New regulations on bank guarantees in Vietnam

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On 30 September 2022, the State Bank of Vietnam (SBV) issued Circular 11 on bank guarantees (Circular 11/2022). Circular 11/2022 will replace Circular 7/2015 of the SBV dated 25 June 2015 (as amended) from 1 April 2023. This post will discuss some notable points of Circular 11/2022.

1. Uncertainty of counter guarantee concept

As discussed here, the counter guarantee as defined in Circular 7/2015 may not be considered as a guarantee under the Civil Code 2015 which may results in uncertainty as to the validity and enforceability of the counter guarantee under the Civil Code 2015. This ambiguity remains existing in Circular 11/2022 because the concept of the counter guarantee is kept unchanged under Circular 11/2022.

2. Improvement in counter-guarantee payment process

2.1. Article 21.2 of Circular 7/2015 as to the payment process under a counter guarantee suggests that upon receiving a demand from the beneficiary, the guarantor must make payment to the beneficiary first and then seek for the reimbursement from the counter guarantor.

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Does an agreement on transfer of land-attached assets require notarization?

The answer is not clear. Under Article 119.2 of the Civil Code 2015, in case the law requires a civil transaction to be made in writing and having notarized, the parties to the transaction must comply with such requirement. In the context of transactions involving land, Article 167.3 of the Land Law 2013 expressly requires agreement on transferring land use right to be notarized or certified, except for the case provided under Article 167.3(b) where at least one party to such agreement is an entity doing real estate business.

However, Article 167.3 of the Land Law 2013 does not make clear whether the agreement on transfer of sole land-attached asset requires a notarization. Article 167.3(b) only provides that a contract for transfer of land-attached asset to which one party or both parties are entity(ies) doing real estate business will be notarized at the parties’ request. It is not clear if the wording of Article 167.3(b) can be interpreted that if neither party to the contract is an entity doing real estate business, then the contract must be notarized.

On the other hand, one may rely on Article 119.2 of the Civil Code 2015 to take a view that the notarization of contract will only mandatory if the law expressly requires so. Accordingly, the notarization of contract for transfer of land-attached asset between the non-real estate business parties should also be optional.

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When is an acquisition of assets considered a gain of control of another company?

Under the Competition Law 2018, an acquisition by purchase of assets sufficient to enable the acquiring company to gain control of either the acquired company or one business of such company is considered a form of economic concentration, and could be subject to merger filing requirement (if certain thresholds are met).

Article 2.1(b) of Decree 35/2020 further clarifies, among other thing, that “controlling or dominating a company or one business of a company” includes the case where “the acquiring company gains the ownership or the right to use more than 50% of the assets of the acquired company in all businesses or one business of such company”. It is unclear as to whether this provision should be interpreted as:

· Interpretation 1: the acquiring company gains the ownership or the right to use more than 50% of the total assets of the acquired company which are used for all businesses or one business of such company; or

· Interpretation 2: the acquiring company gains the ownership or the right to use more than 50% of the assets of either all businesses or one business of the acquired company.

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NEW DECREE ON SECURITY INTERESTS REGISTRATION – PART I

On 30 November 2022, the Government issued Decree 99 on security interest registration (Decree 99/2022) to replace Decree 102/2017 (Decree 102/2017) on the same subject matter. Decree 99/2022 will take effect from 15 January 2023.

· Decree 99/2022 introduces several measures which, if applied correctly, could substantially reduce the burden of obtaining a registration for a security interest under Vietnamese law. In particular, the declaration of the content to be registered incorrectly in accordance with the law is no longer basis for the registrar to refuse the registration of security interest.

· The registrar must not introduce or require procedures which are different from those provided in Decree 99/2022. Decree 99/2022 prohibits the registrar from requesting the submission of additional documents or information not specifically required by this Decree, or requesting the amendment of the name or the terms of the security agreement. The registrar must bear responsibilities if breaching this principle. Under Decree 102/2017, the registrar may request for this amendment if there is an error arising from the applicant’s declaration mistake.

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Vietnam Business Law