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Question :: I am a member of the Supervisory Commission (the Commission) of a public company which is unlisted and termed from 2007 to 2010. Until now, my term is still valid. In 2009, I was [not] invited to attend any meeting of the company’s Commission. Recently, I also did not attend the Commission’s meeting to produce the Commission’s Report for submission to the General Shareholder’s Meeting (the Meeting) year 2010 on April 9. I was informed that this Commission’s Report was built by the Commissions’ Director (the another member of the Commission also did not attend). I would like to ask you whether the operation of the Commission like that is legal or not? Is the Report mentioned above legal? What should I do to comply with the rights, duties and obligations of a Commission’s member?
Question :: I am a president of the Management Board (“the Board”) of a public company. As per regulations, the term of the Board, Supervisory Commission (“the Commission”) is five (5) years. Therefore, the first term of the Board, Commission is due on November 2010. However, in order to facilitate the voting of the Board, the Commission in the second term, the Board would like to submit the General Shareholder’s Meeting (“the Meeting”) with the latest on April 19, 2010 for renewal of the first term of the Board, the Commission until April 2011. So, the question is that is the renewal true or not? If the shareholders are not taken opinions directly at the Meeting, can the Board collect opinions indirectly from shareholders in writing? If the Meeting does not pass the renewal, how can the voting of the Board, the Commission be taken in compliance with laws?
Question :: Our company registers shares at the Securities Depository Central (SDC), but cannot deposit, of which my 10.000 shares. So, can I transfer directly 2.000 shares to my brother and compliment 2.000 shares to my wife?

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PART IX

THE LAW ON LAND, REAL ESTATE AND CONSTRUCTION

1. Law on land

The land law in Vietnam has undergone numerous changes. First promulgated on 29 December 1987 in accordance with the Law no. 3-LCT/HDNN8, and after being amended and updated six times, the current land law system keeps up with and meets the requirements of market-orientated economy.

The Land Use Right and Certificate of Land Use Right

a. The land use
right

There is no private ownership of land in Vietnam. The land is under ownership of the entire people and that the State plays the role as the representative of ownership of land for uniform administration. Therefore, the State only recognizes “the using right” of land, and “the ownership of land” shall not be recognized. The land use right shall be granted by the State to the land user through land allocation or land lease. The State shall determine the form of using land, either land allocation or land lease, subject to the objectives that need to use land (including individuals, family households, local economic organizations or overseas Vietnamese (known as “Việt Kiều”) or foreign organizations and individuals). The State shall stipulate specific rights and obligations for different ways of using land. Basically, the land user may have a number of rights or the entire rights as follows: the rights to transform, transfer, lease, sub-lease, inherit, give as presents, mortgage, guarantee, contribute capital shares by the land use right, the right to be compensated upon land recovery.

b. Certificate of Land Use Right

The land user shall be granted the certificate of land use right when he/she is allocated land or rents land. Foreign investors are given the certificate of land use right in accordance with the laws.

Property attached to land:

In case property is attached to land, such property shall be recorded in the certificate of land use right. The property owner shall register the property ownership right in accordance with the law on real estate registration.

The competent authority to grant the certificate of land use right:

- - The People’s Committee of provinces and centrally-run cities shall grant the certificate of land use right to religious organizations and establishments, overseas Vietnamese, foreign organizations and individuals;
  - The People’s Committee of districts, townships, cities under provincial authority shall grant the certificate of land use right to family households, individuals, residential communities, overseas Vietnamese who buy house attached to residential land use right.

Certain matters that foreign investors (including foreign individuals & organizations) should take into account when they need to use land in Vietnam:

a.Land lease

Pursuant to the laws of Vietnam, foreign investors who need to use land shall rent land from the State with payment of annual land rental or a lump sum payment for the entire term of land lease. The State shall not allocate land to foreign organizations and individuals (except for cases of overseas Vietnamese). The law does not stipulate the minimum lease term but only the maximum lease term. The lease term shall be reviewed and determined based on the investment project but shall not exceed fifty (50) years. With respect to the large capital projects but slow capital turnover rate, the projects which are invested in areas facing socio-economic difficulties or areas with extreme socio-economic difficulties and need a longer term, the land lease term shall not exceed seventy (70) years and must be approved by the Government’s Prime Minister. Upon expiry of the lease term, the Government shall consider and extend the land use term as required and if the investor has strictly complied with the land regulations during the period of using land, and the use of land must be in accordance with the approved land use planning. The provincial People’s Committee shall have the competence to determine the lease of land to foreign investors.

b.Land rental and land use fee

Organizations and individuals using land in Vietnam must pay land rental or land use fees to the State based upon the form of land lease or land allocation. In some cases, the State shall allocate land without collection of land use fees or with an exemption from land use fees, or lease land with preferential treatment (reduction) of land rental. The land use fee shall be paid once or in installments if permitted by the State, as the case may be. The State shall not apply the form of land allocation to foreign organizations or individuals (except for overseas Vietnamese) but only lease land with a fixed term to each project. Land rental shall be paid as determined by the State for each specific case, based upon the used land area, land price and lease term. Land rental may be paid on an annual basis or paid once for the entire lease term.

c.Capital contribution by
the land use right

To carry out investment projects in Vietnam, foreign investors may receive capital contribution by the land use right of their partners who are entitled to use land. In theory, these partners include economic organizations and overseas Vietnamese who have the allocated land, or overseas Vietnamese, foreign organizations & individuals who have the leased land with lump sum payment of land rental and use land in industrial parks, economic zones, and high-tech zones. In fact, capital contribution by the land use right depends on various regulations and elements. Accordingly, the foreign investor should take into consideration each specific case.

2. Law on real estate

a. Investment in real estate projects in Vietnam

The investor shall take the following steps when carrying out a real estate project in Vietnam: Agreement on investment location and objective; Implementation of planning approval procedures; Implementation of procedures to apply for Investment License or for approval of investment project; Procedures of land allocation & land lease; Site clearance, compensation and resettlement assistance; Procedures for approval of project design document; Implementation of the project construction. Nevertheless, the aforesaid procedures shall be conducted based on different requirements of each locality.

b. Site clearance, compensation and resettlement assistance

A foreign investor who invests in real estate projects in Vietnam shall carry out this procedure during the course of project implementation in accordance with the law if the land under such investment project is being occupied by other people. Currently there are two mechanisms for investors’ choice: Firstly, the investor agrees with the land user so as to make the site available for project implementation in a prompt manner. Secondly, the investor enters into agreement with the competent State authorities in order that the State can recover the land from land users and hand over the land site to the investor for project implementation. Its strength is that the funds disbursed by the investor are lower than that in the first mechanism. However, it will be time-consuming and requires numerous procedures. In practice, investors often follow the first mechanism. And the investor shall provide funds in advance for site clearance, compensation and resettlement assistance. This amount of money shall be deducted from the land rental to be paid, provided that the deducted amount shall not exceed the amount of land rental payable for the entire lease term (excluding the extended term).

c. Real estate leasing in Vietnam

Foreign investors are entitled to lease real estate for its business activities in Vietnam or for other legal purposes. The leased property must have the legal ownership certificate attached therewith. Where lease term is six months onwards, the lease agreement must be certified and notarized unless the lessors are entities permitted to lease real estate in accordance with the law.

d. Investment in factory construction and the land use right

Investors who want to construct factories in Vietnam may have two options, either leasing land in industrial parks or leasing land outside. Leasing land in industrial parks is frequently placed in top priority due to its advantages as industrial parks have good infrastructure and in particular “clean” land ready for construction of factories by investors without site clearance. In this case, the investor shall enter into land lease agreement with the industrial park investor and shall be granted the certificate of land use right. In addition to the payment of land rental, foreign investors must pay infrastructure use fees to the industrial park investor. Investors may lease land outside industrial parks to construct factories. This option nevertheless have certain limits, for instance, site clearance may be time-consuming and rather complicated. Moreover, a factory located outside industrial parks may face numerous difficulties, such as environmental standards as barriers to its operation or the project not falling under the master planned areas (for industrial production). Large capital factory projects which require a large area of land frequently choose this option.

e. The housing ownership right of foreign organizations and individuals in Vietnam

Foreign organizations and individuals renting houses in Vietnam must incur high rent expenses and suffer from frequent moves, and in order to meet their increasing demand of owning houses in Vietnam, Vietnam law allows foreigners to buy and own houses under the following legal regulations:

Foreign organizations and individuals are entitled to own houses in Vietnam

Foreign individuals having direct investment in Vietnam according to provisions of investment laws or employed by enterprises operating in Vietnam for management positions;
Foreign individuals having contributions to Vietnam and rewarded with medals by the President of the Socialist Republic of Vietnam; foreign individuals having special contributions to Vietnam as regulated by the Prime Minister;
Foreign individuals who are working in social-economic fields of all kind having college or onwards graduation level and others with special expertise, skill and knowledge in demand by Vietnam;
Foreign individuals having got married with Vietnamese citizens;
Enterprises with foreign invested capital operating in Vietnam, having no business of real estate, having demand on residential houses for individuals working at the enterprise.

Conditions for foreign organizations and individuals to be granted the house ownership right

Foreign individuals must be staying in Vietnam, authorized by competent authorities of Vietnam for residing in Vietnam for more than one year and not the subjects of preferential diplomatic treatment according to Vietnamese laws;
With regard to foreign organizations, they must be enterprises with foreign invested capital and granted certificates of investment or other certificates confirming its investment operations in conjunction with investment fields in accordance with regulations of the laws of Vietnam.
Every foreign organization or individual is entitled to buy houses in Vietnam shall just be allowed to buy and own an apartment appertaining to commercial housing development project and not appertaining to fields prohibiting or restricting foreigners’ residence and moving according to the laws. Those apartments must be used for living and not used for rent, for office or other purposes.
- House ownership term of foreign organizations and individuals

Pursuant to the law of Vietnam, foreign investors are permitted to own houses in Vietnam with ownership term as follows:

Term of housing ownership is a maximum of 50 years. Foreign organizations are allowed to own residential houses equivalent to the term as provided in the Certificate of investment issued to them, including any and all extended terms.
Upon expiry of investment term or dissolution or bankruptcy, the residential house of the enterprise shall be handled in accordance with regulations and laws on investment, enterprise bankruptcy and other regulation of the laws of Vietnam.
Within twelve (12) months as from expiry of ownership of residential house in Vietnam, foreign organizations and individuals have to sell, give or donate such house to others.
In case the foreign individual violates the laws of Vietnam and has been expelled from Vietnam, the residential house of such person will be handled in accordance with the laws of Vietnam.

3. Construction

In the course of the integration and development of Vietnam, the Law on Construction has been amended and revised, granting the investors more discretionary power in construction implementation and constructor selection. Respective responsibilities of the investor are extended at the same time. The construction activities, rights and obligations of the investors and constructors are regulated under the Law on Construction 2003 and the guiding legal documents. The investor’s attention is called to the following issues for assuring lawfulness of the project implementation:

a.Land lease

The development of a civil construction (namely resident domicile and public constructions including cultural, educational, medical structure; commercial and service building; workshop; restaurant; sport facilities, etc.) comprises mainly the following phases:
- The construction project preparation consists of the formulation of basic design and presentations;
- Construction survey phase involves surveys of topography, geology, current status;
- Building design phase may include various steps under the effect of size and features of the construction, i.e. basic design, technical design and construction design;
- Construction permit procurement;
- Construction building;
- Construction inspection.
The investors with insufficient expertise to carry out those steps can engage the service of local individuals or organizations (including Vietnamese enterprise or FDI enterprise) or foreign individual or organization (hereinafter “foreign contractor”) for the works.
The investor who uses foreign contractors’ services should pay attention to the following cases:
- The contractors involved in any project with 30% or more investment funded by State Budget shall only be selected through a bidding process in compliance with the laws on bidding.
- Contractor License: the foreign contractor can operate in Vietnam upon the issuance of Contractor license by the competent authority, either Ministry of Construction or Provincial Department of Construction subject to the rank A, B or C of the project. The rank of the project is based on the features of the project and the size of the investment.
- Professional Certificate: Vietnam acknowledges the professional certificate of engineer or architect granted by the foreign authorities.
Construction Regulations and Construction Standards
- Vietnam has built sets of construction regulations. However, foreign construction regulations of a nation, regional or international standard organizations are allowed for the constructions in Vietnam. The application of foreign construction regulations must be processed on the input which reflects the special conditions of Vietnam specified in the compulsory construction standards.
Contracts in construction business
- Despite the availability of Sample Contracts for construction business introduced by the Ministry of Construction, the parties could use their own version which must include the basic terms and conditions required or the FIDIC sample contract which may be adjusted to the realities of the case in Vietnam.

PREFACE

PART I. INVESTMENT LEGISLATION IN VIETNAM

PART II. ROADMAP OF OPENING VIETNAM SERVICE MARKET UNDER WTO COMMITMENTS

PART III. MERGER AND ACQUISITION IN VIETNAM

PART IV. INTELLECTUAL PROPERTY LAW AND TECHNOLOGY TRANSFER

PART V. LABOR

PART VI. BANKRUPTCY OF ENTERPRISE

PART VII. COMPETITION

PART VIII. TAXATION

PART IX. THE LAW ON LAND, REAL ESTATE AND CONSTRUCTION

PART X. FINANCIAL SERVICES

PART XI. DISPUTE RESOLUTION

PART XII. IMMIGRATION ISSUES

INDEX 1. DOUBLE TAX AVOIDANCE AGREEMENT ENTERED BY VIETNAM

INDEX 2. DOUBLE TAX AVOIDANCE AGREEMENT ENTERED BY VIETNAM

INDEX 3. FINANCIAL SERVICE MARKET

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