07 cases of termination of guarantee obligations in Vietnam 2023

07 cases of termination of guarantee obligations in Vietnam 2023 (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is a bank guarantee?

Bank guarantee means a form of credit extension whereby the guarantor that is a credit institution or FBB undertakes to act on behalf of the obligor to fulfill their financial obligations to the obligee in the event the obligor fails to fulfill or insufficiently fulfills their obligations as agreed upon with the obligee; the obligor shall have the obligation to repay the debt to the guarantor.

(Clause 1, Article 3 of Circular 11/2022/TT-NHNN)

2. 07 cases of termination of guarantee obligations in Vietnam 2023

Guarantee obligations shall be terminated in the following cases:

(1) The obligor’s obligations are terminated.

(2) Guarantee obligations have been fulfilled according to the guarantee commitment.

(3) The guarantee is cancelled or replaced by other security measures as agreed upon between the obligee and guarantor, other relevant parties (if any).

(4) The validity of the guarantee commitment has expired.

(5) The obligee has granted exemption from fulfillment of guarantee obligations to the guarantor.

(6) Guarantee obligations are terminated as agreed upon between the parties.

(7) Guarantee obligations are terminated in other cases as prescribed by law.

(Article 23 of Circular 11/2022/TT-NHNN)

4. Rights of the Guarantor in Vietnam

Guarantor means a credit institution or FBB that provides the guarantee for the obligor. In case of co-guarantee, counter-guarantee and guarantee confirmation, the guarantor shall also include foreign credit institutions.

In which, the bank guarantor has the following rights:

- Approve or refuse applications for guarantee issuance.

- Request the guarantee-confirmation giver to give guarantee confirmation in respect of its guaranteed amounts to the obligor.

- Request the obligor or the counter-guarantor and relevant parties to provide information and documents concerning the appraisal of guarantee and collateral (if any).

- Request the obligor or the counter-guarantor to provide security for the guaranteed obligations (if needed).

- Examine and monitor the financial status of customers during the validity period of the guarantee.

- Collect and adjust guarantee service fee; impose and adjust interest rates or penalty interest rates.

- Refuse to fulfill guarantee obligations when the application for fulfillment of guarantee obligations is invalid or there are reasonable grounds to believe that the submitted documents are forged.

- Request the counter-guarantor to fulfill the agreed-upon guarantee obligations.

- Record to account the amount paid on behalf of the obligor (in case of bank guarantee) immediately after fulfilling guarantee obligations in accordance with SBV's regulations;

Or on behalf of the counter-guarantor (in case the guarantee is issued on the basis of a counter guarantee) immediately when the counter-guarantor fails to fulfill or insufficiently fulfills the agreed-upon guarantee obligations; request the obligor or counter-guarantor to repay the amount paid by the guarantor on their behalf.

- Request other co-guarantors to repay amounts paid by the guarantor to the obligor on their behalf according to the co-guarantee contribution ratio as agreed upon by the parties in case the guarantor acts as the leading guarantor in fulfilling obligations of a co-guarantee relationship.

- Dispose of collateral as agreed and in accordance with regulations of law.

- Transfer their rights and obligations to another credit institution or FBB as agreed upon with relevant parties in conformity with regulations of law.

- File a lawsuit in accordance with regulations of law when the obligor or counter-guarantor is in breach of their agreed-upon obligations.

- Perform other rights as agreed upon between the parties in conformity with regulations of law.

(Clause 6, Article 3 and Article 27 of Circular 11/2022/TT-NHNN)

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE