Licences and Permits for running business in Vietnam
Navigating among numerous licences and permits required by law for running a business in Vietnam has never been easy. There many reasons including:
- There is no comprehensive list of valid licences and permits available. Therefore, businesses run the risks of missing certain licences and permits. This is particular true as many authorities in Vietnam have the power to issue licences and permits;
- The time and efforts required for obtaining a licence or permit may be substantial. In practice, the authorities may not always check or enforce the required licence or permit. Therefore, the risk in practice of missing a particular licence and permit varies; and
- That being said, in theory, missing a required licence or permit may be subject to administrative penalty and, in extreme case, criminal penalty (e.g. see the case against Mr Nguyen Duc Kien).
Regarding the first point, I just come across of report on business licences and permits prepared by the Ministry of Planning and Investment (MPI) in December 2013 (MPI List). The MPI seems to have spent substantial time and efforts verifying with all other ministries about the licences and permits issued by such other ministries. As such, the MPI List is quite comprehensive. The MPI List provides for the list of 334 licences and permits requires for various conditional business lines in Vietnam.
Therefore, a business owner may use the information in the MPI List to check if it has obtained all the licences and permits mentioned in the MPI List for its operation, if necessary.
A copy of the MPI List in Vietnamese can be downloaded here.
An unofficial translation of the MPI List by VILAF can be downloaded here.
On 23 June 2023, the National Assembly adopted the new Law on Tendering effective from 1 January 2024 (Law on Tendering 2023). In an effort to foster a more competitive market, the Law on Tendering 2023 introduces significant amendments regarding the scope of application, methods, and procedures for selecting tenderers and investors. This post will summarize some notable changes in the Law on Tendering 2023.
1) Amendments to the scope of application
Under both the Law on Tendering 2023 and the old Law on Tendering 2013, the selection of investors for (1) projects using land in accordance with the law on land, and (2) other projects in accordance with specific laws must comply with the tendering procedures. The Law on Tendering 2023 provides for certain changes relating to such cases.
Regarding projects using land, the above requirement appears to refer to the circumstances of land allocation and land rental via tender procedure as set forth in the new Land Law effective from 1 January 2025 (Land Law 2024). Under the Land Law 2024, the provincial People’s Council must decide to allow a project using land to be tendered. This condition is not provided in the Land Law 2013 and the Law on Tendering 2013.
With respect to other projects in accordance with specific laws, under Decree 23/2024 implementing the Law on Tendering 2023, the Government specifies projects subject to tendering under specific laws. Such projects include, for example, investment projects for the renovation and reconstruction of apartment buildings, or investment projects for the construction of domestic solid waste treatment works. Previously, the Law on Tendering 2013 did not provide for further clarification on this issue.
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.
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.
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.
Introduction
On 18 January 2024, new Law on Credit Institutions (LCI 2024) has been passed by the National Assembly. LCI 2024 will replace the Law on Credit Institutions 2010 (as amended) (LCI 2010) from 1 July 2024. In a series of posts, we will introduce the new changes of LCI 2024.
It seems that the ongoing criminal case against the controlling shareholders of Saigon Commercial Bank (SCB) has motivated the draftsman of LCI 2024 to introduce stricter management toward credit institutions (CIs).
Stricter conditions of independent board members
LCI 2024 tightens the standards and conditions of independent members of the Board of Directors of CIs. Specifically, an independent member of the Board of Directors of a CI must not represent ownership of any share of such CI and not, together with his/her related persons, directly or indirectly own 1% or more of the charter capital of such CI.
A broader range of related persons
LCI 2024 expands the definition of related persons to also cover the relationship between (i) the “grandparent” company/CIs and the “grandchildren” company, (ii) the manager/controller of a parent company/CIs and the subsidiary, and (iii) an individual with his/her wider range of family members.
On 22 June 2023, the National Assembly passed a new Law on E-transactions, set to be effect from 1 July 2024 (LET 2023). The LET 2023 introduces significant changes regarding the use of e-signatures by individuals as outlined below:
1) Restriction on individuals’ right to create and use of their own e-signature
The LET 2023 categorizes e-signatures into three types as below, none of which encompass e-signatures self-generated by individuals:
specialized e-signatures (chữ ký điện tử chuyên dùng), which are created and used by organizations for their “own private operations” in accordance with their function and tasks;
public digital signature (chữ ký số công cộng), which are used for “public activities” and are secured by an e-certificate confirming the public digital signature issued by a qualified service provider; and
specialized digital signature for official use (chữ ký số chuyên dùng công vụ), which are digital signatures used for official activities and are secured by an e-certificate confirming the specialized digital signature for official use issued by a qualified service provider
Unlike the broader definition of e-signatures under the LET 2005, which may cover signatures self-created by individuals, this classification significantly limits individuals' ability to create and use their own e-signatures. Under the LET 2023, individuals may be required to use a public digital signature issued by a third-party service provider in normal e-transactions.
Under the Law on Bankruptcy 2014, creditors (chủ nợ) of a bankrupt enterprise include unsecured creditors, partially secured creditors (chủ nợ có bảo đảm một phần) and secured creditors (chủ nợ có bảo đảm). While it is not entirely clear, it appears that partially secured creditors are considered as a separate class of creditors and have their own rights during a bankruptcy proceeding.
Under the Law on Bankruptcy 2014,
a secured creditor is defined as a creditor having the right to require the relevant bankrupt enterprise to perform an obligation to repay a secured debt with the assets of the enterprise or a third party; and
a partially secured creditor is defined as a creditor having the right to require the relevant bankrupt enterprise to perform an obligation to repay a secured debt with the assets of the enterprise or a third party “where the value of such assets is less than that debt”.
The definition of a secured creditor does not clearly refer to “fully secured creditors” since it does not require the value of the secured assets is equal or more than the debt owed to a secured creditor. Accordingly, technically, the term “secured creditor” could cover both partially secured creditor and fully secured creditor. That said, a more in-depth reading of the Bankruptcy Law 2014 suggests that partially secured creditors are treated as a separate class of creditors. However, it is not clear whether this distinction is created by design or by chance by the draftsman of the Bankruptcy Law 2014.
From January 2021, under the Enterprise Law 2020, if a member of the board of directors (the Board) hands in his/her letter of resignation to resign as a Board member in a joint stock company (JSC), he/she may not cease to be a Board Member until approved so by the General Meeting of Shareholders (GMS) of the relevant JSC. To mitigate the potential issues arising from this provision, a JSC may consider providing that the GMS must dismiss a Board member when he/she tenders his/her resignation. In addition, the resigning Board Member should give authorisation to another appropriate person until he/she is officially dismissed.
After incorporating a joint stock company (JSC), the founding shareholders of the JSC will typically have 90 days from the issuance of the enterprise registration certificate (Capital Contribution Period) to pay for the shares they have subscribed as at the incorporation of the JSC (Subscription Shares). Under the Enterprise Law 2020, it is reasonable to consider that during the Capital Contribution Period, the founding shareholders who have not paid for the Subscription Shares in full would have all the shareholders rights including rights to transfer the Shares which have not been paid up. However, the drafting of the Enterprise Law 2020 could give rise to the position that during the Capital Contribution Period shareholder rights, the founding shareholders have only the voting right.
rom 1 January 2025, under the new Land Law 2024, Vietnamese who reside overseas and still hold Vietnamese nationality (Vietnamese citizens) will be treated as Vietnamese individuals residing in Vietnam in the matters relating to land use rights in Vietnam, while the land use scheme applicable to persons having Vietnamese origin (người gốc Việt Nam) remains as same as to the one applicable to overseas Vietnamese under the Land Law 2013. This is one of the key changes under the Land Law 2024 relating to Vietnamese residing overseas. This article provides some highlights of the land use scheme applicable to these two groups of land users: (i) Vietnamese citizens and (ii) persons of Vietnamese origin.
This post is written by Cao Khanh Linh and Nguyen Bich Ngoc.