Sub-leasing of spare office or factory space in Vietnam

It is not clear under Vietnamese law if a company may sublease its spare office or factory space without having to register for “real estate trading” and to have a minimum capital of VND 6 billion.  

  •  Article 4.2 of the Enterprise Law provides that “doing business” (kinh doanh) means the continuous conduct of one, several or all of the stages of the investment process, from production to sale of products or provision of services in the market for profits. There is no further interpretation of the term “continuous conduct”. Therefore, it is not clear if a company which enters into only one subleasing contract for its spare office or factory space could be considered as having a continuous conduct of leasing or not.

 

  • In an official letter dated August 2011, the Ministry of Planning and Investment took the view that a company subleasing its spare office or factory space is considered as providing real estate trading service and is required to register for “real estate trading” and to have a minimum capital of VND 6 billion.

 

  • On the opposite end, in November 2013, in an official letter to Long An Department of Planning and Investment, the Ministry of Construction takes the view that  a company subleasing its spare office or factory space is not considered as providing real estate trading service and is not required to register for “real estate trading” and to have a minimum capital of VND 6 billion.

It appears that the Ministry of Construction considers that entering into one sublease contract does not constitute a continuous conduct. On the other hand, the Ministry of Planning and Investment took the opposite view. The issue in question could also extend to other normal corporate activity such as intercompany lending or providing parent guarantee.

Vietnam Business Law Blog

In a recent post, we have discussed the concept of “wholesale” and “retail” as two forms of activities under the regulations concerning trading activities by FIEs in Vietnam. From the commercial perspective, “distribution” (phân phối) activities should involve the purchase or import of goods from suppliers for selling to customers. Thus, if an FIE has registered distribution business (i.e., wholesale or retail), it should naturally be able to import goods to sell within its distribution rights without being subject to further licensing requirements. However, this may not be justified from the legal perspective as the purchase of goods to sell in Vietnam or abroad by an FIE is classified as other forms of trading and should be licensed before implemented. Under Vietnamese regulations,

On 15 October 2018, the Government issued Decree 143/2018, which details regulation on compulsory social insurance (Social Insurance) applicable to foreign employees under the Social Insurance Law 2014. Before the issuance of Decree 143/2018, the Social Insurance Law 2014 only provides that foreign employees would be “allowed” to participate in Vietnam’s Social Insurance from 1 January 2018. For a long time, this vague regulation has given rise to concern as to whether the Social Insurance contribution for foreign employees is compulsory or voluntary. Decree 143/2018 now officially confirms that this is compulsory. In particular,

On 20 August 2018, the Ministry of Industry and Trade (MOIT) issued Circular 21/2018 to amend and supplement some articles of Circular 47 of the MOIT dated 05 December 2014 on management of e-commerce websites (Circular 47/2014) and Circular 59 of the MOIT dated 31 December 2015 on management of e-commerce activities via applications on mobile equipment (Circular 59/2015). Below are some notable provisions of Circular 21/2018.

Set out below are some legal issues in transfer of debts (Debts) from a credit institution (Originator) to a company licensed to trade debts in Vietnam (Debt Trading Co). Debt trading between a credit institution and a credit institution is useful for the credit institution to handle its bad debts or to issue assets-backed securities:

  • Credit institutions are allowed to negotiate loan interest rates based on market demand and supply and the creditworthiness without being restricted to maximum interest rate except in some cases. Meanwhile, interest rates of loans extended by non-credit institutions are subject to the maximum interest rate of 20% per annum under the Civil Code 2015. In practice, interest rates of consumer loans are quite high and could be higher than the maximum rate of 20% per annum. If the interest rate of the Debts is higher than 20% per annum, it is not clear at law whether the Debt Trading Co, upon owning the Debt, can continuously charge such interest rate;

In September 2018, the Government issues Decree 117/2018 on protection of customers information in banking sectors replacing Decree 70/2000. Decree 117/2018 applies to confidentiality, storage and providing of information by credit institutions and foreign bank branches (collectively referred to as CI) relating to the deposit and asset of customers with the CI. The following points are notable:

·       Decree 117/2018 does not apply to, among other things, information, which is classified as State secrets and which is governed by State secrets regulations. Under the old Decision 151/2003 of the Ministry of Police, information regarding customer deposits with a CI is classified as “State secret” at secret level. It is not clear if this classification still remains valid since Decision 45/2007 of the State Bank, which is based on Decision 151/2003, does not list customer deposit information as a State secret. Decree 117/2018 does not clarify this uncertainty;

Decree 9/2018 introduces a new approach regarding trading activities of foreign invested enterprises (FIE) in Vietnam. In particular, wholesale of most goods is not subject to the requirement of Trading License (Giấy Phép Kinh Doanh). However, Decree 9/2018 is still uncertain on the category of wholesale versus retail activities. A clearer definition of these concepts is important because an FIE conducting retail activities must apply for a Trading License with the Ministry of Industry and Trade (MOIT).

Under Decree 9/2018,

  • “wholesale” means the activities of selling goods to (a) wholesalers, (b) retailers, and (c) other traders, organizations; exclusive of retail activities;

  • “retail” means the activities of selling goods to (a) individuals, (b) households, and (c) other organizations for consumption purposes.

There are some issues arising from the above definitions under Decree 9/2018:

The Enterprise Law 2014 provides that in a meeting of the Board of a joint stock company (JSC), a Board director may authorise another person to attend if such authorisation is approved by the majority of members of the Board. However, the Enterprise Law 2014 is silent about the ability of a Board member to authorise another person to vote for such Board member if the Board decides to pass its decision by way of collecting written opinion of Board members.

Under the Law on Construction 2014, a dispute relating to a construction contract can be resolved through mediation, by a commercial arbitration or court “in accordance with law”. This standard wording seems to allow parties to a construction dispute in Vietnam to select arbitration to settle the dispute. However, Circular 26/2016 of the Ministry of Construction provides that a dispute relating to quality of a construction work will be resolved in the following steps: