1. Concept
Real Estate Investment Funds, known as Real Estate Investment Trusts (REITs) according to international practice, have been regulated under Vietnamese law. The legal issues of Real Estate Investment Fund in Vietnam are provided in the Law on Securities and related legal documents. Accordingly, some concepts are clarified as follows:
1.1. Real estate investment fund
Real estate investment fund means a securities investment fund that invests mainly in real estate and securities of an issuing institution engaged in real estate business and earning turnover from real estate possession and business equal to at least 65% of its total turnover as stated in the latest annual financial statement.
Currently, real estate investment funds are organized and operated in two forms, including Closed-end Fund (hereinafter referred to as “Closed-end real estate investment fund”) or Public Securities Investment Company (hereinafter referred to as “Real estate securities investment company”).
1.2. Securities investment fund
Securities investment fund means a fund formed from contributed capital of investors for the purpose of earning profits from investment in securities or other assets, including real estate, though such investors do not have the right to daily control of its investment decisions.
1.3. Closed-end fund
Closed-end fund means a public fund whose certificates, which have been offered to the public, should not be bought back at the request of investors.
1.4. Securities investment company
Securities investment company means a securities investment fund organized in the form of a joint-stock company to invest in securities. Securities investment companies include private securities, investment companies and public securities investment companies.
2. Establishment conditions and order
2.1. Real estate securities investment company
i. Conditions for being granted an establishment and operation license
– Capital-related conditions:
- The actual contributed charter capital is at least VND 50 billion. The public securities investment company must entrust the capital to a securities investment fund management company for management;
- All assets of the public securities investment company must be deposited at a supervisory bank.
- Investors may contribute capital with real estate provided that real estate as capital contribution must satisfy the conditions as prescribed in the Decree 155/2020/ND-CP (Decree 55).
– Head office- related conditions: There is a working office for securities investment activities. A public securities investment company may use the head office of the securities investment fund management company as its head office.
– Personnel- related conditions: A public securities investment company is not allowed to recruit personnel and includes a General Director (Director) and Deputy General Directors (Deputy Directors), appointed by the securities investment fund management company, as the executive officers of this fund.
– Shareholder-related conditions: A public securities investment company must have at least 100 shareholders who are not professional securities investors
– Other conditions: The Board of Directors of a public securities investment company must have at least 2/3 of its members who are not persons related to the securities investment fund management company or the supervisory bank.
ii. Procedures for establishment of a Real Estate Securities Investment Company
– Step 1: Carry out enterprise establishment registration in accordance with the provisions of the Law on Enterprises.
– Step 2: Register and conduct the initial public offering of stocks.
Conditions for the initial public offering of stocks of a real estate securities investment company: (1) Total value of stocks registered for offering is at least VND 50 billion; (2) There are an issuance plan and a plan to use capital amount raised through the offering; (3) The offering is supervised by a supervisory bank; (4) Stocks to be offered to the public must be listed on the Stock Exchange after the offering is completed; (5) The securities investment fund management company must have at least 02 securities investment company executives possessing a fund management practice certificate; not be placed under warning, control or special control, suspension or have not fully implemented all forms of sanctions and remedial measures under decisions on sanctioning of violations against the law provisions on securities and securities market.
– Step 3: Apply for an establishment and operation license for the public securities investment company at the Securities Commission after completing the initial public offering.
2.2. Closed-end real estate investment fund
i. Conditions for closed-end fund establishment and operation
– A closed-end fund must be established by the Securities Investment Fund Management Company;
– The initial public offering of fund certificates must be performed in accordance with the Decree 55;
Conditions for the initial public offering of fund certificates: (1) Total value of fund certificates registered for offering is at least VND 50 billion; (2) There are an issuance plan and a plan on investment of capital amount raised through the offering in accordance with this Law; (3) The offering is supervised by a supervisory bank in accordance with this Law; (4) Fund certificates to be offered to the public must be listed in a securities trading system after the offering is completed; (5) The securities investment fund management company must have at least 02 executive officers of the fund possessing a fund management practice certificate; not be placed under warning, control or special control, suspension or have not fully implemented all forms of sanctions and remedial measures under decisions on sanctioning of violations against the law provisions on securities and securities market.
ii. Procedures for establishment of a Closed-end Real Estate Investment Fund
– Step 1: The securities investment fund management company submits a dossier of registration for public offering of fund certificates to the Securities Commission.
– Step 2: Apply for a certificate of fund establishment registration at the Securities Commission.
Disclaimer:
This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Investment. Please click here to learn more about our services and contact our lawyers in Vietnam for advice via email info@apolatlegal.com.
