How shall violations committed by the obligor in Vietnam be handled?

How shall violations committed by the obligor in Vietnam be handled?

Pursuant to Article 46 of the Decree 91/2018/NĐ-CP stipulating actions against violations committed by the obligor in Vietnam as follows:

1. The obligor shall be considered to have acts of violation when failing to fulfill relevant obligations prescribed herein.

2. Within 60 days from the receipt of a notice from the Ministry of Finance, if the obligor fails to remedy his/her violations, the Ministry of Finance shall supervise financial sources of the obligor, and request the Prime Minister to reject the obligor’s application for government guarantee for a new loan, or on-lending of a foreign loan, or funding from state budget.

3. The Ministry of Finance shall impose specific sanctions on the obligor in the following cases of violation:

a) Request the lender to suspend the obligor’s withdrawal of funds if withdrawing documents are found to have mistakes, and then request the obligor to modify such withdrawing documents;

b) Increase the current government guarantee fee charged on the government-guaranteed loan or bond issue as approved by the Prime Minister by 10% in the following three years provided that total fee shall not exceed 2% per year if the obligor fails to allocate the owner’s equity as registered in the planning year or as regulated by law, or the obligor fails to carry out the mortgage procedures, fails to comply with reporting policies, fails to maintain the required balance in the Project Account, or fails to comply with other regulations herein.

What documents are included in the application for a government guarantee for bond issue made by the bank for social policies in Vietnam?

Pursuant to Article 47 of the Decree 91/2018/NĐ-CP stipulating the application for a government guarantee for bond issue made by the bank for social policies in Vietnam as follows:

1. The application for a government guarantee for an issue of bonds in the domestic market, made by the bank for social policies.

2. The scheme for bond issuance, including the following contents:

a) The needs for funds for execution of preferential credit programs according to the credit growth limit approved by the Prime Minister, including funds from issuance of guaranteed bonds;

b) The plan for raising funds for execution of preferential credit programs, including funds from issuance of guaranteed bonds;

c) Terms and conditions of bonds, including the quantity of bonds to be issued, term (01 year and longer), method for payment of bond principal and interest;

d) The plan for issuing bonds and using funds from issuance of bonds;

dd) The plan for using and managing funds from issuance of bonds, and repurchase and swap of guaranteed bonds (if any);

e) The plan for payment of bond principal and interest when they are due;

g) The obligor’s commitments to bondholders;

h) The finance of the bank for social policies over 03 years preceding the planning year, including owner’s equity, total assets, total funds raised, total revenue, total expense, difference between revenue and expense, provision of subsidies on interest rate difference and state management fees imposed upon the bank for social policies;

i) The raising and use of funds for execution of dedicated credit programs of each of the 03 years preceding the planning year, specifying:

- Total funds raised each year, sorted by source, including: funds from state budget, funds from issuance of guaranteed bonds and other sources; recovered loans; funds carriedforward from the preceding year.

- The use of funds in each year, including: repayment of due debts (including payment of principal of guaranteed bonds); execution of dedicated credit programs (opening balance, loans granted in the year, loans collected in the year and ending balance); funds carriedforward to the succeeding year and other used funds.

k) The issuance, payment of principal and interest of guaranteed bonds, and outstanding bonds over 03 years preceding the planning year.

3. The written approval for the scheme for bond issuance given by the Management Board of the bank for social policies, or its authorized person as defined in its charter.

4. Financial statements of 02 years preceding the year before the planning year audited by the State Audit Office or an independent audit firm (if the state audit office does not take charge of auditing financial statements of such years), and financial statements of the year before the planning year approved by General Director of the bank for social policies.

5. Documents proving the eligibility for issuance of guaranteed bonds as prescribed in Clause 2 Article 5 herein:

a) The Prime Minister’s decision on implementation of the Government’s plan for investment and development credit growth;

b) Documents of the Government, the Prime Minister approving other dedicated credit programs of the State (if they are not part of the credit growth plan approved).

What are procedures for application processing, guarantee limit and issuance of government guarantee made by the bank for social policies in Vietnam?

Pursuant to Article 48 of the Decree 91/2018/NĐ-CP stipulating application processing, guarantee limit and issuance of government guarantee made by the bank for social policies in Vietnam as follows:

1. Based on the application for issuance of guarantee for a bond issue and pursuant to regulations herein and relevant law regulations on bond issuance, the Ministry of Finance shall consider and comment on the bank’s scheme for bond issuance, and satisfaction of eligibility requirements for government guarantee, and submit a report to the Prime Minister for approval for the issuance of government guarantee and guarantee fee included in the annual borrowing and debt repayment plan. To be specific:

a) Within 10 working days after the Prime Minister approves the annual credit growth target, the bank for social policies (the applicant) shall submit 03 sets of application including the documents specified in Article 47 herein to the Ministry of Finance, that will inspect the adequacy and validity of the application, and request additional documents (if any);

b) Within 30 working days from the day on which adequate documents are received as prescribed in Point a Clause 1 of this Article, the Ministry of Finance shall consider and comment on the applicant’s annual plan for issuance of guaranteed bonds, and submit a report to the Prime Minister for approval.

c) A report submitted to the Prime Minister includes:

- The applicant’s eligibility for issuance of guaranteed bonds.

- The applicant’s operation and finance.

- Sources of funding for execution of dedicated credit programs and the plan for issuance of guaranteed bonds.

- The plan for using funds from issuance of guaranteed bonds.

- Proposed government guarantee limit of the planning year serving the dedicated credit programs approved by the Prime Minister.

2. The Prime Minister shall decide the limit on quantity of guaranteed bonds to be issued by the applicant in the annual public borrowing and debt repayment plan on the basis of the Government's decision on annual government guarantee limit. After the Prime Minister grants a written approval, the Ministry of Finance shall send the applicant a written notification for issuing bonds as prescribed in Article 49 herein.

3. While pending approval by the Prime Minister for the annual limit on the government guarantee for bonds issued by the applicant, the Ministry of Finance shall notify the applicant of the provisional limit on quantity guaranteed bonds to be issued in the first quarter of the planning year, which must not exceed the principal of guaranteed bonds to mature in the first quarter and the proposed guarantee limit. The notification shall be sent before December 31 of the year preceding the planning year.

4. The Ministry of Finance shall carry out procedures for confirmation of guarantor’s liability regarding the issued guaranteed bonds after receiving the applicant’s report on the bond issue as prescribed in Clause 4 Article 49 herein.

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