Circular No. 09/2006/TT-NHNN guiding the sale of receivables from finance lease contracts as prescribed in Government Decree No. 65/2005/NĐ-CP dated May 19, 2005 "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"

CIRCULAR

Guidelines for the sale of receivables from finance lease contracts as stipulated in Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government "Amending and Supplementing Certain Provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the Organization and Operation of Financial Leasing Companies"

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Pursuant to Clause 5, Article 1 of Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government amending and supplementing certain provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of financial leasing companies, the State Bank of Vietnam guides some contents regarding the sale of receivables from finance lease contracts as prescribed in this Decree as follows:

1. Explanation of Terms

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

1.1. "Receivable from finance lease contract" (hereinafter referred to as receivable) is the amount of money that the lessee still has to pay to the financial leasing company under the finance lease contract.

1.2. "Transaction of selling receivables from finance lease contract" (hereinafter referred to as transaction of selling receivables) is the act of a financial leasing company selling receivables to the buyer of receivables within the remaining term of the finance lease contract with the aim of diversifying leasing products and increasing operating capital. In the transaction of selling receivables, the financial leasing company continues to collect rent payments from the lessee, using the collected funds to repay the buyer of receivables.

1.3. "Seller of receivables" (hereinafter referred to as seller) is financial leasing companies licensed to operate by the State Bank of Vietnam.

1.4. "Buyer of receivables" (hereinafter referred to as buyer) includes organizations and individuals residing in Vietnam.

1.5. "Selling price of receivables" is the amount of money agreed upon by both parties in the transaction of selling receivables, determined as a percentage of the amount the lessee still has to pay under the finance lease contract, but not less than the principal of the finance lease minus the amount already recovered by the lessor from the lessee.

1.6. "Contract for selling receivables" is the document signed between the seller and the buyer to implement the transaction of selling receivables.

1.7. "Right of recourse in the transaction of selling receivables" (hereinafter referred to as right of recourse) is the right of the buyer to require the seller to fulfill their obligation to pay to the buyer when the contract for selling receivables terminates.

2. Principles of Selling Receivables

2.1. The sale of receivables must be carried out through a contract for selling receivables between the seller and the buyer.

2.2. Ensuring the rights, obligations, and legitimate interests of the parties involved in the contract for selling receivables and related parties to the receivables.

2.3. In the transaction of selling receivables, the seller retains ownership of the leased assets and continues to collect rent from the lessee to repay the buyer.

2.4. The transaction of selling receivables is conducted in the form of selling receivables along with the right of recourse. The contract for selling receivables serves as the legal basis ensuring the buyer's right of recourse against the seller.

3. Conditions for Receivables to be Sold

3.1. Leased assets related to the contract for selling receivables:

a. Legally owned by the seller;

b. Not used to secure other obligations;

c. Not subject to disputes over the leased asset;

d. The leased asset is operating normally.

3.2. Lessee related to the contract for selling receivables: up to the time the receivables are offered for sale, the lessee has fully and timely paid the rent according to the finance lease contract.

4. Process for Implementing the Sale of Receivables

4.1. The seller selects receivables from finance lease contracts to offer for sale to the buyer, and has the obligation to provide complete information about the receivables being offered for sale, including:

a. List of receivables: Name, address of the lessee; leased asset and current status of the leased asset; location of the leased asset; amount of rent and the amount the lessee still owes under the finance lease contract; selling price of receivables; other information if requested by the buyer;

b. Copy of the finance lease contract, insurance contract;

c. Copy of the registration certificate for secured transactions.

4.2. The buyer reviews the file and evaluates the recoverability of the receivables being offered for sale; assesses the business operations and financial capacity of the seller and the lessee to decide to purchase the receivables and notify the seller of the receivables.

4.3. The seller drafts the contract for selling receivables, including the main contents prescribed in Point 8.1 Clause 8 of this Circular. The seller and the buyer agree on the contents of the contract for selling receivables.

4.4. The seller and the buyer sign the contract for selling receivables; simultaneously, the seller notifies the lessee of the sale of receivables.

4.5. The buyer proceeds to make payment to the seller according to the provisions of the contract for selling receivables.

4.6. The seller monitors and collects rent from the lessee according to the finance lease contract to repay the buyer according to the contract for selling receivables.

5. Currency Used in the Transaction of Selling Receivables

The seller and the buyer conduct the transaction of selling receivables in Vietnamese Dong. Transactions of selling receivables in foreign currency can only be executed in cases where the finance lease contract is in foreign currency, and the parties must comply with the relevant laws on foreign exchange.

6. Fees for Selling Receivables

Costs related to the sale of receivables are negotiated by the parties based on the provisions of the law and specified in the contract for selling receivables, including:

6.1. Negotiation fees.

6.2. Other types of fees (if applicable).

7. Security Measures in the Transaction of Selling Receivables

The seller and the buyer may agree to apply or not apply security measures in the transaction of selling receivables in accordance with the law.

8. Contract for Selling Receivables

8.1. The contract for selling receivables must include the following main contents:

- Name and address of the seller and the buyer;

- Description of the receivable and the lessee;

- Current value of the receivable being sold;

- Selling price of receivables, method of payment;

- Security measures for fulfilling obligations under the contract for selling receivables (if there is);

- Method of implementing the sale contract for receivables;

- Term of implementation of the sale contract for receivables;

- Rights and obligations of the seller and buyer;

- Cases of early termination of the sale contract for receivables;

- Liability for breach of the sale contract for receivables;

- Penalty for breach of the sale contract for receivables;

- Resolution of disputes arising during the implementation of the sale contract for receivables;

- Duration of effectiveness of the sale contract for receivables.

8.2. The seller and buyer may agree on other contents provided that such agreements do not contravene the provisions of the law.

8.3. The sale contract for receivables may be amended, supplemented, or terminated if the parties have other agreements that do not contravene the provisions of the law and this Circular.

9. Early termination of the sale contract for receivables

9.1. The buyer has the right to terminate the sale contract for receivables early when one of the following circumstances occurs:

a) The seller breaches the terms of the sale contract for receivables;

b) The seller goes bankrupt or is dissolved and the buyer does not agree to transfer the sale contract for receivables to a third party;

c) The financial lease contract is terminated early and the buyer does not agree to replace it with a receivable from another financial lease contract.

9.2. The seller has the right to terminate the sale contract for receivables early when one of the following circumstances occurs:

a) The buyer breaches the terms of the sale contract for receivables;

b) The buyer requests to terminate the sale contract for receivables due to objective reasons such as bankruptcy, dissolution, death without an heir, or loss of civil capacity without a guardian;

c) The buyer changes the contents of the sale contract for receivables without the seller's consent.

9.3. The sale contract for receivables may be terminated early if both the buyer and the seller agree to terminate the contract early.

10. Handling of the sale contract for receivables terminated early

The buyer and the seller may agree on how to handle the sale contract for receivables terminated early. In case the parties cannot reach an agreement, the handling of the sale contract for receivables terminated early shall be as follows:

10.1. In the case where the sale contract for receivables is terminated early as stipulated in point 9.1, clause 9 of this Circular, the seller must pay the buyer the full amount paid by the buyer after deducting the amount already paid by the seller under the sale contract for receivables; The seller must bear responsibility for compensating the buyer for losses according to the sale contract for receivables. If the seller fails to pay the remaining purchase price within the time requested by the buyer, the buyer has the right to sue the seller according to the law.

10.2. In the case where the sale contract for receivables is terminated early as stipulated in point 9.2, clause 9 of this Circular, the seller must pay the buyer the full amount paid by the buyer after deducting the amount already paid by the seller under the sale contract for receivables; the buyer must compensate the seller for all losses according to the provisions in the sale contract for receivables.

10.3. In the case where the sale contract for receivables is terminated early as stipulated in point 9.3, clause 9 of this Circular, the seller must pay the remaining amount to the buyer according to the sale contract for receivables, and compensation for losses shall be agreed upon by the parties.

10.4. In the case where the sale contract for receivables is terminated early due to the buyer or seller going bankrupt as stipulated in points 9.1.b and 9.2.b, clause 9 of this Circular, the rights and obligations of the buyer and seller shall be handled according to the law on bankruptcy.

11. Rights and obligations of the seller

11.1. Rights of the seller:

a) Fully exercise the rights of the lessor in the financial lease contract against the lessee;

b) Receive payment from the buyer according to the agreement in the sale contract for receivables;

c) Require the buyer to comply fully with the agreements in the sale contract for receivables and the provisions of the law. In case the buyer intentionally breaches the sale contract for receivables, the seller has the right to sue the buyer according to the law;

d) Refuse to fulfill the buyer's requests if they contravene the agreement in the sale contract for receivables and the provisions of the law;

đ) Fully exercise other rights against the buyer according to the agreement in the sale contract for receivables.

11.2. Obligations of the seller:

a) Provide timely, complete, and truthful information to the buyer regarding the sale of receivables as agreed between the two parties and as required by law;

b) Notify the lessee and the guarantor of the lessee (if any) about the sale of receivables;

c) Fulfill the obligations of the lessor towards the lessee under the financial lease contract;

d) Monitor and collect rent from the lessee under the financial lease contract to repay the buyer according to the sale contract for receivables;

đ) Fully fulfill all obligations towards the buyer according to the agreement in the sale contract for receivables.

12. Rights and obligations of the buyer

12.1. Rights of the buyer

a) Require the seller to provide timely, complete, and truthful information to the buyer regarding the sale of receivables as agreed between the two parties and as required by law;

b) Require the seller to transfer all notarized documents related to leased assets, the financial lease contract, and other documents related to receivables (as agreed in the sale contract for receivables);

c) Sell the receivables to another buyer with the condition that the new buyer agrees to comply with the provisions of the sale contract for receivables;

d) Receive payments from the seller according to the agreement in the sale contract for receivables until the full payment is made and the sale contract for receivables is terminated;

đ) Sue the seller according to the law when the seller breaches its commitments;

e) Exercise the right of recourse in case the seller breaches the sale contract for receivables.

12.2. Obligations of the buyer

a) Pay the seller according to the agreement in the sale contract for receivables;

b) Fully fulfill all obligations towards the seller according to the agreement in the sale contract for receivables;

c) Notify the seller of the transfer of the receivable to another buyer;

d) Retain records and documents related to the receivable in accordance with the provisions of the law; and return all records to the seller upon liquidation of the receivable sale contract;

e) Other obligations as prescribed by law and the receivable sale contract.

13. Handling violations

Organizations and individuals who violate this Circular shall be subject to handling according to the provisions of the law depending on the nature and severity of the violation;

14. Implementation

14.1 Responsibilities of Financial Leasing Companies: The Board of Directors of the Financial Leasing Company shall issue internal regulations on receivable sale transactions based on the provisions of this Circular and in compliance with current laws before implementation;

14.2 Responsibilities of units under the State Bank

a) The State Bank Inspectorate shall inspect and supervise financial leasing companies in their implementation of regulations related to receivable sale transactions; handle according to its authority and recommend the Governor of the State Bank to handle cases of violation of the provisions of this Circular;

b) The Accounting-Finance Department shall guide accounting treatment for the business of selling receivables by financial leasing companies;

15. Implementation Provisions

15.1 This Circular takes effect fifteen days from the date of publication in the Official Gazette;

15.2 The Director of the Office, Heads of the Banking and Non-Bank Financial Institutions Department, Heads of units under the State Bank of Vietnam, Governors of the State Bank branches in provinces and centrally-administered cities, Chairmen of the Boards of Directors and General Managers (Directors) of Financial Leasing Companies are responsible for implementing this Circular./.