Unclear Legal Capacity of Vietnamese Company’s Branches

Under Article 84.2 of the Civil Code 2015, a branch (chi nhánh) of a legal entity has the duties to perform all or parts of the legal entity’s functions. However, a branch is not allowed under the Civil Code 2015 to act as an authorized representative of a legal entity. Accordingly, it is not clear in what capacity a branch would perform the functions of a legal entity.

Logically, in order for a branch to perform all or parts of the legal entity’s functions, either

  • Option 1: a branch could be allowed to act as an authorized representative of a legal entity under another law; or

  • Option 2: a branch could perform the functions of a legal entity in its own name and capacity. In other words, a branch can perform the functions of a legal entity without needing an authorization from the parent entity and the action (or inaction) of a branch will be deemed an action or inaction of the parent entity.

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Written by Nguyen Quang Vu On In ,

Requirement For Pricing Information In The Application For An M&A Approval Could Cause Troubles To Investors

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.

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Written by Nguyen Quang Vu On In ,

How Agreements On ROFO, ROFR, Tag Along And Drag Along Could Work In A Multiple Member Limited Liability Company In Vietnam?

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.

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Written by Nguyen Quang Vu On In ,

Comments on New Law on Real Estate Business 2023 – Part 2

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.

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Written by Nguyen Quang Vu On In ,