Author: Phạm Huyền

Tan hoang minh bonds cancelled: how to recover the investment amount?

Written by Phạm Huyền on 21 April, 2022. Posted in Legal newsletter.

In recent times, the project is particularly interested in the fact that the State Securities Commission (“SSC“) has issued a decision to revoke 9 bond issuances of 3 subsidiaries of Tan Hoang Minh Group. Immediately after this Decision, Tan Hoang Minh responded that if one of these issuances must be canceled at the request of the state management agency, Tan Hoang Minh will work with the bond issuer, the state management agency to return the money mobilized to customers in accordance with the law. So what can the investors do to recover the investment money from the bond purchase of Tan Hoang Minh?

1. First, we need to consider whether the cancellation of 09 bond issuances resulted in the guarantee contract between Tan Hoang Minh and the asset management units being invalidated?

In essence, the bond is like a form of the loan contract, the Enterprise bond issuer raises loans from bond buyers ( the investors) for the purpose of financing its business. In return, the business will have to pay interest to the investor for a predetermined periodic period (usually annually or half a year) and return the principal on the due date to end the debt. The issue of bonds with collateral by the Enterprise will ensure the risk when the Enterprise fails to pay interest and principal to the investors.

However, many Enterprises issue bonds but do not have collateral. Pursuant to Clause 1, Article 5 of Decree No. 153/2020/ND-CP stipulates the private offering and trading of corporate bonds in the domestic market and the offering of corporate bonds to the international market. Accordingly, enterprises mobilize individual bonds according to the principle of self-borrowing, self-payment, and self-responsibility, state management agencies do not license the issuance. Therefore, it can be seen that the Securities Law 2019 and Decree 153/2020/ND-CP still has many “loopholes” in regulations related to individual Enterprise bonds with no collateral or collateral of low quality.

It is easy to see that, in the case of Tan Hoang Minh, most of the proceeds from highly likely bond mobilizations have been used by Tan Hoang Minh for investment in projects. Therefore, the processing of cash flow refunded to the investors who bought bonds in 09 bonds issuances canceled will depend on the handling of the collateral Tan Hoang Minh when issuing bonds.

For bond issuances, Tan Hoang Minh has collateral and has a unit to organize and manage collateral. In this case, the contract on the management of collateral will be considered as a subcontract for bond transactions between Tan Hoang Minh and the investors. Pursuant to Clause 2, Article 407 of the Civil Code 2015 Invalid contract “The invalidity of the main contract terminates the sub-contract unless the parties agree that the sub-contract may replace the main contract. This provision does not apply to measures to secure the performance of obligations”. Therefore, although the 09 bond issuances of Tan Hoang Minh were canceled, the contract on organization and management of secured assets between Tan Hoang Minh and the union organizing and managing collateral is still valid. Thus, the cancellation of 09 bonds issuances of Tan Hoang Minh bonds did not result in the cancellation of the guarantee contract between Tan Hoang Minh and the secured asset management units.

2. What can the investors do to recover the investment money from the bonds purchase of Tan Hoang Minh? There are two options investors can use.

– Firstly, in the case of collateral Tan Hoang Minh, it is very difficult to predict the solvency such as shares, land use rights, property rights arising from investment cooperation contracts,… or the solvency of the collateral Tan Hoang Minh is not high.

In this case, after the expiration of the 60-day period from the date of the SSC’s decision to apply the recovery of 9 bond issuances, Tan Hoang Minh has not yet made payment of interest and principal to investors, the investor has the right to request the court to open bankruptcy procedures as prescribed in Clause 1, Article 5 of the Bankruptcy Law 2014. However, this case only applies when the investor has no guarantee or is only partially secured. After being accepted by the Court to open bankruptcy procedures, the assets of the Enterprise will be divided in order such as bankruptcy expenses, salary debts, allowances, debts incurred after opening bankruptcy procedures for the purpose of restoring the business activities of the Enterprise, financial obligations to the State, unsecured debts payable to creditors, debts with guaranteed debts that have not been paid due to the value of assets that are not sufficient to pay debts. Thus, in case the debt payment time limit expires as prescribed, Tan Hoang Minh does not make the payment of the debt, and the investor has no guarantee or partial guarantee, the investor has the right to request the court to open bankruptcy procedures.

– Secondly, request the units to organize and manage assets to ensure the handling of collateral of Tan Hoang Minh for each bond issuance. In case the collateral is owned by Tan Hoang Minh and can be handled. The investor can request the unit to organize and manage the secured assets to handle the secured assets of Tan Hoang Minh to pay the interest and investment principal.

Thus, the investors need to know information about bonds is the only way to limit the risks for investors when entering the corporate bond market. Investors should take note of the basic principle that the higher the interest rate, the greater the risk. Therefore, the investors need to be very careful when assessing risks before deciding to buy Enterprise bonds in order to limit possible situations in having to “follow” the consequences of the Enterprise issuing bonds in violation of regulations. The investors can ensure their rights and interests when participating in bond trading.

The above is to share the legal knowledge of TNTP in response to the question “Tan Hoang Minh bonds are canceled: How to recover the investment amount?”. I hope the article will help your work.

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The necessity for a debt collection law in Vietnam

Written by Phạm Huyền on 14 April, 2022. Posted in Thu hồi nợ, Thu Hồi Nợ.

In the business activities of enterprises, there is always the possibility of incurring debt – an inevitable consequence when a party borrows money or a value of the property and fails to pay on time or in full quantity to the creditor. At that time, creditors often use debt collection services to recover the debt from the debtor. However, at present, legal debt collection activities in Vietnam are not effective because of limitations in the provisions of the law. In this article, we will give our views on the necessity for a Debt Collection Law in Vietnam.

1. Practice of debt collection activities in Vietnam

Before the Investment Law 2020 took effect, the debt collection services were a conditional business line in Vietnam. However, many debt collection companies applied debt collection methods in the “gangsters style” to intimidate the mental and threaten to force the debtor to pay the creditor.

After the Investment Law 2020 took effect, putting the “Debt collection service business” on the list of prohibited investment and business activities, many companies performing debt collection activities that were established before had to be terminated. Up to the present time, only law firms can conduct lawful debt collection activities with more peaceful debt collection methods such as Negotiation and filing lawsuits in court or denouncing the competent police investigation agency if the debtor has conditions but does not pay, or it is determined that the debtor shows signs of violating the Criminal law.

Legally, it is reasonable to ban the business line of debt collection services in the form of “gangsters style” because it may ensure social order and contribute to a more civilized society. However, we cannot deny the effectiveness of these forms of intimidation on the debtor when they directly affect the psychological, even physical, and cause the debtor to be under pressure, and fear, and make debt collection become fast and efficient. Creditors are often not attracted to peaceful and law-abiding options such as negotiation or filing lawsuits in Court because these options often have complicated and time-consuming. Also, they do not bring economic value to creditors.

2. The Necessity for a Debt Collection Law in Vietnam

In some countries around the world, debt collection is still allowed by law, but all conditions must be met. For example, the Fair Debt Collection Act – FDCPA of the United States of America.

The essence of the FDCPA is to make regulations to bind the actions of third parties who perform debt collection services on behalf of creditors to ensure that they do not infringe on the civil rights and other rights of the Debtors as protected by law. Specific regulations include:

– Conditions when making a phone call

Information about debt collectors and creditors must be disclosed before making a request;
Phone calls are only allowed between 8 am and 9 pm;
Do not use offensive or threatening language to the debtor.

– Regulations on providing information to debt collectors

Before requesting the debtor to pay, the debt collector must notify the full name of the debt collector and the debt collection organization in operation;
Amount to be paid by the debtor;
Full name, and specific information of the creditor.

– Prohibited regulations

Prohibit the use of abusive, annoying forms or behaviors to the debtor;
Prohibit disclosure of information about debtors’ debts to parties other than creditors and debtors.

The above experiences of FDCPA can be fully applied in Vietnam because when debt collection activities are controlled by specific and clear regulations, debt collection activities will become civilized and protect the interests of the debtor and maintain social order and stability. At the same time, once debt collection becomes effective, it will clear the stagnant cash flow caused by bad debts and will become a driving force for the development of the economy of Vietnam, especially in the current situation when Vietnam is recovering production and business activities after Covid-19, and many debts have arisen in society due to the impact of the pandemic.

The above is the knowledge sharing of TNTP about the need for a Debt Collection Law in Vietnam. We do hope our article will be useful to you and your work.

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Copyright disputes – how to resolve?

Written by Phạm Huyền on 7 April, 2022. Posted in Legal newsletter.

Currently, copyright infringement is increasingly common and complex. Anyone can become a copyright infringer. Poorly protected copyright carries serious risks and significant economic risks for the author and the rights owner (“Rights Holder“). When copyright disputes occur, what should the Rights Holder do to protect his legitimate rights and interests as well as limit the damages? Kindly read the following article to get an overview of copyright disputes and measures to resolve them.

1. Definition of copyright

Copyright is the legal right of organizations and individuals to work created or owned by themselves. To be protected, the work must be original, not copy other works and meet the protected conditions under Article 14 of the Intellectual Property Law 2005 amended, supplemented in 2009 as literary, scientific, textbook, syllabus, and other works expressed in the form of written or other characters; lectures, speeches, and other speeches; journalistic works; musical works;…

2. Common disputes over copyright

Common disputes related to copyright can be mentioned as:

– Disputes between individuals over copyright for literary, artistic, scientific, and derivative works;

– Disputes between co-authors over the division of co-authors’ rights;

– Disputes between individuals and organizations about the copyright holders of works;

– Disputes between copyright holders and authors over royalties and remuneration for the creators of works on the basis of assigned tasks or contracts;

– Disputes over the exercise of personal rights or property rights of authors and copyright holders;

3. Methods of resolving copyright disputes

– Method of negotiation and reconciliation

+ Negotiation:

When discovering that copyright has been infringed, the Rights Holder may notify in writing to request the infringer to stop the infringing act. The written notice contains guidance on the arising grounds, protection certificates, scope, and duration of protection and must set a reasonable time limit for the infringer to terminate his infringing acts.

After that, the two sides contacted and exchanged to resolve the dispute. The Rights Holder may request the infringing party to stop the infringement, apologize, publicly correct, and pay damages. During this stage, the parties deal internally with each other. With simple settlement procedures and not bound by legal procedures, the negotiating method helps the parties save costs and retain confidentiality and prestige; however, the outcome of dispute settlement depends on the goodwill and cooperation of the parties, and the results of negotiations are not guaranteed by the mandatory legal mechanism.

+ Reconciliation:

With the conciliation method, the parties settle negotiation with the help of an independent third party, the mediator. The mediator acts as an intermediary, independent to analyze for the parties the nature of the dispute, legal provisions, the most appropriate solution that the parties can accept but do not have the right to adjudicate. Like the negotiating method, the outcome of the mediation depends largely on the agreement of the parties and the capacity of the mediator. At the same time, the parties will spend money to invite the mediator.

– Method of requesting a competent state agency to handle violations

The Rights Holder may submit a request for handling of violations to a competent state management agency. Before submitting a petition, the Rights Holder must notify the infringing party that they are infringing and request an end to the infringement within a reasonable time. If, after that time, the infringer does not voluntarily cease the infringement, the Rights Holder has the right to request a competent authority to handle it by submitting a petition and providing evidence proving the existence of the infringing act. An infringement of rights will be handled by administrative or criminal measures depending on the nature and seriousness of the act. In addition to being administratively or criminally handled, the infringing party may still be subject to civil measures by compensation for damages to the Rights Holder.

– Method of bringing the case to court or commercial arbitration

This method is a last one when the infringer does not actively and voluntarily fulfill the legitimate demands of the Rights Holder and the parties failed to reach a final dispute settlement agreement. The Rights Holder may initiate lawsuits to settle copyright disputes by arbitration or initiate dispute settlement lawsuits at competent courts.

Above all, in order to prevent possible copyright disputes, the Rights Holder need to be aware of his legitimate rights and interests by actively registering copyrights with competent state management agencies, and applying measures to prevent copyright infringement, such as:

Provide granting permission management information attached to originals or copies of works, recordings, recordings, broadcasts;
Provide information on the management of the right to appear together with the transmission of the work to the public to identify the work, the author of the work, the rights holder, information about the duration and conditions of use of the work, and any data or codes and symbols representing such information to protect the copyright;
Apply technological measures to protect the information of rights management, prevent acts of access to works, and illegal exploitation of their ownership.

The above is the information that should be noted when dealing with copyright disputes that we have synthesized in the study of the provisions of the law and based on current practice. We do hope our article will be useful to you and your work.

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Principal contract in commercial activities

Written by Phạm Huyền on 31 March, 2022. Posted in Pháp luật Hợp đồng.

Nowadays, Principal Contract (“PC“) is one of the most common types of contracts in commercial business transactions. In establishing a transaction, the parties will base on their needs and abilities to sign an appropriate type of contract. To understand the PC better and especially in comparison with other types of Economic Contract (“EC“), kindly find the information below with us.

1. Nature of Principal Contract

As its name, PC is a contract entered into and between the participating subjects in order to uniformly stipulate the general principles that are imposed and binding on those parties for the purpose of ensuring the performance of one or many transactions that will occur in the near future.

Currently, although there is no specific definition of PC in the law but in practice, PC is considered as a memorandum of understanding (“MOU”) or an agreement between the participating parties on the purchase and sale of products or supply of services, or other civil and commercial transactions. In general, PC is a framework contract that specifies basic terms and serves as a foundation for the parties to carry out subsequent transactions.

2. Features of Principal Contract

PC is directive

PC is often used when the parties have just initially approached to learn about each other’s abilities and needs and have agreed on some collaboration content. PC can be considered as the first agreement on the transaction of the parties; it governs and directs the obligations of the parties in all subsequent transactions.

PC is general

The generality of the PC is shown in that, not all of the terms of the PC are detailed but may be referred to an EC, Sales Contract, or Purchase Orders (“PO”).

PC has precedence to apply

In the first business and commercial transaction between the parties, the PC is signed, paving the way for other contracts to be established in the future. Normally, the contracts established under the framework of the PC can not be inconsistent with the PC, if there is a provision that is contrary to the PC, that provision will be deemed invalid, unless the parties agree otherwise. Thus, the PC shall precedence to apply if there is a conflict in the same provision of the PC and subsequent contracts until the parties agree otherwise on the application of the contract or interpretation of this conflicting provision.

3. Main differences between Principal Contract and Economic Contract

Criteria	Principal Contract	Economic Contract
Purpose	It only stipulates general issues, so it is often considered as a framework contract or a MOU or an Agreement between the parties.	It stipulates issues in more specific and detailed.
Name	Principle Agreement; Contract of Sale Principle; Contract of Agent Principle…	Real Estate Purchase and Sale Agreement, Sales and Purchase Agreement, Services Agreement, Loan Agreement, …
Agreement in the contract	The signing of the PC is directional, other detailed issues will be agreed by the parties later. Therefore, PC is the basis for the signing of an official EC or an Appendix or a PO. However, PC is still valid and enforceable.	The signing of an EC is mandatory, binding. The interests of the parties are also clearer.
Signing time	Usually fixed at the beginning of each year. Over the years, if there is a change, the parties only need to sign an Appendix. PC is valid over time, so it does not depend on the number of deals/orders arising during the validity period of the PC.	The EC will terminate for each transaction/order after the parties fulfill their responsibilities and/or sign a Contract Liquidation Minute.
Subjects of application	Enterprises are geographically located far from each other; enterprises who have regular and continuous trading relationships.	Enterprises who do not trade with each other regularly; Large value transactions; Specific transactions need detailed requirements on the responsibilities of the parties, Unexpected Orders.

The above is our overview knowledge of Principle Contract that we have synthesized in the study of the law and based on current practice. We do hope that the article is useful for you and your work.

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the introduction to the fair debt collection practices act – FDCPA

Written by Phạm Huyền on 24 March, 2022. Posted in Legal newsletter.

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates and directs the proper behavior in the debt recovery process of creditors to the debtor in the United States of America. Accordingly, the FDCPA has many regulations aimed at limiting the activities of third parties – authorized or on behalf of an individual or organization to conduct debt recovery for debtors with a United States of America address.

1. The essence of FDCPA

A lot of people argue that FDCPA is a condonation of United States of America law to protect the interests of the debtor, who is people or organizations that did not fulfill their obligations to pay from the debt collector, while the debt collector is restricted from legitimate rights and obligations when asking the debtor to pay the debt for the creditor. However, the nature of FDCPA is not entirely negative.

FDCPA does not protect the debtor from direct creditors, such as the fact that A is a borrower of B, then B will be the direct creditor. The FDCPA does not protect A from debt recovery measures taken by B. Otherwise, the FDCPA will only be applied to third parties that perform debt recovery services on behalf of direct creditors – or parties who conduct the debt recovery activities.

The main purpose of enacting the FDCPA is to force the parties who carry out debt recovery activities to take peaceful measures and respect the rights of debtors, avoiding the debt collector’s acts of abuse or violence, threatening the debtor and causing social disorder . In short , the FDCPA can be likened to the Code of Ethics and Conduct of Debt Collectors in the United States of America.

2. Some typical provisions of the FDCPA

– Regulations on debt recovery calls

According to the FDCPA’s regulations, debt collectors are only allowed to call debtors between 8 a.m and 9 p.m (not applicable for weekends or public holidays). Any call from debt collectors outside the above hours will be considered harassment and may be sued by debtors themselves for violating the FDCPA provisions, unless debt collectors have agreed with debtors on contacting outside of the above allowed hours.
In case of inability to call the debtor, debt collectors may contact the telephone number of their relatives and neighbors. However, debt collectors are not allowed to disclose any information about the debt to these people. In addition, debt collectors are only allowed to call those involved with debtors once at a time per person.

– Mini-Miranda

This is a special provision of the FDCPA, according to which, debt collectors will have to notify debtors of specific information before mentioning to the content of requesting payment of debts. The specific information includes:

Full name of the debt collector, the organization in which the debt collector is operating
The amount of money the debtor must pay
Full name, specific information of creditors
Must to ask if the debtor agrees to continue the call or not. If the debtor does not agree to continue the call, the debt collector must terminate the call and make an appointment to contact again at another time.

– It is forbidden to threaten or use offensive words

Under FDCPA rules, debt collectors are not allowed to use offensive, harassing or abusive language to debtors, even when making a phone call or send text messages. In addition, if debt collectors threaten debtors to sue but does not prove that the intention to initiate this lawsuit will definitely be conducted, debt collectors may be sued by debtors themselves for the behavior: Threatened by using false information.

As can be seen that FDCPA is a religion that directly and specifically influences the behaviors of debt collectors. Although this reduces legal debt collection activities and actions in the United States of America, the debtor is fully protected for human and civil rights. Therefore, when conducting debt collection in the United States of America, debt collectors need to pay special attention to the FDCPA and the consequences in case of FDCPA violation.

The above is a our legal acknowledge sharing of the United States of America Fair Debt Collection Practices Act. We do hope that the article may help your work.

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Advantages and disadvantages of 03 forms of investment in vietnam

Written by Phạm Huyền on 17 March, 2022. Posted in Legal newsletter.

Investment is an unfamiliar concept in Vietnam. Before carrying out investment activities, investors need to choose the form of investment suitable to their conditions, needs and goals. Being able to choose the right form of investment is very important to bring profit to Investors. Therefore, it is essential to understand the advantages and disadvantages of each form of investment before conducting investment activities. Accordingly, we analyze the advantages and disadvantages of 03 main forms of investment in Vietnam that we have introduced in the article “Introduction to 03 forms of investment in Vietnam”:

1. Establish a business organization;

2. Contribute capital, buy shares, buy capital contribution; and

3. Business Cooperation Contract (BCC Contract).

Thus, depending on the specific case, needs and strategic capabilities, Investors can consider the advantages and disadvantages of the above 03 forms of investment to choose the form of investment that best suits their time and cost conditions

NUMBER

FORM OF INVESTMENT

ADVANTAGE

DISADVANTAGE

1 Establish a business organization

Reducing the risk of disputes caused by the Investment Project is carried out in the name of the business organization instead of an individual investor (“Investor“), all Investors can access and know the information about the process of implementing the Investment Project.

When there is a profit from business activities, Investors will be divided according to the ratio of investment capital. This ensures fairness and transparency for each investment party.

It is necessary to carry out many time-consuming procedures such as Issuing Investment Registration Certificate, Certificate of Business Registration , …

Despite establishing a business organization, there may still be a risk that Investors do not contribute charter capital on schedule and within deadline. At that time, Investors will have to carry out procedures to adjust the reduction of charter capital.

The decision on the issues of the Investment Project must depend on the decision of the investment parties and the implementation of procedures for meeting, issuing resolutions, notifications, … in accordance with the law.

2 Contribute capital, buy shares, buy capital contribution

Not having to establish a new legal entity, Investors can take advantage of the available resources of the enterprise such as personnel, assets, reputation, brand, …

Procedures for contributing capital, sharing purchase, buying capital contribution are simpler than establishing new legal entities.

Investors are allowed to participate in meetings, voted to decide on a number of investment issues in the enterprise in accordance with the provisions of law and the charter of the enterprise.

To be paid profit according to the ratio of contributing capital, sharing purchase, buying capital contribution, ensured clarity and transparency for Investors.

Risks can occur when Investors have registered to contribute capital, buy shares, buy capital contributions but fail to comply with the committed deadline, leading to many adjustments to reduce charter capital.

Risks arising from disputes when Investors have contributed capital, bought shares, bought capital contributions but enterprises do not carry out procedures to change members and shareholders in accordance with the provisions of law or do not pay profits to Investors in accordance with the ratio of contributing capital, sharing purchase, buying capital contribution, which affects the legal rights and interests of Investors.

3 BCC Contract

Save time and costs related to establishing, operating and dissolving the enterprise.

Because there is no need to establish a new business organization, Investors who make decisions about Investment Projects will be more proactive, flexible and less dependent on partners.

Help to limit risks in case the investment parties want to stop investment cooperation and business , because it is only necessary to proceed with the liquidation of the signed BCC Contract.

The failure to establish a new business organization is not closely bound between the investment parties. This will cause a lot of risks, not transparent because the investment is usually made by one or some representative investors.

Investors who are not directly involved in the investment implementation process have difficulty accessing information and documents related to the Investment Project. This can cause suspicion and conflict among Investors about the unfair distribution of profits.

It is difficult to cooperate with a third party because there is no legal entity status.

Hopefully this article is useful for your work and Investors who need to research and learn.

Sincerely.

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Legal ways to collect debts in the United States of America

Written by Phạm Huyền on 10 March, 2022. Posted in Thu Hồi Nợ, Thu hồi nợ.

Disputes in enterprises occur regularly; the most typical of these are disputes over debts between enterprises. In particular, the dispute over debt with foreign elements is complicated due to geographical distances and differences in the laws of countries, such as disputes involving debt owed by a debtor with United States citizenship. Therefore, the debt collection procedure overseas, in general, especially in the US is more complex than the debt collection procedure in Vietnam. In this article, we will offer advice to Vietnamese enterprises to understanding legal debt collection in the US.

1. Legal debt collection methods in the US

Similar to the Vietnamese law, the US law also allows debt collection within its territory, including the following procedures:

– Make direct contact with the debtor;

– Authorize a third party to collect the debt, and/or;

– Initiate a lawsuit at a competent Court or Commercial Arbitration if the parties are unable to reach an agreement on debt settlement.

2. Applicable law in debt collection

Vietnam has the only one legal system that applies throughout the nation. Meanwhile, the US permits each state to establish its own legal system, known as The State Law. State governments in the US have the legislative, executive, and judicial authorities as a nation but they must follow the provisions of Federal Law and the US Constitution. Because of many states have different regulations for debt collection, enterprises intending to perform debt collection in any state need to thoroughly research its legislation because debt collection which is allowed in one state may be restricted in another.

Accordingly, before proceeding debt collection, the creditor needs to be understanding the applicable law to prevent legal risks, save time and effort.

3. The Fair Debt Collection Practices Act – FDCPA

The Fair Debt Collection Practices Act (FDCPA) belongs to Federal Law. The FDCPA was first enacted on September 20th, 1977 and was last amended in 2017. It specifies the legal debt collection procedures that creditors must follow, contains provisions to limit third parties – authorized or acting on behalf of an individual or organization to collect the debt.

According to FDCPA, popular debt collection methods in Vietnam such as calling and sending payment requests may be illegal in the US if certain requirements are not satisfied.

Under FDCPA regulations, the debt collection procedure in the US is complicated because of legal diversity. Creditors must be understanding of US law and the divisions of the US judicial system to collect a debt properly and lawfully. In the following articles, we will analyse more clearly the benefits and inadequacies of the FDCPA, as well as the solutions those Vietnamese enterprises can choose to efficiently perform debt collection in the US.

The above is our legal share about How to legally collect debt in the US. Hope this article is useful to you.

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What ways for hag stock of hoang anh gia lai?

Written by Phạm Huyền on 3 March, 2022. Posted in Legal newsletter.

Recently, the stock market and investors are buzzing about the delisting of HAG stock of Hoang Anh Gia Lai Joint Stock Company (“HAGL“). This issue still has a lot of conflicting opinions, agreeing, disagreeing with the delisting. So what is the provision of the law on delisting of stock and our opinion on whether HAG stock of Hoang Anh Gia Lai will be delisted on HoSE?

1. WHY IS HAGL IN RISK OF DELISTING OF STOCK?

At the time of making HAGL’s financial statements for 2017, 2018 and 2019, the financial statements contained an excepted audit opinion on the recoverability of receivable. However, by the beginning of 2021, HAGL has retroactively adjusted financial statement, so in the financial statements in April 2021, HAGL made a loss for three consecutive years (2017, 2018, 2019). Therefore, HAGL is facing the risk of being delisted for HAG stock due to the loss of business results for three consecutive years.

2. PROVISIONS OF LAW ON CASES OF DELISTING OF STOCK

Pursuant to point e Clause 1 Article 120 of the Government’s Decree No. 155/2020/ND-CP dated December 31, 2020 detailing the implementation of a number of articles of the Law on Securities (“Decree 155“), stock of a public company shall be delisted in case:

” The listed organization incurs losses in 03 consecutive years or total cumulative loss exceeds the charter capital contributed in reality or has a negative equity in the latest audited annual financial statement…”

Thus, in case a public company has production and business results with losses for 03 consecutive years, the company’s stock will be forced to delist in accordance with the law.

Currently, the law does not stipulate the case where the business results of financial statements retroactively leading to the delisting of stock. However, at the present time and according to HAGL’s latest financial statement on the results of three years 2017-2019, HAGL incurs losses in 03 consecutive years 2017-2019 and is the case of compulsory delisting of stock as prescribed in point e Clause 1 Article 120 Decree 155.

Regarding the order and procedures for delisting of stock, there is currently no legal document to replace the Circular No. 202/2015/TT-BTC of the Ministry of Finance on guidance on listing securities on the stock exchange (“Circular 202“). Therefore, in the spirit of Circular 202, whereby, the Stock Exchange shall be responsible for informing the listed organization and for publishing information upon the former’s detection of listed securities prone to delisting and request the listed organization and fund management enterprise to provide specific explanation. According to this regulation, the Stock Exchange will inform the listed organization, publish information upon the former’s detection of listed securities prone to delisting and request the listed organization to provide specific explanation.

In the case of HAGL, HAGL published the latest financial statements of 03 years 2017-2019 in April 2021. We have an idea that at this time, the Ho Chi Minh Ctity Stock Exchange has neither announced nor made information disclosure about the possibility that HAG stock of HAGL are likely to be delisted – maybe due to it has no solution for HAG stock as this is the first case that is likely to be delisted due to retroactive business results. In addition, HAGL’s business at 2021 is considered to be on the rise so that delisting at this time can greatly affect HAGL. However, no one can guarantee whether HAGL’s business results in 2022 will continue to grow or will continue to lose.

We suggest that, although the case of HAG stock is an exception in terms of retroactive business results leading to compulsory delisting, however, we need to strictly apply in accordance with the law. Because before the law, there are no exceptions. Therefore, in this case, HAG stock are subject to compulsory delisting in accordance with Decree 155.

Thus, HAGL’s business is currently being evaluated as potential, so if HAG stock are delisted, it can be transferred to Upcom. Since then, HAGL have efforts to restore its business sales, generate profits, rebuild investor’s confidence and when meeting the conditions for listing again, HAGL’s HAG stock can still return to Hose.

The above is our legal share about the case of delisting of stock for HAG stock of Hoang Anh Gia Lai Joint Stock Company. Hope this article is useful to you.

Best regards,

You may need Value-added tax reduction policy applied from 2022

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Lawyer: Nguyen Thanh Ha

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Five risks for the investor when choosing the design – construction contract (EC) form in project construction

Written by Phạm Huyền on 28 February, 2022. Posted in Pháp luật Hợp đồng.

Currently, in the field of construction, the Investors instead of choosing to sign an Engineering Procurement and Construction Contract (“EPC Contract“) with the Contractor, one of the best options of the main Investor is to sign a Design – Construction Contract (“EC Contract”) in which, the Investors sign an only contract with the Contractor who is responsible for all the work including Project’s construction and design. This form of contract currently brings many advantages to the participants and can limit some disadvantages compared to the EPC contract. However, the use of EC contract still has certain risks, accordingly, in this article, TNTP will mention 05 risks that the Investors may encounter for the Project in this case.

The first: It is difficult for the Investor to make a specific assessment of the Contractor’s ability

For Design – Construction Contract, the Investor will not be able to assess whether the Contractor with whom the Investor signs the Contract will meet the Investor’s design needs for the Project, because the Contractor only provides Project’s detailed design after signing the Contract with the Investor on the implementation of the Project, accordingly, if the Contractor’s design does not meet the Investor’s requirements, The Investor and the Contractor will have to discuss to reach an agreement on the design for the Project, which may prolong the construction process of the Project because the Project can only be implemented if the Design phase has been completed. In addition, in the current market mechanism, many constructions and installation companies, which already have the capacity to carry out construction activities, have carried out the expansion of design activities, so it may arise the case that the Contractor is unable to ensure the capacity for both Design and Construction, resulting in the Contractor not being able to meet the conditions for the EC Contract, which requires the Contractor to be qualified to perform both activities Design and Construction.

Solution: In order for the Investor to be able to limit this risk, the Investor should consider using this Form of Design – Construction Contract when: The Contractor has technological secret that it can be provided with the Contract; or Projects whose Design is greatly influenced by construction technology; or for an uncomplicated Project which the Design and Construction work together without affecting the quality of the Project, for other Projects, the Investor should choose to sign an EPC Contract with the Contractor to avoid risks.

The second: The Investor must accept the higher standby expenses offered by the Contractor

For Design – Construction Contract, the cost of the Project is difficult to predict accurately because the detailed design document is only completed after the Investor has completed the selection of the Design – Construction Contractor. Accordingly, the Contractor, in this case, will face a great risk in meeting the Investor’s requirements because it has not yet been accurately estimated the amount of work to be performed and in this case, to share the risk to the Contractor, the Investor often has to accept a number of reasonable standby expenses to deal with the risks brought out by the Contractor, thereby it leads to a higher cost for the Project;

Solution: In this case, in order to minimize risks for the Investor, in the Contract signed between the Investor and the Contractor, the terms of the Fixed Unit Price must be specified in the Design – Construction Contract, this unit price will not change during the execution of the Project, and at the same time, the Investor must work with the supplier of building materials to be able to accurately determine the actual unit price, avoiding the situation of the estimated number is much larger than the original estimate. However, in the event that at the time of construction of the Project, the price of materials fluctuates greatly, the Contractor, in this case, will face difficulties in construction, leading to the Contractor’s unilateral termination of the Construction Contract.

The third: The quality of the Project is not guaranteed because during the implementation process, the Contractor reduces the quality and function of the product to save the construction cost of the Project.

Because the design and construction units are both conducted by one party, accordingly, during the implementation process of the Project, it will arise the case that the Contractors join hands together to find ways to reduce product quality and performance in order to save costs Construction of the Project which leads to the quality of the Project can difficultly be guaranteed as original plan. Assigning all the work to an implementation unit will happen that the designer often sided with the construction contractor to protect itself, so this is also one of the risks that occur quite popular with Investors.

Solution: In this case, in order to minimize the risk for the Investor, the Construction Supervision unit must be carefully selected by the Investor and must have high construction expertise as well as certain prestige in Project Supervision. Thus, the Investor needs to consider selecting from the Supervision units that the Investor previously cooperated with other Projects and these Projects do not have any problems with the quality of the works of the Project.

In addition, in the Contract signed between the Investor and the Contractor, the Investor needs to ask the Contractor to clarify the materials (including: brand, place of production, technical characteristics, types, uses, regulations,…) will be used to carry out the construction of the Project and at the same time provide sanctions in case the materials are not as committed in the signed Contract.

The fourth: The Investor may lose control in the process of Project implementation

Stemming from the requirement to create the right to be proactive and flexible for the Contractor in organizing the Project implementation, the acceptance and payment in this case is in principle done according to the contract implementation stage or the completed work item. With this principle, the Contractor is proactive in coordinating and inspecting the work on the scene according to the contract performance schedule without being heavily dependent on the regular inspection and supervision of the Investor as well as the time of conducting the acceptance work, thereby reducing the interruption time in the performance of the work. As a result, the Investor may lose control over the process of Project implementation.

Solution: In order to minimize this risk for the Investor, the Investor needs to specify the terms of specific report on the progress of the Project as well as report on the progress of problems arising during the execution of the Project in the Contract so that the Investor can understand the construction progress of the Project as well as have a backup plan in case problems lead to delay in construction progress.

The fifth: The Investor is limited in Termination of the Contract between the Investor and the Contractor

Pursuant to the provisions of Clauses 2 and Clause 7, Article 41 of Decree No. 37/2015/ND-CP dated April 22th 2015 Regulations on construction Contracts, which is amended in Decree No. 50/2021/ND-CP dated April 1^st 2021, the Contractor’s violation of regulations on quality and type of construction materials or the Contractor’s failure to meet the Investor’s requirements,… is not one of the cases that the Investor has the right to terminate the Contract. However, ensuring the quality of the Project’s works as well as ensuring the right type of construction materials is one of the most important factors to avoid future risks for the Investor.

Solution: In order to limit this risk, the Investor can add a clause to the Investor ‘s right to terminate the Contract in case the Contractor violates the Contract signed between the Investor and the Contractor to use another Contractor to ensure the quality and duration of the Project.

Above are the contents and legal sharing about the five risks of the Investor for choosing the Design – Construction Contract (EC) form in Project construction. Hope this article was useful to you.

Best regards.

You may need Illegal capital mobilization in trading off-the-plan real estate through a third party

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Lawyer: Nguyen Thanh Ha

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Illegal capital mobilization in trading off-the-plan real estate through a third party

Written by Phạm Huyền on 28 February, 2022. Posted in Legal newsletter.

The real estate market in Vietnam has been an effective investment market even during the Covid-19 pandemic. However, along with many profit opportunities, there are hidden and unpredictable risks. In this article, we would like to mention a risk that many real estate investors have encountered. It is the illegal capital mobilization in trading off-the-plan real estate by entering a contract with a buyer through a third party.

1. Illegal capital mobilization

a) Who has the right to sell off-the-plan real estate?

Under the provisions of the Law on Real Estate Trading, only investors have the right to open their real estate sale. And investors only have the right to open for sale if the off-the-plan real estate is eligible to be opened for sale.

However, in reality, if the investor wants to open an off-the-plan real estate sale before meeting conditions for sale, they often go through a Third Party to sign a brokerage service contract with the buyer.

b) How is illegal capital mobilization implemented?

Firstly: Through the third party signing a brokerage service contract with the buyer, the contractual term related to the buyer’s deposit will state the content “Payment amount for brokerage services” instead of for the “Deposit to buy real estate”. This term is intended to lick the deposit to buy real estate, “transform” it into a fee paid by the buyer for the third party to carry out brokerage intermediaries – which is a civil transaction allowed by the law. This conceals the illegal capital mobilization under the law on real estate trading.

In addition: The Service contracts will include the following provisions: (i) not allow the buyer to get the deposit back after a specified period of time by the investor, (ii) provisions of deposit penalty if the buyer terminates the Service contract before the term, or (iii) stipulate that the buyer cannot get the deposit back until the investor opens for sale.

These are the most unfavorable terms when the buyer has accepted to enter into the Service contract. In case the buyer finds out the problems arising from the Service contract, such as: the real estate project has not been completed under the committed schedule of the investor; or the project has still been not completed for sale despite expired time limit, etc., the buyer wants to terminate the Service contract. However, at that time, the buyer will encounter unfavorable terms of the Service contract and fall into a dilemma when it is impossible to withdraw the deposit due to the contract’s bond. If the buyer waits, the buyer is also not aware of the timeline that the investor meets the conditions for sale.

2. What does the buyer need to do?

Based on our practice experiences, many enterprises trading real estate have been conducting to mobilize capital illegally from buyers through third parties. However, the competent authorities are still “afraid” to resolve these cases. The authorities assume that the contract between the third party and the buyer contains the content and form of ordinary civil transactions. The applicable regulations of the law on sanctions against third parties conducting illegal capital mobilization are also inadequate and have many loopholes.

Therefore, the buyer needs to recognize suspicious behavior before signing any contract to protect themselves. In particular, if the investor does not directly sign a sale and purchase contract but requests the buyer to sign a sale and purchase or deposit contract with any other third party, it is likely that the investor is conducting the illegal capital mobilization. The buyer should thoroughly consider the commitments as well as the reputation of the third party before entering into a contract or depositing money with such a third party. If uncertain, the buyer should not enter into a contract and deposit money to any third party.

The above is our legal share about the illegal capital mobilization in trading off-the-plan real estate through a third party. Hope this article is useful to you.

Best regard.

You may need 04 risks when signing off-the-plan real estate sale contract

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TNTP & Associates International Law Firm

Lawyer Nguyen Thanh Ha

Email: ha.nguyen@tntplaw.com

Author: Phạm Huyền

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Five risks for the investor when choosing the design – construction contract (EC) form in project construction

The first: It is difficult for the Investor to make a specific assessment of the Contractor’s ability

The second: The Investor must accept the higher standby expenses offered by the Contractor

The third: The quality of the Project is not guaranteed because during the implementation process, the Contractor reduces the quality and function of the product to save the construction cost of the Project.

The fourth: The Investor may lose control in the process of Project implementation

The fifth: The Investor is limited in Termination of the Contract between the Investor and the Contractor

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