Circular No. 14/2016/TT-BKHCN on Managing Activities of Loans from the National Research and Scientific and Technological Development Fund

CIRCULAR

Management activities of lending from the capital sources

of the National Science and Technology Development Fund

______________________

Pursuant to the Law on Credit Institutions dated June 16, 2010;

Pursuant to the Law on Science and Technology dated June 18, 2013;

Pursuant to Decree No. 20/2013/NĐ-CP dated February 26, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Science and Technology;

At the proposal of the Director

At the request of the Director of the National Science and Technology Development Fund and the Department Head of the Legal Affairs Department;

The Minister of Science and Technology issues this Circular on managing activities of lending from the capital sources of the National Science and Technology Development Fund.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the management of activities of lending from the capital sources of the National Science and Technology Development Fund to implement science and technology tasks.

Article 2. Applicability

This Circular applies to:

1. The National Science and Technology Development Fund.

2. Organizations and individuals with the need to borrow funds to implement science and technology tasks.

3. Credit organizations and foreign bank branches.

4. Other organizations and individuals related to the matter.

Article 3. Explanation of Terms

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

1. unions is the abbreviation for the National Science and Technology Development Fund.

2. Customer is the general term for organizations and individuals who have the need and are granted loans from the Fund's capital sources.

3. Entrusted Bank is a credit organization or foreign bank branch entrusted by the Fund to carry out lending activities.

4. Entrusted Lending is the act of the Fund entrusting the Entrusted Bank to perform certain activities related to lending to borrowers according to the provisions of the law.

5. Entrusted Agreement and Entrusted Lending (hereinafter referred to as Entrusted Agreement) is a written agreement between the party entrusted to carry out lending activities and the Fund to establish, change, or terminate the rights and obligations of the parties regarding the entrustment and acceptance of entrustment of lending activities.

Article 4. General Principles on Lending

1. The Fund implements lending for science and technology tasks (hereinafter referred to as projects) in accordance with the Charter on Organization and Operation of the National Science and Technology Development Fund issued together with Decree No. 23/2014/ND-CP dated April 3, 2014 of the Government (hereinafter referred to as Decree No. 23/2014/ND-CP) and related documents.

2. The Fund establishes a Science and Technology Council (hereinafter referred to as the Council) to select projects requesting loans according to the principle of transparency and equality; credit assessment and related operations are entrusted to a credit organization or foreign bank branch to perform.

3. Projects requesting loans shall not simultaneously receive financial support or assistance from other State budget sources for the contents requested for loans at the Fund in accordance with Clause 2, Article 6 of this Circular.

4. Borrowers of the Fund must provide documentation proving that the project has been approved, demonstrating financial capacity to implement the project, the economic efficiency of the project, the ability to fully repay principal and interest on time, providing documentation on collateral for the loan and self-paying all costs arising from the above procedures.

5. Borrowers of the Fund must ensure the proper use of borrowed funds, timely repayment of principal and interest on the loan.

Chapter II

IMPLEMENTATION OF LENDING ACTIVITIES

Article 5. Objectives and Conditions for Consideration of Loans

1. The objects eligible to borrow funds from the Fund's capital sources are specified in Clause 2, Article 3 of the Charter on Organization and Operation of the National Science and Technology Development Fund issued together with Decree No. 23/2014/ND-CP.

2. Loan applicants must meet the following requirements:

a) Having full civil legal capacity, civil conduct capacity, and civil liability capacity as prescribed by law;

b) Having sufficient professional capacity and material conditions to implement the loan project as prescribed;

c) Implementing the provisions on loan guarantees as stipulated in Article 7 of this Circular and relevant laws;

d) At the time of applying for a loan, there are no overdue tax debts or bad debts at credit organizations or foreign bank branches;

e) Having at least 20% of the total investment capital of the project as their own capital participating in implementing the project.

3. Loan projects must meet the following requirements:

a) The project has been approved by the competent authority (including confirmation of environmental impact assessment according to the law on environmental protection);

b) The technology belongs to the lawful use of the borrower and does not belong to the list of restricted transfer technologies or prohibited transfer technologies;

c) The products of the project are produced and circulated in accordance with the law.

Article 6. Criteria for determining interest rates on loans and contents eligible for borrowing

1. The criteria for determining interest rates on loans shall be implemented in accordance with Clause 3, Article 13 of the Charter on Organization and Operation of the National Science and Technology Development Fund issued together with Decree No. 23/2014/NĐ-CP. Specifically, as follows:

a) Interest-free loans shall be provided for projects meeting the following criteria:

- Projects applying research results from scientific and technological tasks that have been accepted at the level of "satisfactory" or higher and recognized by competent authorities;

- Projects creating employment and income for at least five hundred direct participants in the production and consumption processes of the project in areas with special difficulties in socio-economic conditions. The list of areas with special difficulties in socio-economic conditions is specified in Appendix II of Government Decree No. 118/2015/NĐ-CP dated November 12, 2015 detailing and guiding the implementation of certain provisions of the Investment Law.

b) Loans shall be provided at an interest rate equal to seventy percent of the State's investment credit interest rate during each period applicable to projects applying research results from scientific and technological tasks that have been accepted at the level of "satisfactory" or higher and recognized by competent authorities;

c) Loans shall be provided at an interest rate equal to the State's investment credit interest rate during each period applicable to projects applying and transferring research results from science and technology from abroad in compliance with the Technology Transfer Law.

2. Contents of project implementation considered for borrowing include: purchasing raw materials, fuels, materials, tools, spare parts; purchasing machinery, equipment, production lines; purchasing trade secrets, technology transfer; hiring domestic and foreign experts.

Article 7. Guarantee for loans

1. The loan application must be guaranteed with collateral valued at a minimum of one hundred percent of the loan amount.

2. Acceptable guarantee measures include either of the following:

a) Bank guarantee;

b) Mortgage of property including land use rights and ownership of housing, means of transportation, machinery, equipment lines (including existing assets or future assets). Collateral assets must have a clear origin, be appraised by a reputable asset valuation organization (listed by the Ministry of Finance), be permitted for trading, be liquid, not be subject to disputes, and be insured against all risks throughout the guarantee period.

3. Procedures and formalities for securing loans and handling collateral assets shall be carried out in accordance with the law on securing loans and the secured contract signed.

Article 8. Loan Limits

1. The Fund shall provide loans up to seventy percent of the total investment capital of the project and not exceeding ten billion VND per project.

2. The loan term for a project shall not exceed thirty-six months.

3. The annual total loan amount shall not exceed twenty percent, and the total outstanding loan balance shall not exceed fifty percent of the Fund's charter capital. The annual total loan amount for projects specified in Point a and b, Clause 1, Article 6 of this Circular shall not exceed two-thirds of the planned loan amount approved.

Article 9. Entrusted Lending

1. Principles of Entrustment:

a) The Entrustment Fund operates to lend through an Entrustment Contract with the entrusted bank. The contents of the Entrustment Contract specify the obligations, rights, responsibilities of the Fund and the entrusted bank, and other matters agreed upon by the parties that comply with current laws on entrustment, lending from the Fund's capital as stipulated in this Circular, and related legal documents.

b) The entrusted bank performs entrusted transactions according to the Entrustment Contract and current laws governing credit provision by credit institutions and foreign bank branches to customers, and the procedures of the entrusted bank.

2. Requirements for the Entrusted Party:

a) Meeting the conditions for performing entrustment as prescribed in Article 8 of Circular No. 30/2014/TT-NHNN dated November 6, 2014, issued by the Governor of the State Bank of Vietnam on entrustment and entrustment performance by credit institutions and foreign bank branches (hereinafter referred to as Circular No. 30/2014/TT-NHNN);

b) Committing to provide credit of at least 30% of the total investment capital of the project approved for lending by the Fund, except in cases where the bank guarantees the customer 100% of the loan value;

c) In cases where multiple banks meet the above requirements, the Fund will select the bank with the lowest non-performing loan ratio at the time of considering the selection of the entrusted bank.

3. Content and Scope of Entrustment:

The Entrustment Fund entrusts the entrusted bank to perform tasks such as credit assessment; drafting and signing loan contracts, loan guarantee contracts; some tasks related to loan guarantees and handling loan guarantees; disbursing loan funds; supervising the use of loan funds; recovering loan funds, collecting interest, and other matters consistent with current regulations on entrustment and entrustment performance.

The specific content and scope of entrustment for each loan are stipulated in the Entrustment Contract.

4. Entrustment Fee:

The entrustment fee is negotiated between the Fund and the entrusted bank but shall not exceed 30% of the publicly announced entrustment fee of the entrusted bank at the time of signing the Entrustment Contract for each lending project.

5. Coordination Process:

a) The Fund and the entrusted bank shall sign the Entrustment Contract principle, agreeing on basic cooperation among the parties in accordance with Article 5 of Circular No. 30/2014/TT-NHNN.

b) The Fund organizes the evaluation and selection of projects based on scientific and technological criteria, determines the purpose of fund usage, and specifies the applicable interest rate according to Clause 1, Article 11 of this Circular, and sends the results to the entrusted bank.

c) The entrusted bank conducts credit assessment according to its regulations after receiving a request letter from the Fund for the project proposed for lending by the Board.

d) The Fund compiles the evaluation results of the Board and the credit assessment results of the bank to submit to the Fund Management Board for approval of lending.

đ) Based on the lending decision in writing by the Fund Management Board, both parties sign the detailed Entrustment Contract for the lending project.

e) The Fund and the entrusted bank fulfill their obligations and responsibilities in accordance with this Circular and the terms of the Entrustment Contract. The specific coordination process among the parties is detailed in the Entrustment Contract.

g) Both parties terminate the Entrustment Contract when all parties have fully performed their contractual obligations or when the contract is terminated according to the law.

Article 10. Registration Documents

1. Time for receiving documents: Annually, the Fund announces the deadline for submitting registration documents on its official website and provides guidance on related conditions and procedures.

2. The registration documents shall be prepared in two (2) sets in accordance with the Fund's regulations, including:

a) Application form for borrowing capital according to Model 01 attached to this Circular;

b) Project description applying research results and technological development to production and daily life according to Model 02 attached to this Circular;

c) Legal documents of the customer including business registration and company charter; documents proving legal capacity; documents proving the legal representative and approval document for the borrowing plan;

d) Legal documents of the project: approval documents from competent authorities and functional agencies regarding the investment project (if any). Licenses, copyrights for applied technology, construction items, import-export, product manufacturing of the project;

đ) Documents proving the financial capability, management capability, expertise, technical infrastructure of the customer: audited financial reports of the last two years; confirmation from tax authorities; human resources in relevant fields serving the implementation of the project; similar projects already implemented; land, factory buildings, machinery and equipment;

e) Guarantee documents for the loan: documents proving ownership, management rights, usage rights; asset valuation; risk insurance;

g) Other documents as prescribed by the entrusted bank.

3. The customer is responsible for providing complete and truthful information and documents related to the registration documents and bears legal responsibility for the accuracy of such information and documents.

4. Valid registration documents that comply fully with the provisions of Clause 2 of this Article will be submitted by the Fund Management Agency for evaluation and examination in accordance with the regulations.

Article 11. Organization of Evaluation, Examination, and Approval

1. Scientific and Technological Evaluation:

a) The Fund conducts scientific and technological evaluation of the proposed borrowing project through the Science and Technology Council established by the Fund (hereinafter referred to as the Council). The Council is responsible for advising the Fund on whether to lend or not lend, the amount of borrowing capital, interest rate, and term of borrowing.

b) The number, organizational structure, and working procedures of the Council are carried out in accordance with the Regulations issued by the Fund Management Board.

c) Content of Evaluation:

- Evaluation of the project's suitability with the scope and target borrowers specified in Article 1 and Clause 1 of Article 5 of this Circular;

- Evaluation and examination of the project's technology conducted in accordance with current laws.

d) The Council's evaluation results are recorded in the meeting minutes and sent to the Fund for subsequent actions:

- In cases where the Council recommends lending, the Fund sends the project documents to the entrusted bank for credit examination;

- In cases where the Council recommends not lending, the Fund sends a notification letter to the customer regarding the evaluation results of the project.

đ) In certain necessary cases upon request of the Council and approval by the Fund Management Agency, the Fund and the Council representative may conduct on-site examination at the project implementation site before concluding the evaluation results.

2. Credit Examination:

a) The credit examination of the project will be conducted by the entrusted bank in accordance with the organization's regulations and current state regulations for credit institutions and foreign bank branches.

b) The credit examination results of the entrusted bank are reported to the Fund in writing according to the model stipulated in the Entrustment Contract.

3. Project Approval:

a) Consolidation of Evaluation and Examination Results:

The Fund consolidates the Council's evaluation results and the entrusted bank's credit examination results to submit to the Fund Management Board for consideration and approval. A project proposed for borrowing by the Fund must be recommended for borrowing by the Council and for credit provision by the entrusted bank.

If the entrusted bank does not recommend credit provision, the Fund sends a notification letter to the customer regarding the evaluation and examination results of the project.

b) Notification of Project Approval Results:

The Fund is responsible for notifying in writing the entrusted bank and the customer about the Fund's decision to lend/not lend based on the project application after obtaining the approval decision from the Fund Management Board so that all parties can be informed and cooperate in implementation.

4. The maximum time for processing and announcing the evaluation and examination results of the project is six (6) months from the date of receipt of valid documents.

Article 12. Revocation of Loan Decisions

1. From the date the loan decision becomes effective until the time of signing the contract to implement the project, the Fund has the right to revoke the loan decision for the project if it discovers any of the following cases:

a) The customer has engaged in forgery, fraud, or made false declarations in the application documents for implementing the project;

b) Violation of the requirements for customers stipulated in Clause 2, Article 5 of this Circular;

c) There is overlap in the project implementation funds from other sources of the state budget.

2. Customers whose decisions are revoked must bear the forms of handling according to the current relevant regulations.

Article 13. Disbursement of Loan Funds

1. The Fund transfers the loan funds into a separate account opened for the Fund at the Entrusted Bank after signing the Entrustment Contract.

2. The Entrusted Bank shall carry out disbursements in accordance with the project progress, withdrawal periods specified in the Credit Agreement, in compliance with relevant laws, and provide the Fund with copies of related documents within three working days from the date of disbursement.

3. In cases where loan disbursements must be suspended and loans recovered ahead of schedule due to the customer's breach of agreements in the Credit Agreement, the Entrusted Bank must issue a written notice to the Fund for handling in accordance with the regulations.

Article 14. Management and Supervision of Loans

1. The Fund collaborates with the Entrusted Bank to conduct periodic or ad hoc inspections of loans as required for management purposes to ensure the effective use of loan funds.

2. The Fund supervises the Entrusted Bank's implementation of the Entrustment Contract to urge debt recovery, promptly handle any issues arising from the loan, and other related matters.

3. Inspection and supervision activities are recorded in minutes as a basis for handling and retaining records in accordance with regulations.

Article 15. Adjustment of Repayment Periods, Extension of Loans

1. The Fund considers and implements adjustments to repayment periods and extensions of loans in cases where customers are temporarily facing difficulties but have the ability to overcome them and cannot repay debts on time.

2. Two months before the repayment period, customers must submit a request for adjustment of repayment periods and extension of loans using Form 03 attached to this Circular, along with evidence of reasons for delay and new repayment plans to the Entrusted Bank and the Fund.

3. The Fund and the Entrusted Bank conduct inspections to verify the proper use of loan funds, assess new repayment plans, and present these to the Fund Director for decisions on adjusting repayment periods or the Fund Management Board for decisions on extending loans.

4. Each extension of the loan repayment period shall not exceed one-third of the term specified in the loan agreement. The total extended period for a loan project shall not exceed the original loan term.

5. For overdue loans that are not adjusted or extended, the overdue amount must be transferred to overdue debt and subject to an overdue interest rate of 150% of the in-term interest rate for both principal and interest, calculated from the overdue date. For interest-free loans, when extended, the customer must bear the interest rate equivalent to the State's investment credit interest rate published by the Ministry of Finance.

6. For adjustments to repayment periods, the Fund considers and decides within fifteen working days from the receipt of valid documents.

For loan extensions, the Fund considers and decides within forty-five working days from the receipt of valid documents.

Article 16. Information, Reporting, and Record Keeping System

1. Information and Reporting System:

The Fund shall be responsible for reporting to the Ministry of Science and Technology and relevant authorities on the situation of lending activities periodically once every one year or at any time upon management requirements.

2. Record Keeping:

a) The entrusted bank shall be responsible for establishing and preserving credit files in accordance with the bank's regulations and current state regulations applicable to credit organizations and foreign bank branches;

b) The entrusted bank shall be responsible for sending the Fund one set of credit files (certified copies from the bank) before settling the Entrustment Contract and when requested in writing by the Fund;

c) The Fund shall be responsible for preserving records in accordance with current state regulations. The records kept include: initial and ongoing records received from customers during the process; reports, working minutes, inspection minutes, credit decision documents; contracts, financial and legal documents, and related vouchers concerning the loan and collateral of the parties involved in the contract.

Article 17. Rights and Obligations of the Fund

1. Requesting customers to provide materials related to the loan project and refusing to lend if the project does not meet the requirements as assessed and reviewed according to Article 11 of this Circular.

2. Deciding on the selection of the entrusted bank to ensure safe, effective, and appropriate use of borrowed funds in compliance with relevant laws.

3. Having the right to supervise and inspect the entrusted bank's performance of the Entrustment Contract, while requiring the entrusted bank to report and provide materials and information about the implementation of the Entrustment Contract.

4. Cooperating with the entrusted bank to inspect and monitor the borrowing, use, and repayment processes of customers, inspect collateral, extend debt terms, and adjust repayment periods in accordance with regulations.

5. Refusing requests from the entrusted bank that violate agreements in the Entrustment Contract, handling violations within its authority or initiating legal proceedings when the entrusted bank breaches the Entrustment Contract.

6. Fully and timely implementing the transfer of entrusted capital and payment of entrustment fees to the entrusted bank as agreed in the Entrustment Contract.

7. Performing other rights and obligations as stipulated in the Entrustment Contract or as required by competent state agencies.

Article 18. Rights and Obligations of Borrowers

1. Refusing requests from the Fund and the entrusted bank that do not comply with legal provisions and agreements in the Credit Contract; lodging complaints or initiating legal actions against breaches of the Credit Contract according to the law.

2. Requesting capital disbursement when all conditions for disbursement are met.

3. Using borrowed funds for their intended purpose, fully and timely repaying principal, interest, and fees, and complying with all agreed terms in the Credit Contract.

4. Providing complete, timely, and truthful information and materials related to borrowing to the Fund and the entrusted bank. Cooperating and facilitating inspections and supervision by all parties as prescribed.

5. Reporting the results of project implementation to the Fund after the project ends.

6. Being liable under the law in case of breach of the Credit Contract.

Chapter III

IMPLEMENTING PROVISIONS

Article 19. Implementation

1. This Circular takes effect from November 1, 2016.

Decision No. 28/QD-HĐQLQ dated October 5, 2011 of the National Science and Technology Development Fund Management Board promulgating the Regulations on lending by the National Science and Technology Development Fund becomes invalid from the date this Circular takes effect.

2. In cases where legal normative documents cited in this Circular are amended, supplemented, or replaced by new legal normative documents, they shall be applied according to the new documents.

3. The National Science and Technology Development Fund shall be responsible for developing lending procedures, internal control mechanisms, risk assessment, and risk management measures to implement this Circular. During implementation, if there are difficulties or obstacles, organizations and individuals are advised to promptly reflect them to the Ministry of Science and Technology for review and amendment as necessary./.