1. Certification vs. notarization (C&N) of land-related contracts

For the purpose of State management, C&N is compulsorily required for some special types of land related transactions (e.g. – basically, the transfer, donation, mortgage or capital contribution using the land use rights or the rights to use land and assets attached to land). For other land-related transactions, C&N is however optional.

Please also note the key difference between notarization (công chứng) and certification (chứng thực) under Vietnamese law. Simply put, notarization, done by a licensed notary office, covers both legal validity and authenticity (mainly the signatures) of the transactions. Meanwhile, certification, done by the department of justice at district level/commune cpeople’s committee (CPC), limits to the authenticity of signatures, signing time and location. As such, a notary public may be wholly liable for damage caused to his clients if content of the relevant contract is concluded inconsistent with the laws.

Since 2014, the Ministry of Justice of Vietnam (MOJ) has issued a number of official letters requesting local authorities to direct the formalization of land related contracts from the commune people’s committee (CPC) to the notary offices. Though such official letters are not per se legal instruments and it stops at ‘a request for direction’, many CPC has since refused to certify land-related transactions because of the above instructions.

  1. Principles for applying provisions of the Land Law

Unlike the Civil Codes of Vietnam (2005 and 2014) that adopt the negative approach (i.e. – do whatever not expressly restricted or prohibited by the laws), the Land Law builds a ‘positive approach’ which let entities to do what exactly the laws tell them to do. Even more strictly, the restrictions apply to both sides of a transaction. For example, if a seller has a clear right to transfer LURs but the purchaser is not expressly permitted to receive the transfer of such LURs, no deals can be established. Back to FIEs, they can only acquire under specific circumstances set out by the Land Law, mostly listed in its Article 169.

Any ‘ultra vires’ acts may potentially result in a declaration of invalidity of the relevant land related transaction. This principle of applying laws should be taken into full consideration when FIEs are about to make major decisions relating to land-related issues.

  1. Land acquisition by foreign invested enterprises (FIEs)

Compared with their local counterparts, FIEs have more limited access to land. For example, FIEs cannot receive the transfer of land use rights (LURs) with respect to agricultural land or any types of land from households or individuals. Rather FIEs can only receive the transfer of LURs from land users being enterprises. This may cause some difficulties for FIEs who may want to acquire land from, for example, neighboring individual land users to expand their current production or business sites.

To go around this restriction, a number of FIEs seek to employ a local nominee enterprise which will receive the land from the individual land users and transfer back the same to the requesting FIEs. Even so, another question may arise: Can FIEs receive land directly from, among other, enterprises including domestic and foreign invested ones? Item #4 below discusses more.

  1. Receipt of transfer of land use rights by way of purchasing investment capital

As noted in Item #2 above, it appears that FIEs’ options to access land are limited to what exactly the Land Law lists.

As such, without any guidance under the Land Law, FIEs can only receive the transfer of LURs by way of acquiring investment capital from an enterprise land user. Such investment capital is ‘the value of LURs which has been capitalized into the seller’s capital (vốn hóa vào vốn của doanh nghiệp)’. This provision is relatively unclear and fails to correspond to other related legal instruments.  Firstly, while it is possible to carve out value of a specific investment [project] from an accounting perspective, the transfer of such value is not provided elsewhere other than the Land Law 2013 itself. This makes the implementation of the above machenism technically paralyzed. Secondly, questions remains to be seen as to whether the transfer of investment capital could be treated as transfer of ‘investment project’, assets or even equity of the seller(s). Each type of transfer would definitively lead to different legal, business and accounting consequences.

On this, the official of MONRE said the Ministry of Finance will soon issue a detailed guidance. It is also confirmed such ‘investment capital’ transfer has been implemented in some provinces in South Vietnam but we are not provided with more detailed information on how it is arranged in light of the above technical obstacles.

  1. Settlement of land in case of land users’ bankruptcy

The Land Law states that the settlement of LURs of insolvent and dissolved companies will be subject to general provisions of laws. Unfortunately, these ‘laws’ arguably enterprises law and, most critically, the Law on Bankruptcy appear to refer back this issue to provisions of the Land Law (2013) and its guiding regulations. This cross-reference, according to the official of the MONRE, causes difficulties in dealing with land of insolvent companies.

  1. Issuance of LURs for FIEs buying residential houses

Though the Law on Residential Housing (2014) allows FIEs to own some forms of residential houses (e.g. – apartments, villas, etc.), they face problems in acquiring LURs for such houses for many reasons.


MONRE should actively solve issues and provide detailed guidance on all related aspects to the licensing/acquisition process.

MONRE should work on solutions of some unclear points on land use rights for Foreign Invested Enterprises (“FIEs”) in cooperation with (i) the Ministry of National Defense and (ii) the Ministry of Public Affairs with respect to areas which must be secured in terms of security and national defense in each province and therefore will not allow FIEs or foreign buyers to own house and land there.

Please do not hesitate to contact Oliver Massmann under if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.





Lawyer in Vietnam Oliver Massmann Equitization Quality over Quantity

VIETNAM – Comment on a recent draft from the Ministry of Finance on strategic investors purchasing stakes from equitized state-owned enterprises (SOEs)

Author: Oliver Massmann – Chairman of the Legal Sector Committee – European Chamber of Commerce in Vietnam

On 4th August, the Ministry of Finance announced a Draft Decree on converting 100% state-owned enterprises (SOEs) into joint stock companies, which will replace Decree No. 59/2011/ND-CP, Decree No. 189/2013/ND-CP and Decree No. 116/2015/ND-CP.

Although the currently in force Decrees have brought positive results in  the re-structuring of state-owned enterprises since the beginning of the process in 2011, the restructuring quality has proven to be inefficient considering the small percentage of private participation in the company’s charter and management after the privatization. In addition, many big corporations with long financial history will need much more time and have to follow specialized rules to complete the privatization procedure. Many strategic investors have thus found it less attractive to participate in the process.

In order to tackle the above issues and bring substance to the equitization process in the context of new Enterprise Law, Investment Law, etc., there is a need to introduce a new Draft Decree on converting 100% state-owned enterprises into joint stock companies.

In particular, the draft’s Article 6 stipulates that a strategic investor must have the same business sectors as equitized SOEs. In addition, the strategic investor must have at least two years of profits (as of the time for buying stake of SOEs). Moreover, its equity in the latest financial report (which has to be audited by an independent auditing firm) must be sufficient for purchasing the stakes that it registers to buy.

Under the current regulations in Decree 59/2011/ND-CP, the strategic investor is only required to have sound financial capacity, and have a written commitment endorsed by an authorised agency. The commitment must state that after SOEs are equitized, the strategic investor must support SOEs in terms of technology transfer, human resource training, corporate governance, material supply and development of output markets.

This new stricter regulations in the draft will affect foreign firms who wish to buy stakes from SOEs and become strategic partners. In particular, foreign firms must be aware that they are not allowed to freely invest in any SOEs that have business activities not relevant to what they are doing, despite their strong interest in those sectors. This is to prevent cases where inexperienced foreign investors get into the management of the SOEs without having track record ability to manage them, and for example, aim at targeting Vietnam as a trial market for their business expansion.

In addition, we believe that the Government is showing its strong effort to select eligible investors to improve the equitization quality, and to make sure that the investors have proven financial status to efficiently recover the operating at loss status of SOEs. With stricter requirements, the Government will be able to attract investors with serious investment targets and with ability to contribute to the long-term development of SOEs.

Considering these new proposed stricter requirements, it is highly recommended that foreign investors conduct sufficient due diligence on the targeted SOEs, prepare themselves ready in terms of financial capacity and proven management skills, obtaining knowledge about Vietnam’s stock exchange market as well as regulations on bidding to come to a smart investment decision. We expect that with more substantive equitization, foreign investors will have more voice in the SOEs, via which being able to adopt development plans that serve the equitized companies’ future business outcomes, not any individual’s benefits.

Please do not hesitate to contact Oliver Massmann under if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.



© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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