VIETNAMESE LAW ON CONDITIONS OF TRANSFER AND RECEIPT OF INVESTMENT PROJECTS FOR FOREIGN INVESTORS
In the context of Vietnam’s deepening integration into the global economy, it is increasingly common for foreign organizations and individuals to invest capital in Vietnam. The demand for transferring and receiving projects from investors has also increased due to the continuous development of investment activities. In the framework of this article, Dai Ha Thanh Law Firm will provide information on the conditions for transferring and receiving investment projects in Vietnam for foreign investors.
I. Overview of Foreign Investors, Investment Projects, Transferring and Receiving Investment Activities
1.1 Foreign Investors
According to the provisions of Vietnamese law on investment, specifically Clause 19, Article 3 of Law on Investment 2020, “foreign investor” is defined as an individual holding a foreign nationality or an organization established under foreign laws and carrying out business investment activities in Vietnam.
According to the provisions of Vietnamese law, the determination of the status of a foreign investor will be based on the "nationality" factor. For individual investors, their nationality will help determine their "foreign" characteristics. Investors who are legal persons, their nationality determined by the laws of the jurisdiction where they are established.
1.2 Investment Projects
Legally, Clause 4, Article 3 of Law on Investment 2020 defines a collection of proposals for the expenditure of mid-term or long-term capital to carry out investment activities in a particular administrative division over a certain period of time.
In terms of content, an investment project is a set of interrelated activities planned to achieve specific objectives by producing defined results within a specified period, using selected resources.
This is a particularly complex asset. The transfer of an investment project essentially involves the transfer of an asset. Both the investor transferring the investment project and the investor receiving the transfer benefit economically when undertaking this activity.
1.3 Transferring and Receiving Investment Projects
According to the provisions of Clause 1, Article 41 of the Law on Investment 2020, an investor has the right to transfer part or the whole of an investment project to another investor. In essence, the transfer of an investment project is considered a form of civil transaction, which means that the parties involved in this activity must meet the basic conditions outlined in Article 117 of the Civil Code 2015.
II. Requirements for Transfer and Receipt of Investment Projects for Foreign Investors according to Vietnamese Law
To create flexible conditions for investors, Vietnamese law allows investors to have the right to transfer part or the whole of a project they implement to another investor. The Law on Investment 2020 outlines the following six requirements an investor must meet to be eligible for transferring either part or the entirety of an investment project to another investor:
Firstly, the investment project or the part of the investment project that is being transferred must not have been terminated by Clauses 1 and 2 Article 48 of Law on Investment 2020
Along with the adjustment of regulations regarding the termination of investment projects under the Law on Investment 2020, the scope of cases where investment projects are not allowed to be transferred under this regulation has also expanded. This includes new cases such as investment projects that have been terminated or partially terminated by the investment registration agency due to the investor’s failure to deposit or guarantee the escrow obligation, as prescribed by law, for investment projects subject to investment project performance guarantees. It also includes instances where investors conduct investment activities based on fraudulent civil transactions, as per civil law.
Secondly, the foreign investor receiving the investment project or part of the investment project must meet the conditions set out in Clause 2 of Article 24 of the Law on Investment 2020
In general, the transferee investor will inherit the rights and obligations associated with implementing the investment project of the transferor. Therefore, both the transferor and transferee investors must meet the same requirements and conditions for the implementation of investment projects. The conditions for receiving the transfer in Clause 2, Article 24 are appropriate to ensure that the investor receiving the transfer also has the legal status to continue implementing the investment project without going against the original purpose of the project as well as not violating the provisions of law related to investment with foreign elements.
Thirdly, the conditions set forth by the law on land are complied with if the transfer of an investment project is associated with the transfer of the land use rights/assets on the land according to Point c, Clause 1, Article 46 of the Law on Investment 2020
The new law has expanded the scope of cases where land-related conditions apply to include transfers of investment projects that are associated with the transfer of assets attached to the land, in addition to land use rights transfers. All cases of this transfer must comply with the conditions prescribed by the law on land.
Fourth, the conditions outlined in the laws on residential housing and on real estate business are complied with in the case of the transfer of a residential housing construction project or real estate project according to Point d, Clause 1, Article 46 of Law on Investment 2020.
The Law on Investment 2020 has separated the conditions for the transfer of investment projects to build houses and real estate projects separately and clearly compared them to the Investment Law 2014. This transfer must adhere to the law on housing and the law on the real estate business. Such regulation is very necessary because the current trend of project transfers largely involves the transfer of real estate projects.
Fifth, the conditions outlined in the written approval for investment guidelines or the investment registration certificate or by other relevant regulations of law (if any)
The Law on Investment 2020, in addition to stipulating the conditions for investment projects to be transferred or received, also stipulates more conditions related to the procedures for transferring and receiving investment projects. Investors, when carrying out the transfer or receipt of an investment project, must meet the conditions stated in the written approval of the investment policy and the Investment Registration Certificate as required by law. Compliance and satisfaction with these conditions will facilitate the process of transferring and receiving investment projects.
Sixth, upon transfer of an investment project, in addition to compliance with this Article, the state-owned enterprise shall comply with the Law on Management and Use of State Capital Invested in Manufacturing and Business Activities of Enterprises before making any adjustment to the investment project.
This is a new regulation on the transfer of investment projects in the Law on Investment 2020 that state enterprises must take note of. Law on management and utilization of state capital invested in the enterprise’s manufacturing and business activities 2014 speculates on the responsibility for management and use of state capital invested in production and business, proving that the Vietnamese state always pays close attention to and strictly regulates the use of state capital for production and business investment, ensuring that the state budget is used effectively and for the intended purposes.
III. Dossiers, procedure of Transfer and Receipt of Investment Projects for Foreign Investors
Regarding the transfer of investment projects, foreign investors need to comply with the following requirements for documents and procedures:
a) Dossiers:
- Written request for adjustment of the investment project.
- Report on the implementation of the investment project up to the time of transfer, transfer contract, or equivalent legal document.
- Copy of ID card, identity card, and passport for the investor being an individual; copy of the Certificate of Business Registration for the investor being an organization.
- A copy of the Investment Registration Certificate or the decision on investment policy (if any).
- A copy of the BBC contract with the investment project in the form of a BBC contract
- A copy of one of the following documents of the investor receiving the project transfer: financial statements of the last two years, commitment to financial support from the parent company, commitment to support from a financial institution, insurance financial capacity, and documents explaining financial capacity.
After the Investment Registration Authority considers the transfer conditions required by law, it will adjust the Investment Registration Certificate within 10 days from the date of receipt of the documents.
b) Procedures:
- For investment projects subject to the National Assembly’s decision on investment policies:
Step 1: The investors transferring investment projects submit documents to the Ministry of Planning and Investment.
Step 2: Within 15 days after receiving the complete documents, the Ministry of Planning and Investment shall report to the Prime Minister to establish the State Appraisal Council.
Step 3: Within 90 days from the date of establishment, the State Appraisal Council organizes the appraisal of the documents and makes an appraisal report to submit to the Government.
Step 4: No later than 60 days before the opening of the National Assembly session, the Government shall prepare and send a document of requests for approval of the investment policy to the agency in charge of verification of the National Assembly.
- For investment projects subject to the Prime Minister’s decision on investment policies:
Step 1: Investors transferring investment projects submit documents to the Ministry of Planning and Investment
Step 2: Within 03 working days from the date of receipt of the documents, the Ministry of Planning and Investment shall send the documents for appraisal opinions of the relevant state agencies related to the appraisal contents specified in Article 33 of the Law on Investment 2020.
Step 3: Within 15 days from the day on which the application is received, the consulted agency shall give its opinion on the contents under its state management and send it to the Ministry of Planning and Investment.
Step 4: Within 40 days from the date of receipt of the dossier, the Ministry of Planning and Investment shall organize the appraisal of the documents and make an appraisal report including the appraisal contents specified in Article 33 of the Law on Investment 2020, submit to the Prime Minister for approval of the investment policy.
- For investment projects subject to the decision on investment policies of the People’s Committee of the province
Step 1: The investors transferring the investment projects submit documents to the investment registration agency. Within 35 days from the date of receipt of the documents, the investment registration agency must notify the investor of the result.
Step 2: Within 03 working days from the day on which the complete document is received, the investment registration agency shall send the document for appraisal opinions of the relevant state agency regarding the appraisal content specified in Article 33 of the Law on Investment 2020.
Step 3: Within 15 days from the date the document is received, the consultancy agency shall give its opinion on the contents under its state management and send it to the investment registration agency.
Step 4: Within 25 days from the day on which the application is received, the investment registration agency shall make an appraisal report and submit it to the People's Committee of the province.
- For investment projects not falling into the above cases, the transfer of investment projects or the transfer of property ownership rights to the investor receiving the investment project after the transfer must comply with the provisions of the law on civil, corporate, real estate business, and other relevant laws.
For the receipt transfer of an investment project, the foreign investor that receives the transfer of the investment project and establishes an economic organization to implement that investment project, the foreign investor shall carry out the procedures for issuance of the Investment Registration Certificate (in case the project is not granted an investment registration certificate) or adjust the Investment Registration Certificate (in case the project has been granted an Investment Registration Certificate) and carry out the procedures for establishing an economic organization by the law corresponding to each type of economic organization.
IV. Status of Investment Project Transfer and Acquisition by Foreign Investors
A prerequisite is the inconsistency between legal documents and the issue of investors’ financial capacity. Specifically, while the Law on Investment 2020 does not have clear regulations on the financial capacity of the transferor, the Law on Real Estate Trading and the Law on Housing do mention this issue. The specialized legal framework is not detailed enough for foreign investors to choose the option of transferring, receiving project transfer in the form of capital, and buying and selling assets of the enterprise that is the project investor.
In addition, the reason for the transfer of investment projects has not been clearly reflected in the law. It can be understood that leaving the reason for the transfer open in the transfer conditions is to ensure the freedom to dispose of assets of investors in general and foreign investors, but because there is no legal document Adjustment should lead to investors setting up “ghost projects”, then transferring projects continuously to enjoy the difference.
V. Proposals and Measures to improve the law
First, it is suggested to include provisions on the financial capacity of investors in the Law on Investment and other laws where relevant, or specifically refer to the existing law.
Second, regulations on the transfer and acquisition of investment projects should be added to specialized laws to facilitate foreign investors in searching and preparing for project activities.
Finally, regulations on the reasons for transferring investment projects and relevant provisions on the evidence to prove such reasons should be supplemented.
The above is the entire overview of Dai Ha Thanh Law Firm on the provisions of Vietnamese law related to the conditions for the transfer and receipt of investment projects of foreign investors. If you have any questions or issues, please contact us to receive professional legal advice.
