Common cases of investment project termination and some important notes

Currently, the termination of investment projects is stipulated in detail in the Law on Investment 2020 and its implementing documents, however, in the process of termination of investment projects, many investors have forgotten these regulations with the simple thought that the competent authorities only control the process of investment licensing and project implementation. This mistake exposes some investors to risks ranging from sanctions for administrative violations to other potential risks associated with their investment projects. Within the scope of this article, HM&P would like to mention common cases of termination of investment projects and some notes for investors.

1. Termination of investment projects at the will of the investor

The Law on Investment 2020 stipulates that investment projects may be terminated by the will of the investor in the following cases[1]:

• Case 1: The investor decides to terminate the project;
• Case 2: Termination in accordance with the terms of the contract or corporate charter;
• Case 3: The term of the investment project has expired.

It is clear that, except for Case 1 where the will of the investor is directly expressed at the moment of termination of the investment project, in Case 2 and Case 3, the investor may either anticipate the termination of the investment project at an earlier stage or indirectly express the intention to terminate the investment project by not adjusting or extending the term of operation of the investment project.

Investors should take note of this difference, as it is also a factor that leads to differences in the composition of the documents that investors must submit to the competent authority when terminating investment projects in each specific case.

According to the provisions of Point a, Point b Clause 2 Article 57 of Decree 31/2021/ND-CP[2], when an investor decides to terminate the operation of an investment project, "the investor shall send the termination decision to the investment registration authority within 15 days from the date of making the decision together with the investment registration certificate (if any)"; Meanwhile, in case the investment project is terminated in accordance with the conditions stipulated in the contract or corporate charter, or the investment project expires, "the investor shall notify and return the investment registration certificate (if any) to the investment registration authority within 15 days from the date of termination together with a copy of the document recording the termination".

Simultaneously, according to the provisions of Point dd Clause 2 Article 15 of Decree 122/2021/ND-CP[3], investors may be fined from VND 30,000,000 to VND 50,000,000 if they fail to send a notification or decision on the termination of investment project to the investment registration authority within 15 working days from the date of the termination of investment project in the cases specified in Clause 1 Article 48 of the Law on Investment 2020.

According to these regulations, it can be understood that only in cases 2 and 3, the investor must notify the investment registration authority, while in Case 1, the investor only needs to send the decision to terminate the investment project.

However, according to the provisions of Appendix A on the form of documents and reports related to investment activities in Vietnam issued together with Circular 03/2021/TT-BKHDT[4], form No. 22 on the notification of termination of operation of investment projects applies to the cases specified at Points a, b and c Clause 1 Article 48 of the Law on Investment 2020, in other words, this form of notification applies to all three cases mentioned above.

Thus, it can be seen that there is currently an inconsistency in the legal documents. According to the provisions of Clause 2 Article 156 of the Law on the Promulgation of Legislative Documents 2015, if different legislative documents contain regulations on the same issue, the superior document shall apply. In this case, the Decree 31/2021/ND-CP has a higher legal effect than the Circular 03/2021/TT-BKHDT, therefore, investors must comply with the provisions of the Decree 31/2021/ND-CP, investors must notify the investment registration authority if it falls under Case 2 and Case 3, for Case 1, investors only need to send the decision on the termination of the investment project.

In practice, however, there are still some cases where investors are required to send a notification even in Case 1 when conducting the procedure for terminating an investment project at the investment registration authority. In our opinion, to avoid possible difficulties in the process of terminating an investment project with a competent authority and as the content of the notice on the termination of the operation of an investment project is quite simple and somewhat similar to the content of the investor's decision on the termination of the operation of the investment project. Therefore, for Case 1, the investor can fully prepare both this notice to be sent to the investment registration authority together with the investor's decision on the termination of operation of the investment project and the investment registration certificate (if any).

Meanwhile, for cases 2 and 3, in addition to the written notice and the investment registration certificate (if any), the investor must also submit to the investment registration authority a copy of the document recording the termination, which may include an investment contract (in the case of an investment in the form of a contract), the corporate charter, or other documents, as the case may be.

2. Termination of investment projects by investment registration authority

In addition to the above-mentioned cases of termination of investment projects at the will of the investors, the Law on Investment 2020 also provides for some cases in which the investment registration authority has the right to decide on the termination of the investment project in whole or in part. One of the cases that many investors often encounter and that HM&P would like to mention in this article is that the investment project is terminated because the land reserved for the investment project is expropriated by the State due to the fact that the land is not used or use of the land is delayed in accordance with the provisions of the laws on land.

Pursuant to the provisions of Point i Clause 1 Article 64 of the Law on Land 2013, in case land that is allocated or leased for the implementation of an investment project is not used within 12 consecutive months, or the schedule for the use of the land is delayed by 24 months from the date of actual hand-over of the land in the field in comparison with the schedule specified in the project documents, the land shall be expropriated. In case of failure to use the land, the land use term may be extended to 24 months and the investors shall pay a sum of money equivalent to the total land use fee or land rent for the delayed period. If the investors still do not use the land at the end of extended period, the State will take back the land without compensation for land and land-attached assets, except in case of force majeure.

The investors take note that the extension of the land use period for a further 24 months will be carried out if the investor does not use the land for 12 consecutive months or if the progress of the land use is 24 months behind the progress indicated in the investment project since receiving the actual handing over of the land on the field, regardless of whether the delay is due to force majeure or not. Cases of force majeure are considered only if the extended deadline has expired, but the investor has not yet started to use the land. At the same time, cases of force majeure are also specified in Clause 1 Article 15 of Decree 43/2014/ND-CP[5], including: "natural disasters and environmental disasters; fires and epidemics; war; and other cases of force majeure as determined by the Prime Minister". Investors should note that only these cases will be considered as force majeure cases when the State considers land acquisition.

Another note that investors need to pay attention to in this case, relates to the deadline that investors need to carry out the procedures for the extension of land use by the State. According to the provisions of Point d Clause 2 Article 15 of the Decree 43/2014/ND-CP, as amended and supplemented by Clause 12 Article 2 of Decree 01/2017/ND-CP[6], investors who have not used land for more than 12 months or more than 24 months behind the land use schedule, and who wish to extend the progress of putting land into use, must submit a written request to the People's Committee of the appropriate level of competence for land allocation or leasing to consider decisions and decide on the extension. If the land user does not submit a written request for extension after 15 days from the date on which a state authority issues a written notice of violation, the People's Committee at the appropriate level of competence for land allocation or lease shall decide to reclaim the land in accordance with the regulations. Accordingly, investors should pay special attention to submitting a written request for extension to the competent People's Committee in a timely manner in order to be considered for an extension of the land use term.

In the context that many enterprises are in a difficult situation these days, it is not uncommon for them to be allocated and leased land by the State, but in practice cannot manage the financing to implement the project in practice, therefore, knowing the relevant regulations and guidance on this matter can help enterprises to extend the land use period, avoid land confiscation and indirectly avoid the termination of investment projects by the investment registration authority.

As mentioned above, the current law contains relatively detailed provisions on cases of termination of investment projects as well as relevant regulations for each specific case. It is extremely important for enterprises to have a thorough understanding of the legal provisions in the entire investment process, from investment licensing to investment project implementation to investment project termination. This will not only help enterprises to take advantage of the benefits they are entitled to under the law, but also help them to avoid potential risks during operation.