Decision No. 1096/2004/QD-NHNN Issuing the Rules on Factoring Operations of Credit Institutions

Pursuant to …;

Issuing the Rules on Factoring Activities of Credit Institutions

___________________________

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated December 12, 1997, and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

Pursuant to the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997, and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

Pursuant to the Government Decree No. 86/2002/NĐ-CP dated November 5, 2002, stipulating the functions, tasks, powers, and organizational structure of Ministries and Ministerial-Level Agencies;

At the proposal of the Director of the Department of Banks and Non-Bank Financial Institutions,

Pursuant to …;:

Article 1. The attached Rules on Factoring Activities of Credit Institutions are hereby issued with this Decision.

Article 2. This Decision shall take effect from October 1, 2004.

Article 3. The Heads of the Office, Department of Banks and Non-Bank Financial Institutions under the State Bank of Vietnam, Heads of Units under the State Bank of Vietnam, Governors of State Bank of Vietnam Branches in provinces and centrally governed cities, Chairmen of Management Councils and General Directors (Directors) of credit institutions are responsible for implementing this Decision.

REGULATIONS

Factoring activities of credit institutions
(Issued together with Decision No. 1096/2004/QĐ-NHNN dated September 6, 2004 of the Governor of the State Bank of Vietnam)

Chapter I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

1. Scope of Regulation: These Rules prescribe the implementation of factoring operations by credit institutions for customers to diversify credit activities, supplement working capital for customers, and promote domestic and international trade activities.

第二条 组织和实施奖励工作的支出水平，如政府第152/2025/NĐ-CP号决定关于分级授权和奖励领域的分权规定

2.1. Credit institutions conducting factoring operations are credit institutions established and operating under the Law on Credit Institutions, including:

- State-owned commercial banks;

- Joint-stock commercial banks;

- Joint venture banks;

- Foreign banks with 100% foreign ownership;

- Branches of foreign banks;

- Finance companies.

2.2. Customers eligible for factoring by credit institutions are economic organizations in Vietnam and abroad supplying goods and entitled to receivables arising from the sale of goods under agreements between the seller and buyer in purchase and sale contracts (hereinafter referred to as the seller).

Article 2. Definition

Factoring is a form of credit provision by credit institutions to the seller through the acquisition of receivables arising from the sale of goods agreed upon in the purchase and sale contract between the seller and the buyer.

Article 3. Principles of Implementation of Factoring:

Factoring activities must ensure the following principles:

1. Ensuring safety in the operation of credit institutions conducting factoring and compliance with Vietnamese laws;

2. Ensuring the rights, obligations, and legitimate interests of parties involved in the factoring contract and related parties to the receivables;

3. Receivables subject to factoring must originate from purchase and sale contracts in accordance with relevant laws.

Article 4. Definitions

In this Regulation, the following terms shall be understood as follows:

1. Factoring unit: is the credit institutions specified in Point 2.1, Clause 2, Article 1 of these Rules that have been approved by the State Bank of Vietnam to conduct factoring activities.

2. Domestic factoring: is factoring based on purchase and sale contracts where both the seller and buyer are residents as defined by foreign exchange management laws.

3. Export-import factoring: is factoring based on export-import contracts.

4. Export factoring unit: is the unit conducting factoring for the seller who is the exporter in export-import contracts.

5. Import factoring unit: is the unit permitted to engage in factoring processes in export-import factoring.

6. Buyer: is the organization receiving goods from the seller and obligated to pay the receivables stipulated in the purchase and sale contract.

7. Purchase and sale contract: is a written agreement between the seller and the buyer regarding the purchase and sale of goods in accordance with the law, wherein the buyer has not yet reached the due date for payment obligation.

8. Sales documents: are documents related to delivery and the request for payment by the seller to the buyer based on the purchase and sale contract.

9. Factoring balance: is the amount of money advanced by the factoring unit to the seller according to the agreement in the factoring contract.

10. Receivable: is the amount of money the seller is entitled to collect from the buyer under the purchase and sale contract.

11. Factoring limit: is the maximum total balance of receivables subject to factoring within a certain period as agreed upon by the factoring unit and the seller in the factoring contract.

Article 5. Authority to Permit Factoring Activities

Credit institutions specified in Article 1 of this Regulation wishing to conduct factoring activities must be approved in writing by the State Bank of Vietnam.

Article 6. Application of International Treaties and Customs

1. In cases where international treaties on factoring to which the Socialist Republic of Vietnam is a party contain provisions different from those stipulated in this Regulation, such treaty provisions shall apply.

2. The parties may agree to apply rules, customs, and practices regarding factoring, provided that such rules, customs, and practices do not contravene Vietnamese law.

Chapter II

FACTORING ACTIVITIES

Section 1

APPROVAL OF FACTORING ACTIVITIES

Article 7. Conditions for Conducting Factoring Activities

1. The State Bank of Vietnam permits domestic factoring activities when credit institutions meet the following conditions:

a. There is a need to conduct factoring activities;

b. The ratio of overdue loans to total outstanding loans at the end of the last three months is below 5%, and there is no violation of banking operation safety regulations;

c. They are not currently under administrative violation investigation in the financial or banking sector, or if they have been administratively punished in the financial or banking sector but have remedied the violation.

2. For export-import factoring activities:

In addition to the conditions stipulated in Clause 1 of this Article, credit institutions applying for export-import factoring activities must be authorized to engage in foreign exchange operations.

Article 8. Documents for Approval of Factoring Activities

1. The application documents submitted to the State Bank of Vietnam for approval of factoring activities include:

a. A written request from the Chairman of the Board of Directors of the credit institution or a person authorized by him/her to request the State Bank of Vietnam to approve the credit institution's factoring activities. If authorization is granted, a written authorization from the Chairman of the Board of Directors is required;

For branches of foreign banks in Vietnam, a written request from the General Director (Director) of the branch is required.

b. A plan for conducting factoring activities, specifying the need to perform factoring transactions, anticipated customer profiles, and operational plans;

c. Copies of the license for establishment and operation; copies of the business registration certificate;

d. The most recent audited financial report of the credit institution by an independent auditing organization; a report on compliance with safety ratios in the credit institution's operations according to the latest regulations.

2. For export-import factoring activities:

In addition to the documents stipulated in Clause 1 of this Article, applications for export-import factoring activities also include a copy of the foreign exchange operation license issued by the State Bank of Vietnam.

Article 9. Procedures and Formalities for Approval of Factoring Activities

Procedures and formalities for requesting the State Bank of Vietnam to approve factoring activities of credit institutions:

1. Joint-stock credit institutions submit two sets of application documents for factoring activity approval to the State Bank of Vietnam Branch in the province or city where the credit institution's headquarters is located.

Within a maximum period of 15 working days from the date of receipt of all documents, the State Bank of Vietnam Branch in the province or city examines and provides written comments on the conditions and documents for factoring activities according to Articles 7 and 8 of this Regulation and forwards them to the State Bank of Vietnam (Department of Banks and Non-Bank Financial Institutions) along with one set of documents from the joint-stock credit institution.

2. Other credit institutions (excluding joint-stock credit institutions) submit one set of application documents for factoring activity approval to the State Bank of Vietnam (Department of Banks and Non-Bank Financial Institutions).

3. Within a maximum period of 30 working days from the date of receipt of all documents from the credit institution (excluding joint-stock credit institutions), or 15 working days from the date of receipt of documents from joint-stock credit institutions forwarded by the State Bank of Vietnam Branch in the province or city, the State Bank of Vietnam reviews and provides written comments on whether to approve or not approve the factoring activities of credit institutions seeking to conduct factoring activities. In case of non-approval, the State Bank of Vietnam issues a written statement detailing the reasons.

Article 10. Conditions for conducting factoring activities

1. Before implementing factoring activities, credit organizations must register with the business registration authority and publish three consecutive issues in central and local newspapers in Vietnamese in accordance with current laws.

2. Credit organizations must submit to the State Bank the registration document from the business registration authority and other related documents.

Section 2

PROVISIONS ON FACTORING ACTIVITIES

Article 11. Types of factoring

1. Factoring units may carry out the following types of factoring:

a. Recourse factoring: the factoring unit has the right to reclaim the amount advanced to the seller when the buyer is unable to fulfill the payment obligation for the receivable.

b. Non-recourse factoring: the factoring unit bears the entire risk when the buyer is unable to fulfill the payment obligation for the receivable. The factoring unit only has the right to reclaim the amount advanced to the seller if the buyer refuses to pay the receivable due to the seller's failure to deliver goods as agreed in the purchase and sale contract or for another reason unrelated to the buyer's ability to pay.

2. Factoring units may conduct domestic factoring and import-export factoring.

Article 12. Methods of factoring

1. Single factoring: the factoring unit and the seller complete necessary procedures and sign a factoring contract for the seller's receivables.

2. Limit factoring: the factoring unit and the seller agree on and determine a factoring limit maintained over a specific period.

3. Joint factoring: two or more factoring units jointly perform factoring for a purchase and sale contract, with one factoring unit acting as the lead organizer for joint factoring.

Article 13. Process of factoring activities:

1. Factoring activities are carried out through the following main steps:

a. The seller requests the factoring unit to factor their receivables;

b. The factoring unit analyzes the receivables, operational status, and financial capacity of both the seller and the buyer;

c. The factoring unit and the seller agree and sign a factoring contract;

d. The factoring unit and the seller jointly send a notification letter regarding the factoring contract to the buyer and relevant parties, clearly stating that the seller has transferred the right to collect debts to the factoring unit and instructing the buyer to make direct payments to the factoring unit;

đ. The buyer sends a confirmation letter to the seller and the factoring unit acknowledging receipt of the notification and committing to make payments to the factoring unit;

e. The seller transfers the original purchase and sale contract, sales documents, and other documents related to the receivables to the factoring unit;

g. The factoring unit advances funds to the seller according to the agreement in the factoring contract;

h. The factoring unit monitors and collects debts from the buyer;

i. The factoring unit settles accounts with the seller according to the provisions in the factoring contract;

k. Resolve any other outstanding issues arising.

2. For export-import factoring activities: the operational process of factoring may be carried out in accordance with Clause 1 of this Article or through an importing factoring unit. The importing factoring unit is responsible for analyzing the receivables, operational status, and financial capacity of the buyer (importer) in the export-import contract; performing debt collection on behalf of the exporting factoring unit and committing to pay on behalf of the importer in case the importer is unable to pay the receivable.

In cases where factoring activities are conducted through an importing factoring unit, the exporting factoring unit and the importing factoring unit must agree and sign a separate contract in compliance with the law, specifying the rights and obligations of each party.

Article 14. Provisions on the currency to be used in factoring activities

Factoring transactions shall be conducted in Vietnamese Dong. For factoring transactions conducted in foreign currencies, the factoring entity, the seller, and the buyer must comply with current regulations on foreign exchange management.

Article 15. Interest and fees in factoring activities

Interest and fees in factoring activities shall be agreed upon in the factoring contract, including:

1. Interest calculated on the amount of capital advanced by the factoring entity to the seller in accordance with market interest rates.

2. Fees calculated on the value of receivables to offset credit risks, sales ledger management costs, and other expenses.

Article 16. Guarantees for factoring activities

The factoring entity and the seller may agree to apply or not apply security measures for factoring activities. Forms of security include: deposit, pledge, mortgage, third-party asset guarantee, and other security measures as prescribed by law.

Article 17. Provisions on payment extension and overdue debt transfer in factoring

Provisions on payment extension and overdue debt transfer in factoring shall be implemented according to the guidelines of the State Bank.

Article 18. Tax provisions

Tax provisions for factoring activities shall be implemented in accordance with the provisions of the law.

Article 19. Receivables that cannot be factored

The following receivables shall not be factored:

1. Arising from contracts for the purchase and sale of goods prohibited by law;

2. Arising from illegal transactions or agreements;

3. Arising from transactions or agreements currently in dispute;

4. Arising from sales contracts in the form of consignment;

5. Arising from purchase and sale contracts with remaining payment terms exceeding 180 days.

6. Receivables that have been assigned or pledged, mortgaged.

7. Receivables that have exceeded the payment deadline under purchase and sale contracts.

Article 20. Provisions on safety

1. Factoring activities must comply with safety regulations stipulated in the Law on Credit Institutions and guidelines issued by the State Bank.

2. The total balance of factoring for one customer shall not exceed 15% of the factoring entity's own capital. For foreign bank branches, the total balance of factoring for one customer shall not exceed 15% of the foreign bank's own capital.

3. The balance of receivables for which the factoring entity imports payment guarantees for one importer must be within the limit of the credit institution's total guarantee balance for one customer as prescribed in the Letter of Guarantee Regulations.

4. In cases where the factoring needs of one customer exceed 15% of the factoring entity's own capital, factoring entities may implement joint factoring for the customer in accordance with the State Bank's regulations.

5. The total balance of factoring shall not exceed the factoring entity's own capital.

Chapter III

FACTORING CONTRACT

Article 21. Factoring Contract

1. A factoring contract is an agreement between the factoring entity and the seller regarding the purchase of receivables in accordance with legal provisions.

2. A factoring contract may be amended, supplemented, or terminated if the parties agree.

Article 22. Contents of the Factoring Contract

The factoring contract shall include the following main contents:

1. Name, address, telephone number, Fax... of the parties to the factoring contract;

2. Value of receivables subject to factoring, rights and interests related to receivables under the purchase and sale contract;

3. Interest and factoring fees;

4. Purchase and sale price of receivables: determined on the basis of the value of receivables after deducting interest and factoring fees.

5. Advance payment amount and payment method;

6. Notification of factoring to the purchasing party and other relevant parties;

7. Form of guarantee for the factoring entity to recover the advance payment amount, the value of collateral assets;

8. Term of validity of the factoring contract;

9. Rights and obligations of the parties;

10. Method of transferring the purchase and sale contract, sales documents, rights, benefits, and other documents related to receivables subject to factoring;

11. Provisions regarding recovery by the factoring entity;

12. Resolution of disputes arising;

13. Other agreements.

Chapter IV

RIGHTS AND OBLIGATIONS OF THE PARTIES

Article 23. Rights and Obligations of the Factoring Entity

1. Rights of the factoring entity:

a. Request the selling party to provide information and documents related to receivables, financial capacity, and operational status of the selling party;

b. Request the selling party to transfer all original copies of the purchase and sale contract, sales documents, rights, benefits, and other documents related to receivables subject to factoring;

c. Have the right to demand payment from the purchasing party according to the value of receivables subject to factoring and enjoy other rights and benefits that the selling party enjoys according to the provisions of the purchase and sale contract;

d. Transfer the right to demand payment, except where the parties to the factoring contract have agreed not to transfer such right.

2. Obligations of the factoring entity:

a. Notify the purchasing party and other relevant parties as stipulated in point d, Clause 1, Article 13 of this Regulation;

b. Pay the selling party according to the purchase price of receivables agreed upon in the factoring contract;

c. Bear the entire risk when the purchasing party is unable to fulfill the obligation to pay receivables in cases of non-recourse factoring;

d. Fulfill all terms agreed upon in the factoring contract accurately and fully.

Article 24. Rights and Obligations of the Selling Party

1. Rights of the selling party:

Receive payment from the factoring entity according to the purchase and sale price of receivables agreed upon in the factoring contract;

2. Obligations of the selling party:

a. Provide complete, accurate, and truthful information, documents, and reports as required by the factoring entity;

b. Notify the purchasing party and other relevant parties as stipulated in point d, Clause 1, Article 13 of this Regulation;

c. Bear the risk when the purchasing party is unable to fulfill the obligation to pay receivables in cases of recourse factoring;

d. Transfer fully and on time to the factoring entity the purchase and sale contract, sales documents, rights, benefits, and other documents related to receivables subject to factoring as agreed upon in the factoring contract;

e. Fulfill all terms agreed upon in the factoring contract and the purchase and sale contract accurately and fully.

Article 25. Rights and Obligations of the Purchaser

1. Rights of the Purchaser:

a. To be informed about the acceptance for payment;

b. Not to change the rights and obligations stipulated in the purchase and sale contract, except for the party receiving payment for the receivable amount. Any adjustment to the terms specified in the purchase and sale contract must be agreed upon in writing by the purchaser.

2. Obligations of the Purchaser:

a. To confirm in writing receipt of the notification and commitment to pay as provided in point đ, Clause 1, Article 13; in case of refusal to pay, there must be a valid reason and it must be notified in writing immediately to the seller and the accepting for payment unit.

b. To pay the accepting for payment unit according to the terms stipulated in the purchase and sale contract.

c. Not to demand a refund of the amount already paid to the accepting for payment unit in cases where the seller fails to perform, or performs inadequately, the terms stipulated in the purchase and sale contract, except in cases where the accepting for payment unit intentionally pays the buyer's payment to the seller after being informed by the buyer of the seller's breach of the purchase and sale contract.

Chapter V

HANDLING VIOLATIONS

Article 26. Handling Violations

Organizations and individuals violating the provisions of this Regulation shall be subject to disciplinary action, administrative penalties, or criminal liability追究根据本规定的性质和程度，将受到纪律处分、行政处罚或刑事责任追究。

Chapter VI

IMPLEMENTING PROVISIONS

Article 27. Implementation Organization

1. Responsibilities of the Accepting for Payment Unit: Based on this Regulation and relevant legal documents, the accepting for payment unit shall issue specific operational guidelines for accepting for payment that are consistent with its conditions, characteristics, and Articles.

2. Responsibilities of Units under the State Bank:

a. Department of Banks and State Bank Branches in Provinces and Cities:

- To accept applications for permission to operate accepting for payment from credit organizations in accordance with the procedures and formalities prescribed in Chapter II, Section 1 of this Regulation.

- To coordinate with related Departments within the State Bank to examine and submit to the Governor for decision on granting permission to credit organizations to carry out accepting for payment operations.

b. State Bank Inspectorate:

- To cooperate and provide information on the activities of credit organizations to the Department of Banks for submission to the Governor of the State Bank for examination and decision on granting permission to credit organizations to carry out accepting for payment operations.

- To organize inspections and supervision of accepting for payment operations; to handle according to authority and recommend the Governor of the State Bank to handle violations of the provisions of this Regulation.

c. Department of Monetary Policy:

- To guide regulations on extension of payment and transfer of overdue debt in accepting for payment by credit organizations.

- To stipulate regular reporting systems on accepting for payment activities for units with authority under the State Bank.

d. Department of Accounting and Finance: to guide accounting entries for accepting for payment operations of credit organizations.

e. Department of Credit: to guide units engaged in accepting for payment to conduct joint accepting for payment.

Article 28. Amendment and Supplement to the Regulation

The amendment and supplement to this Regulation shall be decided by the Governor of the State Bank.