Circular 57: Guidelines on the Sale of Debts by the Credit Guarantee Fund

Selling debt is the transfer of part or all of the creditor's rights and other related rights concerning the client's debt to the debt buyer and receiving payment from the debt buyer. Here, the client refers to the guaranteed party for whom the Credit Guarantee Fund has fulfilled the guarantee obligation as stipulated in Decree 34/2018/ND-CP.

To be specific, the debt sale by the Credit Guarantee Fund is carried out according to the regulations in Circular 57/2019/TT-BTC as follows:

Illustration (source: internet)

- Subject of consideration: Clients facing risks due to one of the circumstances stipulated in Article 7 of Circular 57.- Conditions for consideration: The Credit Guarantee Fund may consider selling debt to recover the loan when:

- The subject of consideration is stipulated as above;- The client has difficulties in business operations and cannot repay the debt (principal and interest) on time as per the Compulsory Debt Repayment Agreement signed;- The Credit Guarantee Fund evaluates that selling the debt is a more effective measure compared to other risk handling measures to recover the loan.

- Debt sale methods:

- Selling debt through auction: The Credit Guarantee Fund hires a professional auction organization or self-organizes the auction of the debt according to legal regulations on asset auction. In case the auction is unsuccessful, the Credit Guarantee Fund may consider applying the negotiated debt sale method;- Selling debt through negotiation: The Credit Guarantee Fund and the debt buyer directly negotiate the debt sale or through an intermediary according to market principles.

In this case, the determination of the debt sale price for the negotiated sale method, and the starting price for the auction sale method are executed according to the regulations of the State Bank of Vietnam on the valuation of debt in credit institutions' debt purchasing and selling activities. The Credit Guarantee Fund's debt sale must be executed through a Debt Purchase and Sale Agreement, which clearly defines the debt sale price, transfer of creditor rights from the seller to the buyer, and other related agreements.

- Regarding the handling of the difference between the debt sale price (after deducting the costs according to legal regulations) and the book value of the debt:

- In case the debt sale price is higher than the book value of the debt: The difference is added to the Guarantee Risk Reserve Fund as stipulated in **[Decree 34/2018/ND-CP](https://lawnet.vn/vb/nghi-dinh-34-2018-nd-cp-hoat-dong-cua-quy-bao-lanh-tin-dung-cho-doanh-nghiep-nho-va-vua-5c61f.html)** and related legal regulations;- In case the debt sale price is lower than the book value of the debt: The Credit Guarantee Fund uses the Guarantee Risk Reserve Fund to compensate for the difference or follow the decision of the Chairman of the Credit Guarantee Fund as stipulated in clause 3, Article 43 of **[Decree 34/2018/ND-CP](https://lawnet.vn/vb/nghi-dinh-34-2018-nd-cp-hoat-dong-cua-quy-bao-lanh-tin-dung-cho-doanh-nghiep-nho-va-vua-5c61f.html)**.

****Read the full regulations at Circular 57/2019/TT-BTC effective from October 15, 2019.

Thu Ba

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE