VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
and agreed with the creditors, which can be local or foreign-owned banks operating in Vietnam. Loans can also be structured and provided by overseas banks, parent companies, shareholders or business partners overseas. However, residential housing projects can only obtain loans from Vietnamese-licensed credit institutions, as parent company loans are no longer permitted. In addition, the buying entity may consider several other options, such as corporate bonds by private placement, convertible loans, business co-operation, joint ventures with other entities, raising funds from business co-operation contracts, calling for equity, or collection of advances from the homebuyers of off-plan properties if the project is a residential hous - ing development project. The borrower may also use other assets or personal guarantees as collateral. 3.2 Typical Security Created by Commercial Investors While raising funds from credit institutions is most common, the lender usually requires the first charge over: • the land on which the project is premised; • the right in respect of the project development; • off-plan properties; or • the receivables or proceeds from the sale of the properties. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders In Vietnam, foreign lending is permitted subject to restrictions on the purpose, currency, security trans - action, the maximum principal and the fees or expens - es incurred on the foreign loan. However, residential housing projects can only secure loans from Vietnam - ese-licensed credit institutions. Foreign loans with a term of more than 12 months must be registered with the State Bank of Vietnam. Furthermore, the laws on land provide that foreign directly invested enterprises, having obtained the land-use right through land allocation or lump-sum land lease from the state may only charge its land-use right and/or assets attached on land to credit institu - tions duly incorporated in Vietnam. Any charge of real
estate to any foreign lender is not permitted and is not recognised as having any legal authority. However, foreign lenders can hold the LUR indirectly as collat - eral through an agent bank in Vietnam with the proper legal structure. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Security over real estate needs to be duly executed and registered with the competent authority and usu - ally incurs land registration and notary’s fees. 3.5 Legal Requirements Before an Entity Can Give Valid Security To grant security over a land-use right, the following are required: • a land-use right certificate; • the right must be free from dispute, or the dispute is settled by dispute settlement authority; • the land-use right may not be retrained for any judgment enforcement; • the right must still be within the land-use term (with at least seven years’ land-use right remaining); • the LUR is not subject to interim injunction; and • no financial obligation related to LUR must be pending. 3.6 Formalities When a Borrower Is in Default When a borrower is in default, the credit institu - tion (lender) is required to consider loan repayment restructuring before or within ten days prior to the agreed due date, taking into consideration the finan - cial capacity of the credit institutions and evaluation of the borrowers’ debt repayment capacity. If the lender refuses to execute the debt restructuring and decides to recognise the delayed payment as an overdue debt, a notice must be served to the borrower of its repay - ment status concerning such overdue debt. The collateral realisation will proceed according to the agreement between the lenders and borrowers, and after notice on the same is served to the borrower and other secured creditors within 15 days prior to realisation (if not otherwise agreed). Subject to vari - ous factors, the time needed to realise real property security varies. In the event of realisation by way of auction, there are more parties involved, which causes
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