Organizations and individuals doing real estate business should pay attention to the following new regulations on business conditions that have just been issued in Decree 02/2022/ND-CP (“Decree 02”) detailing a number of articles of the Law on Real Estate Business.
Elimination of legal capital requirement
Previously, real estate business law stipulated that the legal capital applied to real estate enterprises and cooperatives was VND 20 billion. However, from 01 January 2021, the Law on Investment 2020 has officially removed the provision on legal capital in the Law on Real Estate Business 2014. Following that change, the requirement of legal capital is no more mentioned in Decree 02, creating consistency among the legal documents on real estate business activities.
Additional conditions on equity
Decree 02 provides detailed guidance on the equity capital required for investors selected as the owner of real estate projects. Accordingly, such investor’s equity shall be at least 20% of the total investment capital, for projects with land area of less than 20 hectares, and at least 15% of the total investment capital, for projects with land area of 20 ha or more.
The determination of the investor’s equity is based on the most recent audited financial statement or independent audit report of the investor (made in the same year or the previous year). In the case of a newly established enterprise, the investor’s equity shall be determined according to its actually contributed charter capital.
Additional information disclosure requirements
Decree 02 supplements regulations on information disclosure in the real estate business. Accordingly, on the website of the real estate company, the headquarters of the Project Management Board, and the real estate trading floor must include information about the real estate company; real estate being in business; information on the mortgage of houses, constructions, real estate projects; the quantity and type of real estate products were and are being traded, sold, transferred or leased out.
Decree 02 will officially take effect from 01 March 2022.