Under the amended Ordinance on Foreign Exchange, a Vietnamese entity (Vietnamese Guarantor) can only guarantee for obligations of an offshore entity if it obtains an approval by the Prime Minister for doing so. Obtaining a Prime Minister’s approval makes it considerably difficult for a company in Vietnam to issue a guarantee for obligations of an offshore company (e.g. the parent company of a Vietnamese subsidiary). Circular 37/2013 of the State Bank of Vietnam (SBV) which takes effect from 14 February 2014 provides further guidance on an offshore guarantee by a Vietnamese Guarantor. In particular,
- Circular 37/2013 provides that the obligations to be guaranteed by a Vietnamese Guarantor need to be “financial obligations” (nghĩa vụ tài chính). There is no definition of financial obligations. It is not clear if this means that offshore guarantees for non-financial obligations can be issued without obtaining Prime Minister’s approval;
- Circular 37/2013 requires the Vietnamese Guarantor to open a special account to pay for the guaranteed obligations and to receive reimbursement payment by the guaranteed entity; and
- Circular 37/2013 requires the Vietnamese Guarantor to register the repayment obligations by the offshore guaranteed entity with the SBV after the Vietnamese Guarantor’s paying the guaranteed amount to the beneficiary.
Below is a list of key approvals and contracts required for a wind farm project in Vietnam (the Project):
Permission by provincial People’s Committee for the Project to carry out wind measurement;
Report on wind measurement result to the provincial People’s Committee;
Approval of the Pre-Feasibility Study of the Project;
Approval of the basic design part of the Feasibility Study of the Project;
In-principle Approval of the Project under the Investment Law 2014;
For a project financing or limited recourse financing in Vietnam, a mortgage over shares (or equity capital) of the project company usually forms part of the security package due to the ease of creating and perfecting a mortgage over shares. That said, when an enforcement event occurs and if the borrower or the project company does not cooperate, the lenders (usually foreign lenders), who wish to immediately taking over the mortgaged shares, may find it difficult to actually enforce the mortgage due to the need to complete various licensing procedures for the sale or transfer of the mortgaged shares.
Thanks to the flexibility offered by the Enterprises Law 2014 and the Investment Law 2014, lenders may now consider taking some extra measures to increase their ability to enforce the mortgaged over shares of a project company in Vietnam. In particular,
On 29 March 2019, the State Bank of Vietnam (SBV) issued Circular 3/2019 to amend and supplement some articles of Circular 32 of the SBV dated 26 December 2034 on restrictions in using foreign exchange within the territory of Vietnam (Circular 32/2013). Circular 3/2019 will take effect from 13 May 2019.
First, a bit of background, under the Foreign Exchange Ordinance, “in the territory of Vietnam” all transactions, payment, price denomination must not be made in foreign currencies except as permitted by the SBV. The SBV usually takes quite a restrictive (and, in our opinion, not reasonable) on what transactions are considered to occur “in the territory of Vietnam”.
The following is a non-exhaustive list of licenses, permits and requirements on environment which an industrial park in Vietnam need to comply with.
1. Environment impact assessment report (EIAR – Báo cáo đánh giá tác động môi trường) or environment protection plan (EPP – Kế hoạch bảo vệ môi trường).
2. Confirmation on completion of the environmental protection works (Xác nhận hoàn thành công trình bảo vệ môi trường).
The following is a non-exhaustive list of licenses, permits and requirements on firefighting and prevention applicable for an industrial park in Vietnam which are subject to the monitor of firefighting and prevention and may pose a risk of fire and explosion.
1) Appraisal of firefighting and prevention design (Thẩm duyệt thiết kế về phòng cháy chữa cháy) by the competent authority before commencing the construction.
2) Acceptance of firefighting and prevention (Nghiệm thu về phòng cháy và chữa cháy) by the competent authority before putting the construction works into operation.
3) Compulsory fire and explosion insurance for the properties of the industrial park.
Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:
Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;
On 11 January 2019, the Supreme Court issued Resolution 1 guiding the application of several regulations on interest, interest rate and relevant penalty (Resolution 1/2019). Resolution 1/2019 will take effect from 15 March 2019. Below are some salient points of Resolution 1/2019
Resolution 1/2019 clearly states that the interest rate caps of the Civil Code 2005 and 2015 will not apply to credit contracts between banks and its customers. In the past, there has been long debate regarding whether the interest rate caps of the Civil Code 2005 and 2015 will apply to credit contracts.
If the interest rate, overdue interest on principal and overdue interest on interest are higher than the permitted cap, the exceeding interest which has been paid will be deducted from the principal of the loan.