What is a letter of guarantee? Who has the authority to issue the letter of guarantee in Vietnam?

What is a letter of guarantee? Who has the authority to issue the letter of guarantee in Vietnam? (Internet image)

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

1. What is letter of guarantee?

According to Clause 13, Article 3 of Decree 91/2018/ND-CP, letter of guarantee refers to a document concerning the government guarantee issued in the form of a letter of guarantee, guarantee contract or written commitment.

2. Who has the authority to issue the letter of guarantee in Vietnam?

- Letters of guarantee are issued and managed by the Ministry of Finance on behalf of the Government. The Ministry of Finance takes charge of issuing Letters of guarantee but Letters of re-guarantee.

- The only letter of guarantee is issued for each loan, or each bond issue, and specifies a guaranteed amount not exceeding the guarantee limit estimated for such loan or bond issue as approved by the Prime Minister.

With regard to banks for social policies, the Ministry of Finance shall certify the guaranteed obligations for each quarter according to the quantity of bonds actually issued.

(Clause 1, 2, Article 7, Decree 91/2018/ND-CP)

3. What are the main contents of a letter of guarantee?

Main contents of a letter of guarantee:

- The guarantor;

- The obligor;

- Reference contents about the related commercial contract or loan agreement, or information concerning the quantity of guaranteed bonds (if any);

- Borrowed amount and currency of the guaranteed loan;

- The Ministry of Finance’s commitment to the obligee to fulfill its obligations and those of the obligor;

- Rights, benefits and responsibilities of the obligee;

- Effect and revocation of a letter of guarantee;

- Governing laws and in-charge authority, location and language used in solving disputes;

- Place and date of signing the letter of guarantee.

Note: A letter of guarantee may contain other agreements made by the concerned parties in conformity with regulations of Vietnam law.

(Clause 4, 5, Article 7, Decree 91/2018/ND-CP)

4. Regulations on modification of a letter of guarantee in Vietnam 

Specifically, Article 26 of Decree 91/2018/ND-CP stipulates modification of a letter of guarantee in Vietnam as follows:

(1) The Ministry of Finance shall consider modifying the letter of guarantee for the signed loan agreement upon the request of the obligor after adequately receiving following documents:

- The obligor’s written request for modification of the letter of guarantee, which indicates reasons of modification, contents to be modified, and effects of such modification on the obligor's performance of obligations as defined in the loan agreement;

- Documents modifying or amending the signed loan agreement;

- The obligee’s opinions about the modification;

- The draft of modified letter of guarantee prepared by the obligee (if any).

(2) In case contents to be modified of the letter of guarantee cause neither an increase in the principal of the government-guaranteed loan nor change of the obligor, the Prime Minister shall authorize the Minister of Finance to make decision and grant a document or an appendix to modify the letter of guarantee within 15 working days as from the receipt of adequate and valid documents submitted by the obligor as prescribed in (1).

(3) In case contents to be modified of the letter of guarantee cause either an increase in the principal of the government-guaranteed loan or change of the obligor, the Ministry of Finance shall submit a report thereof to the Prime Minister within 15 working days as from the receipt of adequate and valid documents submitted by the obligor as prescribed in (1).

The Ministry of Finance shall issue a document or an appendix to modify the letter of guarantee, or give a written refusal of the obligor’s request within 10 working days from the receipt of the Prime Minister’s guidance.

(4) Provisions in (1), (2), (3) shall not apply to bonds issues for which the government guarantee has been issued by the Ministry of Finance.

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