Thông tư 03/1999/TT-NHNN7

CIRCULAR

GUIDING THE BORROWING OF FOREIGN CAPITAL AND REPAYMENT OF FOREIGN DEBTS

Pursuant to Articles 22 and 24 of the Regulation on the Management of Foreign Capital Borrowing and Foreign Debt Repayment issued together with the Government’s Decree No. 90/1998/ND-CP of November 7, 1998, the State Bank of Vietnam (hereafter referred to as the "State Bank") hereby guides the borrowing of foreign capital and repayment of foreign debts by enterprises as follows:

Chapter I

GENERAL PROVISIONS

Section I. INTERPRETATION OF TERMS

In this Circular, the following terms shall be construed as follows:

1. Foreign capital-borrowing enterprises (hereafter referred to as "enterprises") include:

a/ Enterprises other than credit institutions, which operate in Vietnam:

- State enterprises, private enterprises, limited liability companies, joint-stock companies, cooperatives;

- Foreign-invested enterprises (joint-venture enterprises, enterprises with 100% foreign capital);

- Branches of foreign companies;

- Foreign parties to business cooperation contracts, foreign contractors;

- Other enterprises of all economic sectors as prescribed by law.

b/ Enterprises being credit institutions which operate in Vietnam:

- Vietnamese credit institutions: State credit institutions, joint-stock credit institutions of the State and people, cooperative credit institutions;

- Joint-venture credit institutions;

- Non-bank credit institutions with 100% foreign capital;

- Branches of foreign banks.

2. Non-resident is understood as the "non-resident" defined in the Government’s Decree No. 63/1998/ND-CP of August 17, 1998 on the Management of Foreign Exchange.

3. Foreign borrowing contracts are foreign borrowing agreements having the effect to withdraw capital in which foreign loan terms and conditions are prescribed, such as contracts for the purchase of goods with deferred payment, credit contracts, financial renting contracts and other agreements on foreign loans.

4. Registration of foreign borrowing and foreign debt repayment means enterprises, after signing medium- or long-term foreign loan contracts (or after completing the procedures to issue bonds abroad), register the foreign borrowing and foreign debt repayment with the State Bank according to the provisions of this Circular.

5. Certification of foreign borrowing and foreign debt repayment registration means the State Bank makes a written certification of the fact that an enterprise has registered its foreign borrowing and foreign debt repayment with the State Bank.

6. Licensed banks are the banks operating on the Vietnamese territory which are licensed to conduct foreign exchange activities according to the provisions of the Government’s Decree No. 63/1998/ND-CP of August 17, 1998 on the Management of Foreign Exchange.

Section II. GENERAL PROVISIONS

1. Foreign borrowings of enterprises include borrowing in the following forms:

a/ Financial loans (in cash);

b/ Import of goods and/or services on deferred payment by the mode of opening letters of credit, collection via the licensed banks, or by other modes of deferred payment;

c/ Foreign financial leasing;

d/ Bond issuance abroad;

e/ Other types of foreign borrowing.

2. Enterprises, when signing foreign borrowing contracts, shall take self-responsibility for the legality, financial capability as well as capital arrangement capability of the foreign lenders.

3. Enterprises shall not have to register with the State Bank when signing foreign borrowing agreements without the effect to withdraw capital such as the framework credit agreements, memorandums of understanding and other similar accords, provided that the contents of all foreign loan agreements conform to the provisions of the Vietnamese law.

Within 30 days after signing the above-said agreements, enterprises shall have to send the originals (or the notarized copies) of such agreements as well as the Vietnamese translations thereof (with certification by the enterprises’ heads) to the State Bank (Department for Management of Foreign Exchange).

4. Requirements and procedures for registration of foreign borrowings:

a/ For short-term borrowing: Enterprises shall not have to register with the State Bank but the short-term foreign borrowing contracts must meet the conditions stipulated in Section I, Chapter II of this Circular.

b/ For medium- and long-term borrowings: Basing themselves on the conditions stipulated in Section II of this Circular, enterprises shall sign foreign borrowing contracts then register the foreign borrowing as well as the foreign debt repayment with the State Bank within 15 days after signing the foreign borrowing contracts and before withdrawing capital.

5. For capital-contribution loans granted to enterprises by credit institutions operating in Vietnam and foreign lenders, enterprises shall have to comply with the provisions of this Circular regarding the loans granted by foreign parties.

6. In case of the conversion of short-term foreign borrowings into medium- or long-term ones (the lending term is extended for over 1 year), enterprises shall have to comply with this Circular’s provisions on medium- and long-term foreign borrowings and the payment thereof.

7. Before effecting any changes in the contents of the State Bank’s written certification of the foreign borrowing and foreign debt repayment registration such as adjusting the loan (debt) amount, extending the debt, adjusting the lending interest rate, making advance payment, changing the banks that provide the capital-withdrawal and debt-repayment services or other changes, enterprises shall have to register them with the State Bank.

Chapter II

CONDITIONS FOR FOREIGN BORROWINGS

Section I. CONDITIONS FOR SHORT-TERM FOREIGN BORROWING

An enterprise may only sign a short-term foreign borrowing contract when meeting the following conditions:

1. The purpose of the short-term foreign borrowing conforms to the scope of the enterprise�s activities:

a/ For an enterprise other than a credit institution: The short-term foreign borrowing shall be used to meet its demand for working capital for production and business in strict accordance with the scope of enterprise’s activities defined in its business registration certificate; or investment license; or operation license granted by the competent agency.

b/ For the enterprise being a credit institution: The short-term foreign borrowing shall be used to supplement its short-term credit capital sources.

2. Meeting the borrowing conditions stipulated by the State Bank Governor:

a/ The subject enterprises entitled to short-term foreign loans;

b/ The borrowing terms and short-term foreign loan expenses (including the interest rate, fee and other expenses);

c/ The collateral security for short-term foreign loans at commercial banks operating in Vietnam.

In each period, the State Bank Governor shall stipulate in detail the borrowing conditions specified at Point 2, Section I, Chapter II of this Circular.

3. For foreign-invested enterprises, apart from the conditions stipulated at Point 1(a) and Point 2, Section I, Chapter II of this Circular, they shall, during the project construction and pre-operation period, have to ensure that the short-term foreign loan capital shall not increase the total investment capital.

When a foreign-invested enterprise has completed the construction of a project and put it into operation, completed the contribution of legal capital and used up all investment capital, it may seek short-term foreign loan(s) to supplement its working capital according to the provisions of this Circular, without affecting the total investment capital.

4. Enterprises being credit institutions shall, besides meeting the conditions stipulated at Point 1(b) and Point 2, Section I, Chapter II of this Circular, have to comply with the current regulations of the State Bank on the borrowing limits and guaranty for short-term foreign loans.

5. In addition to the conditions stipulated at Points 1, 2, 3, 4, Section I, Chapter II of this Circular, the other contents of the short-term foreign loan contracts and agreements related to short-term foreign loans of enterprises must comply with the current provisions of Vietnamese law.

Section II. CONDITIONS FOR MEDIUM- AND LONG-TERM FOREIGN BORROWING

1. Enterprises other than credit institutions may only sign medium- and long-term foreign borrowing contracts when meeting the following conditions:

a/ Having investment projects or business/production plans ratified by the agencies competent to decide investment;

b/ The borrowing terms, grace periods and expenses (including interest rates, fees and other expenses) of medium- and long-term loans must comply with the State Bank Governor’s stipulations in each period;

c/ For foreign-invested enterprises, apart from the conditions stipulated at Points 1(a) and 1(b), Section II, Chapter II of this Circular, the medium- and long-term foreign loan capital must not increase the total investment capital.

d/ For State enterprises, apart from the conditions stipulated at Points 1(a) and 1(b), Section II, Chapter II of this Circular, before signing medium- and long-term foreign borrowing contracts, they must obtain the State Bank’s written comments on the final drafts (attached with the Vietnamese translations certified by the enterprise heads) of the following documents:

- The letter of guaranty (in cases where a State enterprise is guaranteed by a non-resident);

- The medium- or long-term foreign borrowing contract.

The State Bank’s comments shall serve as orientations for State enterprises in the course of negotiation on the borrowing of foreign capital and repayment of foreign debts.

e/ In addition to the conditions stipulated at Points 1(a), 1(b), 1(c) and 1(d), Section II, Chapter II of this Circular, the following contents of the foreign loan contract and agreements related to the medium- or long-term foreign loan of an enterprise must comply with the current provisions of Vietnamese law:

- The enterprise opens bank account abroad in service of the loan transactions;

- The foreign lender receives pledged and/or mortgaged assets of the enterprise;

- The enterprise borrows foreign capital for capital contribution to its establishment;

- Debts are transferred or converted into stocks and other forms of investment;

- Other contents as prescribed by Vietnamese law.

2. Enterprises being credit institutions may only sign medium- or long-term foreign loan contracts when the following conditions are met:

a/ The medium- or long-term foreign loans are used to supplement their credit capital sources;

b/ For State credit institutions: They must satisfy the conditions stipulated at Points 1(b), 1(d), 1(e) and 2(a), Section II, Chapter II of this Circular;

c/ For other credit institutions: They must satisfy the conditions stipulated at Points 1(b), 1(e) and 2(a), Section II, Chapter II of this Circular.

Chapter III

THE DOSSIER AND PROCEDURES FOR REGISTRATION OF FOREIGN BORROWING AND FOREIGN DEBT REPAYMENT

Section I. Dossier for registration of foreign borrowing and foreign debt REpayment

1. A dossier for registration of foreign borrowing and foreign debt repayment by enterprises other than credit institutions includes:

a/ The application for registration of foreign borrowing and foreign debt repayment;

b/ The notarized copies of the establishment decision, business registration certificate; or investment license; or operation license, and other relevant documents issued by the competent agency;

c/ The notarized copy of the written approval of the investment project or business/production plan by the specialized agency (except for foreign-invested enterprises);

d/ The notarized copy of the decision issued by the competent agency, allowing the enterprise to issue bonds abroad (in cases where the enterprise issues bonds abroad);

e/ The copy and Vietnamese translation of the already signed foreign loan contract (with certification by the enterprise head).

2. A dossier for registration of foreign capital borrowing and foreign debt repayment by enterprises being credit institutions shall include documents defined at Points 1(a), 1(d) and 1(e), Section I, Chapter III of this Circular.

Section II. DOSSIER FOR REGISTRATION OF CHANGES

A dossier for registration of changes (for cases stipulated at Point 7, Section II, Chapter I of this Circular) includes:

1. The application for registration of changes;

2. The final draft and Vietnamese translation (with certification by the enterprise head) of the agreement on changes.

3. The written approval of the changes by the party guaranteeing the enterprise’s foreign loan (in cases where the enterprise is guaranteed).

After obtaining certification of change registration by the State Bank, the enterprise is entitled to sign an agreement on the changes and within 30 days after its signing, such enterprise shall have to send the copy of the already signed agreement on changes and the Vietnamese translation thereof (with certification by the enterprise head) to the State Bank (Department for Management of Foreign Exchange).

Section III. CERTIFICATION OF REGISTRATION BY THE STATE BANK

1. The State Bank shall certify the registration of foreign capital borrowing and foreign debt repayment as well as the registration of changes of an enterprise, based on:

a/ The annual plan on the total foreign loan limit, ratified by the Prime Minister;

b/ The State’s foreign exchange management policy in each period;

c/ The conditions on the loan term, the grace period and loan expenses (including the interest rate, fee and other expenses) as stipulated by the State Bank Governor in each period;

d/ The opinions of the relevant agencies on the foreign loan of the enterprise, in case of necessity.

2. The State Bank shall notify in writing the enterprise within 15 working days after receiving a full and valid dossier from such enterprise, of the following:

a/ The State Bank’s opinions on the contents of the draft letter of guaranty (in cases where the State enterprise is guaranteed by a non-resident) and the draft medium- or long-term foreign loan contract of the State enterprise;

b/ The certification (or refusal to make certification) of the registration of foreign capital borrowing and foreign debt payment by the enterprise;

c/ The certification (or refusal to make certification) in case the enterprise registers the arising changes.

3. Where the contents of the foreign loan contract and the agreements related to the foreign loan (short-, medium- or long-term) fail to comply with the conditions stipulated in Chapter II of this Circular, the enterprise may sign the foreign loan contract only when the State Ban issues a written permission.

Section IV. CAPITAL WITHDRAWAL AND FOREIGN DEBT REPAYMENT

1. The capital withdrawal and foreign debt repayment by an enterprise may only be effected via one licensed bank, except for a number of the following transactions (for which the licensed bank is not allowed to provide guaranty and services):

a/ Capital withdrawal for direct payment to foreign beneficiary(ies), regarding import goods and/or services;

b/ Capital withdrawal and debt repayment through the enterprise’s bank account opened overseas (in cases where the enterprise is allowed to open bank account(s) abroad);

c/ Capital withdrawal in form of importing goods and/or services with deferred payment and debt repayment in form of exporting goods and/or services.

2. Where an enterprise is effecting its capital withdrawal and debt repayment via a licensed bank but wishes to transfer such to another licensed bank, it shall have to clear all the capital withdrawal- and debt repayment-transactions at the former bank; If it is a medium-term loan, the enterprise shall have to register with the State Bank the change of the bank which provides the capital withdrawal- and debt repayment- services.

3. An enterprise withdrawing capital or repaying foreign debts via a licensed bank shall have to comply with the following regulations:

a/ When withdrawing capital:

- For a short-term foreign loan, the enterprise shall have to produce to the licensed bank where it effects the capital withdrawal the original of the already signed short-term foreign loan contract;

- For a medium- or long-term foreign loan, the enterprise shall have to produce the State Bank’s original written certification of registration of its foreign capital borrowing and foreign debt repayment;

Besides, for short-, medium- and long-term loans, the enterprise shall have to produce other necessary documents and materials when so requested by the licensed bank.

In cases where the enterprise does not effect the capital withdrawal but only the debt repayment via the licensed bank, such enterprise shall, within 5 days after withdrawing capital, have to notify in writing the licensed bank where it effects the debt repayment of the date of capital withdrawal and the capital amount already withdrawn under the foreign loan contract.

b/ When repaying debts:

The enterprise shall have to produce to the licensed bank where it effects the debt repayment the following documents:

- The State Bank’s original written certification of registration of foreign capital borrowing and foreign debt repayment by the enterprise (in case of the medium- or long-term loan);

- The original of the already signed foreign loan (short-, medium- or long-term) contract;

- The originals or copies (with certification by the enterprise head) of the vouchers proving the capital withdrawal under the foreign loan (short-, medium- or long-term) contract as well as other necessary documents and materials at the request of the licensed bank.

In cases where the enterprise has effected the capital withdrawal but not the debt repayment via the licensed bank, such enterprise shall, within 5 days after repaying the debt, have to notify in writing the licensed bank where it has effected the capital withdrawal of the date of debt repayment and the debt amount under the foreign loan contract.

4. The licensed bank shall have to comply with the following regulations when withdrawing capital and repaying debt for the enterprise:

a/ For a short-term foreign loan:

- Effecting the capital withdrawal, transferring money to repay debt for the enterprise on the basis of the original of the already signed short-term foreign loan contract as well as vouchers produced by the enterprise, proving its capital withdrawal and debt repayment;

- Inspecting, comparing documents produced by the enterprise so as to ensure the right performance of the loan transactions of such enterprise;

- Making statistics of capital withdrawal transactions, repayment of arising debts, balances and other necessary data of the short-term foreign loans for which the bank has guaranteed or provided services.

- Keeping on file the copies of necessary documents produced by the enterprise.

b/ For medium- and long-term foreign loans:

- Checking, comparing documents produced by the enterprise so as to ensure the strict performance of the loan transactions which the enterprise has registered with the State Bank;

- Effecting the money transfer to repay the foreign debt on the basis of the State Bank’s written certification of the foreign capital borrowing and foreign debt repayment registration, the medium- or long-term foreign loan contract as well as vouchers produced by the enterprise, proving its capital withdrawal and debt repayment;

- Keeping on file the State Bank’s written certification of the foreign capital borrowing and foreign debt repayment registration and copies of other necessary documents and materials produced by the enterprise;

- Making statistics of the capital withdrawal transactions, repayment of arising debts and credit balance of each medium- or long-term foreign loan, which the bank has guaranteed or provided services for;

c/ The licensed bank shall not effect the capital withdrawal and transfer of money to repay foreign debts for the enterprise in the following cases:

- The enterprise has signed a short-term foreign loan contract with contents incompatible with the conditions stipulated in Section I, Chapter II of this Circular, when the State Bank’s has not issued any document permitting signing thereof;

- The enterprise’s medium- or long-term foreign loan is not certified in writing by the State Bank in term of the foreign capital borrowing and foreign debt payment registration;

- Changes have arisen in the enterprise’s medium- or long-term foreign loan but such enterprise has not yet obtained a written certification of the changes from the State Bank.

d/ Guiding enterprises to strictly comply with the current regulations on foreign borrowing and foreign debt repayment; promptly reporting to the State Bank on any violations by enterprises, of the current regulations on foreign borrowing and foreign debt repayment.

5. The licensed bank shall have to strictly comply with this Circular’s provisions on capital withdrawal and repayment of foreign debts regarding the foreign loans of such licensed bank.

Chapter IV

REPORTING REGIME, INSPECTION AND HANDLING OF VIOLATIONS

Section I. REPORTING REGIME

1. Periodically, the licensed banks shall have to report according to current regulations to the State Bank on the data related to short-, medium- and long-term foreign loans which they have borrowed, guaranteed or provided capital withdrawal and debt repayment services for.

2. Periodically, enterprises (including credit institutions other than the licensed banks) shall have to report to the State Bank according to current regulations, on the data related to:

a/ Short-term foreign loans of enterprises, which do not effect the capital withdrawal and debt repayment via the licensed banks (cases mentioned in Points 1(a), 1(b), and 1(c), Section IV, Chapter III of this Circular).

b/ The enterprises’ medium- and long-term foreign loans.

3. In case of necessity, enterprises (including credit institutions) and the State Bank�s branches in the provinces and centrally-run cities shall have to report on the situation of foreign borrowing and foreign debt payment at the request of the State Bank.

Section II. INSPECTION AND HANDLING OF VIOLATIONS

1. Periodically or when necessary, the State Bank and the concerned agencies shall inspect the situation of foreign borrowing and foreign debt repayment by enterprises. Enterprises shall have to provide all necessary documents and materials to ensure that the inspection is conducted in a timely and efficient manner.

2. The State Bank shall not certify the registration of foreign capital borrowing and foreign debt repayment (including the certification of registration of changes) by enterprises in the following cases:

a/ The enterprises have signed medium- or long-term foreign loan contracts with contents incompatible with the conditions stipulated in Section II, Chapter II of this Circular, when the State Bank has not issued any documents permitting the signing thereof;

b/ Enterprises have signed agreements on changes in cases mentioned at Point 7, Section II, Chapter I of this Circular when having not yet obtained a written certification thereof from the State Bank.

3. Any violations of this Circular shall, depending on their seriousness, be handled according to current laws.

Chapter V

IMPLEMENTATION PROVISIONS

1. This Circular takes effect 15 days after its signing and replaces the following documents:

a/ Circular No. 07/TT-NH7 of March 26, 1994 of the State Bank Governor guiding the management of foreign borrowing and foreign debt repayment by enterprises;

b/ Decision No. 161/QD-NH7 of June 8, 1996 of the State Bank Governor on the amendments and supplements to a number of points of Circular No. 07/TT-NH7 of March 26, 1994 guiding the management of foreign borrowing and foreign debt repayment by enterprises;

c/ A number of relevant contents in the State Bank Governor’s Directive No. 06/CT-NH7 of June 6, 1996 on enhancing the management of foreign borrowing and foreign debt repayment.

2. With regard to foreign loans signed before this Circular takes effect and being in the course of capital withdrawal and debt repayment, enterprises shall comply with the following:

a/ For short-term foreign loans: Enterprises (including licensed banks) shall make reports according to the provisions of this Circular.

b/ For medium- and long-term foreign loans having the State Bank’s written certification of registration: Enterprises (including licensed banks) shall continue complying with such written certification and the provisions of this Circular.

3. Any amendments and/or supplements to this Circular shall be decided by the State Bank Governor.

4. The director of the Office, the chief inspector of the State Bank, the heads of the units attached to the State Bank, the directors of the State Bank’s branches in the provinces and centrally-run cities, and the general directors (directors) of credit institutions shall, within the ambit of their functions, have to provide guidance on and organize the implementation of this Circular.

5. The ministries, branches and enterprise-managing agencies shall, according to their functions and tasks, have to coordinate in directing the implementation of this Circular.