Decree No. 39/2014/NĐ-CP on the activities of finance companies and leasing companies

DECREE

Von the activities of finance companies and leasing finance companies

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Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

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

At the proposal of the Governor of the State Bank of Vietnam,

The Government issues a Decree on the activities of finance companies and leasing finance companies.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree stipulates the activities of finance companies and leasing finance companies.

Article 2. Applicability

1. Finance companies and leasing finance companies are established and operate in Vietnam.

2. Organizations and individuals related to the activities of finance companies and leasing finance companies as specified in Clause 1 of this Article.

Article 3. Explanation of Terms

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

1. A comprehensive finance company is a finance company that carries out activities prescribed in the Law on Credit Institutions and this Decree.

2. Specialized finance companies include factoring finance companies, consumer credit finance companies, and leasing finance companies as prescribed in this Decree and guidelines issued by the State Bank of Vietnam (hereinafter referred to as the State Bank).

3. A factoring finance company is a specialized finance company that primarily operates in the field of factoring as prescribed in this Decree.

4. A consumer credit finance company is a specialized finance company that primarily operates in the field of consumer credit as prescribed in this Decree.

5. A leasing finance company is a specialized finance company that primarily engages in leasing finance as prescribed in this Decree. Leasing finance receivables must account for at least 70% of total credit receivables.

6. Consumer credit is a form of credit extended for personal consumption purposes through lending operations including installment loans, consumer loans, and issuance of credit cards.

7. Leasing finance is a medium- to long-term credit activity based on a leasing finance contract between a leasing finance company and a lessee. The leasing finance company commits to purchasing leased assets according to the lessee's requirements and retains ownership of the leased assets throughout the lease period. The lessee uses the leased assets and pays rent throughout the lease term as stipulated in the leasing finance contract.

8. Leased assets (hereinafter referred to as leased property) are machinery, equipment, or other assets as prescribed by the State Bank. The State Bank provides detailed guidance on types of leased property for each period.

9. A leasing finance company (hereinafter referred to as lessor) is a leasing finance company or a finance company.

10. A lessee is an organization or individual operating in Vietnam, directly using leased property for their own operational purposes.

11. Rent is the amount of money that the lessee must pay to the lessor as agreed in the leasing finance contract.

12. A leasing finance contract is an irrevocable contract signed between the lessor and the lessee regarding leasing finance for one or more leased properties.

13. Buy and leaseback under the leasing finance format (hereinafter referred to as buy and leaseback) involves a leasing finance company purchasing machinery, equipment, or other assets as prescribed by law from the lessee's ownership and leasing those assets back to the lessee under the leasing finance format so that the lessee can continue to use them for their own operations. In a buy and leaseback transaction, the lessee simultaneously acts as the supplier of leased assets.

Article 4. Conversion of Business Form

1. A comprehensive financial company may supplement and amend the contents of its business activities as prescribed in this Decree to convert into a specialized financial company.

2. A specialized financial company shall not be allowed to supplement its business activities to convert into a comprehensive financial company.

3. Based on the results of inspections, examinations, and supervision by the State Bank and during the process of restructuring financial companies, the State Bank decides on mergers, consolidations, and conversions of business forms of financial companies.

Chapter II

ACTIVITIES OF FINANCIAL COMPANIES

Article 5. Banking Activities of Financial Companies

The general conditions for financial companies to conduct banking activities as stipulated in Clause 1, Article 108 of the Law on Credit Institutions:

1. The banking activities of financial companies must be recorded in the License for Establishment and Operation issued by the State Bank (hereinafter referred to as the License).

2. Have a staff with adequate qualifications, professional capabilities, material facilities, technology, means, equipment, and internal regulations as prescribed by law to carry out banking activities recorded in the License.

3. For banking activities related to foreign exchange operations, financial companies must comply with the provisions of the law on foreign exchange management.

4. Meet all operational conditions for banking activities as prescribed by the State Bank.

Article 6. Issuance of Deposit Certificates, Promissory Notes, Bills, Bonds to Raise Capital from Organizations

Financial companies are permitted to issue deposit certificates, promissory notes, bills, bonds to raise capital from organizations when they fully meet the following conditions:

2. Must have a minimum charter capital and investment capital of 5 billion VND.

2. Minimum period of operation, operational results, and business performance as prescribed by the State Bank.

3. Long-term securities issuance plans must be approved by the General Shareholders' Meeting or the Board of Directors, Board of Members in accordance with the law.

Article 7. Borrowing from Credit Institutions and Financial Organizations Domestically and Abroad

Financial companies are allowed to borrow from credit institutions and financial organizations domestically and abroad when they fully meet the following conditions:

2. Must have a minimum charter capital and investment capital of 5 billion VND.

2. Not falling under the cases where the State Bank applies measures to restrict, suspend, or temporarily suspend borrowing activities on the interbank market and have no overdue debts at other credit institutions, branches of foreign banks according to the State Bank's regulations.

Article 8. Borrowing from the State Bank in the Form of Refinancing

Financial companies are allowed to borrow from the State Bank in the form of refinancing when they fully meet the following conditions:

2. Must have a minimum charter capital and investment capital of 5 billion VND.

2. Meeting all conditions for refinancing loans as prescribed by the State Bank.

3. The purpose of borrowing aligns with the monetary policy objectives of the State Bank in each period.

Article 9. Lending, Including Installment Loans and Consumer Loans

Financial companies are allowed to lend, including installment loans and consumer loans, when they fully meet the conditions prescribed in Article 5 of this Decree.

Article 10. Bank Guarantees

Financial companies are permitted to engage in bank guarantee activities when they fully meet the following conditions:

2. Must have a minimum charter capital and investment capital of 5 billion VND.

2. Meeting all conditions for the guaranteed party and guarantor as prescribed by the State Bank.

Article 11. Factoring

1. A finance company may carry out factoring activities when it fully meets the following conditions:

b) Having sufficient floor area for indoor training fields to meet the requirements for sports activities as specified by the Minister of Culture, Sports and Tourism.

b) Having internal regulations on procedures, formalities, and principles for customer identification to closely monitor and ensure prevention of abuse for money laundering, terrorist financing, and other criminal purposes.

2. A finance company established and operating before the effective date of this Decree may supplement factoring activities when it fully meets the conditions stipulated in Clause 1 of this Article and the following conditions:

a) Having made a profit in at least the year immediately preceding the year in which the request to supplement the activity is made.

b) Having a minimum period of operation and a factoring business plan as prescribed by the State Bank.

c) Complying with the provisions on safety ratios in banking operations, loan classification, and risk reserve provisioning continuously throughout all quarters of the year immediately preceding the year in which the request to supplement the activity is made.

d) The non-performing loan ratio being below the level prescribed by the State Bank.

đ) Not having been administratively penalized in the monetary and banking sector within the one-year period immediately preceding the date of the request to supplement the activity.

Article 12. Issuing Credit Cards

1. A finance company may issue credit cards when it fully meets the conditions stipulated in Clause 1 of Article 11 of this Decree.

2. A finance company established and operating before the effective date of this Decree may supplement credit card issuance activities when it fully meets the conditions stipulated in Clause 1 of this Article and the following conditions:

a) The conditions stipulated in Points c, d, đ of Clause 2 of Article 11 of this Decree.

b) Having made continuous profits for at least two consecutive years immediately preceding the year in which the request to supplement the activity is made.

c) Having a minimum period of operation and a credit card issuance business plan as prescribed by the State Bank.

Article 13. Financial Leasing

1. A finance company may carry out financial leasing activities in accordance with the provisions on financial leasing in Chapter III of this Decree when it fully meets the following conditions:

a) The conditions stipulated in Clauses 1, 2, and 4 of Article 5 of this Decree.

b) Having internal regulations on procedures, formalities, and principles for customer identification to closely monitor and ensure prevention of abuse for money laundering, terrorist financing, and other criminal purposes.

2. A finance company established and operating before the effective date of this Decree may supplement financial leasing activities when it fully meets the conditions stipulated in Clause 1 of this Article and the following conditions:

a) The conditions stipulated in Point a and b of Clause 2 of Article 12 of this Decree.

b) Having a minimum period of operation and a financial leasing business plan as prescribed by the State Bank.

Article 14. Other Activities of Finance Companies

A finance company may carry out other activities prescribed from Article 109 to Article 111 of the Law on Credit Organizations.

Article 15. Activities of Factoring Finance Companies and Consumer Credit Finance Companies

1. Conditions for factoring activities for factoring finance companies:

a) The conditions stipulated in Clause 1 of Article 11 of this Decree.

b) Minimum factoring debt representing 70% of total credit granted or another ratio as prescribed by the State Bank during each period.

2. A factoring finance company may carry out the activities prescribed in Point a and e of Clause 1 of Article 108 of the Law on Credit Organizations, Articles 6, 7, 8, 11, and 14 of this Decree when it fully meets the conditions stipulated in this Decree, except for the following activities:

a) Guaranteeing corporate bond issuance, buying and selling corporate bonds.

b) Accepting entrusted capital from the Government, organizations, and individuals to implement investment activities in production and business projects.

c) Entrusting capital to other credit institutions to grant credit.

3. Conditions for consumer credit activities for consumer credit finance companies:

a) The conditions stipulated in Article 9 and/or Article 12 of this Decree.

b) Minimum consumer credit debt representing 70% of total credit granted or another ratio as prescribed by the State Bank during each period.

4. A consumer credit finance company may carry out the activities prescribed in Point a and e of Clause 1 of Article 108 of the Law on Credit Organizations, Articles 6, 7, 8, 9, 12, and 14 of this Decree when it fully meets the conditions stipulated in this Decree, except for the activities prescribed in Points a, b, and c of Clause 2 of this Article.

Chapter III

ACTIVITIES OF FINANCIAL LEASING COMPANIES

Article 16. Activities of financial leasing companies

1. Financial leasing companies shall carry out activities prescribed from Article 112 to Article 116 of the Law on Credit Institutions and as stipulated in this Decree.

2. Purchase and lease back.

3. Shall be allowed to sell receivables from financial leasing contracts to organizations and individuals in accordance with the regulations of the State Bank.

Article 17. Rights of lessors

1. Shall have ownership rights over leased assets throughout the lease period and such rights shall not be affected in case the lessee goes bankrupt, is dissolved, or has disputes or lawsuits before courts involving third parties. Leased assets shall not be considered as assets of the lessee when dealing with assets to settle debts for other creditors.

2. Shall have the right to mark the lessor's ownership symbol on leased assets throughout the lease period.

3. Shall have the right to request the lessee to provide collateral and other security measures as prescribed by law if necessary.

4. Shall have the right to request the lessee to provide information about the supplier, quarterly reports on production and business operations, annual financial settlement reports, and other issues related to the lessee and leased assets.

5. Shall have the right to inspect the management and use of leased assets.

6. Transfer their rights and obligations under the financial leasing contract to another leasing company. In this case, the lessor must notify the lessee in writing beforehand.

7. Request the lessee to compensate for damages when the lessee breaches the terms and conditions stipulated in the financial leasing contract.

8. Terminate the financial leasing contract prematurely and request the lessee to pay the remaining lease payments and any additional costs arising from the premature termination of the financial leasing contract due to the lessee's breach of the terms and conditions that serve as grounds for contract termination as specified in the financial leasing contract.

9. Have the right to recover leased assets when the lessee uses or exploits the leased assets contrary to the provisions of the financial leasing contract; request competent state agencies to apply measures as prescribed by law to ensure the lessor's exercise of ownership rights over the leased assets.

10. Have the right to recover leased assets that are damaged beyond repair or restoration, and request the lessee to pay the remaining lease payments and any additional costs arising from the recovery of the leased assets.

11. Other rights as stipulated in the financial leasing contract.

Article 18. Obligations of lessors

1. Assess the financial capacity and reputation of the supplier operating legally; leased assets including technical characteristics, types, prices, delivery and installation deadlines, warranty periods; the feasibility and effectiveness of investment projects for production and business operations, conditions for financial leasing, purposes of using leased assets, and the lessee's ability to repay debts.

2. Purchase and import leased assets according to the agreement of both parties in the financial leasing contract.

3. Register ownership rights and process insurance procedures for leased assets in accordance with the law.

4. The lessor shall not be responsible for the failure to deliver or incorrect delivery of leased assets not in accordance with the conditions agreed upon by the lessee with the supplier.

5. Fully and correctly perform all other terms and conditions stipulated in the financial leasing contract.

Article 19. The lessee has the right

1. To receive and use the leased asset in accordance with the provisions of the financial lease contract.

2. To decide whether to purchase the asset or continue leasing after the lease term ends.

3. To request the lessor to compensate for damages when the lessor breaches the terms and conditions stipulated in the financial lease contract.

4. Other rights as provided in the financial lease contract.

Article 20. The lessee has the obligation

1. To be responsible for selecting the leased asset, the supplier, and the terms and conditions related to the leased asset, including technical characteristics, type, price, delivery and installation period, warranty for the leased asset, and other relevant terms and conditions.

2. To use the leased asset for the agreed purpose in the financial lease contract; not to sell or transfer the right to use the leased asset to another individual or organization except where otherwise agreed upon in the financial lease contract.

3. To provide information about the supplier and quarterly reports on production and business operations, annual financial settlement reports, and other issues related to the leased asset as required by the lessor; to facilitate the lessor's inspection of the leased asset.

4. To pay rent and settle other costs related to the leased asset as stipulated in the financial lease contract.

5. To bear all risks of loss of the leased asset, to cover all maintenance, repair, and replacement costs of the leased asset during the lease term, and to be responsible for any consequences caused by the use of the leased asset affecting other organizations or individuals during the use of the leased asset.

6. Not to erase, deface, or damage the ownership markings attached by the lessor on the leased asset.

7. Not to use the leased asset as collateral, pledge, or security for other obligations.

8. To fully pay the remaining rent and other incidental costs when the leased asset is lost, damaged beyond repair, or when the financial lease contract is terminated prematurely due to the lessee's breach of the termination conditions stipulated in the financial lease contract.

9. To comply fully and correctly with other terms and conditions stipulated in the financial lease contract.

Article 21. Premature termination of the financial lease contract

1. The financial lease contract may terminate prematurely if any of the following situations occur:

a) The lessee fails to pay rent or breaches one of the termination conditions stipulated in the financial lease contract;

b) The lessee is declared bankrupt or dissolved;

c) The lessor breaches one of the termination conditions stipulated in the financial lease contract;

d) The leased asset is lost or damaged beyond repair;

đ) The lessor and the lessee agree that the lessee will pay the entire remaining rent before the lease term stipulated in the financial lease contract.

2. The lessor and the lessee shall specify in the financial lease contract the procedures for terminating the financial lease contract as provided in Clause 1 of this Article.

Article 22. Handling of the financial lease contract terminated prematurely

1. In cases where the financial lease contract is terminated prematurely as provided in Point a and b of Clause 1 of Article 21 of this Decree, the lessee must immediately pay the full remaining rent. If the lessee cannot pay the rent, the lessor shall handle the leased asset as follows:

a) The lessor shall send a written notice to the lessee, the People's Committee, and the public security agency at the main office location of the lessee or the location of the leased asset, informing them of the recovery of the leased asset and requesting these agencies to apply measures within their functions and powers as prescribed by law to maintain public order during the recovery process, ensuring the lessor's rights as the owner of the leased asset; to immediately recover the leased asset (except if the leased asset is an object or evidence in a criminal case being handled according to criminal law regulations); to grant compulsory loans to the lessee to cover costs incurred in recovering the leased asset when the lessee breaches the financial lease contract and does not voluntarily surrender the leased asset.

b) The lessee must immediately cease using and return the leased asset to the lessor as requested, without obstructing the recovery of the leased asset or continuing to possess or use it; to pay the full remaining rent as stipulated in the financial lease contract and incidental costs related to the recovery of the leased asset; to accept compulsory debt for the amount of the compulsory loan granted by the lessor to cover costs incurred in recovering the leased asset when the lessee breaches the financial lease contract and does not voluntarily surrender the leased asset.

2. In cases where the financial lease contract is terminated prematurely as provided in Point c and đ of Clause 1 of Article 21 of this Decree, the provisions of the financial lease contract shall be followed.

3. In cases where the financial lease contract is terminated prematurely as provided in Point d of Clause 1 of Article 21 of this Decree:

a) When the leased asset is lost or damaged beyond repair, the lessor must send a written notice to the local authority at the main office location of the lessee or the location of the leased asset, informing them of the loss or damage of the leased asset and requesting measures within their jurisdiction as prescribed by law to ensure the lessor's rights as the owner of the leased asset; to notify the lessee of the recovery of the damaged leased asset and request the lessee to pay the full remaining rent as stipulated in the financial lease contract and incidental costs related to the recovery of the leased asset;

b) The lessee must return the damaged leased asset as requested by the lessor, to pay the full remaining rent to the lessor as stipulated in the financial lease contract and incidental costs related to the recovery of the leased asset.

Article 23. Certificate of Ownership for Leased Property

During the lease period, the lessor shall hold the original Certificate of Ownership for the leased property. The lessee may use a certified copy issued by a competent state agency in legal relations related to the use of the property.

Article 24. Registration of Financial Lease Contracts

The registration of financial lease contracts shall be carried out in accordance with the provisions of the law.

Chapter IV

IMPLEMENTING PROVISIONS

Article 25. Transitional Provisions

1. Within twelve months from the date this Decree takes effect, finance companies and leasing companies established and operating under Licenses issued by the State Bank prior to the effective date of this Decree must ensure compliance with all conditions stipulated for regulated activities under this Decree.

2. Within eighteen months from the date this Decree takes effect, consolidated finance companies, consumer finance companies, and leasing companies established and operating under Licenses issued by the State Bank prior to the effective date of this Decree must cease activities not permitted under this Decree.

3. For financial lease contracts and loan contracts signed before the effective date of this Decree, leasing companies and customers may continue to perform according to the agreements already concluded until the end of the term of the financial lease contract or loan contract. Any amendments or supplements to these financial lease contracts and loan contracts can only be made if the amended or supplemented content complies with the provisions of this Decree.

4. For financial lease contracts signed before the effective date of this Decree, where the leased property is vessels participating in domestic and international routes, the lessee may retain and use the original Certificate of Ownership for the leased property in international legal relations related to the use of the property, while the lessor holds a certified copy issued by a competent state agency.

5. The State Bank shall provide specific guidance on the transition of finance companies as specified in Clause 1 and 2 of this Article.

Article 26. Responsibilities of Ministries and Sectors

1. The Ministry of Public Security, the Ministry of Justice, and the Ministry of Transport, based on their functions and tasks, shall guide or coordinate to guide the issuance and use of Certificates of Ownership for leased property and the use of certified copies of Certificates of Ownership for leased property, registration of ownership of leased property, ensuring the rights of the owner of the lessor over the leased property throughout the lease period.

2. The Ministry of Justice, based on its functions and tasks, shall be responsible for guiding or coordinating with the State Bank and relevant ministries and sectors to guide the registration of financial lease contracts.

3. The Ministry of Justice, the Ministry of Public Security, the State Bank, and local authorities with relevant functions and tasks shall be responsible for guiding or coordinating to guide the recovery and handling of leased property.

4. People's Committees and public security organs at the location where the lessee has its main office or where the leased property is located within their functions and tasks shall take measures as prescribed by law to maintain security and order during the recovery of leased property, ensuring that the lessor exercises its rights as the owner of the leased property.

Article 27. Effective Date

1. This Decree takes effect from June 25, 2014.

2. This Decree replaces Decree No. 79/2002/NĐ-CP dated October 4, 2002 of the Government on the organization and operation of finance companies, Decree No. 81/2008/NĐ-CP dated July 29, 2008 of the Government amending and supplementing certain articles of Decree No. 79/2002/NĐ-CP dated October 4, 2002 of the Government on the organization and operation of finance companies, Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of leasing companies, Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government amending and supplementing certain articles of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of leasing companies, and Decree No. 95/2008/NĐ-CP dated August 25, 2008 of the Government amending and supplementing certain articles of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of leasing companies.

Article 28. Responsibility for Implementation

The Minister, Heads of Ministries equivalent to Ministries, Heads of Government Agencies, Chairmen of People's Committees of provinces and centrally governed cities, and entities specified in Article 2 of this Decree are responsible for implementing this Decree./.