Currently, real estate (“RE”) business companies in Vietnam are attracting huge attention from foreign investors (“FIs”). FIs may invest in RE business enterprises through capital contribution, share purchase or purchase a part of the contribution capital portion in existing RE business enterprises in Vietnam.
However, competent licensing authorities of Vietnam (“Licensing Authorities”) are applying a special regime to consider and approve the capital contribution, share purchase or purchase of a part of the contribution capital portion of FIs at real estate companies. What is such the regime and what should be noted, BLawyers Vietnam will mention underneath based on our practical experience in supporting some clients recently.
- Conditions for RE business of FIs
Under the Law of Investment 2020, FIs means individuals with a foreign nationality, or organizations established under foreign laws engaging in business investment activities in Vietnam.
FIs must comply with the investment conditions in Vietnam as prescribed by international treaties and multilateral trade agreements of which Vietnam is a signing member. In Vietnam’s commitments on services and the Free Trade Agreements to which Vietnam is a member, there are no conditions for RE business in Vietnam. Therefore, regarding sectors not specified in such commitments on services, the Licensing Authorities can approve or refuse to grant a license to FIs, which is subject to Vietnam’s regime, policies and practical conditions of FIs.
Under the Law of Real Estate Business 2014, FIs can conduct RE business in the following forms:(i) Renting houses, buildings for sublease;
(ii) Building houses on the land which is leased by the State for lease; building houses or constructions other than houses on such land for sale, for lease, or lease purchase; (iii) Receiving total or a part of RE project from investors to build houses, buildings on it for sale, for lease, or lease purchase;
(iv) Building houses on land which is allocated by the State for sale, for lease, or
lease purchase; and
(v) Building buildings on land which are leased out in industrial parks, industrial complexes, export-processing zones, hi-tech zones, or economic zones for trading for the proper land use.
In addition, RE business may only be conducted in the area outside of the national defense and security protection zone according to land-use planning approved by the State.
2. Special regime and some notes
a. Procedure for implementation
FIs shall follow the procedure for registration of capital contribution, share purchase or purchase a part of contribution capital portion of RE business enterprises companies in Vietnam according to the following steps:
(i) Step 1: FIs submit the application for registration of capital contribution, share purchase or purchase a part of contribution capital portion of RE business enterprises in Vietnam to the Licensing Authorities.
(ii) Step 2: After receiving the notification of approval for capital contribution, share purchase or purchase of a part of the contribution capital portion from the Licensing Authorities, the RE business enterprises shall follow procedures for change of members or shareholders, owners, types of business organizations (if any).
b. Practice of the Licensing Authority’s approval for capital contribution, share purchase or purchase of a part of the contribution capital portion of FIs at RE companies in Vietnam
The Licensing Authorities will review the application and check the meeting of requirements on ensuring national defense, national security and land use conditions for the RE companies based on their land use right certificates (“LURCs”). By law, if the land use right is in an island, border- communes, wards, towns and coastal communes, wards, towns and other areas that affect national defense and national security, the Licensing Authorities will not approve FIs to
contribute capital, purchase shares, and purchase contributed capital at RE business companies in Vietnam.
In a case of one of our client, although the land use right is located in a metropolitan area in the South of Vietnam, the Licensing Authorities still sought opinions of the Ministry of National Defense, the Ministry of Public Security, and the People’s Committee at the location of land use right to identify whether the capital contribution, share purchase or purchase a part of the contribution capital portion of FIs affects the national defense and security. The opinion-seeking was done by submitting an explanation together with such client’s submitted application dossier to relevant Ministries and agencies for a response within 2 – 4 months
from the date of sending the explanation. Such responding time was not same at each Ministry or agency.
What made our client surprised was that the Licensing Authorities only considered and resolved the FIs’ request for capital purchase only after receiving responses from the relevant Ministries and agencies. The in-charged officers of Licensing Authorities unofficially explained us that the Licensing Authorities “cannot” do otherwise without an official response from the Ministries and agencies who received the opinion-seeking explanation.
In short, although the settlement of approval for capital contribution, share purchase or purchase of a part of the contribution capital portion of the FIs is clear as regulated by laws, the licensing process is “complex” in practice. Our experience as above-mentioned only refers to a part of the regime for the application dossier settlement. The preparation of an application for requesting an approval from the Licensing Authorities is quite “complicated”, that our lawyers will share you in another chance.
For further information, please contact:
Minh Ngo Nhat, Partner, BLawyers