[Legal Updates] Letter Of Quick Legal Update 19/3/2020

LEGAL UPDATES

[Legal Updates] Letter Of Quick Legal Update 19/3/2020

1| The Draft of the Law on Enterprises (amended) removes the provision that enterprises must notify the seal design to business registration authorities

After receiving first commented by the National Assembly at the 8th session, the Draft of the Law on Enterprises (amended) is being absorbed, revised and finalized to be submitted to the National Assembly for consideration and approval at the 9th session ( in May 2020). One of the notable changes of the Draft of the Law on Enterprises (amended) this time is to eliminate the procedure of notifying the seal design to business registration authorities to reduce administrative procedures. Accordingly, the Draft of the Law on Enterprises (amended) dated March 10th, 2020, provides:

Article 44. Enterprise’s seal

  1. The enterprise has the right to decide whether or not to have the seal, the type of the seal, quantity, form and content of the seal of the enterprise, the seal of the branch, representative office and other units of the enterprise. The management, use and storage of seals shall comply with the provisions of the company’s charter or regulations of the enterprise and other units of the enterprise.

Thus, if this provision of the Draft of the Law on Enterprises (amended) is adopted, the enterprise will not need to notify the seal design to the business registration authority. Instead, the enterprise can post the seal design on its website to protect its rights or at the request of a third party.

2| Application of case law for the validity of a contract of a mortgage of land use rights when a certificate of a land use right is revoked or cancelled

Case law No. 36/2020/AL passed by the Council of Judges of the Supreme People’s Court on February 5th, 2020, on the contract of the mortgage of the land use right complying with the law is not invalidated after the certificate of the land use right is revoked or cancelled due to errors inland areas, order and procedures for granting certificates of land use rights.

The content of the case law is summarized as follows:

On March 22th, 2010, V Bank signed a Credit Contract No. 10.36.0015 with Mr. Nguyen Van C and Mrs. Vu Thi T. To secure the loan, Mr. C and Mrs. T signed a Mortgage Contract No. 10.36.0015 with V Bank on March 18th, 2010. The mortgaged property is the land use right of the land parcel No. 12, map sheet No. 05, Commune H, Town B with the area of ​​3,989.7m2 (the certificate of the land use right No. Đ544493 issued by the People’s Committee of Town B on July 14th, 2004). The secured transaction was registered at the land use right registration office of Town B on March 19th, 2010.

When the mortgage contract is in effect, the People’s Committee of Town B issued Decision No. 3063/QD-UBND dated August 31, 2011, to revoke the certificate of the land use right No. Đ544493. However, V Bank said that the transfer of the land area of 2,400m2 was completed. Therefore, although the certificate of the land use right No. Đ544493 was revoked, Mr. C and Mrs. T still have the right to use this land area and the land use right is still valid for the loan of Mr. C and Mrs. T.

Mr. C and Mrs. T sued an administrative case against Decision No. 3063/QĐ-UBND dated August 31st, 2011, of the People’s Committee of Town B. However, the First-instance Court and the Court of appeal did not accept his and her requests. Then, Mr. C asked the Court to settle the case in under the law because the current collateral is no longer available.

Accordingly, both the first-instance commercial business judgment No. 04/2013/KDTM-ST dated December 10th, 2013 of the People’s Court of Ba Ria – Vung Tau province and the appellate commercial business judgment No. 48/2014/KDTM-PT dated August 15th, 2014 of the Court of Appeals of the Supreme People’s Court in Ho Chi Minh City all declared the Mortgage Contract No. 10.36.0015 to be invalid.

After the appellate Court session, V Bank requested to consider the case according to cassation trials procedure. Judgments of the Court at cassation court sessions are as follows:

(i). V Bank and Mr. Nguyen Van C both confirmed the parties signed the Mortgage Contract No. 10.36.0015 on March 18th, 2010. The collateral was registered for secured transactions at the land use right registration office of Town B. Therefore, under Article 343 of the Civil Code 2005; Point c Clause 1, Article 10 and Point a Clause 1, Article 12 of the Decree No. 163/2006/ND-CP of December 29th, 2006 of the Government on secured transactions, the mortgage of the land use right above complies with the provisions of the law;

(ii). The transfer of land use rights between Mrs. Tran Thi Ngoc H, Mr. Tran Huynh L with Mr. C, Mrs. T was completed, and the parties had no dispute about this transfer contract. Therefore, the revocation and cancellation of the certificate of land use right No. Đ544493 does not lose the lawful land use right of the transferred land area of ​​Mr. C, and Mrs. T. Besides, the contract of the mortgage of the land use right between Mr. C and Mrs. T and V Bank complies with the law, so this contract takes effect. Therefore, the Court of First-instance and the Court of Appeal based on Article 411 of the Civil Code 2005 to declare that the contract of the mortgage of the land use right No. 10.36.0015 dated March 18th, 2010 above is invalid because the object of this Mortgage Contract is no longer available is incorrect;

(iii). In Official Letter No. 887/CNVPĐK-DKCG dated March 28th, 2017, the Branch of the Land Registration Office of City B determined: After the People’s Committee of Town B issued the Decision on revoking and cancelling the certificate of the land use right No. Đ544493 and Appellate Administrative Judgment 01/2013/HC-PT dated January 4th, 2013, of the People’s Court of Ba Ria – Vung Tau Province took legal effect, the Civil judgment enforcement authority of City B made judgment enforcement decisions under legally effective civil judgments which Mrs. Tran Thi Ngoc H has obligations to execute. Accordingly, the Civil judgment enforcement authority of City B held an auction for the land area of ​​2,741.1m2 of the land parcel No. 386, map sheet No. 05, Commune H. Mr. Bui Van C1 was the auction winner and was granted the certificate of the land use right No. CA959055 by the People’s Committee of City B for the land area mentioned above of ​​the auction. Therefore, to ensure the rights and obligations of the involved parties, when resolving the case, the first-instance Court needs to base on Clause 4, Article 68 of the Code of Civil Procedure to require the Civil judgment enforcement authority of City B, Ms Tran Thi Ngoc H, Mr Bui Van C1 and the People’s Committee of City B to participate in the proceedings as persons with related rights and obligations.

Cassation Decision No. 05/2018/DS-GDT dated May 18th, 2018, of the Council of Judges of the Supreme People’s Court, decided: to cancel the declaration of Mortgage Contract No. 10.36.0015 dated March 18th, 2010, is invalid for the Appellate Commercial Business Judgment and the First Instance Commercial Business judgment; to deliver the case file to the People’s Court of Ba Ria – Vung Tau Province for re-trial according to the first-instance procedure, under the provisions of the law.

Case law No. 36/2020/AL was published under Decision No. 50/QD-CA dated February 25th, 2020, of the Chief Justice of the Supreme People’s Court, effective from the date of signing.

Download Legal Update as a PDF here.