Circular No. 06/2005/TT-NHNN guiding the implementation of certain contents under Government Decree No. 16/2001/NĐ-CP dated May 2, 2001 on the organization and operation of Financial Leasing Companies and Government Decree No. 65/2005/NĐ-CP dated May 19, 2005 amending and supplementing some articles of Government Decree No. 16/2001/NĐ-CP dated May 2, 2001 on the organization and operation of Financial Leasing Companies.

CIRCULAR

Guidelines for Implementing Certain Provisions of Government Decree No. 16/2001/NĐ-CP

dated May 2, 2001 on the Organization and Operation of Financial Leasing Companies

and Government Decree No. 65/2005/NĐ-CP dated May 19, 2005 on Amending and Supplementing Certain Provisions of Government Decree No. 16/2001/NĐ-CP dated May 2, 2001 on the Organization and Operation of Financial Leasing Companies

supplementing some articles of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government

on the organization and operation of Financial Leasing Companies

Pursuant to Government Decree No. 16/2001/NĐ-CP dated May 2, 2001 on the Organization and Operation of Financial Leasing Companies and Government Decree No. 65/2005/NĐ-CP dated May 19, 2005 on Amending and Supplementing Certain Provisions of Government Decree No. 16/2001/NĐ-CP dated May 2, 2001 on the Organization and Operation of Financial Leasing Companies, the State Bank of Vietnam (hereinafter referred to as the State Bank) hereby provides guidelines for implementing certain provisions stipulated in these Decrees as follows:

Section I

GENERAL PROVISIONS

1. Interpretation of Terms: In this Circular, the following terms shall be understood as follows:

1.1. Lessee: Refers to organizations operating in Vietnam, individuals residing and working in Vietnam, directly using leased assets for their own operational purposes, including:

a) Individuals, households;

b) Enterprises;

c) Other organizations eligible to borrow from credit institutions.

1.2. Foreign Credit Institution: Refers to foreign banks, financial companies, leasing companies, or international financial organizations established under foreign or international laws, participating in capital contributions to joint venture leasing companies or wholly foreign-owned leasing companies in Vietnam.

1.3. Statutory Capital: Refers to the minimum charter capital required according to the Government's regulations for establishing a leasing company.

1.4. Charter Capital: Refers to the amount of capital contributed by the State, credit institutions with affiliated leasing companies, foreign credit institutions, or by organizations and individuals subscribing or purchasing shares, recorded in the charter of the leasing company.

1.5. Founding Member: Refers to organizations and individuals participating through the first charter of the leasing company.

2. Types of Leasing Companies:

2.1. State Leasing Company: Refers to a leasing company established and managed by the State with its own investment capital. The issuance of licenses for the establishment and operation of state leasing companies is carried out according to specific guidelines of the State Bank.

2.2. Joint Stock Leasing Company: Refers to a leasing company established in the form of a joint stock company, where organizations and individuals contribute capital according to the guidelines of the State Bank and other relevant laws.

2.3. Leasing Company Subordinate to a Credit Institution (hereinafter referred to as Subordinate Leasing Company): Refers to a leasing company with independent legal personality and accounting, established by a credit institution (the owning credit institution) with its own capital.

2.4. Joint Venture Leasing Company: Refers to a leasing company established through capital contributions between the Vietnamese side, comprising one or more credit institutions or enterprises, and the foreign side, comprising one or more foreign credit institutions, based on a joint venture agreement. The Vietnamese side must include at least one Vietnamese credit institution as a member of the joint venture leasing company.

2.5. Wholly Foreign-Owned Leasing Company: Refers to a leasing company established through capital contributions by one or more foreign credit institutions according to Vietnamese law.

3. Maximum Operating Period in Vietnam: The maximum operating period for leasing companies in Vietnam is fifty (50) years. If an extension of the operating period is necessary, it must be approved by the State Bank. Each extension cannot exceed fifty (50) years.

For leasing companies that were established and granted operating licenses before the effective date of Government Decree No. 16/2001/NĐ-CP dated May 2, 2001, the operating period will be applied as stipulated in the issued operating license.

4. Forms of Contributing Charter Capital:

The charter capital of leasing companies can be contributed in the following forms:

4.1. By Currency:

a) For state leasing companies, subordinate leasing companies, and joint stock leasing companies, the charter capital is contributed in Vietnamese Dong.

b) For joint venture leasing companies and wholly foreign-owned leasing companies: Foreign parties in the company may contribute charter capital in foreign currency or Vietnamese Dong derived from lawful investments in Vietnam. Vietnamese parties participating in joint venture leasing companies may contribute capital in Vietnamese Dong or foreign currency. In cases where the contribution is made in Vietnamese Dong or foreign currency other than US dollars, the amount of charter capital must be converted into US dollars at the average inter-bank foreign exchange rate published by the State Bank at the time of contribution.

4.2. By Other Assets: Must be assets legally owned or used by the contributing party and essential for the direct operations of the leasing company (excluding assets intended for leasing). The valuation and transfer of ownership rights to assets and land use rights, as well as the ratio of contribution by assets, shall be carried out in accordance with current Vietnamese law.

5. Ratio of Charter Capital Contribution, Transfer of Contributed Capital Shares, Profit Distribution, and Risk Bearing of Joint Venture Leasing Companies and Wholly Foreign-Owned Leasing Companies:

5.1. Ratio of Charter Capital Contribution: The ratio of charter capital contribution by foreign and Vietnamese parties in joint venture leasing companies is agreed upon by the parties and approved by the State Bank of Vietnam. The portion of capital contributed by foreign parties must not be less than thirty percent (30%) of the charter capital of the company.

a) The Vietnamese Party and the Foreign Party in the Joint Venture Financial Leasing Company have the right to transfer their contributed capital but must ensure the statutory capital contribution ratio as stipulated in Point 5.1 of this Circular and must prioritize transferring to the parties within the joint venture. In the case of transferring to another organization, the conditions for transfer shall not be more favorable than those for transferring to the parties within the joint venture. The transfer of capital must be agreed upon by all parties within the financial leasing joint venture company.

b) A 100% foreign-owned Financial Leasing Company has the right to transfer its capital after obtaining the approval of the State Bank.

c) In the event that the transfer of capital of the Joint Venture Financial Leasing Company and the 100% foreign-owned Financial Leasing Company changes the type of Financial Leasing Company, the Company must make appropriate adjustments in accordance with the type of company as prescribed.

d) In the event that the transfer of capital of the Financial Leasing Company generates profit, the transferring party must pay taxes according to Vietnamese law.

5.3. Profit Distribution and Risk Sharing: The parties participating in the Joint Venture Financial Leasing Company distribute profits and bear risks in the Company according to each party's capital contribution ratio, except where the parties have other agreements specified in the joint venture contract and consistent with Vietnamese law.

PART II

REGULATIONS ON THE ISSUE OF LICENSE FOR ESTABLISHMENT AND OPERATION

FOR FINANCIAL LEASING COMPANIES

6. Conditions for obtaining a license for establishment and operation for Financial Leasing Companies (hereinafter referred to as the license):

6.1. General Conditions:

a) Having the need to operate financial leasing on the territory where it seeks to operate;

b) Having sufficient statutory capital as prescribed by current laws;

c) Founding members being organizations and individuals with reputation and financial capacity;

d) Management and operating personnel having full civil capacity and professional qualifications suitable for the activities of the Financial Leasing Company and the regulations of the State Bank;

e) Having a draft charter on organization and operation in compliance with the Law on Credit Institutions, Government Decree on the organization and operation of Financial Leasing Companies, and other relevant laws;

g) Having a feasible business plan;

h) The owning credit institution having at least three years of operational experience.

6.2. For Joint Venture Financial Leasing Companies and 100% foreign-owned Financial Leasing Companies, in addition to the provisions set out in Point 6.1 above, the foreign party must meet the following conditions:

a) Being permitted by the competent authority of the foreign country to carry out banking activities or financial leasing activities;

b) Being permitted by the competent authority of the foreign country to operate in Vietnam.

7. License Application Documents:

7.1. Application for License:

a) For Financial Leasing Companies under credit institutions: An application for license signed by the Chairman of the Board of Directors of the owning credit institution or a person authorized by the Chairman of the Board of Directors of the owning credit institution (Annex 1a).

b) For Joint Stock Financial Leasing Companies: An application for license signed by the Chairman of the Board of Directors or a Board of Directors member authorized by the Chairman of the Board of Directors (Annex 1b).

c) For Joint Venture Financial Leasing Companies and 100% foreign-owned Financial Leasing Companies: An application for license signed by the legal representative or a person authorized by the contributing parties (Annex 1c).

7.2. Draft Charter: The Charter of the Financial Leasing Company must include the following main contents:

a) The name and location of the headquarters of the Financial Leasing Company;

b) Content and scope of operations;

c) Term of operation;

d) Registered capital and method of capital contribution;

e) Duties and powers of the Board of Directors, General Director (Director), and Supervisory Board;

g) Procedures for electing, appointing, and dismissing members of the Board of Directors, General Director (Director), and Supervisory Board;

h) Legal representative of the Financial Leasing Company;

i) Rights and obligations of shareholders (for Joint Stock Financial Leasing Companies);

k) Financial principles, accounting, auditing, and internal audit;

l) Cases of dissolution and dissolution procedures;

m) Procedures for amending the charter.

7.3. Business Plan for the first three years, including detailed content, methods of operation, operational area, effectiveness, and economic benefits;

7.4. List, curriculum vitae, certificates proving capacity and professional qualifications of founding members, Board of Directors members, Supervisory Board members, and General Director (Director) of the Financial Leasing Company (for Vietnamese individuals, CVs filled out according to Annex 2 model; for foreign individuals, CVs prepared according to the regulations of their home country or the country they hold citizenship);

7.5. Capital contribution plan, list, and commitment to the level of registered capital contribution of contributing parties;

7.6. Financial situation and related information about major shareholders (for Joint Stock Financial Leasing Companies);

7.7. Approval of the People's Committee of the province or centrally administered city regarding the location of the headquarters of the Financial Leasing Company.

8. For Financial Leasing Companies under credit institutions, in addition to the documents stipulated in Clause 7 of Part II of this Circular, the application for a license also includes:

8.1. Document signed by the Chairman of the Board of Directors of the owning credit institution or a person authorized by the Chairman of the Board of Directors of the owning credit institution regarding the source of capital and the level of registered capital for the Financial Leasing Company.

8.2. Documents related to the owning credit institution, including:

a) Decision on establishment or license for establishment and operation, business registration certificate from the date of establishment and through subsequent amendments and supplements;

b) Current charter;

c) Balance sheet, income statement, audited financial statements, and report on operational status for the last three years.

9. For Joint Venture Financial Leasing Companies and 100% foreign-owned Financial Leasing Companies, in addition to the documents stipulated in Clause 7 of Part II of this Circular, the application for a license also includes:

9.1. Articles of the capital contributors;

9.2. Business licenses of the capital contributors;

9.3. Documents issued by foreign authorities authorizing the foreign party to operate in Vietnam under the form of a joint venture financial leasing company or a wholly foreign-owned financial leasing company. In cases where the laws of the home country do not require such a document, evidence confirming this must be provided by the competent authority;

9.4. Balance sheets, profit and loss statements audited, and reports on the operating situation for the last three years of the capital contributors;

9.5. Draft joint venture agreement for a joint venture financial leasing company. The draft joint venture agreement must include the following main contents:

a) Name and address of the joint venture financial leasing company;

b) Name, address, and representatives of the parties participating in the joint venture;

c) Duration of the joint venture operation;

d) Registered capital: Contribution ratio, amount of contribution of each party. Capital contribution plan; specifying clearly the amount in foreign currency, Vietnamese dong, and other assets (if any);

e) Rights and obligations of the parties;

g) Number and ratio of members of the Board of Directors, Supervisory Board, and Management Board of the parties within the joint venture;

h) Principles regarding accounting, reporting, establishment, and utilization of funds; distribution of profits and losses among the parties participating in the joint venture;

i) Procedures for resolving disputes between the parties arising from the implementation of the joint venture agreement, procedures for liquidation, dissolution, and merger of the joint venture financial leasing company;

k) Conditions for amending and supplementing the joint venture agreement.

10. Procedure and formalities for submitting applications for license issuance:

10.1. For joint stock financial leasing companies: The application for license issuance shall be prepared in three (3) sets and submitted to the State Bank of Vietnam branch in the province or centrally-administered city where the company's headquarters is located.

10.2. For financial leasing companies affiliated with credit institutions: The application for license issuance shall be prepared in two (2) sets and submitted to the State Bank of Vietnam.

10.3. For joint venture financial leasing companies and wholly foreign-owned financial leasing companies: The application for license issuance shall be prepared in two (2) sets (one set in Vietnamese and one set in English or French) and submitted to the State Bank of Vietnam.

10.4. The documents in the application mentioned in points 10.1 and 10.2 above must be original copies; in case of copies, they must be notarized or confirmed by the issuing authority.

10.5. For the application mentioned in point 10.3 above: The foreign language set of the application must be an original copy or a certified copy by the competent authority. Vietnamese copies and translations from foreign languages into Vietnamese must be confirmed by a Vietnamese notary office or a diplomatic or consular mission of Vietnam abroad. Translations from Vietnamese into foreign languages must be confirmed by a Vietnamese notary office or the issuing organization of the document. Documents requiring consular legalization include:

a) Operating articles of the organization in the foreign country;

b) Permit from the competent authority in the foreign country allowing the foreign credit institution to conduct banking or financial leasing activities;

c) Document from the competent authority in the foreign country authorizing the foreign party to operate in Vietnam under the form of a joint venture financial leasing company or a wholly foreign-owned financial leasing company.

10.6. Time limit for considering the issuance of the license:

a) For joint stock financial leasing companies:

- Within thirty (30) days from the date of receipt of the complete application for license issuance, the State Bank of Vietnam branch in the province or centrally-administered city will examine, appraise, and submit two (2) sets of the application along with a letter to the Governor of the State Bank of Vietnam for examination and decision.

- Within sixty (60) days from the date of receipt of the complete application for license issuance submitted by the State Bank of Vietnam branch in the province or centrally-administered city, the Governor of the State Bank of Vietnam will consider issuing or refusing the license. In case of refusal, the State Bank of Vietnam will issue a reply letter stating the reasons for refusal.

b) For other financial leasing companies:

Within ninety (90) days from the date of receipt of the complete application for license issuance, the State Bank of Vietnam will consider issuing or refusing the license. In case of refusal, the State Bank of Vietnam will issue a reply letter stating the reasons for refusal.

10.7. License issued by the State Bank of Vietnam:

a) License for financial leasing companies affiliated with credit institutions and joint stock financial leasing companies (as stipulated in Appendix 3a).

b) License for joint venture financial leasing companies and wholly foreign-owned financial leasing companies (as stipulated in Appendix 3b).

11. Licensing fee:

11.1. The level of licensing fee for each issuance (or extension) of the license for financial leasing companies shall be implemented according to the laws on fees and charges.

11.2. The licensing fee prescribed in point 11.1 above shall not be deducted from the registered capital of the financial leasing company and shall not be refunded under any circumstances.

11.3. Within fifteen (15) days from the date of issuance of the license, the financial leasing company that has been granted the license must pay the licensing fee at the State Bank of Vietnam Trading Department; for joint stock financial leasing companies, the fee must be paid at the State Bank of Vietnam branch in the province or centrally-administered city where the company's headquarters is located.

12. Commencement of operations:

12.1. To commence operations, a financial leasing company that has been granted a license must meet the following conditions:

a) Have articles approved by the State Bank of Vietnam;

b) Have a business registration certificate;

c) Have sufficient registered capital as registered:

- Registered capital contributed in cash must be fully transferred into a blocked account without interest at the State Bank of Vietnam Trading Department or the State Bank of Vietnam branch in the province or centrally-administered city where the company's headquarters is located (for joint stock financial leasing companies) and confirmed in writing by the State Bank of Vietnam holding the blocked account. After commencing operations, the financial leasing company can release the funds from the blocked account at the State Bank of Vietnam.

- For the portion of the registered capital contributed in the form of other assets, there must be legal documentation confirming the transfer of ownership rights of the contributed assets to the leasing company in accordance with Vietnamese law.

d) Complete the legal documentation regarding the ownership or right to use the main office of the leasing company in Vietnam;

e) At least thirty (30) days before the opening date of operations, the leasing company must submit to the State Bank (Department of Banks and Non-Bank Financial Institutions) the original or certified copy of the following documents:

- Proof of deposit of the registered capital in a blocked account;

- Proof of payment of the license fee;

- Business registration certificate;

- Legal documentation regarding the ownership or right to use the main office;

g) Publish in central and local newspapers in Vietnamese (at the location of the main office of the company) five consecutive issues announcing the following main contents:

- Full name and abbreviation of the leasing company;

- Main office address; Telephone number; Fax...

- Registered capital;

- Content, scope, territory, and duration of operation;

- Number and date of the license issued by the State Bank; Number and date of the business registration certificate, issuing authority;

- Names, nationalities of the Chairman and members of the Board of Directors, Supervisory Board, General Director (Director);

- The planned opening date of operations;

- Other contents deemed necessary.

12.2. After twelve months from the date of issuance of the license, if the leasing company does not commence operations, the issued license will automatically become invalid. The State Bank will proceed to revoke the issued license and process the refund of funds in the blocked account (if any) after deducting the prescribed administrative fees.

13. Revocation of License:

13.1. A leasing company that has been granted a license may have its license revoked according to the provisions of Clause 1, Article 29 of the Law on Credit Organizations.

13.2. The procedures and documents for revoking the license of a leasing company shall be carried out in accordance with the law and guidelines of the State Bank.

13.3. After the license is revoked, the leasing company must immediately cease all activities listed in the license.

13.4. The State Bank will announce the decision to revoke the license of the leasing company in the local newspaper where the company's main office is located and in three consecutive issues of a central daily newspaper in Vietnamese.

14. Changes to the Leasing Company Must Be Approved:

14.1. The leasing company must obtain written approval from the State Bank before making changes to any of the following points:

a) Name of the leasing company;

b) Authorized capital amount;

c) Location of the main office, branch, representative office;

d) Content, scope, and duration of operation;

e) Transfer of equity contributions of parties within a joint venture leasing company;

g) Total amount of named share transfers exceeding 20% of the registered capital of a joint stock leasing company since the first transfer;

h) Shareholding ratio of major shareholders in a joint stock leasing company;

i) Members of the Board of Directors, General Director (Director), and members of the Supervisory Board.

14.2. Documents requesting the State Bank's approval for changes:

14.2.1. Documents for changing the name of the leasing company:

a) A request from the Chairman of the Board of Directors of the leasing company proposing to change the name of the leasing company. The request must clearly state the reasons and necessity for the name change;

b) Extracts from the minutes and resolutions of the Board of Directors of the leasing company regarding the change of the company's name;

c) Approval documents from credit institutions with the leasing company under their direct management; from contributing parties in a joint venture leasing company; from foreign parties in a 100% foreign-owned leasing company regarding the name change;

d) Extracts from the minutes and resolutions of the Shareholders' Meeting of a joint stock leasing company regarding the change of the company's name.

14.2.2. Documents for changing the level of registered capital:

a) A request from the Chairman of the Board of Directors of the leasing company proposing to change the level of registered capital, clearly stating the necessity, reasons for the change, and measures to resolve existing issues (if any) before the change;

b) Extracts from the minutes and resolutions of the Board of Directors of the leasing company regarding the change of the registered capital level;

c) Approval documents from credit institutions with the leasing company under their direct management; from contributing parties in a joint venture leasing company; from foreign parties in a 100% foreign-owned leasing company regarding the change of the registered capital level;

d) Report on organizational structure and operations up to the end of the most recent quarter of the leasing company;

e) In addition to the above documents, a joint stock leasing company must submit to the State Bank the following documents:

- Extracts from the minutes and resolutions of the Shareholders' Meeting regarding the change of the registered capital level;

- Plan for changing the registered capital level approved by the Shareholders' Meeting;

- List and shareholding ratios of shareholders before and after the leasing company changes its registered capital;

- Application forms for buying or selling shares from major shareholders.

14.2.3. Documents for changing the location of the main office, branch, representative office:

a) A request from the Chairman of the Board of Directors of the leasing company requesting the State Bank's approval for the change of the location of the main office, branch, representative office, clearly stating the reasons for moving the location and the security situation at the new location;

b) Extracts from the resolutions of the Board of Directors of the leasing company regarding the change of the location of the main office, branch, representative office;

c) Approval document from the People's Committee of the province or city at the new location allowing the leasing company to establish its main office, branch, representative office;

d) Documentation confirming the lawful ownership or right to use the new location for the main office, branch, representative office.

e) Opinion of the Governor of the State Bank of Vietnam branch in the province or centrally governed city where the leasing company has its main office, branch, or representative office at the new location.

14.2.4. Documents for changing the content, scope, and duration of operations:

a) A request from the Chairman of the Board of Directors of the leasing company proposing changes to the content, scope, and duration of operations, specifying the reasons for the change and the necessity thereof;

b) Extracts from the minutes and resolutions of the Board of Directors of the leasing company regarding the change in the content, scope, and duration of operations;

c) Approval documents from the credit organization that owns the leasing company; from the parties contributing capital in a joint venture leasing company; and from foreign parties in a wholly foreign-owned leasing company concerning the change in the content, scope, and duration of operations;

d) Report on organizational structure and operations up to the end of the most recent quarter of the leasing company;

e) Extracts from the minutes and resolutions of the General Meeting of Shareholders of a publicly traded leasing company.

14.2.5. Documents for transferring equity interests among parties in a joint venture leasing company:

a) A request from the Chairman of the Board of Directors of the joint venture leasing company requesting the State Bank of Vietnam's approval for the transfer, specifying the reasons for the transfer;

b) Extracts from the minutes of the Board of Directors meeting of the joint venture leasing company agreeing on the transfer of equity;

c) A document from the transferring party sent to the State Bank of Vietnam requesting permission to transfer part or all of their equity interest in the joint venture leasing company, accompanied by a draft transfer agreement;

d) A document from the receiving party regarding the acceptance of the transfer of equity and requesting the State Bank of Vietnam's permission to purchase part or all of the transferring party's equity interest in the joint venture leasing company;

e) In cases where the receiving party is not a member of the joint venture, this entity must provide additional documents as specified in Clause 9, Section II of this Circular.

14.2.6. Documents for transferring shares exceeding 20% of the registered capital or changing the shareholding ratio of major shareholders in a publicly traded leasing company:

a) A request from the Chairman of the Board of Directors proposing the transfer of shares exceeding 20% of the registered capital or the change in the shareholding ratio of major shareholders;

b) A share transfer application from the shareholders (for corporate shareholders, the application must be signed and stamped by the legal representative of the corporation);

c) An application from the shareholders to purchase shares (for corporate shareholders, the application must be signed and stamped by the legal representative of the corporation), committing to the legality of the source of funds for purchasing shares, accepting the current financial status and articles of association of the publicly traded leasing company, and ensuring compliance with current laws related to capital contribution and share purchases;

d) Documents of shareholders transferring shares below 20% of the registered capital;

e) Other relevant documents related to the change or transfer of shares.

14.2.7. Documents, procedures, and formalities for changing members of the Board of Directors, Supervisory Board, and General Director (Director): Implemented according to the regulations of the Governor of the State Bank of Vietnam on the organization and operation of the Board of Directors, Supervisory Board, and General Director (Director) of non-bank credit institutions.

14.3. Procedures and formalities for obtaining approval for changes in leasing companies:

14.3.1. For publicly traded leasing companies:

a) Changes at Points 14.2.2, 14.2.3, and 14.2.6 of this Circular, the documents are prepared in two copies and submitted to the State Bank of Vietnam branch in the province or centrally governed city where the leasing company has its main office. Within fifteen working days from the date of receipt of complete documents, the Governor of the State Bank of Vietnam branch will review and approve the aforementioned changes of the leasing company. If not approved, the State Bank of Vietnam branch will issue a written response stating the reasons.

After approving or not approving the aforementioned changes, the Governor of the State Bank of Vietnam branch in the province or centrally governed city where the publicly traded leasing company has its main office will report in writing to the Governor of the State Bank of Vietnam.

b) For changes at Points 14.2.1 and 14.2.4 of this Circular, the documents are prepared in three copies and submitted to the State Bank of Vietnam branch in the province or centrally governed city where the leasing company has its main office. Within fifteen working days from the date of receipt of complete documents, the State Bank of Vietnam branch must send a written opinion to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions) along with two copies of the leasing company's documents.

14.3.2. For other leasing companies:

The documents are prepared in two copies and submitted to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions).

14.3.3. Within fifteen working days from the date of receipt of complete documents as stipulated, the Governor of the State Bank of Vietnam will review and approve the changes of the leasing company. If not approved, the State Bank of Vietnam will issue a written response stating the reasons.

14.3.4. After being approved by the State Bank of Vietnam, the leasing company must register the changes prescribed in Points 14.2.1, 14.2.2, 14.2.3, and 14.2.4 with the competent state authorities and publish them in central and local newspapers as required by law.

14.3.5. The leasing company must submit registration documents for the changes issued by the competent state authorities (certified copies) and other related documents to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions). For publicly traded leasing companies, an additional copy of the aforementioned documents must also be submitted to the State Bank of Vietnam branch in the province or centrally governed city where the publicly traded leasing company has its main office.

15. The changes must be notified: Within thirty (30) days from the date of the following changes, the financial leasing companies affiliated with credit institutions, joint venture financial leasing companies, and wholly foreign-owned financial leasing companies shall submit a notification in writing to the State Bank:

15.1. Changes in the Chairman of the Board of Directors, General Director (Director) of the capital contributors;

15.2. Changes in the name and address of the capital contributors;

15.3. The capital contributors divide, split, merge, consolidate, dissolve, or go bankrupt.

Section III

ORGANIZATIONAL STRUCTURE, MANAGEMENT, OPERATIONS, AND SUPERVISION

OF FINANCIAL LEASING COMPANIES

16. Organizational structure of financial leasing companies:

16.1. Branches, representative offices:

a) Financial leasing companies are permitted to establish, terminate branches and representative offices in domestic and foreign areas where there is a need for operations, after obtaining written approval from the State Bank.

b) Conditions, documents, and procedures for establishing and terminating branches and representative offices of financial leasing companies shall be applied according to the regulations of the Governor of the State Bank on the establishment and termination of branches and representative offices of non-bank credit institutions and current laws.

16.2. Affiliated companies:

a) Financial leasing companies may establish affiliated companies with legal personality and independent accounting using their own capital to operate in certain financial, banking, insurance, and management, exploitation, and sale of assets during the process of handling collateral and assets entrusted by the state for debt recovery.

b) The establishment of affiliated companies of financial leasing companies shall be carried out according to the guidelines of the State Bank.

16.3. Administrative machinery at headquarters and branches of financial leasing companies include: office, specialized and operational departments, transaction rooms.

17. Division, split, merger, consolidation, acquisition, dissolution: The division, split, merger, consolidation, acquisition, and dissolution of financial leasing companies must be approved in writing by the State Bank and implemented according to the guidelines of the State Bank.

18. Management, operation, and supervision:

18.1. Financial leasing companies must have a Board of Directors, Supervisory Board, and General Director (Director).

For financial leasing companies affiliated with credit institutions that currently do not have their own Board of Directors and Supervisory Board, within ninety (90) days from the effective date of this Circular, the Board of Directors of the owning credit institution must appoint members of the Board of Directors and Supervisory Board of the financial leasing company in accordance with the regulations and submit them to the Governor of the State Bank for approval.

18.2. The election, appointment, or removal of the Chairman and members of the Board of Directors, Head and members of the Supervisory Board, and General Director (Director) of financial leasing companies shall be carried out according to the regulations of the Governor of the State Bank regarding the organization and operation of the Board of Directors, Supervisory Board, and General Director (Director) of non-bank credit institutions and current laws.

18.3. The Chairman and members of the Board of Directors, Head and members of the Supervisory Board, and General Director (Director) of financial leasing companies must be approved by the Governor of the State Bank before performing their duties.

18.4. Specific functions, tasks, and powers of members of the Board of Directors, Supervisory Board, and General Director (Director) of financial leasing companies shall be implemented according to the regulations of the Governor of the State Bank regarding the organization and operation of the Board of Directors, Supervisory Board, and General Director (Director) of non-bank credit institutions and current laws.

Chapter IV

ACTIVITIES OF FINANCIAL LEASING COMPANIES

19. Content and scope of activities:

19.1. Financial leasing companies are permitted to raise funds from the following sources:

a) Accept time deposits of one year or more from organizations and individuals.

b) Short-term, medium-term, and long-term loans from domestic and foreign credit institutions.

c) Issue various securities:

- Financial leasing companies are permitted to issue various securities (bills, promissory notes, deposit certificates, bonds, etc.) with a term of over one year to raise funds from domestic organizations and individuals in accordance with the regulations of the Governor of the State Bank on the issuance of securities by credit institutions to raise domestic funds.

- Financial leasing companies may issue bonds, deposit certificates, and other securities with a term of over one year to raise funds from foreign organizations and individuals when approved by the State Bank.

d) Receive other sources of funds as prescribed by the State Bank.

19.2. Financial leasing companies may carry out the following business activities according to the regulations of the State Bank:

a) Financial leasing;

b) Consulting for customers on issues related to financial leasing business;

c) Entrusted services: Financial leasing companies lease equipment to customers at the request of the entrusting party and earn leasing commission. All risks during the leasing process are borne by the entrusting party. Financial leasing companies may perform the following entrusted services:

- Accepting entrusted equipment for financial leasing to customers.

- Accepting entrusted funds from domestic and foreign organizations and individuals to import equipment for financial leasing to customers.

- Other entrusted services related to financial leasing activities.

d) Implement asset management services related to financial leasing, specifically:

- Providing asset management services for financial leasing of other financial leasing companies.

- Other asset management services related to financial leasing activities.

e) Implement guarantee services related to financial leasing according to the guidelines of the State Bank;

g) Operating leases;

h) Purchase and re-lease under financial leasing form;

i) Sell receivables from financial leasing contracts to organizations and individuals.

19.3. Financial leasing companies may carry out other business activities upon permission from the State Bank.

19.4. Foreign exchange activities:

A financial leasing company conducts foreign exchange activities in accordance with the license issued by the State Bank.

20. Currency used in leasing transactions:

20.1. Financial leasing companies shall conduct leasing transactions in Vietnamese dong.

20.2. For leasing transactions conducted in foreign currency, financial leasing companies must comply with the guidelines of the State Bank and current laws and regulations on foreign exchange management.

21. Interest rates and reduction of lease interest:

21.1. Financial leasing companies set lease interest rates based on the supply and demand for credit capital, domestic and international market interest rates, and related costs.

21.2. Reduction of lease interest: Financial leasing companies implement the waiver or reduction of lease interest in accordance with the provisions of the State Bank.

22. Restructuring of debt repayment terms and transferring overdue debts in leasing activities in accordance with the regulations of the State Bank.

23. Safety ratios: Financial leasing companies must maintain safety ratios as stipulated in Article 81 of the Law on Credit Institutions and the Governor's regulations on safety ratios in the operations of credit institutions.

24. Situations where a financial leasing company may not lease:

24.1. A financial leasing company may not lease to the following entities:

a) Members of the Board of Directors, members of the Supervisory Board, General Director (Director), Deputy General Director (Deputy Director) of the financial leasing company;

b) The person assessing and approving leasing;

c) Parents, spouses, children of members of the Board of Directors, members of the Supervisory Board, General Director (Director), Deputy General Director (Deputy Director) of the financial leasing company.

24.2. A financial leasing company may not accept guarantees from the entities specified in Point 24.1 of this Section as a basis for leasing to customers.

25. Leasing restrictions:

25.1. A financial leasing company may not lease under preferential conditions to the following entities:

a) Auditing organizations, auditors currently auditing at the financial leasing company; Chief Accountant; Inspector;

b) Large shareholders of the financial leasing company;

c) Enterprises where one of the entities specified in Point 24.1 of this Section owns more than 10% of the enterprise's charter capital.

25.2. The total outstanding lease balance for the entities specified in Point 25.1 of this Section shall not exceed 5% of the financial leasing company's own capital.

26. A financial leasing company may open accounts at the State Bank and commercial banks permitted to operate in Vietnam. In cases requiring opening foreign currency accounts abroad, approval from the State Bank is required.

27. Leasing contracts:

27.1. Leasing contracts must be documented in writing in compliance with relevant laws and Government Decrees on the organization and operation of financial leasing companies.

27.2. Leasing contracts become effective from the date agreed upon by the parties in the contract.

27.3. Circumstances for terminating leasing contracts prematurely:

27.3.1. The lessor has the right to terminate the leasing contract prematurely if any of the following situations occur:

a) The lessee fails to pay rent as stipulated in the leasing contract;

b) The lessee breaches the terms of the leasing contract;

c) The lessee goes bankrupt or is dissolved;

d) The guarantor of the lessee goes bankrupt or is dissolved and the lessor does not agree to terminate the guarantee or propose another guarantor to replace the original guarantor.

27.3.2. The lessee may terminate the leasing contract prematurely if any of the following situations occur:

a) The lessor fails to deliver the leased asset on time due to the lessor's fault;

b) The lessor breaches the terms of the leasing contract;

27.3.3. The leasing contract may be terminated prematurely if the leased asset is lost or damaged beyond repair.

27.3.4. The leasing contract may be terminated prematurely if the lessor agrees to allow the lessee to pay all rent before the term specified in the leasing contract.

27.4. Handling of prematurely terminated leasing contracts:

27.4.1. In the event that the leasing contract is prematurely terminated according to any of the circumstances specified in Point 27.3.1 above, the lessee must immediately pay the remaining rent. If the lessee cannot pay the rent within the period requested by the financial leasing company, then the financial leasing company will handle the leased asset as follows:

a) The financial leasing company has the right to immediately recover the leased asset without waiting for a court ruling and demands the lessee to immediately pay the full remaining rent according to the contract. Any obstruction, possession, use, or failure to return the leased asset to the lessor is strictly prohibited;

b) After recovering the leased asset, within a maximum period of 60 (sixty) days, the lessor must complete the handling of the leased asset. The proceeds from the sale of the leased asset are used to settle the lessee's outstanding debt and the costs incurred during the recovery process. If the proceeds are insufficient to cover these amounts, the lessee remains responsible for paying the shortfall to the lessor;

c) If the lessee has already paid part of the rent owed and the financial leasing company has completed the handling of the leased asset, and if the proceeds exceed the rent owed under the contract and the costs incurred during the recovery process, the financial leasing company must refund the excess amount to the lessee;

d) During the period when the lessor handles the leased asset, if the lessee pays the full rent owed under the contract and the costs incurred during the asset handling process, the lessor transfers ownership of the leased asset to the lessee as if the lease contract had been fully completed.

e) Within thirty (30) days from the date the lessee receives the request for recovery of the leased asset from the lessor, the lessee shall be responsible for returning the asset to the lessor.

27.4.2. In the case where the financial lease contract terminates prematurely pursuant to Point 27.3.2 above, the lessor shall compensate the lessee for damages.

27.4.3. In the case where the financial lease contract terminates prematurely pursuant to Point 27.3.3 above, the lessor shall refund to the lessee the amount of insurance paid on the leased asset when the lessee has fully paid the lease payments due to the lessor and when the lessor has received the insurance payment from the insurer.

27.4.4. The ownership rights of the lessor over the leased asset during the lease period shall not be affected in the event of the lessee's bankruptcy, dissolution, or insolvency. The leased asset shall not be considered as the lessee's property when disposing of the lessee's assets to pay off other creditors.

Section V

FINANCE, ACCOUNTING AND REPORTING

28. Finance:

28.1. The fiscal year of the Financial Leasing Company begins on January 1 and ends on December 31 of each calendar year. The first fiscal year starts on the date of commencement of operations and ends on December 31 of the calendar year.

28.2. Financial income and expenditure of the Financial Leasing Company shall be carried out in accordance with the current legal provisions governing the financial system of credit organizations.

29. Accounting: The accounting records of the Financial Leasing Company must comply with the provisions of the Law on Credit Organizations, the Law amending and supplementing certain articles of the Law on Credit Organizations, and the accounting regulations issued by the State Bank.

30. Establishment and utilization of reserves:

30.1. The profit realized in the fiscal year of the Financial Leasing Company is the business result of the company after paying taxes as prescribed by law;

30.2. The establishment and utilization of reserves by the Financial Leasing Company shall be carried out in accordance with the current legal provisions governing the financial system for credit organizations;

30.3. The Financial Leasing Company may not use the reserves specified in Point 30.2 above to distribute profits or dividends to shareholders in any form, except in the case of the company's dissolution and liquidation (in which case priority must be given to paying off creditors before distributing to shareholders).

31. Provision for risks:

The Financial Leasing Company shall establish and utilize risk provisions in accordance with the regulations of the State Bank and other relevant laws.

32. Transfer of profits and remaining assets after liquidation or cessation of operations abroad by foreign parties in joint venture Financial Leasing Companies and wholly foreign-owned Financial Leasing Companies shall be conducted in accordance with the Law on Credit Organizations and current laws.

33. Information Reporting System:

33.1. The Financial Leasing Company shall implement the information reporting and statistical system in accordance with current regulations and guidelines of the State Bank. Reports of the Financial Leasing Company must be presented in Vietnamese and in Vietnamese Dong.

33.2. Within thirty (30) days from the end of the fiscal year, the Financial Leasing Company must submit a written report evaluating its organizational structure, activities, and projected business plan to the State Bank (Department of Banks and Non-Bank Credit Institutions).

34. Audit:

34.1. At least thirty (30) days before the end of the fiscal year, the Financial Leasing Company must select an independent auditing organization meeting the conditions stipulated by the State Bank to audit its activities. The selection of the independent auditing organization shall be carried out in accordance with the legal provisions on bidding.

34.2. Within one hundred twenty (120) days from the end of the fiscal year, the Financial Leasing Company must send two (2) copies of the audited financial statements to the State Bank (Bank Inspection Department and Department of Banks and Non-Bank Credit Institutions) and must publicly disclose the financial statements in accordance with the law.

34.3. Within one hundred eighty (180) days from the end of the fiscal year, the joint venture Financial Leasing Company and the wholly foreign-owned Financial Leasing Company must submit the financial statements of the foreign credit institution that contributed capital to the State Bank.

Chapter VI

INSPECTION, SPECIAL SUPERVISION, LIQUIDATION, DISSOLUTION, BANKRUPTCY

LIQUIDATION, BANKRUPTCY

Article 35. Inspection:

Clause 35.1. Financial leasing companies must be subject to inspection by the State Bank.

Clause 35.2. The State Bank's inspection of financial leasing companies' activities shall be carried out in accordance with the Law on Credit Organizations, the Law Amending and Supplementing Certain Provisions of the Law on Credit Organizations, and other regulations concerning the inspection of credit organizations.

Clause 35.3. Overseas inspection and internal audit: Foreign credit organizations contributing 100% foreign capital to operate financial leasing companies in Vietnam shall conduct internal audits of such companies. Before conducting inspections and internal audits, foreign credit organizations must notify the State Bank in writing about the content, expected start and end dates of the inspection period. Within thirty days from the end of the inspection period, foreign credit organizations must submit a written report of the inspection results to the State Bank.

Article 36. Special supervision, bankruptcy, dissolution, and liquidation of financial leasing companies shall be implemented in accordance with the Law on Credit Organizations, the Law Amending and Supplementing Certain Provisions of the Law on Credit Organizations, and current laws.

Article 37. Rewards and penalties for the activities of financial leasing companies shall be implemented in accordance with Chapter X of the Law on Credit Organizations and related legal documents.

Chapter VII

IMPLEMENTING PROVISIONS

Article 38. Responsibilities of units under the State Bank:

Clause 38.1. Branches of the State Bank in provinces and centrally governed cities:

Receiving and examining applications for licenses to establish and operate joint-stock financial leasing companies and approving changes in financial leasing companies in accordance with the procedures and formalities stipulated in this Circular.

Clause 38.2. Department of Banks and Non-Bank Credit Institutions:

a) Receiving and reviewing applications for licenses to establish and operate financial leasing companies and approving changes in financial leasing companies in accordance with the procedures and formalities stipulated in this Circular;

b) Coordinating with relevant departments under the State Bank to submit to the Governor for consideration the issuance of licenses to establish and operate financial leasing companies and approvals for changes in financial leasing companies;

c) Studying and proposing to the Governor of the State Bank to issue the following regulations:

- Regulations guiding the implementation of operating lease activities.

- Regulations guiding the implementation of sale and leaseback activities under financial leasing.

- Regulations guiding the implementation of the sale of receivables.

Clause 38.3. State Bank Inspectorate:

a) Cooperating and providing information to the Department of Banks and Non-Bank Credit Institutions regarding the operations of financial leasing companies, proposing issues related to the issuance of licenses to establish and operate financial leasing companies and issues related to the addition of business activities and changes in financial leasing companies;

b) Providing inspection and supervision reports on financial leasing companies to the Department of Banks and Non-Bank Credit Institutions.

Clause 38.4. Department of Monetary Policy:

Studying and proposing to the Governor of the State Bank to issue regulations guiding the implementation of financial leasing activities and related entrusted service activities.

Clause 38.5. Department of Credit:

Studying and proposing to the Governor of the State Bank to issue regulations guiding the implementation of syndicated leasing activities and guarantee activities related to financial leasing.

Clause 38.6. Department of Accounting and Finance:

Directing accounting entries for the accounting transactions of financial leasing companies.

Article 39. This Circular shall take effect fifteen days after its publication in the Official Gazette. The following documents shall cease to be effective:

- Circular No. 08/2001/TT-NHNN dated September 6, 2001, of the Governor of the State Bank guiding the implementation of Decree No. 16/2001/NĐ-CP dated May 2, 2001, of the Government on the organization and operation of financial leasing companies;

- Circular No. 07/2004/TT-NHNN dated November 1, 2004, of the Governor of the State Bank amending Point 17.2 of Circular No. 08/2001/TT-NHNN dated September 6, 2001, of the Governor of the State Bank guiding the implementation of Decree No. 16/2001/NĐ-CP dated May 2, 2001, of the Government on the organization and operation of financial leasing companies;

Article 40. The Head of the Office, Heads of Departments of Banks and Non-Bank Credit Institutions, Heads of Units under the State Bank of Vietnam, Governors of State Bank branches in provinces and centrally governed cities, Chairmen of the Board of Directors, General Managers (Directors) of financial leasing companies within their authority and responsibilities shall be responsible for implementing this Circular./.