Circular No. 89/2004/TT-BTC guiding the handling of risks related to state investment development credit capital

CIRCULAR

Guidelines for Handling Risks of State Development Investment Credit Capital

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Implementing Decree No. 106/2004/NĐ-CP dated April 1, 2004 of the Government on State Development Investment Credit, the Ministry of Finance guides the handling of risks of State development investment credit capital at the Fund for Development Support as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of application:

1.1. Investors from all economic sectors with projects borrowing State development investment credit capital or guaranteed by the Fund for Development Support (hereinafter referred to collectively as State development investment credit capital borrowing projects) encountering financial difficulties and failing to repay loans due to objective and irresistible reasons; dissolution, bankruptcy; State policy adjustments.

1.2. State-owned enterprises subject to ownership conversion, organizational restructuring, and financial difficulties with projects borrowing State development investment credit capital from the Fund for Development Support.

1.3. The Fund for Development Support.

2. Scope of Risk Handling:

2.1. Overdue debts or the entire outstanding loan balance of State development investment credit capital borrowing projects encountering risks due to objective and irresistible reasons; dissolution, bankruptcy; State policy adjustments.

2.2. The handling of overdue debts or the entire outstanding loan balance of State development investment credit capital will be considered on a case-by-case basis based on the extent of loss, the cause of risk, and the borrower's ability to repay.

3. Measures for Handling Risks:

3.1. Loan extension;

3.2. Debt write-off;

3.3. Interest exemption or reduction;

3.4. Debt cancellation (principal and interest).

4. Principles for Handling Risks:

4.1. The examination and handling of risks shall only be carried out for State development investment credit capital borrowing projects encountering difficulties due to objective reasons as specified above.

4.2. The examination and handling of risks must be linked to the borrower, the extent of loss, based on the proposal of the Investor (or representative of the borrower) confirmed by the competent state management agency.

4.3. A project may simultaneously apply multiple risk handling measures. Based on the results of debt classification according to the causes of risk, appropriate handling measures shall be applied as prescribed.

4.4. Debts that have been handled according to decisions of competent state agencies do not fall within the scope of adjustment under this Circular.

5. Time for Examining and Handling Risks:

5.1. In cases where the Investor is a state-owned enterprise subject to ownership conversion, organizational restructuring, and financial difficulties, the examination and handling of risks shall be conducted before the enterprise conversion.

5.2. In cases where the Investor encounters risks due to objective and irresistible reasons; dissolution, bankruptcy; or due to State policy adjustments, the examination and handling of risks shall be carried out in batches based on the proposal of the Fund for Development Support and approval by the Ministry of Finance.

II. SPECIFIC PROVISIONS

1. Debt Classification According to Risk Causes:

1.1. Due to Objective and Irresistible Reasons, including:

a) The Investor encounters difficulties due to natural disasters, fires, epidemics, wars, unexpected accidents causing damage to the borrowing project;

b) The Investor dies or goes missing without a legal heir, leaving no assets to repay debts after all debt recovery measures have been applied;

c) The Investor has a decision on dissolution or bankruptcy issued by a competent state agency, and after liquidation according to regulations, there is no source left to repay debts;

1.2. Due to State Policy Adjustments Directly Affecting the Business Operations of the Investor Leading to Financial Difficulties in Repaying Loans, Specifically:

a) The project is banned from production, product sales, or raw material supply;

b) The project has been invested but suspended from operation or stopped according to a decision by a competent state agency;

1.3. Financial Difficulty Resolution Due to Conversion:

The Investor is a state-owned enterprise subject to shareholding reform, transfer, lease, or business contracting according to a decision by a competent state management agency..

2. Measures for Handling Risks:

Handling risks is based on the extent of loss and the financial capacity of each investor, specifically:

2.1. Loan Extension

Loan extension involves adjusting the grace period, repayment term, installment periods, and repayment amount in each installment period.

It applies to projects damaged due to the causes listed in sub-item a, Point 1.1, where the investor still has the ability to repay, and the cases stipulated in Points 1.2 and 1.3, Section 1, Part II.

2.2. Debt Write-off

Debt write-off is a temporary measure of not collecting the principal debt within a certain period and not charging interest on the principal debt during that period.

It applies to projects damaged due to the causes listed in sub-item a, Point 1.1, where the investor still has the ability to repay, and the cases stipulated in Points 1.2 and 1.3, Section 1, Part II.

2.3. Interest Exemption or Reduction

Interest exemption or reduction involves not collecting or only partially collecting overdue interest as stipulated in the credit agreement between the Fund for Development Support and the investor.

It applies to the cases stipulated in Section 1, Part II.

2.4. Debt Cancellation

Debt cancellation involves not collecting the principal and interest (if any) from investors who encounter risks after exhausting all possible sources of repayment.

It applies to the cases listed in sub-items b and c of Point 1.1, Section 1, Part II, where the investor no longer has the ability to repay after exhausting all possible sources of repayment. For investors subject to shareholding reform as stipulated in Point 1.3, Section 1, Part II, only interest cancellation will be implemented, and the total interest canceled shall not exceed the accumulated losses up to the time of shareholding reform.

3. Documentation for Handling Risks:

3.1. Loan Extension:

Proposals for examining and adjusting the grace period; repayment term, installment periods, and repayment amount in each installment period shall be carried out according to the regulations of the General Director of the Fund for Development Support.

3.2. Debt Write-off:

a) A written request for debt write-off from the investor or the representative of the borrower as prescribed by law;

b) Written opinions from higher-level state management agencies regarding the investor's request for debt write-off (for state-owned enterprise investors);

c) A feasible plan for reorganizing production and business operations and a repayment plan after debt write-off, approved by the Branch of the Fund for Development Support;

d) Financial reports for the two most recent years.

đ) Credit contract, loan agreement, statement of outstanding balance up to the time of request for handling, confirmed by the Branch of the Development Support Fund.

e) In cases where the project owner suffers partial damage to assets, there must be a record confirming the damage in accordance with point 3.4, clause 3, part II.

g) For cases where the project owner is a State-owned Enterprise undergoing ownership transfer, in addition to the above documents, they must also submit the Decision on Ownership Transfer issued by the competent authority.

3.3. Waiver or reduction of interest rates:

a) A written request from the project owner or representative of the borrowing party for waiver or reduction of interest on borrowed funds in accordance with the provisions of the law;

b) Written opinion of the higher-level state management agency regarding the project owner's request for waiver or reduction of interest on borrowed funds (for project owners that are State-owned Enterprises);

c) Financial reports of the enterprise for the two most recent years;

d) Credit contract, loan agreement, statement of outstanding balance confirmed up to the time of request for handling;

đ) In cases where the project owner suffers partial damage to assets, there must be a record confirming the damage in accordance with point 3.4, clause 3, part II.

3.4. Debt write-off:

a) A written request for debt write-off from the project owner or representative of the borrowing party in accordance with the provisions of the law.

b) Written opinion of the higher-level state management agency regarding the project owner's request for debt write-off (for project owners that are State-owned Enterprises);

c) Record of damage caused by the project owner, clearly stating the extent (quantity) and value of the damage, confirmed by the competent authority at the local level at the time of occurrence, specifically:

- For enterprises: Confirmation by the People's Committee of the ward (commune) where the damage occurred; confirmation by the relevant functional agency at the provincial (city) level (storm and flood prevention agency, veterinary agency, insurance agency, etc., depending on specific circumstances); confirmation by the Department of Finance; confirmation by the Branch of the Development Support Fund; confirmation by the People's Committee of the province (city).

- For Cooperatives: Confirmation by the People's Committee of the ward (commune) where the damage occurred; confirmation by the relevant functional agency at the district (county) level (storm and flood prevention agency, veterinary agency, insurance agency, etc., depending on specific circumstances); confirmation by the Branch of the Development Support Fund and the People's Committee of the district (county).

- For private individuals, sole proprietors, households engaged in production and business: Confirmation by the People's Committee of the ward (commune); Police Station of the ward (commune); Branch of the Development Support Fund.

d) Credit contract, loan agreement, statement of outstanding balance up to the time of request for handling, confirmed by the Branch of the Development Support Fund.

đ) Resolution on dissolution by the competent authority or Bankruptcy Declaration by the Court, along with the final settlement report upon dissolution of the enterprise (in case of enterprise dissolution) or asset liquidation report (in case of enterprise bankruptcy).

e) Documents and papers proving that the project owner has died, gone missing, or suffered an accident rendering them unable to work, confirmed by the police station managing the household registration; confirmation by the People's Committee of the ward (commune) where the project owner resides regarding the absence of assets to repay debts and the lack of heirs according to the law.

g) For cases where the project owner is a State-owned Enterprise undergoing ownership transfer, in addition to the above documents, they must also submit the Decision on Ownership Transfer issued by the competent authority.

4. Procedures and formalities for risk handling

4.1. The project owner who requests handling of debts shall be responsible for preparing the required documentation in accordance with regulations and submitting it to the Branch of the Development Support Fund where the transaction took place.

4.2. The Branch of the Development Support Fund shall review and provide a written opinion on the risk handling request, sending it back to the Development Support Fund along with the project owner's debt handling documentation.

4.3. The Development Support Fund shall review and consolidate the requests from the project owner and the Branch of the Development Support Fund for consideration and handling within its authority or propose measures for risk handling to the Ministry of Finance.

4.4. The Ministry of Finance shall handle within its authority or report to the Prime Minister for consideration and decision.

4.5. Based on the decisions on risk handling made by authorized state management agencies, the Development Support Fund shall guide and organize implementation in accordance with regulations.

5. Authority and responsibility for risk handling:

5.1. Development Support Fund:

a) The General Director of the Development Support Fund shall examine and decide on the extension of debt repayment periods for each project, up to a maximum of one-third of the loan term stipulated in the initial credit contract; the total loan period and extended debt repayment period shall not exceed the maximum loan term specified for each type of entity.

b) The Development Support Fund shall report to the Ministry of Finance for submission to the Prime Minister for consideration of debt extension for projects where the total extended debt repayment period and loan period exceed the maximum loan term specified.

c) Guide the project owner in preparing risk handling documentation in accordance with regulations; review risk handling documentation and compile reports for the Ministry of Finance; organize implementation of risk handling decisions made by authorized authorities.

5.2. Ministry of Finance:

a) The Minister of Finance shall organize a review of the risk handling proposals of the General Director of the Development Support Fund; submit to the Prime Minister for decision on debt extension for projects where the total extended debt repayment period and loan period exceed the maximum loan term specified, write-off of debts, waiver and reduction of interest rates, and write-off of debts for the project owner.

b) Announce the results and guide the Development Support Fund in organizing implementation of risk handling in accordance with the Prime Minister's decision.

c) Propose solutions for cases where the risk reserve fund is insufficient to cover losses for submission to the Prime Minister for consideration and decision.

III. SOURCES FOR RISK HANDLING

1. The establishment and allocation of the risk reserve fund shall be carried out in accordance with Article 20 of Decree No. 106/2004/ND-CP dated April 1, 2004, and guidelines issued by the Ministry of Finance.

2. Based on the Prime Minister's decision on risk handling, the Development Support Fund shall use the allocated risk reserve fund to cover the following situations:

a) Principal debt written off;

b) The shortfall between the outstanding principal loan balance at the Development Support Fund at the time of risk handling and the amount recovered from selling the debt.

If the risk reserve fund is insufficient to cover the shortfall, the General Director of the Development Support Fund shall report to the Minister of Finance for submission to the Prime Minister for consideration and decision.

3. Unrecoverable interest due to debt write-off and write-off shall be compensated by the state budget for the difference in interest rates according to current regulations.

IV. IMPLEMENTATION

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

2. The General Director of the Development Support Fund shall guide and organize the implementation in accordance with the provisions of this Circular.

3. The Chairman of the Management Board, the General Director of the Development Support Fund, and the Project Investors from all economic sectors that have projects borrowing credit for investment development from the State shall be responsible for implementing this Circular.