1.         The Law on amending the Law on Higher Education dated 19 November 2018 (Amendment Law 2018) provides for various new points compared to the Law on Higher Education dated 18 June 2012 (Higher Education Law 2012). One of important new points is the change in the organizational structure of private universities. Accordingly, the Amendment Law 2018 requires private universities to have an university council (hội đồng trường) (similar to public universities) instead of a board of directors (hội đồng quản trị) as previously provided in the Higher Education Law 2012.

2.         Thus, whether investors in a private university that has not been restructured under the Amendment Law 2018 (Non-restructured University) can transfer their capital contribution in that university and if so, what procedures must be followed?

Mandatory requirement of restructuring before transferring

3.         Although the Amendment Law 2018 and Decree 99/2019 do not clearly provide, in order for a capital transfer transaction in the Non-restructured University to be lawful, such private university must be restructured to have an university council under the Amendment Law 2018 before conducting the transfer. This is because:

3.1.      One of the rules of capital transfer in a private university under Decree 99/2019 is that “the person who wants to transfer capital shall notify the transfer conditions to the university council”, and then “the university council shall notify the transfer conditions to the remaining contributing members and announce such transfer to the school's employees with the same conditions”. Therefore, without an university council, the transfer of the capital contribution cannot comply with this rule; and

3.2.      Decree 99/2019 provides that for universities that have not set up an university council, the conference of investors or the owner must recognize the university council and the university council chairperson within 6 months from the effective date of Decree 99/2019 (i.e. 6 months from 15 February 2020). This provision requires private universities established before 15 February 2020 which have not had an university council to be restructured according to Decree 99/2019 and they cannot keep the existing organizational structure.

Procedures for transferring contributed capital

4.         According to Decree 99/2019, the transfer of capital contribution by a member in a private university will be specified in the regulations on organization and operation and internal financial regulations of the university, in accordance with the law, and must comply with the following transfer rules:

4.1.      The transferor will notify the transfer conditions to the university council;

4.2.      The university council will notify the transfer conditions to the remaining contributing members and the employees of the university; such notice must be valid for at least 30 days from the date of notice; and

4.3.      The transfer will be conducted in the following order:

(i)         among contributing members of the university in proportion to each member's capital contribution;

(ii)        to the university’s employees if the members refuse the transfer or only purchase part of the capital contribution; and

(iii)       to persons who are not members and employees of the university if the employees of the university refuse the transfer or only purchase part of the capital contribution.

5.         Decree 99/2019 does not require the transferor and transferee to obtain any approval from the State authorities regarding the transfer of capital contribution.

Documents evidencing the ownership of capital contribution after the transfer

6.         Neither the Amendment Law 2018 nor Decree 99/2019 clearly provides that after the transfer of capital contribution, which document will prove the ownership of the capital contribution of the transferee. However, according to the Amendment Law 2018, the regulations on organization and operation of private university must provide for the selection and application of laws related to limited liability company (LLC) or social fund to resolve problems in higher education institutions which the law on higher education has not provided.

7.         If a private university chooses to apply the laws related to multiple member limited liability company, according to Article 47.5 of the Law on Enterprise 2020, after a member contributes capital in full, such member will be issued a capital contribution certificate by the private university. In addition, the private university must also establish a member register recording the contributing members of the university. As such, in this case, the documents evidencing the transferee's ownership of the capital contribution in a private university will include (i) the member register updated to record the transferee as a new contributing member, and (ii) a capital contribution certificate issued by the private university to the transferee.

This post is written by Le Vo Thuy Tien and edited by Hoang Thi Thanh Thuy.