Circular No. 06/1997/TT-NHNN17 guiding the implementation of the Model Credit Union Charter issued by the Government along with Decree No. 42/CP dated April 29, 1997.

 CIRCULAR

Guidelines for Implementing the Model Charter of People's Credit Funds issued by the Government along with Decree No. 42/CP dated April 29, 1997

On April 29, 1997, the Government issued Decree No. 42/CP on the Model Charter of People's Credit Funds. The State Bank guides the following specific points:

I. GENERAL PROVISIONS

Article 1. Scope of Application:

These Circulars apply to grassroots People's Credit Funds (referred to as QTDND) established and operating under the Law on Cooperatives, the Ordinance on Banks, Cooperative Credit and Financial Companies.

2. Emblem:

The QTDND is organized and operates on the spirit of mutual assistance and close cooperation, therefore these funds may uniformly use a common emblem, reflecting the strength of the QTDND system.

3. Operating Area:

QTDND is established and operates mainly within the precincts of communes and wards. In addition, there are the following cases:

- QTDND organized across communes and wards must be adjacent to the commune or ward where the main office is located within the same district, city, or town, and must obtain written agreement from the People's Committees of those communes and wards.

- QTDND organized according to industry must be established by economic organizations or trade unions recognized by law within each type of industry on the provincial or municipal territory.

- QTDND for enterprises can only be organized within each enterprise on the provincial or municipal territory.

4. Conditions for Establishment:

QTDND can be established in places that meet the following conditions:

a. Possess the ability to mobilize capital to meet the needs for production development, business operations, and living standards.

b. Have the demand of the masses and the agreement of local authorities or leadership collectives of enterprises and industry trade unions.

c. Have staff with sufficient qualifications and capabilities to perform banking operations.

d. Have convenient means of communication and information.

e. Have a transaction office suitable for banking activities.

II. REGISTRATION FOR OPERATIONS AND BUSINESS REGISTRATION

1. Authority to Issue Operation Licenses:

The Governor of the State Bank delegates the Director of the Branch of the State Bank in provinces and cities to issue and revoke operation licenses for QTDND within their jurisdiction. For urban QTDND, industry QTDND, and large enterprise QTDND, approval letters from the Central State Bank must be obtained before issuing operation licenses.

Within thirty days from the date of receiving complete application files for operation licenses, the State Bank must issue or refuse to issue the license.

If the operation license is refused, the State Bank must provide a written explanation of the reasons. QTDND has the right to appeal to the competent authority if they believe the reasons for refusing the operation license are not reasonable.

2. Conditions for Issuing Operation Licenses:

a. Established in areas that meet all the required conditions.

b. Registered minimum capital contribution must equal the statutory capital.

c. Members of the Board of Directors, Supervisory Board, and General Manager must meet the prescribed criteria.

d. The charter of organizational and operational activities must comply with the Model Charter of QTDND issued by the Government and related laws.

e. Have a feasible operational plan.

3. Procedure for Issuing Operation Licenses:

The State Bank receives, studies, and reviews application files for operation licenses of QTDND. If all conditions are met, it will proceed to issue the following decisions:

- Decision confirming the list of members of the Board of Directors, Supervisory Board, and General Manager of QTDND.

- Decision confirming permission to apply the Charter of QTDND.

- Decision issuing the operation license for QTDND.

- Issuing the operation license for QTDND.

4. Time Limit for Business Registration and Commencement of Operations:

At the latest twelve months from the date of issuance of the operation license, QTDND must apply for a business registration certificate from the Provincial or Municipal People's Committee and commence operations.

5. Commencement of Operations:

a. QTDND wishing to commence operations must have an operation license, a business registration certificate, a transaction office, and facilities suitable for banking activities.

b. Deposit the statutory capital in a frozen account at the State Bank at least thirty days before commencing operations. This capital can only be released after QTDND commences operations.

c. Announce in local mass media at the operating area for three consecutive days at least fifteen days before commencing operations.

6. Revocation of Operation Licenses:

6.1. QTDND may have their operation licenses revoked in the following circumstances:

a. The application file for the operation license contains intentionally false information.

b. Voluntary dissolution.

c. Forced dissolution.

d. Being declared bankrupt.

e. Splitting or merging.

6.2. QTDND ceases operations after the revocation of the operation license.

6.3. The decision to revoke the operation license is announced in the mass media.

7. Changes to License Content and Charter:

QTDND must obtain written approval from the State Bank and register with the agency issuing the business registration certificate when changes are needed:

- Name of QTDND;

- Supplementing charter content;

- Statutory capital;

- Location of the main office;

- Content and scope of operations.

III. RIGHTS AND OBLIGATIONS OF PEOPLE'S CREDIT FUNDS

1. Capital Mobilization:

QTDND is permitted to mobilize capital through the following methods:

a. Accept deposits: QTDND can accept deposits from individuals and organizations in the form of demand deposits, term deposits, savings deposits, and other types of deposits as specified in the operation license issued by the State Bank.

b. Borrowing: QTDND can borrow from Regional QTDND, Central QTDND, banks, other credit institutions, and the State Bank (if applicable).

2. Lending:

- QTDND can lend short-term, medium-term, and long-term loans to members in accordance with the credit regulations issued by the State Bank.

- Organizations and individuals in leadership positions within the area, regardless of whether they are members, are not allowed to borrow more than the amount stipulated by law from QTDND. - Members of the Board of Directors, Supervisory Board, and Management Board (including parents, spouses, children) are not allowed to enjoy preferential treatment over other members when borrowing from QTDND.

- Credit Cooperatives shall not lend or deposit funds with each other in any form.

3. Establishing transaction points within the area of operation:

Credit Cooperatives may only establish transaction points within their operational areas; for industry-specific cooperatives and business cooperatives, they must obtain permission from the State Bank to establish transaction points.

IV. MEMBERS OF THE PEOPLE'S CREDIT UNION

1. Founding Members:

When establishing a People's Credit Union, there must be at least nine founding members. Founding members can be organizations or individuals with credibility and financial capacity.

2. Members:

a. Vietnamese citizens aged eighteen or older who have full civil capacity and reside legally within the operational area of the People's Credit Union.

b. Household representatives who are the head of the household or authorized persons, meeting the criteria to become members of the People's Credit Union.

c. Economic and social organizations with headquarters within the operational area of the People's Credit Union must appoint a legal representative when participating as members.

An authorized person cannot delegate authority to another person.

A person ceases to represent a legal entity automatically ceases to represent the People's Credit Union.

3. Rights of Members:

a. Members have equal rights in voting: Each member is one vote, regardless of the amount of capital contributed.

b. Members may leave the People's Credit Union under the following circumstances:

- Moving residence outside the operational area of the Fund;

- Having transferred all contributed capital to another member;

- The member being a legal entity when it is dissolved or bankrupted;

- The member being a legal entity when it splits or merges and the new organization does not wish to join the People's Credit Union;

- The member encountering sudden difficulties such as serious illness, natural disasters, fire, or business losses.

Members wishing to leave the People's Credit Union must submit a written application one month in advance for the Board of Directors to consider and decide.

4. Termination of Member Status:

Upon termination of member status:

- The member must fulfill all economic obligations to the People's Credit Union, including loans (principal and interest), losses to be compensated, and business losses shared according to the decision of the Member Assembly.

- The member will be refunded the contributed capital (establishment capital, regular capital) based on the financial results of the People's Credit Union.

- The member will enjoy benefits from the reward fund and welfare fund according to the decision of the Member Assembly.

V. MANAGEMENT, OPERATIONS AND CONTROL

1. Chairman and members of the Board of Directors, Supervisory Board, and General Director of the People's Credit Union must be approved by the State Bank to meet the management and operational standards of the People's Credit Union.

2. Individuals ineligible for election as members of the Board of Directors, Supervisory Board, or General Director:

- Currently being pursued for criminal responsibility;

- Previously convicted of offenses against national security, socialist property and citizens, bribery, offering bribes, and other economic crimes;

- Previously a member of the Board of Directors or General Director of a company that has gone bankrupt; an economic organization suspended due to serious violations of the law;

- Civil servants dismissed from service;

- Persons deprived of civil rights.

3. The Chairman and members of the Board of Directors may not delegate their responsibilities to non-members of the Board of Directors.

4. Supervisors:

a. The charter of the People's Credit Union may stipulate that supervisors audit documents daily, weekly, periodically, or monthly.

b. Supervisors must be responsible for the work assigned to them and the documents they have audited.

c. The benefits of supervisors are determined by the Member Assembly based on their contribution to the business operations of the People's Credit Union.

5. Management of the People's Credit Union:

a. The management of the People's Credit Union is the General Director elected by the Member Assembly from among the members of the Board of Directors. The Member Assembly may resolve to transfer, dismiss, or appoint a General Director during the interim between terms if necessary. If the appointed General Director is not a member of the Board of Directors, they will serve as acting General Director until the next Member Assembly can elect them as a Board member.

b. Qualifications of the General Director:

- Must have undergone training in banking or finance and accounting;

- Not violating any of the four provisions set out in Article 16 of the Banking Ordinance, Cooperative Credit and Financial Company Ordinance;

- Not concurrently holding any position in other credit institutions, nor serving as the manager or chief accountant of other economic organizations;

- Must be a regular capital contributor to the People's Credit Union.

6. Loan Committee:

a. The Board of Directors may select a reputable, capable, and qualified member of the People's Credit Union to participate in the Loan Committee.

b. Principles of Operation of the Loan Committee:

- The Loan Committee examines and decides on loans beyond the authority of the General Director according to the banking regulations of the State Bank. The Loan Committee operates as a collective body, deciding by majority rule.

- Each Loan Committee meeting must record the opinions of each member in minutes, which are kept separately according to the bookkeeping and document preservation system.

- Members of the Loan Committee are financially responsible for loans approved but not recovered due to subjective reasons. If a member disagrees with a loan, they may reserve their opinion and will not be held financially responsible.

VI. ASSETS AND FINANCIALS OF THE PEOPLE'S CREDIT UNION

1. The use of funds of the People's Credit Union is decided by the Member Assembly according to the guidelines of the State Bank, on the principle:

- Common reserve fund, risk compensation fund, technical development fund, and basic depreciation fund for fixed assets shall not be distributed to members in any form.

- Reward fund and welfare fund are common funds for members, used to reward members and employees of the People's Credit Union based on their contributions to the collective, and also to contribute to public welfare.

2. Profit Distribution:

a. After fulfilling tax obligations, remaining profits are distributed:

- To cover previous year losses (if any);

- To establish the common reserve fund, technical development fund, reward fund, and welfare fund;

- To distribute profits to member contributions;

- To allocate other amounts according to the charter of the People's Credit Union Alliance (if applicable).

b. The distribution of profits shall be decided by the General Meeting of Members in accordance with the guidance of the State Bank, but must ensure a harmonious combination of the interests of members and the development of the Credit Cooperative.

3. Handling losses due to objective reasons:

a. Losses of the fiscal year shall be decided by the General Meeting of Members according to the following directions:

- Deducting from the general reserve fund to offset;

- Deducting from the capital contribution of members;

- Carrying over to the next fiscal year.

b. Losses carried over from the previous fiscal year may be offset by the profit of the subsequent settlement period.

VII. MERGER, SPLITTING, DISSOLUTION AND BANKRUPTCY OF CREDIT COOPERATIVES

1. Merger, splitting of Credit Cooperatives:

The procedures for merger and splitting shall be carried out in accordance with Article 45 of the Law on Cooperatives. To ensure accuracy regarding assets and capital reflected in the balance sheet of the Credit Cooperative at the time of merger and splitting, the preparatory board for merger and splitting must organize an inventory and reconcile with actual assets and capital before drafting the merger and splitting plan to submit to the General Meeting of Members.

2. Dissolution of Credit Cooperatives:

A Credit Cooperative may dissolve voluntarily when the Asset Side is sufficient to cover the Liability Side.

VIII. IMPLEMENTATION

1. This Circular shall take effect fifteen days from the date of signature. All previous regulations contrary to this Circular are hereby abolished.

2. The Director of the Governor's Office, the Director of the Department of Management of People's Credit Organizations, and the heads of other relevant units under the State Bank of Vietnam, and the Directors of the provincial and municipal branches of the State Bank have the responsibility to organize the implementation and guide the Credit Cooperatives to comply with this Circular.

Any difficulties encountered during the implementation should be promptly reported to the State Bank of Vietnam for guidance and resolution./.