).

On 17 May 2023, the Ministry of Finance issued Circular No. 30/2023/TT-BTC guiding a number of the regulations on registration, depository, exercise of rights, transfer of ownership rights, transaction payment, and organization of the market for trading privately placed corporate bonds in the domestic market (“Circular 30”). Circular 30 specifically guides the privately placed corporate bonds (the “Bonds”) issued from 01 January 2021 in accordance with Decrees 153. Regarding Bonds issued prior to 01 January 2021 with the outstanding principle, the bond depository and transaction will continue to be conducted in accordance with the approved bond issuance plan.

1. General Principles 

Circular 30 sets out 08 general principles when implementing the registration, depository, exercises of rights, transfer of rights of the Bonds. Some notable principles are as follows:

  1. The Bonds must be registered and deposited in concentration at the Vietnam Securities Depository and Clearing Corporation – VSDC (Tổng công ty Lưu ký và Bù trừ chứng khoán Việt Nam, in Vietnamese).
  2. The Issuer, the VSDC, and the depository members shall be responsible for exercising the rights for the bondholders in accordance with the Law on Securities and other relevant laws.
  3. The Issuer shall have to register the trading of issued Bonds in the bond trading system.
  4. The payment for transactions in the bonds trading system shall be made via the bonds payment system according to the instant payment method for each transaction, the central clearing partner mechanism shall not be applied.

2. Trading account for trading of the privately placed corporate bonds

This is a new regulation that requires the investors to open a trading account at the trading members for the implementation of transactions.

In case the investor has already had the securities trading account opened at the trading member, the investor is entitled to use such account to trade Bonds. Before the purchase of Bonds, the investors must be a professional investor and have signed a letter of confirmation in accordance with the laws on securities. The Securities enterprises being the trading members are responsible for identifying the professional investor qualification and ensuring that the investors are eligible for bonds purchase before entering commands into the bonds trading system.

3. Trading the corporate bonds via the bond trading system opened at Hanoi Stock Exchange

Circular 30 particularly releases a “life jacket” for the bondholders under the current circumstances where there are several issuers being unable to repay both principal bond and interests under the Bonds. The investors may directly offer their Bonds through the corporate bond trading system opened at the Hanoi Stock Exchange to recover their investment costs. So what are the conditions for investors to be able to offer their Bonds?

First, the issuer must register the Bonds at the VSDC. Secondly, before being traded or transferred to others, the Bonds must be deposited in concentration at the VSDC through a securities enterprise. Thirdly, and being the most crucial factor, is to find investor willing to purchase the Bonds.

In such cases, the Bonds shall be transferred and traded on the bond trading system via the mutual agreement of the parties. Such transaction is established when the buyer or seller enters a trading command into the bond trading system and the reciprocal party confirms that trading command.

4. Transfer of bond ownership rights

The VSDC shall transfer the Bonds that have been registered and deposited at its corporation via the bonds trading system. However, Circular 30 further guides some special circumstances where the transfer of Bonds ownership rights is not subject to bond trading system, such as donation, inheritance; division, separation, consolidation, merging, dissolution of enterprises; exercises of courts’ judgment, decisions of arbitration court or the judgment enforcement; etc.

5. Payment settlement of bonds transaction

Circular 30 sets forth more detailed instructions on bond transaction payment. Accordingly, individuals and organizations eligible for Bonds transactions on the depository account system of the VSDC includes: (i) the depository members settling payment for their own Bonds transactions or their clients’ and (ii) the organizations opening accounts for the direct payment of their own Bonds transactions (the “Permitted Bond Transfer Organization”). The Permitted Bond Transfer Organization must open a deposit account under its name at the bank for the payment settlement of bond transactions.

The payment of bond transactions shall be made at the settlement bank based on the payment obligation announced by the VSDC. The transfer of bond payments, on the other hand, shall be made via the system of VSDC on the principle of Bond transfer between accounts of investors at the Permitted Bond Transfer Organization, simultaneously with the payment settlement at the bank. The depository members at which the investors open their accounts are responsible for the distribution of money and Bonds to the investors’ accounts immediately upon the completion of payment transfer by VSDC and payment settlement of transactions by the bank.

In addition, Circular 30 also prescribes instructions for processing some circumstances of insolvency for bond transactions, for instance, where the Permitted Bond Transfer Organization is temporarily insolvent, the bank shall lend money for the payment settlement of bonds transactions by virtue of the financial support agreement signed between the parties. In the event such agreement prescribes the use of deposited securities at VSDC as collaterals for the loan amount, VSDC shall freeze such securities under the suggestion of the bank. Furthermore, in case the payment deadline arrives and the Permitted Bond Transfer Organization does not have available funds for such payment, VSDC shall remove the transaction payment.

Download pdf version

LEGAL UPDATE – FEBRUARY 2024 – LAW ON PRICE 2023

Issue February 2024

Trinh Hoang Lien
Partner 

 

Ha T. Thu Trang
Legal Assistant

 

The Law on Price No. 16/2023/QH15 (“Law on Price 2023“) was adopted by the National Assembly on June 19, 2023 to overcome limitations under the Law on Price 2012 to adapt with drastical changes in reality. The law will take effect on July 01, 2024 except for the provisions on the expertise of the Valuer Council, which will be delayed until January 01, 2026. Below are some notable new points of the Law on Price 2023.

1. Principles of applying the Law on Price and other related laws

Application of the Law on Price on issues concurrently regulated by other effective laws is guided in more detail under the Law on Price 2023. Specifically, in case there are inconsistancies between the Law on Price and other laws issued before the effective date of the Law on Price, the Law on Price shall be applied, except for pricing by the State of some commodities required to implemented in accordance with the lining laws, including laws on land, housing, electricity, medical examination, treatment, education, university education, vocational education and intellectual property.

2. Price declaration

The Law on Price 2023 expands numerous cases subject to price declaration besides the mandatory case of declaring prices for goods and services in the price stabilisation list as regulated under the Law on Price 2012. Goods and services subject to price declaration include goods and services in the price stabilisation list; goods and services that the State determines the price range, maximum price, minimum price for organisations to determine specific prices to sell to consumers; goods and services that traders agree to follow the reference price; and other essential goods and services determined by the Government.

It is concerned that expansion of the subjects of price declaration can become a form of “sub-license” for traders of goods and services. The list of organisations providing goods and services that must perform price declaration is unclear. Price declaration shall be implemented at two levels, the Ministrial level and equivalent agency and the provincial level (Provincial People’s Committee) according to the list issued by these agencies. The questions whether the price declaration procedure is complicated or not, the list of organisations subject to price declaration is long or not and if there will be overlap in the list of goods and services subject to price declaration issued by these two levels of implementation or not only be answered upon the promulgation of Decree guiding in detail by the Government.

3. Business conditions for valuation services of valuation enterprises

The conditions for valuation services of valuation enterprises are regulated more strictly to ensure the stability of human resources of valuation enterprises and limit violations in the implementation process. The new regulation increases the requirement for the minimum number of valuers at enterprises from 3 to 5 valuers.

Furthermore, additional requirements are set for each form of valuation enterprise. Specifically, for partnership company, general partners of the partnership must be persons who obtains valuer card registered for the valuing profession at the enterprise. For limited liability company with two or more members and joint stock company, it is further required that the total contributed capital of the members or shareholders who have an valuer card registered for the valuing profession at the enterprise must account for more than 50% of the charter capital of the enterprise.

For the branch of the valuing enterprise, the new regulation requires to increase the number of valuers at the branch of the valuing enterprise from at least 2 to at least 3 valuers who meet all conditions for registering for the valuing profession and registering for the valuing profession at the branch.

4. Conditions for valuers

The Law on Price 2023 reduces the working experience time required before register for the valuing profession for those who gain university degree or higher in the field of price or valuation according to the application-oriented program as prescribed by law. For these persons, the minimum total actual working time at the valuation enterprises, state management agencies on price and valuation is 24 months compared to the general level of total actual working time at the valuation enterprises, state management agencies on price and valuation for those with a general university degree or higher of 36 months.

5. List of goods and services subject to price stabilisation

The Law on Price 2023 removes electricity, table salt and table sugar (including granulated sugar and refined sugar) from the list of goods and services subject to price stabilization regulated by the Law on Price 2012 and adds DAP fertilizer, animal feed and aquatic feed. Consequently, the list of goods and services subject to price stabilisation according to the Law on Price 2023 includes 9 goods and services: Gasoline, oil products; Liquefied petroleum gas (LPG); Milk for children under 6 years old; Ordinary paddy and rice; Nitrogen fertilizer, DAP fertilizer, NPK fertilizer; Animal feed, aquatic feed; Vaccines for disease prevention for livestock, poultry; Pesticides; Drugs in the list of essential drugs used at medical examination and treatment facilities. The regulation of this list in the law ensures transparency, clarity, avoids abuse to expand the scope of goods subject to price stabilisation, ensures legal certainty, stability, helps businesses and people who are doing business in goods subject to price stabilisation have a suitable business plan.

6. List of goods and services subject to price determination by the State

The Law on Price 2023 supplements a criterion for goods and services subject to price determination by the State, essential goods and services of monopoly nature in buying and selling or have a limited competitive market and affect the economy – society, people’s lives, production and business activities. Additionally, in order to get rid of inconsistancy, overlap between the Law on Price and other lining laws in related to goods and services subject to price determination by the State, the Law on Price 2023 also updated the list of goods and services subject to price determination by the State in line with the regulations of lining laws such as adding station entry and exit services; auction services, … to the list.

Download pdf version

LEGAL UPDATE – JANUARY 2024 – WHAT ARE THE IMPACTS OF NEW LAND LAW 2024 ON PROPERTY/ REAL ESTATE DEVELOPERS IN LAND PRICE EVALUATION?

Special Issue Jan, 2024

Nguyen Dang Viet
Partner

We take a snapshot on amendments and supplements under the new Land Law 2024 related to land pricing and evaluation, a very important issue concerned by all real estate developing investors to find out whether there are significant impacts on land costs leading to changes in real estate selling prices or not.

I – Principles of land pricing

II- Land Price Evaluation Approaches

Download pdf version

LEGAL UPDATE – JUNE 2023 – VIETNAMESE GOVERNMENT’S DECREE NO. 08/2023/ND-CP DATED MARCH 5, 2023 AMENDING AND SUSPENDING SOME ARTICLES OF DECREES PRESCRIBING PRIVATE PLACEMENT AND TRADING OF PRIVATELY PLACED CORPORATE BONDS IN DOMESTIC MARKET AND OFFERING OF CORPORATE BONDS IN INTERNATIONAL MARKET

Issue June 2023

Nguyen Thi Thu Trang
Counsel

Phan Van Huy
Senior Associate

Recently, a number of bond issuers, especially those engaged in real estate business, have faced difficulties meeting their due bond principal and interest repayment obligations. With the purpose to facilitate issuers as well as providing more options for bondholders, on 5 March 2023, the Government issued Decree No. 08/2023/ND-CP amending, supplementing and suspending the effect of a number of articles in the Decrees prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market (“Decree 08/2023”).

Decree 08/2023 is expected to bring positive solutions for bond issuers and bondholders in payment of due bonds. The Decree takes effect from the date of signing and marks following significant points:

 1. Allowing negotiation to pay principal and interest of due bonds with other assets

Formerly, the bond issuer is responsible to “make full and timely payments of bond principal and interests when they become due, and exercise associated rights (if any) for bondholders under terms and conditions of bonds” as stipulated in  Article 34.3 of Decree No. 153/2020/ND-CP of the Government prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market (“Decree 153/2020”), with no regulation allowing adjustment of the payment term. Decree 08/2023, notably, provides regulations allowing the issuers and bondholder to negotiate to pay due principal and interest of bond with other assets. In particular, regarding bonds offered for sale in the domestic market, where the issuers cannot make full and timely payment of the bond principal and interest in Vietnam dong in compliance with the issuance plan announced to the investors, the issuers may negotiate with the bondholders to pay due principal and interest of the bond with other assets on the following principles:

(i) comply with the provisions of civil law and relevant laws. For conditional business lines, they must also comply with the provisions of respective law on such conditional business lines;

(ii) must be approved by the bondholders;

(iii) issuers must disclose unusual information and take full responsibility for the legal status of assets used to pay bond principal and interest in accordance with the laws.

This new legal framework is expected to motivate bond issuers that are having difficulty paying bond principals and interests according to the issuance plan announced to investors and, together with bondholders, to find a solution to settle the payment of due bond principal and interest. On the other side, the new regulation opens up more options for bondholders to receive payment with other assets instead of long waiting for the issuers to pay in compliance with the initial plan.

However, it should be noted that this new legal framework only stipulates that the issuers are fully responsible for the legal status of the assets used for payment, but does not provide a strict mechanism to control the legality of the assets and subsequent payment process. Many argue that the change of payment assets can pose issues to asset valuations, asset divisions, notably under circumstances where many bondholders receive payment with the same real estate.

2. Extending bond’s term up to 02 years compared to the announced issuance plan

For bonds issued prior to and having outstanding balance by 16 September 2022 – the effective date of Decree No. 65/2022/ND-CP amending and supplementing a number of articles of Decree No. 153/2020 (“Decree 65/2022”), instead of not allowing issuers to change the term of issued bonds as prescribed in Article 3.3.(b) of Decree No. 65/2022, Decree 08/2023 allows the change of the terms and conditions of bonds on the condition that it must ensure the following principles:

(i) approved by a competent authority of the issuers;

(ii) accepted by bondholders representing at least 65% of the total outstanding bonds of the same type;

(iii) where the bond’s term is extended, the maximum duration shall not exceed 02 (two) years compared to the term in the bond issuance plan announced to investors;

(iv) for bondholders who do not agree to change the bond’s terms and conditions, the issuers are responsible for negotiation to ensure the interests of the investors. Where a bondholder does not accept the negotiation plan, the issuers must fulfill all obligations towards the bondholder according to the bond issuance plan announced to investors (even if the change in terms and conditions of bonds has been approved by bondholders representing 65% or more of the total bonds).

Accordingly, the notable new point is the extension of the bond’s term up to 2 years compared to the term in the bond issuance plan announced to investors. This period shall give the issuers more time to fulfill its obligations towards bondholders.

3. Suspending the effect of some regulations until the end of 2023

Decree 08/2023 further suspends the effect of the following provisions in Decree 65/2022 until the end of 31 December 2023:

(i) Regulations on determining the status of individual professional stock investors at Article 8.1.(d) of Decree 153/2020 as amended in Article 1.6 of Decree 65/2022;

(ii) Regulations on bond distribution time of each issuance instalment in Article 1.7 and 1.8 of Decree No. 65/2022;

(iii) Regulations on credit rating results for bond issuers at Article 12.2.(e) of Decree 153/2020 as amended in Article 1.9 of Decree No. 65/2022.

The suspension of the above regulations is considered a short-term measure to help issuers facing difficulties in liquidity and payment of due bonds due.

To sum up, Decree 08/2023 provides new mechanisms for bond issuers to negotiate with bondholders to solve the current challenging situation of the domestic corporate bond market. Generally, to be able to change the payment assets and extend the bond’s term, the issuers must obtain the approval of the bondholders. Thus, bondholders are advised to carefully consider before making their decisions in the context where many issues may arise in regards to asset valuation, division of assets of co-ownership or the issuers’ provision of unclear or inaccurate information.

Download pdf version

LEGAL UPDATE – MAY 2023 – CHANGES IN LAND REGULATIONS

Issue May 2023

Nguyen Dang Viet
Partner

Nguyen Tu Oanh
Associate

On 03 April 2023, the Government issued Decree No. 10/2023/ND-CP amending and supplementing a number of articles of Decrees guiding the implementation of the Land Law. (“Decree 10/2023”), taking effect from 20 May 2023.

The Decree 10/2023 is considered, amongst 04 other Decrees, significantly affecting the land sector and real estate market. the Decree 10/2023 aims to solve and remove certain difficulties and obstacles in land procedures, land valuation, and granting certificates of land use rights, ownership rights for non-residential real estates (condotel and villas and office real estate, etc.). In particular, the Decree 10/2023 sets out the following noteworthy new provisions:

 1. Extension of land use period shall exclude force majeure affection time

Article 64.1.(i) of the  Law on Land 2013 stipulates that “…If [project] developers still fail to put the land into use when the extended time is over, the State shall revoke the [allocated] land without compensation for land and land-attached assets, except due to force majeure”. Force majeure events had been specifically stated under Article 15.1 of the Decree 43/2014/ND-CP, however, this Decree is silent on handling the consequences of force majeure events. The Decree 10/2023 has now supplemented that the period of time being affected by a force majeure event shall be excluded and added into the 24 months’ grace period.

The following authorities have power to determine the period of force majeure effects: (i) Provincial People’s Committees for projects located in a province/ centrally-affiliated city and (ii) the Minister of Natural Resources and Environment for projects located in two or more provinces or centrally-affiliated cities.

2. Auction of land use rights

Article 119 of the Law on Land 2013 sets out only basic conditions for auctioning and entities to take part into land auction when the State allocates or leases land.

The Decree 10/2023 supplements Article 17.a on auction of land use rights when the State allocates land with collection of land use fees or leases land:

 (i) Conditions for organizations participating in the auction of land use rights: If two or more companies having cross-ownership participate in auction of a parcel of land or a project sited at one or more parcels of land, only one company is allowed to participate in the auction; the deposit requirement is increased to 20% of starting price of the land parcel(s); and companies must satisfy the conditions prescribed by the law on housing and the law on real estate business in order to attend the auction of land for developing housing and other real estate business projects;

(ii) Conditions for land: apart from the conditions specified in Article 119.1 of the Law on Land, the following conditions must also be satisfied: (a) starting price of the auction is determined by a competent state authority; (b) process of auction is applicable to each single parcel; (c) The detail planning 1/500 of the parcel used for development of a housing construction project is approved by a competent authority.

Furthermore, Article 17.a also clearly stipulates on handling deposit in specific cases.

3. Issuance of certificates for condotels

The issuance of certificates of ownership of non-residential construction works, namely condotel, villas, etc., had been guided by the Minister of Natural Resources and Environment in the Official Letter. No. 703/BTNMT-TCQLDD dated 14 February 2020 (“Official Letter 703”). Accordingly, Official Letter 703 referred to Article 32 of Decree 43/2014/ND-CP on certification of ownership of non-residential construction works. However, Article 32 of Decree 43/2014/ND-CP does not have specific regulations on construction works used for travel accommodation purposes.

 The Decree 10/2023 has supplemented Article 32.5 of the Decree 43/2014/ND-CP expanding its application to construction works used for travel accommodation purposes. This regulation clearly states that: “For construction works developed to serve travel accommodation purposes on commercial or service land as prescribed in laws on tourism, if the construction works satisfy the conditions set forth in laws on land, laws on construction and laws on real estate business, the ownership of such construction works attached to land can be granted certificates for commercial or service land use purposes.”. Nonetheless, we view that the Decree 10/2023 has yet to specify whether a developer of a project who develops construction works used for travel accommodation purposes can transfer a single construction work (ie. a condotel or villa) to other organizations or individuals, as in fact, such a transfer may lead to distortion of the original investment project granted to the developer, and whether the transfer is considered a transfer of a part of the investment project or not.

The regulation clearly states that owner of construction work used for travel accommodation purposes take legally responsibility to meet all conditions under the law on construction and real estate business, but it does not prescribe whether or not to comply with the law on investment.

4. Authority to issue title certificates

Currently, the Decree 43/2014/ND-CP, as amended and supplemented by the Decree 01/2017/ND-CP stipulates that: For localities in which Land Registration Offices have been established, the Department of Natural Resources and Environment is the competent agency to grant certificates of land use rights and ownership of houses and other land-attached assets to land users and owners of land-attached assets (“Certificate”) in the following cases: (i) When land users or asset owners exercise the rights of land users or owners of land-attached assets, which requires the grant of a new Certificate; (ii) Renewal or re-grant of Certificates.

The Decree 10/2023 has amended the authority to issue Certificates or to confirm changes to the issued Certificates in a manner that create favorable conditions for people in carrying out these administrative procedures (being implemented at Land Registration Offices without having to go to the Department of Natural Resources and Environment).

5. Online land administrative procedures

Article 1.7 of the Decree 10/2023 provides clearer guidance on procedures for registration and issuance of Certificates in the electronic environment.

The applicants of some land related administrative procedures are now able to undertake online and receive the results of issuing documents by post without having to go directly to the competent authorities. This regulation will help saving time and costs.

6. Conditions for conversion of use purpose of land for rice cultivation, protective forest land, and specialized use forest land to implement investment projects

Regarding the conversion of use purpose of land to implement investment projects as to land for rice cultivation, forest land, etc., Article 1.9 of the Decree 10/2023 has supplemented Article 68.a of Decree 43/2014/ND-CP on conditions and criteria for the conversion of use purpose of land, notably:

  • Having alternative afforestation plans or written document confirm completion of obligations to pay for alternative afforestation in accordance with the laws on forestry in case of the conversion of use purpose of protection forest or special-use forest land or ; having topsoil use plans and written document confirming completion of obligations to pay for protection and development of land for rice cultivation in accordance with the laws on crop production in case of the conversion of use purpose of land for rice cultivation.
  • Having a preliminary environmental impact assessment and environmental impact assessment in accordance with the law on environmental protection (if any).

7. Application dossier for granting Certificates in housing development projects, real estate business projects other than housing development projects

For housing development projects, after the completion of the construction, the investors shall no longer be responsible for submitting the Report on project implementation to the Department of Natural Resources and Environment. This regulation is possibly to reduce administrative procedures, given that there is already procedure for inspection and acceptance of the construction completion to be put into use.

For real estate business projects other than a housing development projects, after completion of construction, the investors shall be responsible for sending the Notification of specialized construction authority that allows investors to conduct taking-over of construction items, construction work or approve the result of taking-over in accordance with laws on construction together with other papers.

Download pdf version

LEGAL UPDATE – MARCH 2023 – SOME NOTABLE CHANGES IN BANK GUARANTEE UNDER THE CIRCULAR 11/2022/TT-NHNN

Issue March 2023

Tran Cong Quoc
Partner

Nguyen Thuy An
Associate

On 30th September 2022, the State Bank of Vietnam issued the Circular No. 11/2022/TT-NHNN on bank guarantees (hereinafter referred to as the “Circular 11”). The Circular 11 will repeal the Circular 07/2015/TT-NHNN and the Circular 13/2017/TT-NHNN on bank guarantees (hereinafter referred to as the “Circular 07”), and take effect from 1st April 2023. Below are some notable changes of the Circular 11.

1. Electronic guarantees

Pursuant to Article 9 of the Circular 11, in addition to the bank guarantees in writing, credit institutions/foreign bank branches may offer electronic bank guarantees (hereinafter referred to as “electronic guarantees”). Adoption of electronic guarantees will depend on agreement by the credit institutions/foreign bank branches and clients. Those matters related to security of data and information confidentiality in electronic guarantee must comply with, among others, regulations on anti-money laundering, electronic transactions, SBV’s instruction on risk management of electronic transactions. The supplementation of electronic guarantee form under Circular 11 is based on the actual demand of clients, which implement the provisions of the Law on Credit Institutions on electronic banking services. Regulations on electronic transactions in e-banking activities and electronic guarantee are also found in other legal documents, including, among others, Decree 35/2007/ND-CP, Decree 130/2018/ND-CP and Decision 35/2006/QD-NHNN.

In case “know your clients” are made electronically, the value of each issued bank guarantee shall not exceed VND04 billion per individual and VND45 billion per organization, except the following cases:

  • Client identification information is certified by the competent authority or electronically certified by electronic certification service providers in accordance with the law on electronic certification and identification;
  • Request for issuance of an electronic guarantee is submitted via SWIFT system;
  • Client information and guaranteed obligations are verified and certified through the customs e-payment portal or the national bidding system;
  • Clients use digital signatures as prescribed by law when applying for a guarantee or entering into a guarantee agreement with credit institutions/foreign bank branches;
  • The client is a credit institution or a foreign bank branch.

2. Guarantees over future residential property

The Circular 11 clarifies some certain contents regarding guarantees over future residential property as follows:

  • An agreement on guarantees over future residential property is defined by Circular 11 as a contractual agreement between a commercial bank, a developer and other relevant parties (if any) whereby commercial bank agrees to guarantee for obligations of developer against the buyer under the sale, and purchase leasing of future residential property. The guarantee letter will be issued by the bank to buyers after conclusion of the agreement on guarantees over future residential property.

The agreement on guarantee over future residential property is signed before signing contracts on sale or contracts on purchase leasing of future residential property (hereinafter referred to as the “Sale contract” or “Purchase leasing contract”). Upon signing Sale contract or Purchase leasing contract, the developer shall request the commercial bank to issue guarantee letters to buyers.

  • Rights and obligations of the parties

The Circular 11 specifies those rights and obligations of developers, commercial banks and buyers in relation to guarantees over future residential property, which give buyers more protection in case of claiming the guarantee, including, among others:

  • Commercial banks are obliged to issue and deliver guarantee letters to buyers, or developers in accordance with Sale contract or Purchase leasing contract;
  • Upon receipt of guarantee letters from the commercial bank, developers are obliged to deliver the same to buyers;
  • Buyers are entitled to receive the guarantee letters from commercial banks or developers within the effective term of the agreement on guarantees over future residential property and before the estimated hand-over date of future residential property;
  • If the guarantee agreement over future residential property is early terminated, within the business day immediately following termination date, the commercial bank shall so publish on its website and notify this early termination in writing to the housing management authority of the provincial level where the project is located, specifically stating that the commercial bank will no longer issue guarantee letters for the buyer to sign a Sale contract or Purchase leasing contract with the developer after the guarantee agreement over future residential property is terminated. For guarantee letters previously issued to the buyer, the commercial bank shall continue to fulfill its commitment until the guarantee obligation is terminated.

3. The cases where enterprises are not guaranteed for bond payment obligations

Pursuant to Article 11.2 of the Circular 11, the credit institutions/foreign bank branches are not allowed to grant the bank guarantees with respect to the bond issued for debt restructure, capital contribution, shares acquisition or operational capital increase, while under Circular 07 such limitation was only applied for two cases of debt restructure and bond issued by subsidiaries or affiliates of other credit institutions.

4. Foreign language in bank guarantees

Previously, pursuant to the Circular 07, bank guarantee was allowed to be in a foreign language only if the guaranteed transaction is a civil relation involved a foreign element as defined in the Civil Code. The Circular 11 now supplements two additional cases where it is allowed to use a foreign language: (i) guaranteed obligations arising from projects financed by international financial institutions, and (ii) guaranteed obligations arising from participating in international bidding packages.

5. Transitional regulation

The parties continue to implement the signed bank guarantee agreement, bank guarantee commitment which took effect prior to the effective date of the Circular 11 until termination of the guarantee obligations thereof. The amendment and supplementation of the above-mentioned signed documents shall comply with the regulations of the Circular 11.

Download pdf version

LEGAL UPDATE – JANUARY 2023 – DECREE NO.99/2022/ND-CP DATED NOVEMBER 30, 2022 ISSUED BY THE GOVERNMENT REGARDING THE REGISTRATION OF SECURITY INTERESTS, SUPERSEDES DECREE NO. 102/2017/ND-CP DATED SEPTEMBER 01, 2017.

Issue January 2023

Nguyen Bich Van
Partner

Ha Tuan Viet
Associate

Security interests always play a crucial role in stabilizing civil, business, and commercial relations, preventing conflicts arising, and increasing respect for the law among the parties involved in the transaction. Simultaneously, security interests are also the method for the protection of legitimate rights and interests of such involved transaction’s parties in the event that the obligator fails to perform or improperly performs its obligations when due.

The registration of a secured transaction “comes out into society” due to the need for disclosure of the secured transactions, and protection of legitimate rights and interests of the subjects involved in the transaction and related parties. In recent years, facing the demands of actual practices, the provisions of registration of secured transactions have been increasingly improved, creating a solid basis for organizations and individuals to have favorable conditions in accessing credit sources, ensuring legal safety in civil transactions, commercial business.

As of November 30, 2022, the Government promulgated Decree 99/2022/ND-CP regarding the registration of security interests to supersede Decree No. 102/2017/ND-CP dated September 01, 2017 in order to significantly contribute to the completion and unification of the law in the field of registration of security interests.

Decree 99/2022/ND-CP on registration of security interests officially takes effect on January 15, 2023 and contains the following noteworthy points:

 1. Scope of regulation

Comparing Decree 99/2022/ND-CP to Decree 102/2017/ND-CP, there is an expansion in the regulation’s scope regarding (i) the registration of security interests, (ii) the provision of information on security interests centrally registered at the Vietnam Securities Depository and Clearing Corporation (“VSDCC”).

Accordingly, in relation to the unprovided matters in the law of securities, the registration shall comply with the provisions relating to the registration of security interests in immovable property, other than aircraft and seagoing ships as prescribed in Decree 99/2022/ND-CP.

2. Security interests subject to the registration procedure

Decree 99/2022/ND-CP stipulates that four circumstances required the registration of security interests in assets, including (i) registration of mortgages, pledges of assets, retention of ownership rights in accordance with the Civil Code and other relevant laws; (ii) registration according to the agreement between the securing party and the secured party or at the request of the secured party, except for property liens; (iii) registration of notification of collateral disposal in case an asset is utilized to secure the execution of several obligations where multiple parties jointly receive the security or in case the securing party and the secured party have agreements;  (iv) registration of changes in registered contents; deregistration of registered contents for the cases specified at the aforementioned points.

Compared to the contents of Decree 102/2017/ND-CP, the newly updated regulations have demonstrated the discrepancy in the expansion of institutions and security interests, in which the entities involved in the transaction can decide to register the security interests. Correspondingly, Decree 102/2017/ND-CP previously stipulated a quite rigid classification of security interests into two groups, including (i) groups of security interests required to be registered (mortgage of land use rights, mortgage of land-attached assets, mortgage of aircraft, seagoing ships) and (ii) groups of registered security interests upon request (mortgage of movable assets, mortgage of land-attached assets formed in the future, reservation of ownership rights in case of purchase and sale of land-attached assets, land-attached assets formed in the future; purchase and sale of aircraft, seagoing ships; purchase and sale of other movable assets with reservation of ownership rights).

3. Principles of registration and provision of information

For the purpose of ensuring uniformity and consistency in the registration, provision and exchange of information on security interests, creating a legal framework conducive to the registration and provision of information by competent State authorities in order to register and secure legitimate rights and interests for entities requesting registration of security interests, Decree 99/2022/ND-CP stipulates the principle that information on security interests must be made available to the public, provided upon request, information exchanged in accordance with law; to comply with procedures, competence, duration, tasks, powers and responsibilities, not to give rise to procedures other than those prescribed by the Decree. And notably, in case of violation of any above-mentioned principles, the Registry must be responsible before the law.

In addition, the Registry is not responsible for the name of the security contract and the contents of the agreement of the parties in the security contract; the parties must be honesty in declaring, providing and exchanging information; being responsible before the law for the accuracy of the information declared, provided and exchanged.

4. Validity of the registration

For the purpose of ensuring transparency about the effectiveness and validity of the registration, simultaneously with separating the registration of security interests and other registration related to assets used to secure the performance of obligations (hereinafter referred to as “other registration”), Decree 99/2022/ND-CP has set out new regulations on the validity of registration as follows:

– Specifying in detail and clarifying the time of arising and termination of the validity of registration of security interests and other registrations;

– The validity of the registration of security interest is the ground for determining the period of countervailing effect of security interest to third parties in accordance with the law on security for the performance of obligations;

– The validity of other registration is only for notifying, publicizing agreements and commitments in civil transactions rather than the basis for determining the validity of civil transactions, the validity of countervailing effect against third parties;

– Separating the effect of deregistration in case the security interest is terminated as required or prescribed by law from the cancellation of registration due to the security contract being declared invalid according to the effective judgment or decision of the court, arbitration or the security interest is registered at an incompetent Registry.

5. Competence of the Registry

In order to ensure conformity with the relevant provisions of law, maintain transparency and convenience of a state registration and management authority for the registration of security interests, Decree 99/2022/ND-CP has provided the registration authority of the VSDCC for the registration of securities that have been registered centrally in accordance with the law on securities. Concurrently, in addition to stipulating the general competence, tasks and powers of the Registry, Decree 99/2022/ND-CP also provides the cases of registration falling under the exclusive competence of each Registry, showing the legal mechanism for information exchange between the Registry and other competent agencies and persons in accordance with the law.

6. Dossiers, procedures for registration and provision of information

Regarding the registration dossier, information provision

In order to ensure transparency and consistency of registration dossiers and prevent inappropriate requirements in registration practices, Decree 99/2022/ND-CP specifies in detail the following contents:

– The information must be on the Registration Request Form; Forms are documents and papers belonging to the dossier component; signatures and seals in the registration; languages used in the registration; the description of the information about security assets in some specific cases, for example, movable assets other than aircraft, seagoing ships, securities which have been centrally registered;

– The composition of registration dossiers for registration of security interests in housing construction investment projects; investment projects on construction of works other than houses; future-formed assets; assets being annual trees or temporary works; assets being agricultural investment projects, forest development projects, projects on planting perennial trees or annual trees, other projects using land, transferring the mortgage registration of property rights arising from contracts for purchase and sale of land-attached assets to the mortgage registration of land-attached assets; other registration dossiers;

– Particularizing the composition of registration dossiers for changes in cases of purchase and sale of debt collection rights, receivables, other payment claims; dossiers for deregistration in cases where economic organizations other than credit institutions mortgage land use rights or land-attached assets of individuals or households using land become foreign-invested enterprises; persons requesting deregistration are not security recipients, such as securiting parties, civil judgment enforcement agencies, buyers of security assets to be handled, recipients of transfer of ownership of security assets.

Regarding the registration procedure

Decree 99/2022/ND-CP controls the registration procedure by defining general and particular procedures for each kind of collateral, in particular:

– For the purpose of ensuring full coverage of registration cases, and the convenience for application and determination of the authority of the Registry, instead of defining the circumstances of registration as previously, the Decree outlines the cases of registration of security interests in accordance with each kind of asset. In addition, the Decree also specifies other cases of registration as well as the competence to carry out such registrations.

– In order to ensure transparency, limit arbitrariness in refusing registration and prevent risks and occurred additional costs for the requester for registration, the Decree stipulates that the Registry may only be allowed to refuse registration when there are clear-cut grounds specified in the Decree. Furthermore, the Decree has particularized several cases where the Land Registration Office and the Branch are required to carry out the registration procedure when the information agreed upon by the parties describing the collateral is inconsistent with the information on the Certificate or archived at the competent authority.

– Moreover, the Registry is not allowed to refuse to register for the following reasons: the name of the security contract, the content of the agreement on the value of the collateral, the secured obligation, the guarantee of the performance of obligations of others, the scope of the secured obligation, the duration of performance of the secured obligation.

–  For the purpose of ensuring the appropriateness of the competence to request registration in accordance with the law on guarantee of performance of obligations and related laws, the Decree has provided the regulation regarding the registration procedure by the requester in the way of separating the person who has the right to request the first registration with the person who has the right to request in the registration of change and deletion of registration; specified information about the guarantor, the secured party, the representative in the registration; the rights and obligations of the requester for registration.

– In order to create favorable conditions for individuals and businesses, as well as ensure the feasibility in resolving registration dossiers, providing information, in parallel with continuing to regulate the submission of registration dossiers through the electronic environment and the submission of registration dossiers in paper form, the Decree specifically stipulates the process of receiving and inspecting the registry’s registration dossier components, which includes the following main contents:

  • Separation of the time limit for settlement of dossiers when refusing registration with the time limit for settlement of dossiers for making registration;
  • Provisions on cases where the registry fails to register due to force majeure events in the receipt of dossiers, settlement of dossiers and time limit for settlement of dossiers in such case;
  • Regulations on notifying the requester for the guidance of the completion and supplementation of dossier components; the sending of papers and documents to competent agencies for verification when detecting signs of forged documents and time limit for settlement of dossiers in such case;
  • Regulations on the method of returning registration results in accordance with the method of submission of registration dossiers and the legal value of registration results;
  • Regulations on mechanisms and procedures for registration in the electronic environment.

– In order to ensure the accuracy of the information on registered security interests and to limit unnecessary procedures for registration of changes, the Decree separates cases of mandatory registration of changes from cases of registration of changes upon request; deletes the registration of contents registered for changes in cases of withdrawal of collateral; clarifies the responsibilities of the requester for the failure of registration for the cases where the registration procedure for changing is required.

– For the purpose of ensuring uniformity and consistency with the provisions of the law on ensuring the performance of obligations, fully covering situations arising in practice, and protecting the legitimate rights and interests of property owners and other related subjects, the Decree specifies the following contents:

  • Cases of deregistration to conform to reality and in accordance with changes in the law on security for performance of obligations;
  • Recording the deregistration of the withdrawn property in case of the registration changes due to the reduction of the collateral; in case of deregistration of part of the content, the remaining shall not be changed or terminated;
  • Regulations on the responsibilities of the requester for registration in case of failure to delete the registration when there are grounds for the registration to be deleted;
  • Supplementing the provisions on deregistration for other cases of registration.

In conclusion

During the time of practical application, Decree 102/2017/ND-CP has revealed the limitations expressed in the ineffectiveness and validity of registration; the refusal of registration; information about the securing party and the secured party; information on the registration request form; language, signature and seal in the registration; the return of registration results; registration of changes and deregistration; separation between deregistration and deregistration due to invalidity of the security contract; the mechanism to correct information; method of payment of registration fees; submission of registration dossiers on the electronic environment; information exchange between competent state agencies.

With the updated provisions of Decree 99/2022/ND-CP, the processes of registration of security interests have been renovated, perfected and become effective legal instruments, demonstrating the safety and transparency of assets and transactions. Thereby, individuals and businesses shall have a solid legal basis to access low-cost capital sources for the development of production and business. Additionally, the financing entities are more confident when the market’s supply of capital has a protective legal mechanism to implement in a safe and stable manner. Moreover, the new provisions of Decree 99/2022/ND-CP also contribute to the competent agencies and organizations to obtain accurate and convenient legal evidence on security interests in the course of state management or in case of having to settle cases in accordance with the law.

Download pdf version