Circular No. 09/2004/TT-NHNN guiding foreign borrowing and repayment by enterprises

CIRCULAR

Decision No. 09/2004/TT-NHNN dated December 21, 2004 guiding foreign borrowing and repayment by enterprises

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Pursuant to Article 22 and Article 24 of the Regulation on Management of Foreign Borrowing and Repayment issued together with Decree No. 90/1998/NĐ-CP dated November 7, 1998 of the Government, the State Bank of Vietnam (hereinafter referred to as "the State Bank") guides foreign borrowing and repayment by enterprises as follows:

PART I

GENERAL PROVISIONS

PART 1

INTERPRETATION OF SOME TERMS

In this Circular, the following terms are understood as follows:

1.Foreign borrowing enterprise (hereinafter referred to as "Enterprise") includes:

a) Enterprises that are not credit organizations operating in Vietnam:

- State-owned enterprises, private enterprises, limited liability companies, joint-stock companies, cooperatives, partnerships;

- Enterprises with foreign investment capital including joint ventures, wholly foreign-owned enterprises.

- Other enterprises outside the aforementioned objects established and operating in accordance with the provisions of the law.

b) Enterprises that are credit organizations operating in Vietnam:

- Vietnamese credit organizations: State credit organizations, joint-stock credit organizations, cooperative credit organizations;

- Joint venture credit organizations;

- Wholly foreign-owned credit organizations.

2.Non-resident person is understood according to the provisions of Vietnamese law on foreign exchange management.

3.Foreign loan contract means foreign loan agreements that are effective for withdrawal of funds, which stipulate the terms and conditions of foreign loans such as deferred payment purchase contracts, credit contracts, financial lease contracts, and other foreign loan agreements.

4. Registration of foreign borrowing and repayment means that after signing a medium- or long-term foreign loan contract (or after completing the procedures for issuing bonds abroad), the Enterprise must register with the State Bank in accordance with the provisions of this Circular.

5. Confirmation of registration of foreign borrowing and repayment means that the State Bank issues a document confirming that the Enterprise has registered foreign borrowing and repayment with the State Bank.

6. Change registration means that after registering foreign borrowing and repayment, if there are changes compared to the contents confirmed by the State Bank's registration confirmation document, the Enterprise must register the changes with the State Bank in accordance with the provisions of this Circular.

Confirmation of change registration means that the State Bank issues a document confirming that the Enterprise has registered changes to some contents of the foreign loan contract already confirmed by the State Bank.

8. Authorized bank is a bank operating in Vietnam permitted to conduct foreign exchange activities in accordance with Vietnamese law.

PART 2

GENERAL PROVISIONS

9. The foreign loan of the Enterprise includes borrowing in the following forms:

a) Financial borrowing (in cash);

b) Import of goods and services on deferred payment terms through the issuance of letters of credit, collection through authorized banks, or other deferred payment methods;

c) Overseas financial leasing;

d) Issuance of bonds abroad;

e) Other types of foreign borrowing.

10. The Enterprise bears full responsibility for the legal capacity, financial capacity, and ability to perform the foreign loan contract of the foreign lender when signing a foreign loan contract. The Enterprise is obligated to use borrowed funds for the intended purpose and in compliance with Vietnamese law. The Enterprise bears all risks and responsibilities under national law for signing and performing the foreign loan contract.

11. The Enterprise does not need to register with the State Bank when signing foreign loan agreements without immediate effect for fund withdrawal such as framework credit agreements, memorandums of understanding, and similar agreements, but the content of the foreign loan agreements must comply with Vietnamese law.

12. For syndicated loans from credit organizations operating in Vietnam and foreign lenders, the portion of foreign borrowing by the Enterprise must be carried out in accordance with the provisions of this Circular.

Chapter II

CONDITIONS FOR FOREIGN BORROWING

PART 1

PURPOSES AND CONDITIONS FOR SHORT-TERM LOANS

13. The purpose of short-term borrowing must be consistent with the scope of operations of the Enterprise:

a) For Enterprises that are not credit organizations: Short-term loans shall be used to meet working capital needs for production and business activities within the scope of operations specified in the Business Registration Certificate; Investment License; or Operating Permit issued by the competent authority.

b) For Enterprises that are credit organizations: Short-term loans shall be used to supplement short-term credit sources.

14. Meeting the borrowing conditions prescribed by the Governor of the State Bank:

a) The objects of Enterprises eligible for short-term foreign borrowing;

b) The term of borrowing and costs of short-term loans (including interest rates, fees, and other costs);

c) Deposit requirements for short-term loans at commercial banks operating in Vietnam.

In each period, the Governor of the State Bank shall specify in detail the borrowing conditions set forth in Point 14, Section I, Chapter II of this Circular.

15. For Enterprises with foreign investment capital, in addition to the conditions stipulated in Point 13(a) and Point 14, Section I, Chapter II of this Circular, they may only enter into short-term loan contracts when meeting the following condition:

- During the construction period, the total short-, medium-, and long-term debt balance (including domestic debt) must remain within the allowable limit and not exceed the total investment capital as specified in the Investment License.

- After completion of construction and commencement of project operation: The Enterprise may borrow short-term funds to replenish working capital without being included in the maximum control limit of total investment capital as specified in the Investment License.

16. Credit organizations, in addition to the conditions stipulated in Point 13(b) and Point 14, Section I, Chapter II of this Circular, must comply with the current regulations of the State Bank regarding limits on foreign borrowing and guarantees for short-term foreign borrowing.

17. In addition to the conditions stipulated in Points 13, 14, 15, and 16 of Section I, Chapter II of this Circular, all other contents of short-term foreign loan contracts and agreements related to short-term foreign borrowing by Enterprises must comply with the current provisions of Vietnamese law.

PART 2

CONDITIONS FOR MEDIUM- AND LONG-TERM FOREIGN BORROWING

18. Enterprises that are not credit organizations may only enter into medium- and long-term foreign loan contracts when meeting the following conditions:

a) The Enterprise has an investment project or production and business plan approved by the competent authority in accordance with the law;

b) Foreign loans shall be used to meet production and business needs within the scope of operations specified in the Business Registration Certificate; Investment License; or Operating Permit issued by the competent authority;

c) The medium- and long-term foreign loan contract of the Enterprise must comply with the regulations of the Governor of the State Bank during each period;

d) Agreements in the medium- and long-term foreign loan contract of the Enterprise must comply with the current relevant laws of Vietnam, such as opening foreign currency accounts abroad to serve transactions of the loan, pledging or mortgaging assets of the Enterprise, borrowing abroad to contribute capital to establish an Enterprise, converting debt into shares, and other contents regulated by Vietnamese law;

đ) For Enterprises with foreign investment capital, in addition to the conditions stipulated in Points 18(a), 18(b), 18(c), and 18(d) of Section II, Chapter II of this Circular, the medium- and long-term debt balance (including domestic debt) of the Enterprise must remain within the allowable borrowing limit and not exceed the total investment capital as specified in the Investment License;

e) For State-owned Enterprises, they may only enter into medium- and long-term foreign loan contracts when meeting the following conditions:

- Having a document from the competent authority approving the investment project;

- Having a document reflecting the opinion of the State Bank of Vietnam according to Point 23, Section I, Chapter III of this Circular.

- The conditions stipulated in Points 18(a), 18(b), 18(c), and 18(d) of Section II, Chapter II of this Circular.

19Credit organizations may only enter into medium- and long-term foreign loan contracts when meeting the following conditions:

a) Medium- and long-term loans shall be used to supplement credit sources;

b) The conditions stipulated in Points 18(c) and 18(d) of Section II, Chapter II of this Circular;

c) Specifically, for state-owned credit organizations: In addition to the conditions stipulated in Points 19(a) and 19(b) of Section II, Chapter II, state-owned credit organizations may only enter into medium- and long-term foreign loan contracts when having a document reflecting the opinion of the State Bank of Vietnam according to Point 23, Section I, Chapter III of this Circular.

Chapter III

REGISTRATION AND AMENDMENT OF FOREIGN LOAN AND DEBT REPAYMENTS

PART 1

REQUIREMENTS, PROCEDURES, AUTHORITY TO CONFIRM REGISTRATION AND AMENDMENT OF FOREIGN LOAN AND DEBT REPAYMENTS

20.Requirements and procedures for registering foreign loans:

a) For short-term loans, Enterprises do not need to register with the State Bank but the short-term foreign loan contract must comply with the conditions set forth in Section I, Chapter II of this Circular.

b) For medium- and long-term loans: Based on the conditions stipulated in Section II, Chapter II of this Circular, Enterprises may enter into foreign loan contracts. Within 30 working days from the date of signing the foreign loan contract and before withdrawing funds, Enterprises must register foreign loans and debt repayments with the State Bank.

21. In case short-term loans are extended and the total extension period plus the original short-term loan period exceeds one year, the Enterprise must register with the State Bank within 30 working days from the date of signing the extension agreement and comply with the regulations on medium- and long-term loans set forth in this Circular.

22. In case there is any change in any content related to the loan of the Enterprise as specified in the State Bank's confirmation document for registration of foreign loans and debt repayments, the Enterprise may enter into an amendment agreement when ensuring that the changes comply with the provisions of Section II, Chapter II of this Circular. The Enterprise must register the amendment with the State Bank within 30 working days from the date of signing the amendment agreement and before the amended content takes effect.

23. State-owned enterprises must submit the final draft (accompanied by a Vietnamese translation certified by the head of the unit) of the following documents to the State Bank for comments before signing:

- Draft Foreign Loan Agreement;

- Draft Guarantee Letter, in cases where non-residents guarantee;

The State Bank shall issue a document providing comments on the above drafts submitted by state-owned enterprises within fifteen working days from the date of receipt of complete files.

24. Authority to confirm registration or change registration of foreign borrowing and repayment:

a) The State Bank branch in provincial or centrally governed city shall confirm registration and changes in registration for medium and long-term loans of enterprises not being state-owned enterprises with a value up to ten million US dollars (or equivalent foreign currency at the time of signing the foreign loan agreement) and in compliance with the provisions of this Circular;

In cases where enterprises violate the provisions of this Circular, the State Bank branch in provincial or centrally governed city must report to the Governor of the State Bank for consideration and decision.

b) The State Bank shall confirm registration and changes in registration for medium and long-term loans of enterprises other than those specified in point 24(a), Section I, Chapter III of this Circular.

PART 2

DOCUMENTS FOR FOREIGN BORROWING AND REPAYMENT REGISTRATION

25. Documents for foreign borrowing and repayment registration for enterprises that are not credit organizations include:

a) Application for foreign borrowing and repayment registration (in accordance with Form No. 1 attached to this Circular);

b) Certified copy of the Decision on Establishment, Business Registration Certificate; or Investment License; or Operating Permit, or other relevant documents issued by the competent authority;

c) Certified copy of the approval document by the competent authority for the investment project or business plan (except for foreign-invested enterprises);

d) Certified copy of the Decision by the competent authority allowing the enterprise to issue bonds abroad (in case the enterprise issues bonds abroad);

đ) Certified copy and Vietnamese translation of the signed foreign loan agreement (with confirmation by the head of the enterprise).

26. Documents for foreign borrowing and repayment registration for enterprises that are credit organizations include: The documents stipulated in points 25(a), 25(d), 25(đ), Section II, Chapter III of this Circular.

PART 3

DOCUMENTS FOR CHANGE REGISTRATION

 27. Documents for change registration (for cases specified in point 22, Section I, Chapter III of this Circular) include:

a) Application for change registration (in accordance with Form No. 2 attached to this Circular);

b) Certified copy and Vietnamese translation (with confirmation by the head of the enterprise) of the signed change agreement;

c) Approval document of the guarantor for the enterprise's foreign loan regarding the changes (in case the enterprise is guaranteed).

PART 4

CONFIRMATION OF REGISTRATION BY THE STATE BANK

28. The State Bank or the State Bank branch in provincial or centrally governed city confirms the foreign borrowing and repayment registration and change registration of enterprises based on:

a) The annual total foreign borrowing limit plan approved by the Prime Minister;

b) The state's foreign exchange management policy during each period;

c) Compliance with all conditions prescribed in Section II, Chapter II of this Circular;

d) Opinions of related agencies concerning the enterprise's foreign borrowing when necessary.

29. The State Bank or the State Bank branch in provincial or centrally governed city shall notify the enterprise in writing within fifteen working days from the date of receipt of the enterprise's valid application about:

a) Confirmation of registration or change registration of the enterprise's foreign loan;

b) Refusal to confirm registration or change registration of the enterprise's foreign loan. In case of refusal, the State Bank will clearly state the reasons.

30If additional information or conditions are required to have sufficient basis for confirmation or refusal of registration or change registration of the enterprise's foreign loan, the State Bank or the State Bank branch in provincial or centrally governed city will inform the enterprise within fifteen working days from the date of receipt of the enterprise's application.

PART 5

WITHDRAWAL OF CAPITAL AND REPAYMENT OF FOREIGN DEBT

31. Transactions for withdrawal of capital and repayment of foreign loans by enterprises can only be conducted through one authorized bank, except for certain transactions (where the authorized bank does not guarantee and provide services):

a) Withdrawal of capital for direct payment to foreign beneficiaries for imported goods and services;

b) Withdrawal of capital and repayment through the enterprise's account opened abroad (in cases where the enterprise is permitted to open an account abroad);

c) Withdrawal of capital in the form of delayed import of goods and services, repayment in the form of export of goods and services.

32. In cases where enterprises are currently conducting withdrawal of capital and repayment through an authorized bank but wish to switch to another authorized bank, they must settle all transactions for withdrawal of capital and repayment at the old bank; For medium and long-term loans, enterprises must register with the State Bank regarding the change of bank for service of withdrawal of capital and repayment.

33. When enterprises conduct withdrawal of capital and repayment of foreign debt through an authorized bank, they must comply with the following regulations:

a) When withdrawing capital:

- For short-term foreign loans, enterprises must present the original Short-Term Foreign Loan Agreement to the authorized bank where the enterprise conducts the withdrawal;

- For medium and long-term loans, enterprises must present the original confirmation document for foreign borrowing and repayment registration issued by the State Bank;

Additionally, for short, medium, and long-term loans, enterprises are responsible for presenting other necessary documents and materials when requested by the authorized bank.

In the case where the Enterprise does not withdraw capital through a permitted Bank but only repays debt through a permitted Bank, within five working days from the date of capital withdrawal, the Enterprise must notify in writing to the permitted Bank where the Enterprise repays its debt about the date of capital withdrawal and the amount withdrawn according to the Foreign Loan Contract.

b) When repaying debt:

The Enterprise must present to the permitted Bank where the Enterprise repays its debt the following documents:

- Original confirmation registration for borrowing and repaying foreign debts of the State Bank (in the case of medium and long-term loans);

- Original Foreign Loan Contract (short, medium, and long-term) signed;

- Original or certified copy (by the head of the Enterprise) of the documents proving the withdrawal of capital according to the Foreign Loan Contract (short, medium, and long-term) and other necessary documents when requested by the permitted Bank.

In the case where the Enterprise has withdrawn capital through a permitted Bank but does not repay debt through a permitted Bank, within five working days from the date of repayment, the Enterprise must notify in writing to the permitted Bank where the Enterprise withdrew capital about the date of repayment and the amount repaid according to the Foreign Loan Contract.

34. The permitted Bank must comply with the following regulations when performing foreign capital withdrawal and repayment for Enterprises:

a) For short-term foreign loans:

- Perform capital withdrawal and transfer of foreign debt repayment funds to the Enterprise based on the original Short-Term Foreign Loan Contract signed and the documents proving capital withdrawal and repayment presented by the Enterprise;

- Check and compare the documents presented by the Enterprise to ensure compliance with the loan transactions of the Enterprise;

- Statistically record the transactions of capital withdrawal and repayment, balances, and other necessary data of short-term loans that the bank has guaranteed or serviced;

- Retain copies of the necessary documents presented by the Enterprise.

b) For medium and long-term loans:

- Conduct checks and comparisons of the documents presented by the Enterprise to ensure compliance with the loan transactions registered with the State Bank;

- Transfer foreign debt repayment funds based on the confirmation registration document; the confirmation registration change document for foreign borrowing and repayment issued by the State Bank, the Medium and Long-Term Foreign Loan Contract, and the documents proving capital withdrawal and repayment presented by the Enterprise;

- Retain copies of the confirmation registration document for foreign borrowing and repayment issued by the State Bank and copies of other necessary documents presented by the Enterprise;

- Statistically record the transactions of capital withdrawal and repayment and balances of each medium and long-term loan that the bank has guaranteed or serviced;

c) The permitted Bank shall not disburse funds or transfer foreign debt repayment funds according to the request of the Enterprise in the following cases:

- The Enterprise's medium and long-term loan does not have a confirmation registration document or a registration change document for foreign borrowing and repayment issued by the State Bank; or the Foreign Loan Contract contains contents inconsistent with Vietnamese laws.

- The Enterprise's short-term Foreign Loan Contract is extended, and the total extension period and the already borrowed short-term period exceeds one year without a confirmation registration document for foreign borrowing and repayment issued by the State Bank.

d) Guide Enterprises to comply with current regulations on foreign borrowing and repayment; promptly report to the State Bank in case of discovering violations of current regulations on foreign borrowing and repayment by Enterprises.

35. The permitted Bank is responsible for complying with the provisions of this Circular regarding foreign capital withdrawal and repayment for its own foreign loans.

Chapter IV

REGIME OF REPORTING, INSPECTION WORK, AND VIOLATION HANDLING

PART 1

REPORTING SYSTEM

36.At the end of the working day (if there are any occurrences), the State Bank branch in provinces and centrally-administered cities is responsible for sending to the State Bank (Department of Foreign Exchange Management) the documents confirming the registration or change registration of loans for Enterprises:

a) Copy of the Application for Registration or Change Registration of Foreign Loans of the Enterprise;

b) Confirmation Registration or Change Registration document for the Enterprise;

c) Other necessary documents related to the loan when requested by the State Bank;

d) Document sent to the Enterprise as stipulated at Point 30, Section IV, Chapter III of this Circular.

37Financial institutions as Enterprises report to the State Bank on the figures of foreign borrowing and repayment according to the current reporting system applicable to units under the State Bank and financial institutions as prescribed by the State Bank.

38. Non-financial institution Enterprises implement reporting to the State Bank branch in the province or city where the Enterprise's main office is located on the implementation of foreign loans according to the following regulations:

a) Quarterly (no later than the 7th day of the first month of the next quarter): Report on the implementation of short-term loans of the Enterprise, which does not withdraw capital and repay debt through a permitted Bank (cases specified at Points 31(a), 31(b), 31(c) of Section V, Chapter III of this Circular). The report is made according to Form No. 1 attached to this Circular.

b) Quarterly (no later than the 7th day of the first month of the next quarter): Report on the situation of medium and long-term foreign borrowing and repayment according to Form No. 2 attached to this Circular.

39. The State Bank branch in provinces and centrally-administered cities implements reporting to the State Bank (Department of Foreign Exchange Management) according to the following regulations:

a) Aggregate the reported figures on the implementation of short, medium, and long-term loans of Enterprises in the area according to the current reporting system applicable to units under the State Bank and financial institutions.

b) Every six months once (no later than July 15 and January 15 each year), the State Bank branch in provinces and centrally administered cities shall report to the State Bank on the implementation of foreign borrowing and repayment management, difficulties, obstacles, and recommendations for the State Bank.

PART 2

INSPECTION AND HANDLING OF VIOLATIONS

40. Periodically or when necessary, the State Bank and relevant agencies shall conduct inspections of foreign borrowing and repayment situations of enterprises. Enterprises are responsible for providing all necessary documents to ensure timely and effective inspections.

41. In cases where violations of this Circular occur, depending on the severity of the violation, enterprises and authorized banks will be subject to penalties under current regulations on administrative sanctions in the monetary and banking sectors.

Chapter V

IMPLEMENTING PROVISIONS

42. This Circular takes effect fifteen days from the date of publication in the Official Gazette and replaces the following documents:

a) Circular No. 03/1999/TT-NHNN7 dated August 12, 1999, issued by the Governor of the State Bank, guiding foreign borrowing and repayment by enterprises;

b) Decision No. 1432/2001/QĐ-NHNN dated November 16, 2001, issued by the Governor of the State Bank, supplementing and amending certain contents of Circular No. 03/1999/TT-NHNN7 dated August 12, 1999, guiding foreign borrowing and repayment by enterprises.

43. For foreign loans signed before the effectiveness of this Circular and currently in the process of disbursement or repayment, enterprises shall proceed as follows:

a) For short-term loans: Enterprises (including authorized banks) shall comply with reporting requirements as stipulated in this Circular;

b) For medium- and long-term loans that have been confirmed by registration documents from the State Bank, enterprises and authorized banks shall continue to implement the foreign loan contracts already confirmed by the State Bank.

44. Any amendments or supplements to this Circular shall be decided by the Governor of the State Bank.

45. The Director of the Office, the Inspector General of the State Bank, heads of units under the State Bank, Governors of State Bank branches in provinces and centrally administered cities, and General Directors (directors) of credit organizations within their respective functions shall be responsible for organizing guidance, implementation, and enforcement of this Circular.

46. Ministries, sectors, and enterprise management agencies shall coordinate in directing the implementation of this Circular according to their respective functions and responsibilities./.