In Vietnam: Cases in which withdrawal of loan proceeds or debt repayment is not carried out through foreign loan accounts

In Vietnam: Cases in which withdrawal of loan proceeds or debt repayment is not carried out through foreign loan accounts

Pursuant to Article 34 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating cases in which withdrawal of loan proceeds or debt repayment is not carried out through foreign loan accounts in Vietnam as follows:

1. Cases in which withdrawal of loan proceeds is not carried out through foreign loan accounts include:

a) Withdrawing loan proceeds in the form that the borrower directly pays the non-resident beneficiary providing goods or services under goods or services sale and purchase contracts with residents being the creditor;

b) Withdrawing foreign loan proceeds in the form of finance lease;

c) Withdrawing loan proceeds through the account that the borrower opens abroad in case the borrower is allowed to open accounts abroad for arrangement of foreign loans;

d) Withdrawing loan proceeds from mid-term, long-term foreign loans through settling or clearing against direct payment obligations to the creditor, including: payment obligation under the goods import contract, obligation to repay foreign loan debt, the obligation to repay the indebtedness amount under the provisions of this Circular directly to the creditor;

dd) Withdrawing loan proceeds in case the amount of money for investment preparation is converted into a foreign loan as agreed between the parties in accordance with the law on foreign exchange management for foreign direct investment activities into Vietnam.

2. Cases in which debt repayment is not carried out through foreign borrowing and foreign debt repayment accounts include:

a) Paying debts by means of providing goods or services for the borrower;

b) Paying debts in the form that the creditor and the borrower agree to convert the outstanding debt into shares or contributed capital of the borrower;

c) Paying debts in the form that the creditor and the borrower agree to swap the outstanding debt into shares or contributed capital owned by the borrower;

d) Paying debts incurred from mid-term or long-term loans through settling or clearing against direct receivables with the borrower;

dd) Paying debts through the account that the borrower opens abroad (in case the borrower is allowed to open accounts abroad for arrangement of foreign loans).

3. Within 05 working days from the date of withdrawal of loan proceeds or debt repayment in the cases specified in Clauses 1 and 2 of this Article, the borrower is responsible for notifying and sending documents proving the withdrawal of loan proceeds, debt repayment in the form of not using the foreign loan account so that the account service provider knows and continues to monitor the borrower's foreign loan.

What are regulations on performance of guarantee obligations regarding security of conventional loans in Vietnam?

Pursuant to Article 35 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating performance of guarantee obligations regarding security of conventional loans in Vietnam as follows:

1. As for guaranteed foreign loans, the guarantor shall perform guarantee obligations to the foreign creditor (the obligee) as requested under commitments of the loan agreement, written guarantee commitments (letter of guarantee, guarantee contract or other guarantee commitments) which have been reached between parties involved, not contrary to applicable laws.

2. The guarantor is a resident who transfers money to fulfill the guarantee obligations through a bank providing secured transactions (except for the case specified in Clause 3 of this Article).

3. In case the guarantor is a credit institution or foreign bank branch in Vietnam, the guarantee money transfer is not required to do through the bank providing secured transactions. Credit institutions, foreign bank branches in Vietnam that provide guarantees for foreign loans are responsible for complying with the provisions of law on bank guarantees and notifying the account service provider about the guarantee amount provided.

What are regulations on performance of security obligations in the form of collateralized security regarding security of conventional loans in Vietnam?

Pursuant to Article 36 of the Circular 12/2022/TT-NHNN (takes effect from 15/11/2022) stipulating performance of security obligations in the form of collateralized security regarding security of conventional loans in Vietnam as follows:

1. When a collateralized security obligation arises for a foreign loan, the grantor shall perform the security obligation in accordance with the commitments in the loan agreement and the guarantee agreements which are not contrary to Vietnamese law on secured transactions and other relevant laws.

2. The transfer of the proceeds after realizing the collateral in the Vietnamese territory to the creditor or the creditor's representative to perform the obligation to secure the property (hereinafter referred to as the "money transfer to perform collateralized security obligation”) must be done through 01 bank providing secured transactions as prescribed in this Circular.

3. In case of realization of collateral in the form that the secured party receives the collateral itself to replace the performance of the obligation, the borrower is responsible for notifying the account service provider of information about the debt obligation that has been paid in the form that the secured party receives the collateral itself to replace the performance of the obligation.

Best regards!