Vietnam: Are borrowers other than credit institutions of foreign loans without the Government's guarantee required to have a plan for use of foreign loan capital?

Main Content

• Are borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam required to have a plan for use of foreign loan capital?
• What may borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam only use medium or long-term foreign loans for?
• What are the responsibilities of borrowers of foreign loans without the Government's guarantee in Vietnam?

Are borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam required to have a plan for use of foreign loan capital?

Under the provisions in Clause 4, Article 17 of Circular 08/2023/TT-NHNN on foreign loan purposes:

Foreign loan purposes

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4. The borrower shall be required to prove its foreign loan purposes by presenting:

a) Investment certificate, investment registration certificate or written approval for investment guidelines as prescribed by the investment law and other relevant law provisions, if the foreign loan capital is used for executing the borrower’s investment project;

b) The plan for use of foreign loan capital as prescribed in Clause 3 Article 7 of this Circular, if the foreign loan capital is used for executing the borrower’s business plans or other projects;

c) The debt restructuring plan as prescribed in Article 8 of this Circular, if foreign loan capital is used for restructuring the borrower’s foreign debts.

Under the above regulations, borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam must prove their foreign loan purposes by presenting:

- Investment certificate, investment registration certificate or written approval for investment guidelines as prescribed by the investment law and other relevant law provisions, if the foreign loan capital is used for executing the borrower’s investment project;

- The plan for use of foreign loan capital as prescribed in Clause 3 Article 7 of Circular 08/2023/TT-NHNN, if the foreign loan capital is used for executing the borrower’s business plans or other projects;

- The debt restructuring plan as prescribed in Article 8 of Circular 08/2023/TT-NHNN, if foreign loan capital is used for restructuring the borrower’s foreign debts.

Thus, borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam must also prove their foreign loan purposes by presenting the plan for use of foreign loan capital if the foreign loan capital is used for executing the borrower’s investment project.

What may borrowers other than credit institutions of foreign loans without the Government's guarantee in Vietnam only use medium or long-term foreign loans for?

According to the provisions of Clause 2, Article 17, Circular 08/2023/TT-NHNN on foreign loan purposes:

Foreign loan purposes

1. Purposes of a short-term foreign loan:

a) The borrower may only use the short-term foreign loan capital for restructuring its foreign debts and paying its short-term debts payable in cash (excluding outstanding principal amounts of domestic loans). Short-term debts payable mentioned in this Clause are those incurred by the borrower during its execution of investment projects, business plans and/or other projects, and determined in accordance with current regulations and guidelines on corporate accounting policies;

b) Apart from the purpose defined in Point a Clause 1 of this Article, the borrower that is required to achieve minimum levels of prudential indicators as prescribed by specialized laws is allowed to use the short-term foreign loan capital for its business operations within a maximum duration of 12 months from the day on which the foreign loan capital is withdrawn.

2. Purposes of a medium/long-term foreign loan:

The borrower may only use a medium/long-term foreign loan for the following purposes:

a) Executing its investment projects;

b) Executing its business plans or other projects;

c) Restructuring its foreign debts.

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Thus, borrowers other than credit institutions of foreign loans may only use a medium/long-term foreign loan for the following purposes:

- Executing its investment projects;

- Executing its business plans or other projects;

- Restructuring its foreign debts.

The borrower’s use of medium/long-term foreign loans must be conformable with:

- the borrower’s registered business lines, scope of its establishment license, investment certificate, investment registration certificate, written approval for investment guidelines, certificate of registration of cooperative or cooperative union or other documents of equivalent validity as prescribed by laws;

- the scope of other lawful operations prescribed in current legislative documents on charter on organization and operation of the borrower.

What are the responsibilities of borrowers of foreign loans without the Government's guarantee in Vietnam?

Under the provisions of Article 19 of Circular 08/2023/TT-NHNN, borrowers of foreign loans without the Government's guarantee in Vietnam have the following responsibilities:

- Comply with eligibility requirements for foreign loans laid down in this Circular and relevant law regulations on foreign exchange management.

- Comply with regulations of the civil code, laws on enterprises, investment, secured transactions, and anti-money laundering, specialized laws, relevant laws and international practices when entering into foreign loan agreements and getting foreign loans.

- Assume legal responsibility for the accuracy and truthfulness of documents proving purposes of the foreign loan, and use foreign loan capital for the purposes defined in such documents as prescribed in Clause 2 Article 14 and Clause 4 Article 17 of Circular 08/2023/TT-NHNN.

- Retain adequate documents proving the borrower’s use of the foreign loan capital for proper purposes as prescribed in Article 14 and Article 17 of Circular 08/2023/TT-NHNN, documents on changes in the capital demand statement (if any) as prescribed in Clause 4 Article 7 of Circular 08/2023/TT-NHNN, and present them to serve competent authorities’ inspection of use of foreign loan capital.

- Keep record of each idle amount of money in case the borrower makes term deposits at credit institutions and FBBs according to the rules for using foreign loan capital in Article 6 of Circular 08/2023/TT-NHNN, and present it together with the documents proving the borrower’s compliance with Article 6 of Circular 08/2023/TT-NHNN to serve competent authorities’ inspection of use of foreign loan capital, when required.