By Lawyer Luu Thi Hue – UniLaw LLC

Adjustment of a Project When Receiving Transferred Assets as Collateral in Vietnam: A Detailed Legal Guide

In the dynamic landscape of Vietnam investment law, the handling of distressed assets and the subsequent adjustment of investment projects are critical areas of practice. Investors, credit institutions, and legal practitioners often encounter scenarios where an investment project, or assets within a project, serve as collateral for credit obligations. When the primary investor defaults, the enforcement of security interests leads to a transfer of these assets. This article, provided by Unilaw, a leading international law firm in Vietnam, explores the comprehensive legal framework and procedural steps for adjusting a project when receiving transferred assets as collateral.

Real-Life Legal Battle: The Enforcement of Collateral over a Hospitality Project

To understand the practical implications of project asset transfers, we look at a significant commercial case involving a high-value hospitality project in Central Vietnam. This case highlights how a vietnam investment lawyer navigates the complexities of debt recovery and asset liquidation.

Case Situation: Company M (the Defendant) entered into multiple credit agreements with PVB Bank to finance the development of Hotel M. The loan was secured by a series of mortgage contracts, including mortgages on machinery and equipment (Contract No. 28/2015/HDBD-PVB-CNDNg), a luxury vehicle (Contract No. 22/2016/HDBD-PVB-CNDN), and the hotel structure itself. By late 2018, Company M had defaulted on its repayment obligations. On December 29, 2018, PVB Bank sold the debt to Company A (a state-owned asset management company – VAMC) under Debt Purchase Agreement No. 6961/2018/MBN.VAMC-PVCOMBANK. Company A notified Company M of the transfer and attempted to negotiate a settlement, but Company M, citing economic hardship, was unable to pay. Company A then filed a lawsuit to recover a total debt of over 246 billion VND and requested the right to foreclose on the collateral.

The Verdict and Result: The People’s Court of District C, Da Nang City, in Judgment No. 04/2020/KDTM-ST, ruled in favor of Company A. The court ordered Company M to pay the full principal and interest. Crucially, the court decided that if Company M failed to pay, Company A had the legal right to request the civil judgment enforcement agency to seize and auction the collateral. This included the Hotel M building, all associated machinery, and the mortgaged vehicle. The court confirmed that as the debt purchaser, Company A inherited all rights of the original lender, including the right to handle the collateral to recover the debt. This case sets the stage for the next legal step: once a new investor acquires these assets through auction, they must undergo a “Project Adjustment” procedure to legally continue the project.

The Rights of Entities Receiving Investment Projects as Collateral

The primary regulation governing this scenario is Decree No. 31/2021/ND-CP, which provides detailed guidance on the implementation of the Law on Investment. Article 49 of this Decree specifically addresses the adjustment of investment projects when the transferee receives the project as collateral.

Clause 1, Article 49 of Decree No. 31/2021/ND-CP:

“A credit institution or an organization or individual that receives an investment project as collateral (hereinafter referred to as ‘the collateral recipient’) is entitled to transfer that investment project.”

Explanation: This clause clarifies that banks or any entity that holds a mortgage over a project have the legal authority to sell or transfer that project to another party if the original borrower fails to fulfill their debt obligations. It provides the “collateral recipient” with a clear exit strategy to recover capital through asset liquidation.

Succession of Rights and Obligations by the New Investor

When an investor acquires a project through the enforcement of collateral, they do not start from zero. They step into the shoes of the previous investor regarding the project’s legal standing.

Clause 2, Article 49 of Decree No. 31/2021/ND-CP:

“The investor receiving the transferred investment project shall inherit the rights and obligations to perform the investment project of the transferor according to the conditions prescribed in the project transfer contract and relevant legal regulations.”

Explanation: If you buy a project that was used as collateral, you automatically take over all the legal rights (like the right to use the land and build) and all the legal duties (like environmental protection or tax payments) that the first investor had. However, these rights and duties are limited by what is written in the transfer contract and the general laws of Vietnam.

Essential Documentation for Adjusting a Project Received as Collateral

The administrative process of updating the project’s legal status requires a specific set of documents to prove the legitimacy of the asset transfer. A foreign law firm in Vietnam will typically assist in compiling this dossier to ensure zero rejection from the authorities.

Clause 3, Article 49 of Decree No. 31/2021/ND-CP states that the dossier must include:

“a) An application for adjustment of the investment project;

b) The investment project transfer contract between the collateral recipient and the transferee investor;

c) The loan agreement or credit granting contract or debt purchase contract (if any);

d) The contract or document confirming the security transaction (if any);

dd) The document confirming the winning of the auction in case the collateral recipient or the civil judgment enforcement agency auctions the assets (if any);

e) Copies of legal documents of the transferor and the transferee investor;

g) A copy of the Investment Registration Certificate; Decision on investment policy approval; Decision on investor approval (if any);

h) A copy of one of the following documents of the transferee investor: the most recent 2-year financial statement or equity audit report of the investor, commitment of financial support from the parent company, commitment of financial support from a financial institution, guarantee of the investor’s financial capacity, or document explaining the investor’s financial capacity;

i) Written confirmation from the collateral recipient about the legal status of the collateral assets.”

Explanation: To update your project license after buying it as collateral, you need a full file including: the formal application, the sale contract, the original mortgage papers, evidence of winning an auction (if applicable), legal ID/business licenses of both sides, the project’s existing permits, proof that you have enough money to finish the project, and a statement from the bank confirming the asset is legally cleared for sale.

Procedural Steps for Projects with Investment Policy Approval

The procedure for adjustment depends on whether the project was originally approved by a high-level authority (like the Prime Minister or Provincial People’s Committee) or just registered with a local investment agency.

Point a, Clause 4, Article 49 of Decree No. 31/2021/ND-CP:

“For an investment project that has been granted investment policy approval concurrently with investor approval and the transfer of the entire project falls under the case specified in point g, Clause 3, Article 41 of the Law on Investment, the collateral recipient or the transferee investor shall submit the dossier specified in Clause 3 of this Article and perform the project adjustment procedure according to the corresponding provisions in Articles 44, 45, and 46 of this Decree;”

Explanation: If the project is a major one that needed a “Policy Approval” and is being sold entirely, the bank or the new buyer must submit the documents and follow a strict review process by the government to officially change the name of the investor on the project’s master approval.

Handling Changes that Affect the Core Investment Policy

Sometimes, transferring a project as collateral doesn’t just change the owner; it might change the project’s scale, goals, or technology. These changes require a deeper level of government scrutiny.

Point b, Clause 4, Article 49 of Decree No. 31/2021/ND-CP:

“For an investment project that has been granted investment policy approval and the project transfer leads to a change in the content of the investment policy approval in one of the cases specified in points a, b, c, d, dd, and e, Clause 3, Article 41 of the Law on Investment, the project adjustment procedure upon transfer shall be performed according to the corresponding provisions in Articles 44, 45, and 46 of this Decree, except for the case specified in Clause 5 of this Article.”

Explanation: If selling the collateral project means the new owner wants to change what the project does (like turning a factory into a warehouse) or significantly change its size, they must go through a formal “re-approval” process for those specific changes along with the change of ownership.

Fast-Track Procedures for Minor Ownership Changes

If the transfer of collateral is straightforward and does not alter the fundamental characteristics of the project, the law provides a simplified path.

Point c, Clause 4, Article 49 of Decree No. 31/2021/ND-CP:

“For an investment project that has been granted investment policy approval and the project transfer does not lead to a change in the content of the investment policy approval in one of the cases specified in points a, b, c, d, dd, and e, Clause 3, Article 41 of the Law on Investment, the procedure for approval of investment policy adjustment is not required. The collateral recipient or the transferee investor shall perform the procedure for adjusting the Decision on investor approval according to the corresponding provisions in points a, b, c, d, dd, and e, Clause 8, Article 48 of this Decree.”

Explanation: If the only thing changing is the owner (because the bank sold the collateral) and everything else about the project stays the same, you don’t need to ask for a new “Policy Approval.” You just need to update the specific document that names the investor, which is a much faster and simpler administrative task.

Procedures for Projects Holding Only an Investment Registration Certificate

For many foreign-invested projects in Vietnam, the core legal document is the Investment Registration Certificate (IRC). The procedure for adjusting an IRC after an asset transfer is more decentralized.

Point d, Clause 4, Article 49 of Decree No. 31/2021/ND-CP:

“For an investment project that has been granted an Investment Registration Certificate and does not fall under the category of requiring investment policy approval, or has been granted investment policy approval but does not fall under the case specified in Clause 3, Article 41 of the Law on Investment, the collateral recipient or the transferee investor shall submit 01 dossier specified in Clause 3 of this Article to the investment registration authority to perform the procedure for project adjustment according to the corresponding provisions in Article 47 of this Decree.”

Explanation: If the project doesn’t need high-level government approval and only has a basic “Registration Certificate,” the bank or the buyer just takes the file to the local Investment Office (like the Department of Planning and Investment). That office will then update the certificate to reflect the new ownership within a set number of days.

The Scenario Where the Lender Takes Over the Project

In some cases, the bank or the creditor doesn’t want to sell the project to a third party but wants to operate it themselves. Vietnam investment law permits this, provided the creditor meets the legal requirements for an investor.

Clause 6, Article 49 of Decree No. 31/2021/ND-CP:

“In case the collateral recipient wishes to receive and perform the investment project, the asset collateral recipient shall establish a dossier and perform the project adjustment procedure according to the corresponding provisions in Articles 44, 45, 46, and 47 of this Decree; in which, the dossier for adjustment of the investment project shall be supplemented with the contract or document confirming the security transaction; the credit contract or document confirming the debt; written confirmation from the collateral recipient about the legal status of the collateral assets.”

Explanation: If a bank decides to keep and run the project they took as collateral, they have to apply for a license adjustment just like a new buyer would. They must add their own loan and mortgage documents to the application to prove they have the legal right to take over the project from the debtor.

Special Provisions for Distressed Real Estate Projects

Real estate projects are subject to even stricter controls. The Law on Real Estate Business and the Law on Land impose specific conditions that must be met before a project transfer—even as collateral enforcement—can be finalized.

Article 39 of the Law on Real Estate Business:

“Real estate project investors are entitled to transfer the whole or a part of the project to another investor to continue the investment, construction, and business when the project is within the implementation period approved by the competent state agency. When performing the transfer, it must be ensured that the planning and goals of the project are not changed; the legitimate rights and interests of relevant parties are ensured.”

Explanation: You can sell a real estate project (or part of it) to another developer, but only while the project’s timeline is still valid. You are not allowed to change the original master plan or the main purpose of the project (e.g., you can’t change a park into a condo). Also, you must make sure that anyone who already bought an apartment or a lot in that project is still protected.

Financial Obligations and Land Rights Inheritance

A major concern for any investor acquiring assets through collateral enforcement is the status of land use rights and outstanding financial duties to the State.

Article 40 of the Law on Real Estate Business (Conditions for Transfer):

“The transferor has completed the financial obligations regarding the land of the project, including land use fees, land rent, and taxes, fees, and charges related to the land (if any) to the State… The transferee shall inherit the rights and obligations of the transferor and is the investor for the project or the part of the project received.”

Explanation: Before a real estate project can be legally transferred, the original owner must have paid all land-related taxes and fees to the government. Once the transfer is done, the new owner completely takes over all the old owner’s legal rights and duties regarding that land and project.

Land Law 2024: Transitional Provisions for Foreign-Invested Enterprises

The Law on Land 2024 introduced important transitional rules for foreign-invested enterprises (FIEs) that are currently in the process of acquiring project assets.

Article 249 of the Law on Land 2024:

“Foreign-invested enterprises… that are performing procedures to receive the transfer of the whole or a part of a real estate project but as of the effective date of this Law have not completed the land procedures… the competent state agency shall perform the procedures for land allocation, land lease to the transferee, and grant the Certificate of land use rights and ownership of assets attached to land according to the provisions of this Law.”

Explanation: If a foreign company is in the middle of buying a real estate project but hasn’t finished the paperwork when the new Land Law starts, the government will still process their application under the new rules. The authorities will issue the land lease and the “Red Book” directly to the new foreign buyer, who inherits all the land rights from the seller.

Challenges in Adjusting Projects with Multiple Creditors

Complex projects often involve multiple loans from different banks, each secured by different phases or components of the project. This creates a “priority” puzzle when enforcing collateral.

In a case reviewed by the Supreme People’s Court, a large iron smelting factory project was funded by two different banks (Bank NH and Bank B) for its two stages. They had a written agreement that assets from Stage I would secure Bank NH’s loan, and Stage II assets would secure Bank B’s loan. When the project defaulted, Bank NH sued. However, the lower courts failed to clearly distinguish which machines and structures belonged to which stage. The Supreme Court overturned the rulings, stating that the court must accurately identify which specific collateral assets belong to which bank before allowing an auction. This prevents one creditor from encroaching on another’s security interests during the project adjustment phase.

Explanation: If a project has multiple stages and multiple bank loans, the court must be very careful to list exactly which machines and buildings belong to which bank. You can’t just sell the whole factory to pay off one bank if the other bank also has a mortgage on some of the equipment. This clarity is essential for the new investor to have a “clean” title when they apply for project adjustment.

The Role of Unilaw: Your Strategic Legal Partner in Vietnam

Navigating the adjustment of an investment project when assets are received as collateral requires more than just administrative filing; it requires a strategic approach to Vietnam investment law. As an international law firm in Vietnam, Unilaw provides specialized legal service in vietnam to help clients mitigate risks and capitalize on distressed investment opportunities.

Comprehensive Legal Due Diligence

Before receiving or acquiring assets as collateral, Unilaw performs exhaustive due diligence. This includes verifying the “cleanliness” of the Investment Registration Certificate, checking for undisclosed liens, and ensuring that all land-related financial obligations have been fulfilled. For example, in Source, Unilaw assisted KIS Vietnam in auditing a target company’s large debts and mortgaged assets to ensure a transparent transaction.

Structuring Complex Transfers

Our vietnam investment lawyers are experts in structuring the transfer to be as tax-efficient and procedurally smooth as possible. We advise on whether to receive the project directly or through a debt-to-equity swap. For instance, in Source, Unilaw proposed a solution where an individual’s investment license was transferred to a company by converting a debt obligation into a capital contribution, saving time and costs for the client.

Managing Government Relations and Procedural Filings

Adjusting a project often involves multiple state agencies, such as the Department of Planning and Investment, the Department of Construction, and the Department of Natural Resources and Environment. Unilaw acts as the primary liaison, handling all explanations and supplementary filings. Our track record in resolving “wrong stamp” errors (Source) or handling “expired investment policies” (Source) demonstrates our ability to rescue projects from administrative deadlocks.

Dispute Resolution and Litigation

If the transfer of collateral is contested by the debtor or other creditors, Unilaw’s litigation team steps in. We represent clients in commercial courts to affirm the validity of security transactions and enforce the right to project adjustment based on final court judgments (as seen in the success of Judgment 04/2020/KDTM-ST).

Conclusion

Receiving transferred assets as collateral is a powerful mechanism for debt recovery and a gateway for new investors to enter the Vietnamese market through established projects. However, the legal path from “collateral enforcement” to “lawful project operation” is filled with procedural hurdles. Whether you are a credit institution seeking to liquidate a project or an investor looking to acquire one, engaging a professional foreign law firm in Vietnam is indispensable. Unilaw stands ready to provide the high-level expertise needed to ensure your investment project is adjusted correctly, protected legally, and positioned for future success.

For detailed consultation on Vietnam investment law and the specific procedures for your project, contact Unilaw today.

• Judgment No. 04/2020/KDTM-ST (Da Nang): Articles 299, 317, 365, 368, 463 of the Civil Code.
• Decree No. 31/2021/ND-CP (Implementation of Investment Law): Article 49.
• Law on Investment 2020: Articles 41, 46.
• Judgment No. 17/2020/QDST-DS (Dak Lak): Regarding the auction of assets on land to recover bank debt.
• Judgment No. 01/2013/KDTM-ST (Quang Tri): Regarding the invalidity of asset sale when assets are still mortgaged at a bank.
• Law on Real Estate Business: Articles 39, 40, 43.
• Law on Land 2024: Article 249.