Vietnam: 02 forms of contribution of charter capital or share capital of borrowers that are enterprises

According to Clause 10 Article 1 of Circular No. 32/2019/TT-NHNN of the State Bank of Vietnam, VAMC is entitled to make contribution of charter capital or share capital of the borrower that is an enterprise in the following forms:

- Convert the bad debts purchased with special bonds into the charter capital or share capital of the borrower;

- Use assets (except the bad debt purchased with special bonds) and/or lawful funds to make contributions of charter capital or share capital of the borrower (including conversion of the bad debt purchased at the market price into the charter capital or share capital of the borrower).

Moreover, the conversion of bad debts purchased with special bonds into the charter capital or share capital of the borrower shall only be made in the following cases:

- The borrower is a domestic enterprise engaging in business lines other than insurance, securities, money remittance, foreign exchange, gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services, and credit information provision;

- VAMC reaches a written agreement with the debt-selling credit institution on the conversion of the bad debt purchased with special bonds into the charter capital or share capital of the borrower before carrying out that conversion.

- The debt-selling credit institution is a commercial bank that meets the following requirements:

+ It is allowed to contribute capital and purchase shares according to its establishment and operation license;

+ It maintains the minimum capital adequacy ratio as prescribed in Point b Clause 1 Article 130 of the Law on Credit Institutions of Vietnam and the ratio of capital contribution/share purchase as prescribed in Article 129 of the Law on Credit Institutions, and has the actual value of its charter capital lower than the legal capital (the contributed capital/share capital converted from bad debts purchased with special bonds must be taken into accounts when calculating the ratio/value of the charter capital as mentioned above) at the time of obtaining the document on the conversion of the bad debt purchased with special bonds into the charter capital or share capital of the borrower;

+ It earns profits as shown in its financial statements, which have been audited by an independent audit organization, of the year preceding the year in which it obtains the document specified in Point b of this Clause;

+ It did not incur any penalties for administrative violations against debt classification, setting aside and use of provisions for risks, capital contribution and share purchase within the consecutive period of 12 months preceding the month in which it obtains the document specified in Point b of this Clause;

+ Its organizational structure, Board of Directors, Board of Members, Control Board, and General Director (Director) conform to regulations of the Law on Credit Institutions and SBV’s regulations.

View relevant provisions at Circular No. 32/2019/TT-NHNN of the State Bank of Vietnam effective from February 14, 2020.

Thu Ba

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE