IS PARTIAL TRANSFER OF INVESTMENT PROJECT PERMITTED?

Transfer of investment projects is the common practice in business to optimize resources and restructure investments. However, if an investor has demand on partial transfer of investment project, is such a transaction permissible?

Is partial transfer of investment project permitted?

The transfer of an investment project is a legal act by which an investor, whether an organization or an individual, transfers in whole or in part of their rights and obligations related to their investment project to another investor. Such transfers must comply with the applicable provisions of investment law, including specific conditions defined for the project and relevant legal regulations.

The transfer of an investment project serves various objectives. One common purpose is resource optimization, enabling investors who no longer have the capacity or desire to continue a project to lawfully divest. At the same time, it ensures the project’s effective implementation by transferring it to an investor better suited to its needs, thereby fostering a dynamic investment market and enhancing competition in project execution.

Under the Law on Investment 2020, investors are permitted to transfer either the entirety or partial of investment projects. This flexibility supports practical needs such as resource allocation, capital recovery, or concentration of investments.

What are the conditions of partial transfer of investment project?

The partial transfer of investment project must not be subject to termination

A fundamental condition is that the portion of the investment project intended for transfer must not have been terminated under legal provisions. This ensures the legality of the transfer and the continued implementation of the project’s objectives as approved post-transfer.

Specifically, termination of an investment project occurs in cases such as: (i) due to the decision by the investor; (ii) under the conditions specified in contracts or company charters; (iii) expiration of the project’s operational term; or (iv) termination by the investment registration authority due to violations by the investor or pursuant to a court or arbitration ruling.

Foreign investors receiving the transfer must satisfy legal conditions

If the transferee is a foreign investor, they must comply with the requirements for capital contribution, share purchase, or equity acquisition in economic organizations in Vietnam.

Firstly, foreign investors must adhere to market access conditions under Article 9 of the 2020 Law on Investment, which include restrictions in sectors with limited access or conditional access industries.

Secondly, national defense and security considerations must be satisfied. Investments through partial transfer of investment project must not compromise national interests, particularly in sensitive areas related to economic or political security.

Thirdly, compliance with land laws is essential. This includes meeting conditions for land use rights and respecting restrictions on land use in strategic areas such as islands, border communes, wards, or coastal towns. These provisions ensure that foreign investors’ participation supports development while safeguarding national interests and socio-economic stability.

Compliance with laws on land and planning

For transfers involving land use rights and assets attached to the land, adherence to land law provisions is mandatory.

Conditions include: fulfillment of financial obligations related to the land (e.g., land use fees, lease payments, taxes); legitimate land use rights (through allocation, lease, or recognized use in accordance with regulations); consistency with approved planning by the competent state authority. In sensitive areas such as islands, borderlands, or coastal regions, the transfer must receive approval from competent state authorities.

Compliance with Housing Law and Real Estate Business Law

In the case of partial transfer of investment project involving housing construction or real estate development, compliance with the respective provisions of the Housing Law and the Real Estate Business Law is required.

Housing projects must meet conditions regarding zoning, construction design, and technical infrastructure as approved by competent authorities. Additionally, the investor must fulfill all financial obligations, including land use fees and infrastructure development costs.

For partial transfer of real estate development projects, the transferring party must provide complete and legally compliant project documentation. The transfer agreement must strictly adhere to regulatory content requirements. At the time of transfer, the real estate project must have completed legal procedures related to investment approval, zoning approval, land compensation, and resettlement support.

Compliance with specific requirements in the certificate registration certificates and relevant legal provisions

In addition to general regulations, the portion of the project subject to transfer must satisfy specific conditions outlined in the investment policy approval documents, the Investment Registration Certificate, or other applicable legal provisions. These specific requirements ensure that the transfer aligns with the approved project objectives and legal framework.

Furthermore, if the project involves the participation of state-owned enterprises, strict compliance with regulations on the management and use of state capital in business activities is mandatory. This compliance is particularly important prior to any adjustments or transfers of the investment project, ensuring transparency, accountability, and the preservation of state assets.

Projects not meeting legal requirements, the transfer will be prohibited?

As above-analyzed, the transfer of investment projects, whether in full or in part, must strictly adhere to the applicable conditions and regulations. Consequently, any transaction involving the transfer of a targeted project portion that fails to meet these requirements will be deemed unlawful.

By restricting non-compliant transactions, the law ensures that investment projects are executed transparently and align with approved development plans. This approach mitigates legal and financial risks for involved parties, fostering a stable and sustainable investment market while maintaining adherence to regulatory frameworks.

>> PROCEDURE FOR CAPITAL CONTRIBUTION, CAPITAL AND SHARE PURCHASE IN VIETNAM https://linconlaw.vn/procedure-for-capital-contribution-capital-and-share-purchase-in-vietnam/

>> INVESTMENT INCENTIVES FOR EXPORT PROCESSING ENTERPRISES https://linconlaw.vn/investment-incentives-for-export-processing-enterprises/