Decree No. 65/2005/ND-CP on Amending and Supplementing Certain Provisions of Decree No. 16/2001/ND-CP dated May 2, 2001 of the Government on the Organization and Operation of Financial Leasing Companies

DECREE

Regarding amendments and supplements to certain articles of Decree No. 16/2001/NĐ-CP

dated May 2, 2001 of the Government on organization and operation

of Financial Leasing Companies

THE GOVERNMENT

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

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 Articles 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 Articles of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

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

DECREE:

Article 1. Amending and supplementing certain articles of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on organization and operation of Financial Leasing Companies as follows:

1. Amend Clause 2 of Article 1 as follows:

"A financial leasing transaction must satisfy one of the following conditions:

a) Upon expiration of the lease term under the contract, the lessee has the right to transfer ownership of the leased asset or continue leasing the asset according to mutual agreement;

b) Upon expiration of the lease term under the contract, the lessee has the right to purchase the leased asset at a nominal price lower than its actual value at the time of repurchase;

c) The lease term for a type of asset must be at least 60% of the depreciation period of the leased asset;

d) The total lease payment for a type of asset specified in the financial leasing contract must be at least equivalent to the value of the asset at the time of signing the contract."

2. Supplement Clause 4, Clause 5 of Article 7 as follows:

"4. Lease payments are the purchase price of the leased assets, reasonable costs, and lease interest that the lessee must pay to the lessor under the lease contract.

5. Operating lease is a form of leasing assets where the lessee uses the leased assets of the lessor for a specific period and returns the assets to the lessor upon expiration of the lease term. The lessor retains ownership of the leased assets and receives lease payments according to the lease contract."

3. Amend Article 10 as follows:

"Financial Leasing Companies which have been granted licenses to operate by the State Bank of Vietnam must pay fees in accordance with the laws on fees and charges."

4. Supplement Clause 3 of Article 16 as follows:

"In cases of purchasing and re-leasing under the financial leasing form, the Ministry of Finance shall guide the tax payment procedures of financial leasing companies in accordance with the tax laws."

5. Supplement Clause 7 and Clause 8 of Article 16 as follows:

"7. Be allowed to conduct operating leases in accordance with the guidelines of the State Bank of Vietnam.

8. Be allowed to sell receivables from financial leasing contracts to organizations and individuals in accordance with the guidelines of the State Bank of Vietnam."

6. Amend Article 19 as follows:

"All financial leasing transactions must be registered at the Center for Registration of Security Transactions. The Ministry of Justice shall provide detailed guidance on registration procedures and the legal effect of registering financial leasing transactions.

In case the leased asset subject to security transactions is seized by competent state authorities due to the lessee's violation of the law, the financial leasing company is permitted to reclaim the leased asset for continued leasing. The lessee shall bear full responsibility for any violations of the law during the use of the leased asset."

7. Supplement Article 20 as follows:

"Financial Leasing Companies may register ownership of leased assets with the competent authority where the main office or branch of the financial leasing company is located or where the lessee resides or operates. The Ministry of Public Security, the Ministry of Justice, and the Ministry of Transport shall be responsible for guiding the implementation of this provision."

8. Amend Clause 7 of Article 23 as follows:

"7. Reduction of lease interest, extension, adjustment of payment terms, conversion of overdue lease payments according to the guidelines of the State Bank of Vietnam."

9. Amend Clause 1 of Article 28 as follows:

"In case the financial leasing contract is terminated prematurely under one of the circumstances stipulated in Clause 1 of Article 27 of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on organization and operation of Financial Leasing Companies, the lessee must immediately pay the remaining lease payments. If the lessee cannot make the lease payments, the financial leasing company shall handle the leased asset as follows:

a) The financial leasing company has the right to immediately recover the leased asset without waiting for a court judgment and demand the lessee to immediately pay the remaining lease payments under the contract. Any obstruction, possession, or use of the leased asset without returning it to the lessor is strictly prohibited;

b) After recovering the leased asset, within a maximum period of 60 (sixty) days, the lessor must complete the handling of the leased asset. The proceeds from the sale of the leased asset shall be used to settle the outstanding amount owed by the lessee and the costs incurred in recovering the leased asset. If the proceeds are insufficient to cover these amounts, the lessee shall be responsible for paying the shortfall to the lessor;

c) If the lessee has already paid part of the lease payments and the financial leasing company has completed the handling of the leased asset, if the proceeds exceed the lease payments due under the contract and the costs incurred in recovering the leased asset, the financial leasing company shall refund the excess to the lessee;

d) During the period when the lessor is handling the leased asset, if the lessee can fully repay the lease payments due under the contract, the lessor shall transfer ownership of the leased asset to the lessee as if the lease contract had been fulfilled;

đ) Within thirty days from the date the lessee receives the notice of recovery of the leased asset from the lessor, the lessee shall be responsible for returning the leased asset to the lessor;

e) Entrust the State Bank of Vietnam, the Ministry of Public Security, the Ministry of Justice, and relevant local authorities to guide financial leasing companies in recovering and disposing of leased assets."

10. Amend Article 37 as follows:

"Financial Leasing Companies are not allowed to purchase or invest in fixed assets exceeding 50% of their own capital. Assets used for financial leasing and operating leases are not included in the calculation of fixed assets under the above provisions."

11. Supplement Clause 3 of Article 39 as follows:

"3. Foreign credit organizations of wholly foreign-owned financial leasing companies are allowed to conduct internal audits of the operations of wholly foreign-owned financial leasing companies in Vietnam."

Prior to conducting an internal inspection, the foreign credit institution must provide written notice to the State Bank of Vietnam regarding the content, start date, and end date of the inspection. Within thirty (30) days from the completion date of the internal inspection of a wholly foreign-owned leasing company in Vietnam, the foreign credit institution must submit a report to the State Bank of Vietnam on the results of the inspection.

Article 2. Amend the phrase "Total value of leased assets" in Clause 2, Article 30 and "Total amount of financial leasing" at Point a, Clause 2, Article 31 to "Total outstanding financial leasing debt."

Article 3. Implementation Provisions

1. This Decree shall take effect fifteen days after its publication in the Official Gazette.

2. The State Bank of Vietnam and relevant ministries and sectors shall be responsible for guiding the implementation of this Decree.

3. The ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, and chairpersons of provincial people's committees under central cities shall be responsible for enforcing this Decree.