Issue 020921 – Procedures to register non-government-guaranteed loans

​Dear Valued Clients, 

Overseas borrowing is one of the popular activities of enterprises during their business activities. Looking for foreign loans can come from many reasons such as repaying debts, expanding production models, etc. Therefore, enterprises need to firmly grasp the foreign loan procedures so as not to miss any development opportunities. The following article will provide the most basic content related to foreign loan procedures for enterprises.

RELEVANT LEGISLATION

The following legal documents are referenced in this article:

1. Circular No.03/2016/TT-NHNN dated February 26, 2016 of the Governor of the State Bank of Vietnam dated June 17, 2020 regarding guiding some regulations of foreign exchange management for foreign borrowing and repayment of enterprises (“Circular 03”);

2. Circular No.05/2017/TT-NHNN of the Governor of the State Bank of Vietnam dated June 30, 2017 regarding amending and supplementing a number of Articles of Circular No.03/2016/TT-NHNN dated February 26, 2016 of the Governor of the State Bank of Vietnam dated June 17, 2020 regarding guiding some regulations of foreign exchange management for foreign borrowing and repayment of enterprises (“Circular 05”);

3. Circular No. 39/2016/TT-NHNN of the Governor of the State Bank of Vietnam dated December 30, 2016 regulations on lending activities of credit institutions, foreign bank branches to customers (“Circular 39”).

OVERVIEW OF FOREIGN LOAN

Definition

“Foreign loan” is a generic term to refer to all foreign loans that are not guaranteed by the Government and those are guaranteed by the Government by means of foreign borrowing through loan contracts, deferred payment contracts for import of goods, loan entrustment contract, financial leasing contract or the issuance of debt instruments in the international market of the borrower. In this Article, we only share the regulations regarding non-government-guaranteed foreign loans.

Foreign loans of enterprises that are not guaranteed by the Government must be registered.

The loan must be registered with the State Bank in the following cases:

(i). Foreign medium and long-term loans;

To clarify, according to current regulations, a medium-term loan is a loan with the term of more than 01 (one) year and a maximum of 05 (five) years, while a long-term loan is a loan with the term more than 05 (five) years.

(ii). A short-term loan (a loan with a maximum term of 01 (one) year) is extended but the total term of the loan is over 01 (one) year;

(iii). A short-term loan is a loan without renewal contract but with outstanding principal balance at the date of full 01 (one) year from the date of first capital withdrawal, unless the borrower completes loan repayment within 10 days from the date of full 01 year since the date of first withdrawal.

Loan term to determine registration obligation

Regarding to the loan term to determine registration obligation, we have summarized the provisions in Article 10 of Circular 03 corresponding to the order of content mentioned in Section 2 to help customers easily follow:

(i). For loans specified in section 2.(i), the loan term is determined from the expected date of first capital withdrawal to the expected final repayment date on the basis of provisions in the foreign loan agreement;

(ii). For loans specified in section 2.(ii), the loan term is determined from the date of first withdrawal to the expected date of final repayment on the basis of the provisions of the foreign loan agreement, agreement on extension of foreign loan;

(iii). For loans specified in section 2.(iii), the loan term is determined from the date of first withdrawal to the expected date of final repayment.

The capital withdrawal date specified in this Section 3 is the loan disbursement date for loans disbursed in cash, the date of customs clearance of goods for loans in the form of foreign financial lease in accordance with the provisions of Vietnamese law.

Subjects of loan registration

According to Article 12 Circular 03, the subject will have to make registration including:

(i).           The borrower signs a foreign loan agreement to disburse directly in cash with the non-resident lender;

(ii).          Credit institutions, foreign bank branches receiving entrustment loans from non-resident entrusting party;

(iii).         The party obligated to repay the debt under a debt instrument issued to a non-resident;

(iv).         The lessee in the financial leasing contract with the lessor is a non-resident.

PROCEDURES TO REGISTER NON-GOVERNMENT-GUARANTEED FOREIGN LOANS

Step 1: According to Article 13 of Circular 03, the borrower will prepare the dossier and send it to the loan registration confirmation agency according to its authority by online form or in person. In order to help customers easily understand to the procedure, we have summarized the document headings in the application and the term of submission in the section below:

a.  Application dossier include:

b. Term of submission

The borrower must submit the dossier within 30 (thirty) days from:

(i).              The date of signing the medium- and long-term foreign loan agreement or the date of signing the written capital withdrawal agreement in case the parties agree to withdraw capital on the basis of framework agreement signed and before capital withdrawal;

(ii).           The date of signing the agreement to extend short-term foreign loans into medium and long-term loans for cases specified in Section 2.(ii);

(iii).         The date of being fully 01 (one) year from the date of first withdrawal for the loan specified in Section 2.(iii).

Step 2. The State Bank shall issue a written confirmation or refusal for the loan registration within the time limit:

(i).              12 (twelve) working days from the date of receipt of the borrower’s valid dossier in case the borrower chooses the online form;

(ii).           15 (fifteen) working days from the date of receipt of the borrower’s valid dossier in case the borrower chooses the traditional method; or

(iii).         45 (forty five) working days from the date of receipt of the borrower’s valid application for a loan in Vietnamese currency, which must be reviewed and approved by the Governor of the State Bank in accordance with the current regulations regarding conditions for non-government-guaranteed foreign loans of the enterprises.

In case of refusal to confirm loan registration, the State Bank shall send a written explanation clearly stating the reasons.

Step 3. The State Bank/State Bank branch shall check the documents, update the processing status on the website or create a loan code and store the information in the database of foreign loans and debt repayment of the enterprise is not guaranteed by the Government.

Kind regards, 

ENT Law LLC

The full version of this Legal Aritcle can be found here.