Supreme Court’s Precedent 55/2022 recognising validity of an unnotarised contract for transfer of land use right

In October 2022, the Supreme Court issued Precedent 55/2022 which recognises the validity of an unnotarised contract for transfer of land use right on the basis that two thirds of the contract have been performed and accordingly the contract becomes valid in accordance with Article 129 of the Civil Code 2015. The background of the case is as follows:

· In 2009, the parties signed a contract for transfer of land use right over a piece of land which would be allocated by the Government to the seller in accordance with a land compensation scheme. The contract was not notarised.

· In 2016, the Seller received the land use right certificate for the transferred land. The Buyer also paid around 90% of the sale price. The Buyer also leased the land to a third party.

· However, the Seller later on refused to register the transfer with the authority and claimed that the transfer contract was invalid since it has not been notarised.

In the Precedent 55/2022, the Supreme Court accepts the judgement of the lower court which recognises the validity of the transfer contract on the ground that the parties have performed two-thirds of the contract. Under Article 129.2 of the Civil Code 2015, where the civil transaction established in writing is in breach of compulsory provisions on notarization or certification, and one or more parties have performed at least two-thirds of the obligations in the transaction, the court will, at the request of one or more parties, recognize the validity of such transaction.

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The case for a new law for offshore wind development in Vietnam

To realize the potential of offshore wind development in Vietnam, the National Assembly of Vietnam will likely need to issue a new law which provides for a more comprehensive and consistent legal framework supporting an offshore wind project. This is because (1) the existing legal framework is not adequate for an offshore wind development, and (2) the issues under the existing legal framework need to be addressed by the National Assembly being the highest law-making authority in Vietnam. In particular,

· The existing legal framework does not confer any property right relating the sea area required for an offshore wind development. Decree 11/2021 deals with the allocation of sea areas to investors to implement offshore investment projects including offshore wind development. However, under Decree 11/2021, the investor is not allowed to transfer the allocated sea area, and does not have exclusive right to use the sea area. In other words, the Government may allocate the same sea area to other investors to develop other projects as long as such projects do not “conflict” with the offshore wind projects. The allocation of sea area is made via an administrative decision which could technically be revoked by the Government.

· Investors will likely be extremely reluctant to invest significant sum of money in a sea area which they cannot transfer, mortgage, or prevent others from using. To address this issue, the National Assembly will need to issue a law establishing property right over sea area granted to investors in an offshore wind development. The new law could follow the provisions of Land Law which confer “land use right” to investors of onshore investment projects. Under the Land Law, investors of onshore investor projects could lease land from the relevant provincial People’s Committee. The investors will then have land use right over the relevant land area which, in many cases, can be transferred or mortgaged.

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Obligations of a Vietnamese company satisfying public company requirements pending an SSC registration

A Vietnamese company which satisfies public company requirements but which has not registered its public company status with the State Securities Commission (SSC) may arguably not need to comply with various obligations of a public company under Vietnamese law.

Under the Securities Law 2019, a public company is a joint stock company that satisfies the following conditions (the Required Conditions):

· having a minimum paid-up charter capital of 30 billion dongs, and

· having at least 10% of the voting shares held by at least 100 investors not being major shareholders.

The Securities Law 2019 also provides that:

· a company satisfying the Required Condition must register its public company status with the State Securities Commission (the SSC); and

· after the SSC confirms the registration of public company status, the relevant company will have various rights and obligations of a public company such as public disclosure, corporate governance, and registration for trading.

However, the law is silent on the obligations of a company which satisfy the Required Conditions but which has not obtained the SSC’s confirmation on public company status.

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Major changes to private issuance of corporate bonds in Vietnam

In response to the recent scandals of private issuance of corporate bonds, the Government has introduced several major changes to Decree 153/2020 on private issuance of corporate bonds in Vietnam. In particular, Decree 65/2022 amending Decree 153/2020 was issued in September 2022 and took effect immediately. We discuss below the key changes introduced by Decree 65/2022 which apply mostly to private domestic issuance of corporate bonds.

· Use of proceeds. Issuance of bonds to finance working capital or internal capital restructuring is no longer permitted. Issuance of bonds to refinance existing debt is still permitted. A bond issuer must now report how it uses the proceeds from bond issuance every six months. And the report must be verified by a qualified auditing company. When issuing a new bond, the bond issuer must also disclose how it uses the proceeds from earlier issuance in the issuance documents or the bond issuance plan.

· Voting of bond holders. Decree 65/2022 expressly allows bond holders holding 65% or more of the outstanding bond to have the right to (1) approve changes to bond terms and conditions; (2) approve the issuer’s remedial plan if the issuer breaches the bond issuance plan or the law; and (3) change of the bond holders’ representative. Decree 65/2022 requires the minimum voting threshold of a bondholder meeting is 65% of the outstanding bond.

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Vietnam Business Law