Register foreign loans not guaranteed by the Government in Vietnam

Foreign loans include guaranteed loans and unguaranteed loans. Foreign loans are a method of capital mobilization for enterprises, especially applied to foreign-invested companies and large foreign-invested projects. In which, the form of loans without state guarantees is more popular in the private sector. So what are the steps in registering foreign loans not guaranteed by the Government in Vietnam? In the article below, Viet An Law will advise you on the procedures for registering foreign loans not guaranteed by the Government in Vietnam.

What is a foreign loan without guarantee?

Pursuant to Clause 1, Article 3 of Circular 12/2022/TT-NHNN, foreign loan is a generic term which means foreign loans that are not guaranteed by the Government (hereinafter referred to as conventional loan) and those that are guaranteed by the Government by means of foreign borrowing through borrowing contracts, deferred payment contracts for import of goods, lending entrustment contracts, contracts for finance leasing or debt instrument issuance on the international market of the borrower.

Foreign loans that are not guaranteed by the Government are defined in Clause 2, Article 3 of Decree 219/2013/ND-CP, according to which borrowing of a foreign loan without government guarantee (below referred to as “borrowing a foreign loan by the mode of self-borrowing and self-payment”) means a Borrower taking a foreign loan by the mode of self-borrowing and self-responsibility for payment to the foreign lender.

When to register foreign loans?

Procedures for registering foreign loans not guaranteed by the Government apply to medium- and long-term loans (except foreign loans arising from the issuance of letters of credit by credit institutions and foreign bank branches) and some short-term loans in case the loan term is extended, including:

• Short-term loans with extended principal repayment period where the total loan term is over 01 year and the date of signing the extension agreement is after 01 year from the date of first capital withdrawal; and
• Short-term loans without an agreement to extend but with outstanding principal (including interest included in the principal) at the time of 01 year from the date of first withdrawal, except in the case where the borrower completes payment of the above principal within 30 working days from the time of 01 year from the date of first withdrawal.

For short-term loans that are not extended, the borrower only needs to notify the State Bank of the loan. To distinguish between short-term, medium-term and long-term loans, Article 10 of Circular 39/2016/TT-NHNN on lending activities of credit institutions and foreign bank branches to customers stipulates as follows:

“Article 10. Loan category

A credit institution shall consider granting a decision to offer a loan to a customer which is divided into the following categories:

…1. Short-term loan, defined as loans having the maximum loan term of 01 (one) year.

…2. Medium-term loan, defined as loans having the loan term between above 01 (one) year and 05 (five) years at the maximum.

…3. Long-term loan, defined as loans having the loan term of more than 05 (five) years.”

Dossier for register foreign loans not guaranteed by the Government in Vietnam

Foreign loan registration dossier includes the following documents:

• Application for foreign loans not guaranteed by the Government (Appendix 01 issued with Circular 12/2022/TT-NHNN);
• Legal documents of the Borrower and the loan user in case the Borrower is not the loan user: Copy

• Document proving Loan purpose: Copy (certified by Borrower) or original
• Foreign loan contract or foreign loan agreement and agreement to extend short-term loan to medium-term or long-term (if any); or capital withdrawal document with framework agreement: Copy and Vietnamese translation (certified by the Borrower)
• Guarantee commitment document (letter of guarantee, guarantee contract or other form of guarantee commitment) in case the loan is guaranteed: Copy and Vietnamese translation (certified by the Borrower)
• Document of competent authority approving foreign loan according to law provisions: Copy (certified by Borrower)
• Report on compliance with State Bank regulations on credit limits and safety ratios at the end of the month nearest to the date of signing the foreign loan agreement.
• Confirmation from the bank providing account services
• Documents and certificates proving legally distributed profits in VND from direct investment activities of the Lender and confirmation from the bank providing account services on the situation of profit distribution and transfer to the Lender’s country.
• Explanation document on the need for foreign loans in VND in case of foreign loans in VND must be approved by the Governor of the State Bank according to the current regulations of the State Bank on Conditions for foreign loans in VND.

Quantity: 01 set.

Agency receiving dossier for foreign loans not guaranteed by the Government

State Bank (Foreign exchange management Department)

Carry out registration confirmation and registration of changes for loans with loan turnover of over 10 (ten) million USD (or other foreign currency with equivalent value) and foreign loans in VND.

State Bank branch in the province or centrally-run city where the Borrower has its head office

• Carry out registration confirmation and registration of changes for loans with loan turnover up to 10 (ten) million USD (or other foreign currency with equivalent value).
• In case of changes to increase or decrease the loan amount, change the loan currency, change the Borrower’s head office, change the Borrower to an enterprise with its head office in another locality that changes the competent authority confirming the registration of loan changes, the authority confirming the registration and registering the initial loan change is responsible for being the focal point for receiving the Borrower’s loan change registration dossier.

How is the foreign loan registration procedure carried out?

Procedures for registering foreign loans follow these steps:

Step 1: Borrower prepares Application for foreign loans not guaranteed by the Government

• In case the borrower has declared loan information on the Website before submitting the foreign loan registration application: the borrower prints the Application from the Website, signs and stamps;
• In case the borrower does not declare loan information on the Website before submitting the application: the borrower completes the Foreign loan Application Form according to Appendix 01 issued with Circular No. 12/2022/TT-NHNN.

Step 2: Borrower submits 01 set of foreign loan registration dossier

Pursuant to Article 16 of Circular 12/2022/TT-NHNN to the State Bank within the time limit:

• 30 working days from the date of signing the medium and long-term foreign loan agreement;
• 30 working days from the date of signing the agreement to extend a short-term foreign loan to a medium or long-term loan for loans specified in Clause 2, Article 11 of Circular 12/2022/TT-NHNN where the date of signing the extension agreement is within 01 year from the date of first capital withdrawal;
• 30 working days from the date the borrower is granted an Enterprise Registration Certificate, a License for Establishment and Operation under specialized laws, the date of signing an investment contract under the public-private partnership method (PPP contract), the date the parties sign a foreign loan agreement to convert the amount of investment preparation into loan capital (whichever comes later), applicable to foreign loans arising from converting the amount of investment preparation of projects that have been granted an Investment Registration Certificate into foreign loan capital;
• 60 working days from the 1st anniversary of the first withdrawal date for:
  • Short-term loans with extended principal repayment period where the total loan term is over 01 year and the date of signing the extension agreement is after 01 year from the date of first capital withdrawal; and
  • Short-term loans without an agreement to extend but with outstanding principal (including interest included in the principal) at the time of 01 year from the date of first withdrawal, except in the case where the borrower completes payment of the above principal within 30 working days from the time of 01 year from the date of first withdrawal.

Step 3: The State Bank issues a document confirming or refusing to confirm the loan registration (stating the reason)

Processing time:

• 12 working days from the date of receipt of complete and valid documents from the borrower in case the borrower has declared loan information on the Website;
• 15 working days from the date of receipt of complete and valid documents from the borrower in case the borrower does not declare loan information on the Website.

Clients who need advice on register foreign loans not guaranteed by the Government in Vietnam, please contact Viet An Law for the most effective support!