Structure for foreign lenders to take mortgage over the Land Use Right held by Vietnamese borrower

Under Land Law 2013, a foreign lender (Foreign Lender) is not permitted to take mortgage over land use right (LUR) from a Vietnamese borrower. However, a foreign lender with the support of a Vietnamese bank may consider the following the structure to allow a Vietnamese company (Borrower) to use its LUR as security for a foreign lender. The structure could be summarized as follows:

  • A Vietnamese bank (Vietnam Bank) will lend a loan (Domestic Loan) to the Borrower. The Borrower will mortgage to the Vietnam Bank its LUR as security for the Domestic Loan (such mortgage, the LUR Mortgage). Under the Land Law 2013, a company in Vietnam can mortgage its LUR to a bank licensed to operate in Vietnam.

  • Under Vietnamese law, upon enforcement of LUR Mortgage by the Vietnam Bank, the Borrower has the right to receive the remaining proceeds after payment of the Domestic Loan (Right to LUR Mortgage). If the value of the Domestic Loan is less than the value of the LUR then the Right to LUR Mortgage could have substantial value. The Right to LUR Mortgage is usually recorded in the mortgage agreement between the Borrower and the Vietnam Bank. Accordingly, Right to LUR Mortgage is a type of contractual property right, which can be used to secure performance of obligation under Article 14 of Decree 21/2021.

  • Accordingly, the Borrower could mortgage the Right to LUR Mortgage to a foreign lender (Foreign Lender) as a mortgage of contractual rights (Rights Mortgage) in order to secure a loan extended by the Foreign Lender (Foreign Loan) to the Borrower.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Guarantee for obligations of a non-resident by a Vietnamese individual

It is not entirely clear under the foreign exchange (FX) regulations of Vietnam if a Vietnamese individual can provide guarantee for a non-resident (i.e. guarantee for the performance of obligation of such non-resident) (Non-Resident Guarantee). While the FX Ordinance 2005 provides that “economic institutions [established in Vietnam] are permitted to provide offshore loans, except for the export of goods and services on deferred payment, and to provide guarantees for non-residents when the Prime Minister so permits”, there is no similar clause applicable to Vietnamese individuals. Due to this ambiguity, one can take different views on this issue.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

New regulations on public offering of shares under in Vietnam

The new rules on public offering of securities in Vietnam under the Securities Law 2019 and Decree 155/2020 contain several changes to the previous rules under the Securities Law 2006 and Decree 58/2012. Here are some notable new changes.

This post is written by Nguyen Khanh Linh and Nguyen Quang Vu.

1. Forms of public offering of securities

According to Decree 155/2020, “the initial public offering of shares to establish an enterprise in an infrastructure or high-tech sector, or establish a shareholding credit institution, and “public offer of capital contribution contracts for investment”, are no longer considered as a separate form of public offerings. The forms of public offering under Securities Law 2019 now only consist of:

(a) public offering for raising additional capital to the issuing organization;

(b) public offering to become a public company by changing ownership structure without increasing the charter capital of the issuing organization; and

(c) A combination of the forms described at (a) and (b).

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

RETURN OF DEBT PURCHASE PRICE TO A FOREIGN DEBT PURCHASER

1. BACKGROUND

1.1. A Vietnamese company (Seller) exports goods to a foreign company (Buyer) under a goods sale and purchase contract (Goods Sale Contract).

1.2. The Seller transfers the receivables under the Goods Sale Contract (Receivables) to another foreign company (Debt Purchaser) (not a credit institution) through a debt sale and purchase agreement (Debt Sale Contract) at a Debt Purchase Price being 90% of the Receivables value (Debt Purchase Price).

1.3. Under the Debt Sale Contract,

1.3.1. the Debt Purchaser will advance the Debt Purchase Price to the Seller and will receive the Receivables from the Buyer when due;

Read MoreInfo
Comment
Written by Lawyers VNLaw On In