FX ADMINISTRATION OF ENTERPRISES’ FOREIGN BORROWING AND DEBT REPAYMENT

LEGAL UPDATE

On 30 September 2022, the State Bank of Vietnam (SBV) issued Circular No. 12/2022/TT-NHNN on foreign exchange administration of overseas borrowing and debt repayment by enterprises (Circular 12). Circular 12 will replace Circular No. 3/2016/TT-NHNN (Circular 3).

It regulates various matters on foreign borrowing and debt repayment, such as the registration procedure of the enterprise’s foreign loan without a Government guarantee, opening and use of accounts for foreign borrowing and debt repayment, and reporting regime related to the enterprise’s foreign loan.

Circular 12 came into effect on 15 November 2022.

In this update, we set out some remarkable points of Circular 12 compared to the current regulations.

1. Registration Regulations Applicable to Foreign Loans

1.1. Foreign Loans Subject to Registration with SBV

There is no change in the types of foreign loans that need to be registeerd, but there are some related changes The following types of foreign loans will need to be registered with the SBV:

• Medium to long term loans;

• Short-term loans renewed for the principal repayment period withing a maturity term of more than one year; and

• Short-term loans still owning the principal at the date of one year as from the first withdrawal date, but is not renewed after the principal repayment period.

Circular 12 makes an exception that a loan as listed under c will not need to beregistered if the borrower completes the repayment in full within 30 working days after one year countedfrom the first drawdown date. This is a positive change compared to the current period of only ten working days.

1.2. Amending Foreign Loans already Registered with SBV

Generally, amendments to an approval by the SBV requires another approval. Circular 12, however provides some exceptions and the borrower only needs to submit a notification on SBV’s website after it has been updated to support this notification process. The notification process will apply to:

• Amendment of the period for principal withdrawal and repayment within ten working days compared to the original period stated in SBV’s written approval;

• Amendment of the borrower’s address within the same city or province;

• Amendment of the lender and relevant information of the lender. This does not apply  when a lender is also the representative for collective lenders in a syndicated loan, and such change may alter the role of representative for collective lenders;

• Amendment of the commercial trading name of the bank as the account service provider or secured transaction service provider;

• Amendment of the interest or fee payment plan while the interest and fee calculation method stated in the foreign loan agreement is not amended;

• Amendment of the withdrawal, repayment, interest or fee amount within 100 currency units as compared to the original period stated in SBV’s written approval; and

• Amendment of the actual withdrawal or repayment amount of a specific period less than the amount stated in the SBV’s written approval.

1.3. Registration Procedures

In the Annex the registration process of (a) the new medium - long term foreign loans and short term foreign loans to be extended, and (b) the amendment of the existing foreign loan with SBV is demonstrated.

2. Banks Serving the Secured Transactions

Circular 12 also introduces the concept of the bank supporting secured transactions This refers to credit institutions and foreign bank branches operating within Vietnam’s territory providing remittance services to fulfil guaranteed obligations or handle the secured assets relating to foreign loans.

This means that the money transferred to fulfil the guaranteed or  secured assets obligations must be made through the bank supporting secured transactions. This bank will not necessarily be the same as the bank providing the account services for the relevant foreign loans.

3. Reporting Obligations

According to Circular 12, reports on foreign loans must be submitted to the SBV via its website. The traditional reporting methods allowed under Circular 3 will no longer be available.

Circular 12 also requires the report on the implementation status of foreign loans to be conducted monthly instead of every quarter as currently done.

It is worth noting that the guideline for individuals residing in Vietnam to register for the foreign loans from offshore lenders is still not included in Circular 12.

4. Conclusion

Under the government orientation until 2025, foreign loans will play an essential part in developing local enterprises’ operations. For that reason, the Vietnamese government has issued Circular 12 to reflect the government orientation and finalise the debt and borrowing policies for enterprises.

For more information, please contact:

Thang Nguyen / Special Counsel

thang.nguyen@acsvlegal.com  

Cuong Ta / Associate

cuong.ta@acsvlegal.com

© 2022 ACS Legal Vietnam Company Limited – All rights reserved

This legal update is not an advice and should not be treated as such.

Download pdf: FX Administration of Enterprises’ Foreign Borrowing and Debt Repayment

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