Vietnamese merger regulations
Under the Vietnamese Competition Law, an “economic concentration” is defined to include the following types of transactions:
(a) Merger of enterprises means the transfer by one or more enterprise(s) of all of its lawful assets, rights, obligations and interests to another enterprise and at the same time the termination of the existence of the merging enterprise(s).
(b) Consolidation of enterprises means the transfer by two or more enterprises of all of their lawful assets, rights, obligations and interests to form a new enterprise and at the same time the termination of the existence of the consolidating enterprises.
(c) Acquisition of an enterprise means the purchase by one enterprise of all or part of the assets of another enterprise sufficient to control or govern the activities of one or all of the businesses of the acquired enterprise. Controlling or governing all or one of the businesses of another enterprise means an enterprise (controlling enterprise) obtains ownership of the assets of another enterprise (controlled enterprise) sufficient to give the controlling enterprise 50% of the voting rights at the general meeting of shareholders, the board of management or other level sufficient according to law or the charter of the controlled enterprise to enable the controlling enterprise to govern the financial policies and operations of the controlled enterprise aimed at receiving economic benefit from the business operations of the controlled enterprise.
(d) Joint venture between enterprises means two or more enterprises together contribute a portion of their lawful assets, rights, obligations and interests to form a new enterprise.
Article 20.1 of the Competition Law provides that if the parties to a merger have a combined market share in a relevant market from 30% to up to 50% then the parties must notify the Vietnam Competition Authority of the enterprise acquisition before completing the merger unless the parties to the merger still remain a small and medium enterprise after the merger. A small and medium enterprise under Vietnamese law is subject to different criteria based on its business lines. But in general, a small and medium enterprise should not have more than 300 employees and a charter capital of more than VND 100 billion (about US$ 4.8 million). An economic concentration with a combined market share of more than 50% is prohibited unless an exemption is granted.
The Land Law 2024 introduces major amendments to the land use regime in Vietnam. One of the most interesting new amendments is the ability of a land user who lease land from the Government with annual rental payment (such user, Annual Land User) could now sub-lease or, subject to certain conditions, sell the land (via a sub-lease or sale of the lease rights) together with the assets attached to such land to another person. Previously, most land users who pay land rental for the whole term in advance could sublease or sell its land to another person. In our opinion, if implemented properly, the new amendment could improve the supply side of the real estate market substantially.
While it is common in practice for the Chief Representative of a Representative Office (RO) to act on behalf of the RO in opening and using the RO's bank account, there are instances where the parent company may wish to authorize another person (Authorized Person) to handle these matters. The key question is the validity of such authorization and whether the Chief Representative's acknowledgment of such Power of Attorney (POA) should be sought.
Short answer: The authorization for the Authorized Person should originate from the RO, not the parent company. If the authorization is granted by the parent company, it should be recognized by the Chief Representative as the "legal representative" of the RO. This acknowledgment would then serve as a concurrent authorization by the RO.
In this post, we highlight some key changes to regulations on industrial zone land under the new Land Law 2024.
State-owned developers
Regarding areas eligible for investment incentives (those with underdeveloped socio-economic conditions) that are unable to attract private developers, the Land Law 2024 allows the State to lease or allocate land to a public-service entity (đơn vị sự nghiệp công lập) to develop industrial zones.
Under the Land Law 2013, it appears that only economic organization, foreign-invested company, and Vietnamese individual residing oversea can become industrial zone developer (IZ Developer).
IZ Developer’s option to change method of payment for land rental
The Land Law 2024 expressly allows the IZ Developers using industrial zone’s land via annual rental payment method to change to the one-off land rental payment method for all or part of the leasable land area.
The Land Law 2013 also generally entitles a land user using land on annual rental payment to change to using land with one-off land rental payment. However, the law does not make clear whether the change can be made for separate land parcels in the industrial zone. Accordingly, one may take a strict view that the IZ Developer may only convert all industrial zone land to one-off rental payment instead of a portion of it.
The new regulation of the Land Law 2024 may provide flexibility for both a IZ Developer and its tenants in negotiating the suitable land rental payment method.
After the expiration of the preferential Feed-in Tariff (FiT) policy for solar and wind power projects in Vietnam, the energy selling price of solar and wind power plants in Vietnam will now be up to the parties’ negotiation in a power purchase agreement (PPA) but must be within the electricity generation price (EGP) bracket approved by the competent authorities. For that purpose, on 1 November 2023, the Ministry of Industry and Trade (MOIT) issued Circular 19 regulating the mechanism for establishing EGP brackets for solar and wind power plants (Circular 19).
From 1 January 2025, under the new Land Law 2024, Vietnamese who reside overseas and still hold Vietnamese nationality (Vietnamese citizens) will be treated as Vietnamese individuals residing in Vietnam in the matters relating to land use rights in Vietnam, while the land use scheme applicable to persons having Vietnamese origin (người gốc Việt Nam) remains as same as to the one applicable to overseas Vietnamese under the Land Law 2013. This is one of the key changes under the Land Law 2024 relating to Vietnamese residing overseas. This article provides some highlights of the land use scheme applicable to these two groups of land users: (i) Vietnamese citizens and (ii) persons of Vietnamese origin.
On 23 June 2023, the National Assembly adopted the new Law on Tendering effective from 1 January 2024 (Law on Tendering 2023). In an effort to foster a more competitive market, the Law on Tendering 2023 introduces significant amendments regarding the scope of application, methods, and procedures for selecting tenderers and investors. This post will summarize some notable changes in the Law on Tendering 2023.
1) Amendments to the scope of application
Under both the Law on Tendering 2023 and the old Law on Tendering 2013, the selection of investors for (1) projects using land in accordance with the law on land, and (2) other projects in accordance with specific laws must comply with the tendering procedures. The Law on Tendering 2023 provides for certain changes relating to such cases.
Regarding projects using land, the above requirement appears to refer to the circumstances of land allocation and land rental via tender procedure as set forth in the new Land Law effective from 1 January 2025 (Land Law 2024). Under the Land Law 2024, the provincial People’s Council must decide to allow a project using land to be tendered. This condition is not provided in the Land Law 2013 and the Law on Tendering 2013.
With respect to other projects in accordance with specific laws, under Decree 23/2024 implementing the Law on Tendering 2023, the Government specifies projects subject to tendering under specific laws. Such projects include, for example, investment projects for the renovation and reconstruction of apartment buildings, or investment projects for the construction of domestic solid waste treatment works. Previously, the Law on Tendering 2013 did not provide for further clarification on this issue.
From February 2024, companies and foreign investors applying for a contribution of capital or purchase of share/capital contribution by the foreign investor (M&A Approval) must state the actual price of proposed transfer, instead of the estimated transfer price as previously. This is one critical change in the new template for the application for an M&A Approval under Circular 25/2023 of Ministry of Planning and Investment (MPI).
The change may have an adverse effect on relevant parties, especially the foreign investor, particularly:
The parties of an M&A transaction may find it difficult to declare an “actual transfer price” since the M&A Approval will be issued well in advance of the closing of the transaction.
In a shareholder agreement (or joint venture agreement) between members of a multiple member limited liability companies (Multiple LLC), the members often agree on various transfer restrictions such as right of first offer (ROFO), right of first refusal (ROFR), tag along or drag along rights. These transfers are intended for the parties to control the ownership structure of the Multiple LLC and their exit from the Multiple LLC. However, implementing such agreements on transfer restriction may be inconsistent with the statutory transfer restrictions provided in Article 52 of the Enterprise Law 2020. Therefore, a shareholder agreement relating to a Multiple LLC should have specific provision to resolve such inconsistencies.
The table below sets out the potential inconsistencies between agreements on ROFO, ROFR, Tag Along and Drag Along and the transfer procedures under Article 52 of the Enterprise Law 2020.
Please download the pdf version here.
In this post, we continue discussing the new changes introduced by the Real Estate Business Law 2023. Part 1 of our discussion can be found Here.
This post is written by Nguyen Hoang Duong and Nguyen Bich Ngọc, and edited by Nguyen Quang Vu.
1) New restriction when collecting deposit for purchase of off-plan real estate
Under the Real Estate Business Law 2023, real estate developers can only collect a deposit of up to 5% of sale price of the relevant real estate from purchasers when the residential houses, construction works are qualified to be put into trading. The law further requires a deposit agreement to expressly set out the sale price and area of the off-plan real estate. The off-plan real estate under the deposit agreement must satisfy conditions for sale under law. This indicates that collecting a deposit is considered putting relevant off-plan real estate into business.
The new requirements may pose significant difficulty for real estate developers with weak financial capacity when it comes to funding for pre-construction phase of their projects.
Introduction
On 18 January 2024, new Law on Credit Institutions (LCI 2024) has been passed by the National Assembly. LCI 2024 will replace the Law on Credit Institutions 2010 (as amended) (LCI 2010) from 1 July 2024. In a series of posts, we will introduce the new changes of LCI 2024.
It seems that the ongoing criminal case against the controlling shareholders of Saigon Commercial Bank (SCB) has motivated the draftsman of LCI 2024 to introduce stricter management toward credit institutions (CIs).
Stricter conditions of independent board members
LCI 2024 tightens the standards and conditions of independent members of the Board of Directors of CIs. Specifically, an independent member of the Board of Directors of a CI must not represent ownership of any share of such CI and not, together with his/her related persons, directly or indirectly own 1% or more of the charter capital of such CI.
A broader range of related persons
LCI 2024 expands the definition of related persons to also cover the relationship between (i) the “grandparent” company/CIs and the “grandchildren” company, (ii) the manager/controller of a parent company/CIs and the subsidiary, and (iii) an individual with his/her wider range of family members.