What are the instructions for conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
- What are the instructions for conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
- When is the time of conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
- How to handle if the obligor fails to comply with regulations on loan guarantee applied to foreign loans on-lent by the Government in Vietnam?
What are the instructions for conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
Pursuant to Clause 1, Article 5 of Circular 139/2015/TT-BTC, there are instructions for conclusion of guarantee contract in the event that the Ministry of Finance undertakes direct on-lending as follows:
(1) The obligor shall recommend an organization acting on behalf of the Ministry of Finance to perform loan guarantee operations, sign the guarantee contract, inspect and supervise pledged assets used as collateral for on-lent foreign loans on the basis of mutual agreements on the fee for the service provided by this organization and in conformity with requirements:
The organization acting on behalf of the Ministry of Finance to perform loan guarantee operations, inspect and supervise pledged assets used as collateral for on-lent foreign loans shall be selected if it meets the following requirements:
- Have sufficient competence in and capability of performing loan guarantee operations, signing guarantee contracts, inspecting, supervising and dealing with pledged assets in accordance with legal regulations.
- Demonstrate that it is one of the credit institutions qualified to perform banking operations to assist projects for on-lending of the Government’s foreign loans as released by the State Bank in the chosen year, or the preceding year; or is one of the organizations having good financial health and excellent past performance of management of pledged assets used as collateral for loans on-lent by the Government.
- Obtain approval from the obligor that then submits the written request to the Ministry of Finance.
(2) Conclusion of the service provision contract to perform loan guarantee operations:
- If the Ministry of Finance accepts the obligor’s aforesaid recommendation, the Ministry of Finance shall carry out loan guarantee operations by taking the following action: The Ministry of Finance and the obligor shall together enter into the service provision contract to perform loan guarantee operations with the organization acting on behalf of the Ministry of Finance to perform loan guarantee operations recommended by the obligor by filing the form stipulated in Appendix 1 of Circular 139/2015/TT-BTC.
- If the Ministry of Finance refuses the obligor’s aforesaid recommendation, the Ministry of Finance shall send the written response to the obligor and request them to select other organization.
(3) The loan guarantee contract shall be signed between the organization acting on behalf of the Ministry of Finance to perform loan guarantee operations as stated in (2) and the obligor, and shall be executed according to the rules of this organization which are applied to the loan guarantee given by customers having normal credit relationship.
(4) In some special or particular cases, if it is impossible to authorize the organization acting on behalf of the Ministry of Finance to perform loan guarantee operations, the Ministry of Finance shall directly perform relevant operations as follows:
- With regard to assets which have already come into existence, the Ministry of Finance and the obligor shall enter into the loan guarantee contract by adopting the form given in the Appendix 2 hereof on the basis of the confirmation of the book value of assets used as collateral for loans provided by an independent auditing company under the provisions of Clause 11 Article 3 of Circular 139/2015/TT-BTC.
- With regard to assets which will be formed in the future:
+ The Ministry of Finance and the obligor shall mutually enter into the contract for collateralization of assets formed in the future by adopting the form given in Appendix 3 of Circular 139/2015/TT-BTC.
+ The Ministry of Finance and the obligor shall mutually agree on the appendix to the contract for collateralization of assets formed in the future by adopting the form given in Appendix 4 hereof which is relevant to the actual progress of formation of these assets from Government-backed loans.
+ The obligor shall be liable for expenses arising during the process of performing loan guarantee operations (including inspection, supervision and handling of pledged assets) under the provisions of Clause 5 Article 3 of Circular 139/2015/TT-BTC.
What are the instructions for conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
When is the time of conclusion of guarantee contract in the event that the Ministry of Finance of Vietnam undertakes direct on-lending?
Pursuant to Article 6 of Circular 139/2015/TT-BTC with the following provisions:
Time of conclusion of guarantee contract
1. The loan guarantee contract or the contract for collateralization of assets formed in the future shall be signed between the obligee and the obligor within the period which is not later than the first disbursement of the on-lent loan.
2. If it is impossible to sign the loan guarantee contract or the contract for collateralization of assets formed in the future prior to the first disbursement of the on-lent loan on objective grounds, involved parties shall be responsible for reporting to the Ministry of Finance to clearly state the reasons. Such parties shall conclude the contract prior to the second loan disbursement.
3. If these parties fail to sign the loan guarantee contract or the contract for collateralization of assets formed in the future under the provisions of Clause 2 of this Article, the obligee shall report to the Ministry of Finance to temporarily suspend the next loan disbursement of the borrower (the obligor), or to competent authorities for consideration and decision-making purposes.
Accordingly, the time of signing the loan guarantee contract for the Government's on-lending of foreign loans is determined as prescribed above.
How to handle if the obligor fails to comply with regulations on loan guarantee applied to foreign loans on-lent by the Government in Vietnam?
Pursuant to Article 17 of Circular 139/2015/TT-BTC, if the obligor fails to comply with regulations on loan guarantee under the provisions of this Circular applied to foreign loans on-lent by the Government, the Ministry of Finance shall report to the Prime Minister to take one or several of the following measure(s):
- Temporarily suspend the loan disbursement if the obligor is withdrawing their loan funds.
- Prematurely recover all of disbursed loan amounts.
- Refuse to approve new loans taken out by the defaulting obligor.
- Apply other relevant measures in compliance with legal regulations.
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