Draft Circular replaces Circular 03/2016/TT-NHNN on foreign exchange management for foreign borrowing and foreign debt repayment of enterprises

Circular 03/2016/TT-NHNN dated February 26, 2016, providing several instructions on foreign exchange management for enterprise’s foreign borrowing and foreign debt repayment (hereinafter referred to as “Circular 03”) has been promulgated for 5 years. With the current trend of international integration, foreign borrowing and foreign debt repayment activities are growing strongly, reflected in the increasing scale and numbers of transactions, complex loan contents and rich security structure, and so on, which requires additional adjustments in the management of those activities. For that reason, the State Bank of Vietnam (SBV) has drafted a Circular to replace Circular 03 (hereinafter referred to as “Draft”). This article includes the notable regulations in the Draft, specifically as follows:

1. Increasing the object shall not be required to apply for registration or registration for changes of foreign loans

(i)  Increasing the cases shall not be required to apply for registration of foreign loans

According to the provisions of Clause 3, Article 9 of the Draft: “Short-term loans without any loan renewal contracts being over 1 (one) year from the date of first fund withdrawal unless in case of borrowers fulfilling their debt obligations within 30 (thirty) days from the first anniversary of the first date withdrawing fund” is not required to register with the State Bank.

Compared with the current regulation of 10 (ten) days, the Draft has increased the time for the borrowers to complete overdue short-term debt repayment to 30 (thirty) days to reduce the number of overdue short-term loans subject to an application for registration.

(ii) Increasing the object shall not be required to apply for registration for change of foreign loans

In addition to inheriting regulations on cases shall not be required to apply for registration for change under Clause 3, Article 15 of Circular 03, the Draft supplements some cases as follows:

  • Changing fund withdrawal plan, debt repayment, fee remittance within 10 (ten) working days;
  • Changing interest and fee payment plan but do not change the principle and method of determining interest and fees (the parties do not change the total amount of interest and fees to be paid, only the time and number of payments are changed); and
  • Withdrawal and principal repayment of a specific payment period are less than the amount confirmed at the loan registration form or the registration form for changes. The enterprise will register to change the capital withdrawal/debt repayment amount before making this withdrawal/debt repayment.

2. Supplementing guidance on foreign exchange management for foreign loan security measures

Currently, Circular 03 only guides foreign exchange management to perform transactions related to guaranteeing foreign loans, including instructions for money transfer to perform guarantee obligations; instructions the borrowers to repay the compulsory indebtedness amount between the Borrower and the guarantor: The Draft supplements general guidelines on foreign exchange management for secured transactions related to foreign loans ( guarantee, pledge, mortgage the assets of the Borrower, the Third Party), specifically including:

  • Regulations on the use of a representative organization to handle collateral which is a legal entity established under Vietnamese law in case the collateral for a foreign loan is a property in the Vietnamese territory;
  • Regulations on responsibilities for secure documents in case the Guarantor/Security Disposal Representative is concurrently the account service provider (where the Borrower opens an account to borrow and repay foreign loans); 
  • Regulations on the responsibility of providing information from the Guarantor/Security Disposal Representative to the account services provider;
  • Regulations on documents that the Bank needs to check when providing money transfer services to fulfil security obligations to the Lender (money transferred by the guarantor, money arising from financial processing activities);
  • Regulations on transferring money to pay the indebtedness amount between the Borrower and the Securer.

3. Amending the regulations on reporting on foreign loan performance

Instead of quarterly reporting as prescribed in Circular 03, according to the new provisions in the Draft, enterprises, the borrowers, shall make monthly online reports on the website accessed via www.sbv.gov.vn or www.qlnh-sbv.cic.org.vn.

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