What are regulations on inspection and supervision of government-guaranteed loan or bond issue in Vietnam?

What are regulations on inspection and supervision of government-guaranteed loan or bond issue in Vietnam?

Pursuant to Article 40 of the Decree 91/2018/NĐ-CP stipulating inspection and supervision of government-guaranteed loan or bond issue in Vietnam as follows:

1. The Ministry of Finance has the right to conduct regular supervision of fulfillment of obligations by the obligor, including:

a) The withdrawal of funds according to the registered plan;

b) The payment of debts;

c) The allocation of owner’s equity by the enterprise executing the investment project;

d) Provision of collateral for loan by the enterprise executing the investment project;

dd) The obligor’s performance of additional commitments as requested by the Government or the Prime Minister in each specific case.

2. In case the obligor denotes financial difficulties, or fails to fulfill its obligations, or there is an outstanding debt of the loan or bond issue, or an outstanding debt to the Accumulation Fund for Debt Repayment of group 4 or group 5 as regulated in Article 37 herein, the Ministry of Finance has the right to inspect the project’s financial status, or request the representative agency (if any), or the governing body to inspect the project's financial status, determine reasons and submit report thereof the Prime Minister for consideration.

3. The obligee shall share information about supervision or inspection reports (if any) within the permitted scope with the guarantor for the purpose of risk management.

What are regulations on repayment of government-guaranteed loan or bond issue in Vietnam?

Pursuant to Article 41 of the Decree 91/2018/NĐ-CP stipulating repayment of government-guaranteed loan or bond issue in Vietnam as follows:

1. The obligor shall allocate funding to ensure the repayment of loan or bonds in full and on schedule.

2. If an obligor is not willing to repay debts, the guarantor (the Ministry of Finance) is entitled to:

a) Request the Serving Bank to transfer money from the obligor's Project Account to pay debts to the obligee;

b) Request the Serving Bank to request credit institutions where the obligor’s deposit accounts are opened to transfer money from these deposit accounts to pay debts in case the Project Account’s balance is not enough to pay debts;

c) Request the obligor that has purchased credit insurance for the government-guaranteed loan or bond issue under regulations in Point c Clause 3 Article 55 of the Law on public debt management to contact the insurer to fulfill debt obligations as defined in the signed insurance policy.

3. Debt repayment by the parent company (if any) or group of majority shareholders:

a) If the obligor is not able to pay debts, 06 months before the debt repayment term, the obligor must send report to its parent company (if any) or the group of shareholders holding at least 65% in the aggregate of charter capital as registered with the Ministry of Finance in order to repay debts on behalf of the obligor; in this case, the obligor is also required to send the copies of that report to the Ministry of Finance and the representative agency (if it is a state-owned enterprise, or an enterprise of which more than 50% of charter capital is held by the state);

b) If the parent company, or the group of shareholders holding at least 65% in the aggregate of charter capital as registered with the Ministry of Finance, is unable to repay debts on behalf of the obligor, the obligor must, at least 03 months before the due date, submit a report to the Ministry of Finance to consider giving an approval for a forced loan from the Accumulation Fund for Debt Repayment to pay debts to the obligee under regulations in Article 42 and Article 43 herein. In such case, the obligor shall bear the supervision of the Ministry of Finance under regulations in Clause 2 Article 37 and Clauses 2, 3 Article 38 herein.

The Ministry of Finance shall cooperate with relevant authorities in submitting a consolidated report, indicating measures for debt repayment in this case, to the Prime Minister. The obligor must strictly implement the measures for debt repayment given approval by the Prime Minister.

4. If the obligor is absolutely insolvent (it is unable to restart production from the receipt of an approval for the debt repayment plan from the Prime Minister), the Ministry of Finance shall report to the Prime Minister for making decision on collateral disposal as regulated in Article 32 herein.

If the proceeds from disposal of the collateral are not enough to pay debts, the obligor, or the parent company, or the group of shareholders holding at least 65% in the aggregate of shares as registered with the Ministry of Finance, shall be indebted of the remaining debt. In case the obligor is declared bankrupt, applicable law regulations shall apply.

5. In any case of failure to pay debts due to subjective reasons, the Ministry of Finance shall request the Prime Minister to designate the representative agency (if it is a state-owned enterprise or an enterprise of which more than 50% of charter capital is held by the state), or a competent authority, to consider taking actions against organizations and/or individuals that commit violations resulting in the insolvency under the loan agreement or forced loan agreement in accordance with applicable law regulations.

6. If the obligor’s failure to submit a report to the Ministry of Finance on his/her difficulties in fulfilling repayment obligations causes damage to the Accumulation Fund for Debt Repayment, the obligor shall compensate for any physical damage caused to the Accumulation Fund for Debt Repayment.

7. If an enterprise still has outstanding debts to the Accumulation Fund for Debt Repayment, its application for a government guarantee for a new loan, or application for approval for the project on on-lending of Government’s foreign loans shall be refused.

What are regulations on forced loans from the Accumulation Fund for Debt Repayment regarding government-guaranteed loan or bond issue in Vietnam?

Pursuant to Article 42 of the Decree 91/2018/NĐ-CP stipulating forced loans from the Accumulation Fund for Debt Repayment regarding government-guaranteed loan or bond issue in Vietnam as follows:

1. The obligor that faces either temporary or long-term financial problems, or is unable to pay debts of the government-guaranteed loan, or bond issue, when they are due must apply for a forced loan from the Accumulation Fund for Debt Repayment for an amount which must be advanced by the Accumulation Fund for Debt Repayment to pay debts on behalf of the obligor under regulations in Point b Clause 3 Article 41 herein. To be specific:

a) If the Accumulation Fund for Debt Repayment advanced money for a debt repayment period (principal and/or interest), the forced loan shall be subject to the Minister of Finance’s decision;

b) If the Accumulation Fund for Debt Repayment advanced money for 02 debt repayment periods and above (principal and/or interest), the Minister of Finance shall submit a report to the Prime Minister for consideration and decision on the forced loan.

2. The obligor and the parent company (if any) shall enter into a forced loan agreement with the Ministry of Finance. The parent company is obliged to pay debts to the Accumulation Fund for Debt Repayment if the obligor fails to fulfill partial or all debt obligations specified in the signed forced loan agreement.

3. During the term of a forced loan:

a) The obligor shall accept the Ministry of Finance's control and transfer of money from the Project Account and other deposit accounts of the obligor to pay debts to the Accumulation Fund for Debt Repayment when they are due;

b) The obligor must submit report to the Ministry of Finance on revenues, expenditures, cash balance, deposits, financial and business situations of the project on a quarterly basis if a forced loan is given to pay debts in 02 repayment periods, or on a monthly basis if a forced loan is given to pay debts in more than 02 repayment periods, and other ad hoc reports at the request of the Ministry of Finance since the obligor gets a forced loan from the Accumulation Fund for Debt Repayment;

c) The Ministry of Finance has the right to conduct annual inspection of the obligor’s financial capacity until debts to the Accumulation Fund Debt Repayment are paid off. The Ministry of Finance has the right to make decisions on inspection in accordance with regulations of the Law on inspection, where necessary.

4. An application for a forced loan:

The obligor shall provide documentary evidences of his/her temporary financial difficulties or absolute insolvency, or the parent company (if any) shall provide documentary evidences of its inability to pay debts on behalf of the obligor, and the following documents:

a) Documents proving that the aggregated balance of the obligor’s Project Account and other accounts is not enough to partially or fully pay due debts; these documents must be certified by the Serving Bank and banks where the obligor’s accounts are opened;

b) Documents proving that the obligor or the parent company (if any) earns no profit and may not mobilize enough money for debt repayment, enclosed with the financial statements for the previous year and/or for the six-month period of the obligor and of the parent company (if any);

c) The letters of refusal to approve an application for loan of the obligor, or the parent company (if any), of at least 03 commercial banks;

d) The obligor’s application for a forced loan from the Accumulation Fund for Debt Repayment, which specifies the borrowed amounts (separate principal, interests and fees), the loan term, repayment schedule and estimated sources of funding for debt repayment, and opinions of the parent company (if any) and of the representative agency (if it is a state-owned enterprise, or an enterprise of which more than 50% of charter capital is held by the state). The application must be submitted to the Ministry of Finance at least 03 months before the due date.

5. Payment of debts under the forced loan agreement:

a) The obligor shall pay debts to the Accumulation Fund for Debt Repayment according to the signed forced loan agreement;

b) In case there is a positive balance in the Project Account or any other deposit account of the obligor opened at a commercial bank according to the obligor’s quarterly or monthly reports, the Ministry of Finance shall request the Serving Bank or such commercial bank to transfer money from the Project Account or the obligor’s deposit account, with a notice given to the obligor, in order to pay overdue debts and due debts (if any) if the obligor incurs no loss in the previous fiscal year, or to pay undue debts to the Accumulation Fund for Debt Repayment (if any) if the obligor incurs no loss in the last two fiscal years;

c) In case of failure to pay debts for more than 02 debt repayment periods under a forced loan agreement, the obligor shall submit a report, supported with documentary evidences of its financial problems, to the Ministry of Finance in order for reporting the Prime Minister.

Best regards!