Guidelines for Handling Financial Leasing Contracts Terminated Before The Due Date From 01/7/2024 in Vietnam

Guidelines for Handling Financial Leasing Contracts Terminated Before The Due Date From 01/7/2024 in Vietnam​ (Image from the Internet)

On 28/6/2024, the Governor of the State Bank of Vietnam issued Circular 26/2024/TT-NHNN regulating financial leasing activities of comprehensive finance companies and financial leasing companies.

1. Cases in which financial lease contracts can be terminated before the due date in Vietnam

A financial lease contract can be terminated before the due date in the following cases:

(i) The financial lessor discovers that the financial lessee provides false information, violating the terms agreed upon in the contract, financial lease agreement, or guarantee agreement;

(ii) The leased financial asset is lost or damaged beyond repair and cannot be replaced;

(iii) The financial lessor violates any of the terms or conditions that are grounds for terminating the financial lease contract, as stipulated in the financial lease contract;

(iv) Other cases of early termination of financial lease contracts as regulated by law and the financial lease contract.

Note:

• The financial lessor and the financial lessee must specify the cases for early termination of the financial lease contract as mentioned above in the financial lease contract.

• If one party unilaterally terminates the financial lease contract, that party must immediately notify the other party of the termination of the contract.

The content of the notice for unilateral termination of the contract and the time of early termination must be agreed upon by the parties in the financial lease contract in accordance with legal regulations.

(Clauses 1, 2, Article 20 Circular 26/2024/TT-NHNN)

2. Guidelines on handling financial lease contracts terminating before the due date from 01/7/2024 in Vietnam

In Article 21 Circular 26/2024/TT-NHNN, the handling of financial lease contracts terminating before the due date from 01/7/2024 is as follows:

(1) In cases where the financial lease contract is terminated before the due date as specified in (i) and (ii) of section 1, the handling of rent money is as follows:

(i) The financial lessee must pay the entire remaining rent due under the financial lease contract up to the point of early termination, including principal debt, rent interest, and interest on overdue rent (if any).

The rent collection is executed as stipulated in Clause 3, Article 11 of Circular 26/2024/TT-NHNN;

(ii) The time at which the financial lessee must pay the entire rent stipulated in (i) is agreed upon by the parties in the financial lease contract. If there is no agreement, the time the financial lessee must pay the remaining rent is at the point of early termination of the financial lease contract.

(iii) If the financial lessee cannot pay the entire due rent on time as stipulated in (i) and (ii), the lessee must pay overdue interest on the unpaid principal and delayed interest on unpaid rent according to the financial lease contract agreement.

(2) In cases where the financial lease contract is terminated before the due date as specified in points c, d Clause 1, Article 20 Circular 26/2024/TT-NHNN, the handling of rent is conducted according to the financial lease contract and related legal regulations.

(3) The handling of leased financial assets and other issues in the financial lease contract in cases of early termination as regulated by Clause 1, Article 20, Circular 26/2024/TT-NHNN, the financial lessor and the financial lessee will follow the financial lease contract and related legal regulations.

More details can be found in Circular 26/2024/TT-NHNN, effective from 01/7/2024.

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