Classification of Debts and Risk Management of Agricultural and Forestry Companies

According to Circular 11/2015/TT-NHNN regulating the “Scheme for reorganizing and restructuring agricultural and forestry companies,” such schemes may be executed in several forms: continuation, consolidation, and development under the model where the State holds 100% charter capital, transformation to a joint-stock company, conversion to a limited liability company with two or more members, dissolution of the agricultural and forestry company and conversion to a protective forest management board under a revenue-generating public service mechanism.

Illustrative image (Source: Internet)

The Circular guides the classification of debts and the handling of loan risks of agricultural and forestry companies at credit institutions when implementing reorganization and restructuring. Specifically:

- Credit institutions are permitted to consider and decide on the restructuring of the repayment term and maintaining the debt group classification as initially categorized prior to restructuring the repayment term for loans incurred before the agricultural and forestry company's reorganization and restructuring as per Decree No. 118/2014/ND-CP.

- The restructuring of the repayment term and maintaining the debt group classification for the loans specified in Clause 1 of this Article shall only be conducted once and the restructuring period is limited to 2 (two) years from the date the agricultural and forestry company continues to operate, consolidate, develop, and restructure according to Article 4, Clause 1, Clause 2 Article 8 of Decree No. 118/2014/ND-CP or convert to a protective forest management board, joint-stock company, or limited liability company with two or more members as decided by the competent authority.

- Credit institutions must regularly review and assess the repayment ability of the agricultural and forestry company after the repayment term restructuring and maintenance of the debt group classification. For loans that have been restructured in terms of repayment and maintained in their original debt group classification as per this Circular but the agricultural and forestry company still fails to repay when due according to the restructured schedule, the credit institution shall classify and handle the loan according to legal regulations on asset classification, provisioning rates, provisioning methods, and the usage of provisions to handle risks in the operation of credit institutions.

- Apart from the case specified in Clause 1 of this Article, the classification of debts, risk provisioning, and usage of provisions for handling risks for agricultural and forestry companies, protective forest management boards, joint-stock companies, limited liability companies with two or more members established from the reorganization and restructuring of agricultural and forestry companies are implemented according to legal regulations on asset classification, provisioning rates, provisioning methods, and the usage of provisions to handle risks in the operation of credit institutions.

Details can be found in Circular 11/2015/TT-NHNN, effective from October 5, 2015.

Le Hai

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