Pledge over intangible assets in Vietnam

Pledge (cầm cố) of property is a transaction in which a party (the pledgor) handovers (giao) a property owned by the pledgor to the other party (the pledgee) to secure the performance of a obligation(s). The law does not clarify what action could be considered as “handover” of a property. Therefore, it is not clear whether one can use intangible asset such as the right to claim debt as a pledged asset.

On one hand, the definition of pledge suggests that the pledged assets must be tangible so that it can be handedover or delivered to the pledgee. In this regard, intangible asset cannot be pledged because it cannot be physically delivered from one party to another party.

On the other hand, other provisions of the law suggest that pledge over intangible assets could be permissible because:

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Written by Nguyen Quang Vu On In ,

New guidance on registration of mortgage of land use right and construction works - Part 2

On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.

Registration that must be completed before the registration of mortgage of land use right and construction works

Circular 7/2019 regulates that following kinds of registration of change to land and/or asset attached to land or confirmation of change must be completed before a person can register a mortgage of land use right and construction works:

(i) the information relating to land parcel or land parcel area is inconsistent with the information on the Certificate due to land consolidation, measurement or re-determination of land area/size; and

(ii) the information relating to asset attached to land certified on the Certificate (including kind of house, name of building, number of floors, building area, use area) is inconsistent with the information on the new Certificate due to measurement or re-determination of area, construction, or repair.

In the past, if there is change in (i) above, such change can be registered at the same time with the mortgage registration.

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Written by Nguyen Quang Vu On In ,

New guidance on registration of mortgage of land use right and construction works - Part 1

New guidance on registration of mortgage of land use right and construction works - Part 1

On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.

Competent authority managing the registration of mortgage

Previously, the document detailing the registration of mortgage over land use right and asset attached to land is usually a joint circular of the MOJ and MONRE. However, since joint circular is no longer legislative document (văn bản quy phạm pháp luật) under Law on Laws 2015. Accordingly, the unified authority to manage the security interest registration is vested in MOJ. Under Decree 102/2017, the MOJ now has the authority to issue or to submit for the Government to issue legislative documents on the registration of security interest, which includes Circular 7/2019.

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Written by Nguyen Quang Vu On In ,

A closer look at the use of DICA account for M&A transactions in Vietnam – Part 2

Unclear definition of 51% FIE

Under Circular 6/2019, enterprises with foreign direct investment (FIEs), which must open DICA include (1) enterprises which are established by foreign investors (with or without local partners) (Incorporated FIEs); and (2) enterprises which do not fall under (1) but 51% of which are owned by foreign investors (51% FIEs). Normally, one would expect that a 51% FIE must be a FIE, 51% of which is actually owned by foreign investors (Actual 51% FIEs). However, Circular 6/2019 provides that a 51% FIE include enterprises which have foreign investors making capital contribution or purchasing shares resulting in  foreign investors’ owning 51% of the FIE. The use of the words “resulting in” suggests that a 51% FIE could be a 100% locally-owned company, which has potential foreign investors who may acquire 51% or more of its charter capital (Future 51% FIEs). 

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Written by Nguyen Quang Vu On In ,