Circular No. 08/2001/TT-NHNN dated September 6, 2001 of the State Bank of Vietnam guiding the implementation of the Government’s Decree No. 16/2001/ND-CP of May 2, 2001 on the “organization and operation of financial leasing companies”

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No. 16/2001/ND-CP OF MAY 2, 2001 ON THE "ORGANIZATION AND OPERATION OF FINANCIAL LEASING COMPANIES"

Pursuant to Article 42 of the Government’s Decree No. 16/2001/ND-CP of May 2, 2001 on the "organization and operation of financial leasing companies", the State Bank hereby guides the implementation of a number of articles of the Decree, which fall under its competence as follows:

Section I. GENERAL PROVISIONS

1. Interpretation of terms and phrases:

In this Circular, the following terms and phrases shall be construed as follows:

1.1. The lessees mean organizations and individuals operating in Vietnam that directly use the rented assets for their production and business purposes, including:

a) Individuals with business registration;

b) Family households;

c) Enterprises;

d) Other organizations being subjects entitled to borrow capital of credit institutions.

1.2. Foreign credit institutions mean banks, financial companies and financial leasing companies of foreign countries or international financial organizations, which have been established under foreign or international laws, participating in the capital contribution to joint-venture financial leasing companies, financial leasing companies with 100% foreign capital.

1.3. The legal capital means the minimum charter capital amount required by law for the setting up of a financial leasing company.

1.4. The charter capital means the capital amount contributed by organizations and individuals and recorded in the charter capital of a financial leasing company.

1.5. Founding members mean organizations and individuals that adopt the first charter of the financial leasing company.

2. Forms of financial leasing companies:

A financial leasing company is a non-bank credit organization or a Vietnamese legal entity, conducting the principal operation of financial leasing. Financial leasing companies are established and operate in Vietnam in the following forms:

2.1. The State-run financial leasing companies are the financial leasing companies which the State invests capital in, sets up and manages their business operations. The granting of establishment and operation licenses for the State-run financial leasing companies shall comply with the separate guidance of the State Bank.

2.2. The joint-stock financial leasing companies are those set up in form of joint-stock companies, where organizations and individuals contribute capital according to the regulations of the State Bank and other provisions of law.

2.3. The attached financial leasing company of a credit institution is the one that conducts independent cost accounting and has the legal person status, is set up by a credit institution with its own capital which acts as the owner according to the regulations of the State Bank and other provisions of law.

2.4. The joint-venture financial leasing company is the one that is set up with capital contributed by the Vietnamese party embracing one or several Vietnamese credit institutions and/or enterprises, and the foreign party embracing one or several foreign credit institutions, on the basis of a joint-venture contract.

2.5. The financial leasing company with 100% foreign capital is the financial leasing company set up with capital of one or several foreign credit institutions under the provisions of Vietnamese laws.

3. The operation term of a financial leasing company shall comply with the provisions in Article 5 of Decree No. 16/2001/ND-CP of May 2, 2001 of the Government.

4. Charter capital

The charter capital of financial leasing companies shall be contributed in the following forms:

4.1. In money:

a) Vietnamese currency (VND): For the State-run financial leasing companies, the financial leasing companies attached to credit institutions and the joint-stock financial leasing companies, the charter capital shall be contributed in Vietnam dong.

b) US dollars (USD): For joint-venture financial leasing companies and financial leasing companies with 100% foreign capital, the charter capital shall be contributed in USD.

c) The Vietnamese parties to joint-venture financial leasing companies may contribute charter capital in US dollars or Vietnam dong. In case of capital contribution in Vietnam dong, the contributed charter capital amounts must be converted into US dollars at the average exchange rate on the inter-bank foreign currency market between Vietnam dong and US dollars, announced by the State Bank at the time of capital contribution.

4.2. In kinds: They must be assets with valid papers evidencing the ownership and necessary assets in service of operation of the financial leasing companies (excluding assets used for lease). The valuation and transfer of ownership of the capital-contributing assets shall comply with the current provisions of Vietnamese law.

5. Charter capital contribution percentages, transfer of contributed capital proportion and profit sharing in joint-venture financial leasing companies and financial leasing companies with 100% foreign capital:

5.1. The charter capital contribution percentages: The charter capital contribution proportions of the foreign parties and the Vietnamese parties in joint-venture financial leasing companies shall be agreed upon by the parties and approved by the State Bank. The capital contribution proportion of the foreign party must not be lower than 30% of the charter capital of a financial leasing company.

5.2. Transfer of the contributed capital proportion:

a) The Vietnamese parties and the foreign parties in joint-venture financial leasing companies may transfer their respective contributed capital amounts to other parties in the joint ventures, but must ensure the charter capital contribution percentage prescribed at Point 5.1.

b) The financial leasing companies with 100% foreign capital may transfer their capital, but have to give priority to Vietnamese organizations.

c) The percentage of and conditions for the transfer of capital of joint-venture financial leasing companies must be specified in their charters and be in conformity with the provisions of law. Where the charter capital amount to be transferred exceeds the prescribed level, the capital transfer shall be effective only after it is approved by the State Bank.

d) In cases where profits are generated from the transfer of capital of financial leasing companies, the transferors shall have to pay taxes according to the provisions of Vietnamese law.

5.3. Profit sharing and risk-bearing rates: The parties joining the joint-venture financial leasing companies shall share profits and bear risks of the joint-venture financial leasing companies according to their respective capital contribution proportions, except otherwise agreed upon by the parties in their joint- venture contracts.

Section II. PROVISIONS ON LICENSING THE ESTABLISHMENT AND OPERATION OF FINANCIAL LEASING COMPANIES

6. The conditions for a financial leasing company to be granted the establishment and operation license (hereinafter called the license for short):

6.1. It wishes to conduct financial leasing activities in the geographical areas where the operation is applied for;

6.2. It has sufficient legal capital prescribed in Decree No.82/1998/ND-CP of October 3, 1998 of the Government, concretely as follows:

a) The legal capital of a joint-stock financial leasing company or an attached financial leasing company of a credit institution is VND 50 billion.

b) The legal capital of a joint-venture financial leasing company or a financial leasing company with 100% foreign capital is USD 5 million.

6.3. Its founding members are organizations or individuals, that have prestige and financial capability;

6.4. Its administrator and executive officials have full civil act capacity and professional qualifications suitable to the operations of the financial leasing company and compatible to the regulations of the State Bank;

6.5. It has a draft establishment and operation charter compatible to the Law on Credit Institutions, the Government’s Decree No.16/2001/ND-CP of May 2, 2001 on organization and operation of financial leasing companies and other provisions of law;

6.6. It has feasible business plan;

6.7. Besides the above-mentioned conditions, the foreign parties in the joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital shall also have to:

a) Be permitted by competent bodies of foreign countries to conduct banking activities or financial leasing activities;

b) Be permitted by competent bodies of foreign countries to operate in Vietnam.

7. A dossier of application for a license shall include:

7.1. The application for the license:

a) For the attached financial leasing company of a credit institution: It shall be signed by the Managing Board chairman or the person authorized by the Managing Board chairman.

b) For the joint stock financial leasing company: It shall be signed by the founding members or the authorized representative of the group of founding members.

c) For the joint-venture financial leasing company, the financial leasing company with 100% foreign capital: It shall be signed by its representative at law or the lawfully authorized representatives of the capital contributing parties.

7.2. The draft charter: The charter of a financial leasing company must have the following principal contents:

a) The name and head-office location of the financial leasing company;

b) The operation duration;

c) The operation contents and scope;

d) The charter capital and mode of capital contribution;

e) The procedures for election, appointment and dismissal of Managing Board members, the general director (director) and the Control Board;

f) The tasks and powers of the Managing Board, the Control Board and the general director (director).

g) The legal person representative of the financial leasing company;

h) The rights and obligations of shareholders;

i) The financial, accounting, inspecting and internal auditing principles;

j) Cases of dissolution and the dissolution procedures;

k) Procedures for charter amendment.

7.3. Operation plan: clearly stating the contents, mode and areas of operation, usefulness to the economy, in which the concrete plan for operation in the first three years must be clearly defined;

7.4. The list and curricula vitae, diplomas evidencing the capabilities and professional qualifications of the founding members, the Managing Board members, the Control Board members and the general director (director) of the financial leasing company;

7.5. The plan on charter capital contribution, the list and charter capital contribution level commitments of the capital contributing parties;

7.6. The financial situation and relevant information on major shareholders;

7.7. The approval of the location of the financial leasing company’s head office by the concerned provincial/municipal People’s Committee.

8. Apart from the documents prescribed at Point 7, Section II of this Circular, the dossier of application for license of an attached financial leasing company of a credit institution shall also include the following documents:

8.1. The document signed by the chairman of the Managing Board of the credit institution or the person authorized by the Managing Board chairman on the source and level of charter capital allocated to the financial leasing company.

8.2. The documents related to the credit institution being the owner include:

a) The establishment decision or the establishment and operation license, the business registration certificate;

b) The current charter;

c) The State Bank’s decision approving the charter capital;

d) The financial balance sheet, the profit and loss statement already audited and the report on situation of operation in three latest years.

9. Apart from the documents prescribed at Point 7 Section II of this Circular, the dossier of application for license of a joint-venture financial leasing company or a financial leasing company with 100% foreign capital shall also include the following documents:

9.1. The charters of the capital-contributing parties;

9.2. The licenses of the capital-contributing parties;

9.3. The document issued by a competent body of the foreign country permitting the foreign party to operate in Vietnam in form of joint-venture financial leasing company or the financial leasing company with 100% foreign capital. Where the law provisions of the original foreign country do not require this document, there must be evidence certified by competent body(ies);

9.4. The financial balance sheets, the audited loss and profit statements and the reports on the situation of operation in the three latest years of the capital-contributing parties;

9.5. The joint- venture contract for a joint-venture financial leasing company. A joint-venture contract shall include the following principal contents:

a) Name and address of the joint venture financial leasing company;

b) Addresses and representatives of the joint venture parties;

c) The operation duration of the joint venture;

d) The charter capital: capital contribution proportion, the contributed capital level of each party, capital contribution plan clearly stating the capital amounts in foreign currency(ies), in Vietnam dong and in kind (if any);

e) The rights and obligations of the parties;

f) The quantity and proportion of members of the Managing Board, the Control Board and the Directorate of the joint venture parties;

g) The projected number of bureaus and boards as well as the quantity of officials and employees of each party in the initial stage (the number of people bearing the Vietnamese nationality, the number of people bearing foreign nationality(ies);

i) The principles for accounting, book-keeping, reporting, fund establishment and use, profit and loss sharing to the joint-venture parties;

j) Procedures for settlement of disputes between parties over the performance of the joint-venture contract, the procedures for liquidation, dissolution and/or merger of a joint-venture financial leasing company;

k) Conditions for amendment, supplementation of the joint-venture contract.

10. Provisions on submission of dossiers of application for licenses:

10.1. Dossiers of application for licenses of joint-stock financial leasing companies, attached financial leasing companies of credit institutions shall be made in two sets in Vietnamese language. The documents in the dossiers must be the originals; in case of the copies thereof, they must be certified by the agencies which have issued the originals or certified by the State notary public;

10.2. The dossiers of application for licenses of the joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital must be made in two sets, one in Vietnamese and one in English or French. The dossiers made in foreign countries must be the originals or copies certified by competent bodies.

The documents which must be consularly legalized include: The permits of foreign competent bodies permitting the foreign credit institutions to conduct banking operation or financial leasing activities and the documents of the competent foreign agencies permitting the foreign parties to operate in Vietnam in form of the joint-venture financial leasing company or the financial leasing company with 100% foreign capital.

The Vietnamese copies and the Vietnamese translation of foreign language documents must be certified by the notary public offices of Vietnam or Vietnamese diplomatic missions or consular offices overseas;

10.3. Organizations and individuals applying for licenses must send to the State Bank of Vietnam two sets of dossiers as provided for at Points 10.1 and 10.2.

11. Confirmation of dossiers and time limits for consideration and granting of licenses:

11.1. After receiving the complete dossiers, the State Bank shall give written confirmation of the completeness of the dossier sets to the representative of the capital-contributing parties.

11.2. The time limit for consideration and granting of licenses: Within 90 (ninety) days as from the date of receiving the complete dossiers of application for licenses, the State Bank shall grant or refuse to grant the licenses. In case of refusal, the State Bank must issue documents justifying the reasons therefor.

11.3. The licenses shall be granted in set forms by the State Bank, including:

a) The licenses for the attached financial leasing companies of credit institutions and the joint-stock financial leasing companies;

b) The licenses for joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital.

12. Licensing fees:

12.1. The fee level for each licensing (or each extension of license):

a) For the attached financial leasing companies of credit institutions and the joint stock financial leasing companies, the fee level paid for each licensing or each extension of the license shall be equal to 0.1% of the charter capital level;

b) For the joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital, the fee paid for each licensing or each extension of the license shall be USD 10,000 (ten thousand USD).

12.2. Within 15 days as from the date of being granted the licenses, the licensed financial leasing companies shall have to pay fees into the accounts at the transaction bureaus of the State Bank or its branches in the provinces or cities where the companies are headquartered. The vouchers on fee payment must be copied and sent to the State Bank (the Department for Banks) for file keeping.

12.3. The fee amounts prescribed at Point 12.1 above must not be deducted into the charter capital and shall not be refunded in any circumstances.

13. The transfer of charter capital of financial leasing companies into frozen accounts:

13.1. At least 30 days before their inauguration, the financial leasing companies shall have to:

a) Transfer all their charter capital contributed in money into the frozen accounts opened at the transaction bureaus of the State Bank or its branches in the provinces or cities where the companies are headquartered, without enjoying interests thereon, and with written certification by the holders of the frozen accounts. The written certification of the money amounts paid into the frozen accounts must be sent to the State Bank (the Department for Banks);

b) The charter capital amounts contributed in kind must have documents on transfer of the right to own the assets contributed as capital to the financial leasing companies under the provisions of Vietnamese law.

13.2. After their inaugural dates, the financial leasing companies may release the money amounts from frozen accounts into their operation accounts opened at the State Bank, commercial banks, branches of foreign banks or joint-venture banks operating in Vietnam.

14. Business registration:

14.1. After being granted licenses, the financial leasing companies shall have to make business registration strictly according to the current law provisions on business registration;

14.2. The financial leasing companies shall have to send to the State Bank the originals or notarized copies of their business registration certificates;

15. Commencing operation:

15.1. Within 12 (twelve) months as from the date of being granted licenses, the financial leasing companies shall have to complete all the following necessary conditions to commence their operation:

a) Having their charters approved by the State Bank;

b) Having obtained the business registration certificates;

c) Having obtained the State Bank’s written certification of the full contribution of their charter capital;

d) Having the legal documents on the right to own or the right to use the head- offices of the financial leasing companies in Vietnam;

e) At least 30 (thirty) days before commencing their operation, having to publish on daily Vietnamese-language newspapers (at least one central daily and one local daily of the localities where they are headquartered) for five consecutive issues the following major contents:

- The full names and abbreviated names of the financial leasing companies;

- The head-office addresses; telephone, fax numbers;

- The charter capital;

- The operation contents, scope, areas and duration;

- The serial numbers and issuing dates of the licenses granted by the State Bank; the serial numbers and issuing dates of the business registration certificates, the names of the issuing agencies;

- The full names and nationality(ies) of the chairman and members of the Managing Board, the Control Board and the general director (director);

- Other contents if deeming it necessary;

- The planned date of inauguration.

15.2. At least 15 (fifteen) days before the inaugural date, the financial leasing companies must notify the inaugural dates to the State Bank, the business registration bodies and the People’s Committees of the provinces or cities where the financial leasing companies are headquartered.

15.3. In special cases where the operation is not commenced as provided for at Point 15.1, at least 30 (thirty) days before the expiry of the inaugural time limit, the Managing Board chairmen or the authorized persons of the financial leasing companies must send documents to the State Bank applying for the extension of the inaugural date. The inauguration extension for a financial leasing company shall not exceed 6 (six) months.

15.4. Upon the expiry of the prescribed time limit or the extended duration, if the financial leasing companies still fail to commence their operation, the State Bank shall proceed with the withdrawal of the granted licenses and carry out procedures to reimburse the capital at the frozen accounts (if any) after subtracting the procedural fees as prescribed.

16. Withdrawal of licenses:

16.1. The licensed financial leasing companies may have their licenses withdrawn under the provisions in Clause 1, Article 29 of the Law on Credit Institutions.

16.2. The procedures and dossiers for withdrawal of licenses of financial leasing companies shall comply with the current law provisions and the guidance of the State Bank.

16.3. After having their licenses withdrawn, the financial leasing companies must immediately stop all activities inscribed in the licenses.

16.4. The State Bank shall announce the license withdrawal decisions on local newspapers of the localities where the concerned companies are headquartered and on central Vietnamese-language dailies for three consecutive issues.

17. Financial leasing companies changes which must be approved:

17.1. A financial leasing company must get the State Bank’s written approval before changing one of the following contents:

a) Its name;

b) Its charter capital level;

c) The location of its head-office, branch and/or representative office;

d) The operation contents, scope or duration;

e) The transfer of registered shares beyond the percentage prescribed by the State Bank;

f) The percentage of shares held by major shareholders;

g) The Managing Board members, the general director (director) and the Control Board members.

17.2. The procedures and dossiers applying for the approval of changes named at Point 17.1 shall comply with the guidance of the State Bank.

17.3. After getting the approval from the State Bank, the financial leasing companies shall have to register with competent State bodies the changes prescribed at Point 17.1 and must publish them on central and local newspapers under the provisions of law.

Section III. ORGANIZATIONAL STRUCTURE, ADMINISTRATION, MANAGEMENT AND CONTROL

18. Administration, management and control:

18.1. The financial leasing companies licensed by the State Bank have the Managing Board, the Control Board and the general director (director). In a financial leasing company, the Managing Board has the function of managing the company according to the provisions of the Law on Credit Institutions and other law provisions; the Control Board is tasked to inspect the financial activities of the company, supervise the observance of the accounting regime as well as activities of the company’s internal inspection and auditing system; the general director (director) is answerable to the Managing Board for running daily activities according to his/her tasks and powers under the provisions of the Law on Credit Institutions and other law provisions.

For financial leasing companies attached to credit institutions, the administration and control of companies shall be decided by the Managing Boards and the Control Boards of such credit institutions.

18.2. The election or relieve from office, the appointment or dismissal of the chairman and other members of the Managing Board, the head and other members of the Control Board, the general director (director) of a financial leasing company shall comply with the provisions of law and the guidance of the State Bank.

18.3. The chairman and other members of the Managing Board, the head and other members of the Control Board, the general director (director) of a financial leasing company must be approved by the State Bank Governor him-/herself or under his/her authorization.

18.4. The specific tasks and powers of the members of the Managing Boards and the Control Boards as well as the general directors (directors) of the financial leasing companies shall be defined by the State Bank.

19. The Managing Board:

19.1. A Managing Board has a minimum number of 3 members and the maximum number of 11 members. The number of Managing Board members shall be decided by the capital-contributing parties or the shareholders congress and stipulated in the charter.

19.2. The Managing Board members are those who have prestige, professional ethics and knowledge about banking-financial operation and who are not subjects prescribed in Article 40 of the Law on Credit Institutions and must comply with the stipulations of the State Bank.

19.3. The Managing Board chairman and members must not authorize persons who are not members the Managing Board to perform their tasks and exercise their powers. The Managing Board chairman must neither join the Managing Board of, nor participate in administering, another credit institution, except for cases where such institution is an affiliate company.

19.4. The Managing Board chairman must not be concurrently the general director (director) or deputy-general director (deputy-director) of a financial leasing company.

19.5. The term of office of a Managing Board member shall be 2 to 5 years. The chairman and members of a Managing Board may be re-elected.

20. The Control Board:

20.1. A Control Board is composed of at least 3 members, including 1 being its head and at least 1 being the full-time member or being not concurrently engaged in running the financial leasing company’s activities. The number of Control Board members is specified in the charter.

20.2. The Control Board members must be those who have the university or higher degree in finance and banking and have the professional ethics, must not be the subjects prescribed in Article 40 of the Law on Credit Institutions and must comply with the regulations of the State Bank.

21. The general director (director):

The general director (director) and deputy-general director (s) (deputy director(s)) must not be the subjects prescribed in Article 40 of the Law on Credit Institutions, have university or higher degree in economics, banking and finance, have at least five years’working experiences in the field of banking and finance, have the capability to administer the financial leasing company according to the regulations of the State Bank and must reside in Vietnam while being in office.

22. Organizational structure of a financial leasing company:

22.1. A financial leasing company may open and terminate the operation of its domestic and/or overseas branches and/or representative offices after getting the written approval from the State Bank. The conditions, dossiers and procedures for opening and terminating the operation of branches and/or representative offices of the financial leasing companies shall comply with Article 33 of the Law on Credit Institutions and the guidance of the State Bank.

22.2. The financial leasing companies may set up their affiliate companies with legal person status and independent cost-accounting for operating in a number of financial, banking and/or insurance fields under the provisions of law and the guidance of the State Bank.

22.3. The assisting apparatus at the head-office or a branch of a financial leasing company shall include: the office, specialized and professional sections and transaction bureaus.

23. The division, separation, consolidation, merger, purchase or dissolution of financial leasing companies must be approved in writing by the State Bank.

Section IV. OPERATION OF FINANCIAL LEASING COMPANIES

24. Operation contents and scope:

24.1. The contents and scope of operation of financial leasing companies in Vietnam shall be prescribed in the licenses granted by the State Bank, the Government’s Decree No.16/2001/ND-CP of May 2, 2001 and the guiding documents issued by the State Bank.

24.2. The financial leasing companies are allowed to mobilize capital from the following sources:

a) Time deposits with terms of one year or longer from organizations and individuals.

b) Short-, medium- and long-term capital borrowings from domestic and foreign credit institutions.

c) Issuance of valuable papers of different kinds:

- The valuable papers include bonds, deposit certificates and other valuable papers with a term of over one year.

- The financial leasing companies are allowed to issue assorted valuable papers when so permitted by the State Bank.

- The dossiers of applying for the issuance of valuable papers shall be sent to the State Bank for consideration and settlement and include: The application for the issuance of valuable papers; the plan on the issuance and the use of capital gathered through the issuance; other relevant documents as requested by the State Bank.

d) Capital received from other sources under the regulations of the State Bank.

24.3. The financial leasing companies are allowed to perform the following operations:

a) Financial leasing;

b) Effecting purchase and sublease in form of financial leasing (hereinafter called the purchase and sublease for short): In this form, the financial leasing companies shall re-purchase machinery, equipment, transport means and other moveables under the lessee’s ownership and sublease such assets to the lessee in form of financial leasing so that the lessee shall continue to use them in service of their activities;

c) Advising clients on matters related to the financial leasing operation;

d) Providing services of entrustment, asset management and guarantee related to financial leasing activities;

e) Other activities when so permitted by the State Bank.

24.4. Foreign exchange activities:

a) The foreign exchange activities of joint-venture financial leasing companies and financial leasing companies with 100% foreign capital shall be prescribed in the licenses granted by the State Bank. For the joint-venture financial leasing companies and the financial leasing company with 100% foreign capital, which had been licensed before the promulgation of Decree No.16/2001/ND-CP of May 2, 2001, the State Bank shall carry out procedures for addition of foreign exchange activity contents to their operation licenses.

b) The financial leasing companies being other than the subjects mentioned at Point a, Clause 24.4 of this Section, if wishing to conduct foreign exchange activities, shall have to file their applications and dossiers of application for foreign exchange activity licenses to the State Bank according to the current regulations.

24.5. The currencies used in financial leasing transactions:

a) The financial leasing companies may conduct financial leasing activities in Vietnam dong.

b) For financial leasing transactions effected in foreign currency(ies), the financial leasing companies shall have to strictly comply with the current regulations on foreign exchange management applicable to cases of providing loans in foreign currency(ies), and the guidance of the State Bank.

24.6. Financial leasing interests:

a) With regard to the interests on financial leasing in Vietnam dong, the financial leasing companies shall fix them on the basis of the base lending interest and the amplitude provided by the State Bank Governor in each period and other relevant costs.

b) With regard to the interests on financial leasing in foreign currency(ies), the financial leasing companies shall fix them on the basis of the international market interests and the demand for, as well as supply of credit capital in foreign currency(ies) at home, and other relevant costs.

25. Security rate: The financial leasing companies must maintain the security rate prescribed in Article 81 of the Law on Credit Institutions and the guiding documents of the State Bank.

26. The financial leasing limit for a client:

26.1. The total financial leasing debit balance for a client must not exceed 30% of the own capital of a financial leasing company, except for cases where the financial leasing amounts come from the sources of entrusted capital of the Government, organizations or individuals or where the lessees are credit institutions;

26.2. Where the renting demand of a client exceeds 30% of the own capital of a financial leasing company or a client has the demand of renting from various sources, the financial leasing companies may provide consolidated capital loans according to the regulations of the State Bank Governor.

26.3. In special cases where for key projects of the State the syndicated capital of the financial leasing companies still fails to satisfy the financial renting demand of a client, the total financial leasing debit balance for each specific case shall be decided by the Prime Minister.

27. Cases where the financial leasing companies are not allowed to provide financial leasing:

27.1. The financial leasing companies must not provide financial leasing to the following subjects:

a) Their Managing Board members, Control Board members, general directors (directors), deputy- general directors (deputy-directors);

b) The persons who evaluate, consider and approve the financial leasing;

c) The fathers, mothers, wives, husbands and/or offspring of the Managing Board members, the Control Board members, the general directors (directors), the deputy- general directors (deputy-directors).

27.2. The financial leasing companies are not allowed to accept the guarantee of the subjects prescribed at Point 27.1, Section IV of this Circular for use as basis to provide financial leasing for clients.

28. Limiting the financial leasing:

28.1. The financial leasing companies must not provide financial leasing with preferential terms for the following subjects:

- Auditing organizations, auditors, that are conducting the audit at the financial leasing companies; chief accountants, inspectors;

- Major shareholders of the financial leasing companies;

- Enterprises with one of the subjects prescribed at Point 27.1, Section IV of this Circular owning more than 10% of the charter capital of such enterprises.

28.2. The total financial leasing debit balance for subjects prescribed at Point 28.1 of this Section must not exceed 5% of the own capital of the financial leasing companies.

29.The financial leasing companies may open accounts at the State Bank and commercial banks licensed to operate in Vietnam. In case of necessity to open foreign currency accounts overseas, such must be permitted by the State Bank.

30. Financial leasing contracts:

30.1. The financial leasing contracts must be made in writing in accordance with the provisions in the Government’s Decree on organization and operation of the financial leasing companies.

30.2. The financial leasing contracts shall take effect as from the date agreed upon in the contracts by the parties.

31. Cases where financial leasing contracts terminate ahead of time:

31.1. The lessor shall have the right to terminate the financial leasing contracts before the expiry of the leasing term in one of the following cases:

a) The lessee fails to pay the rental as provided for in the financial leasing contract;

b) The lessee breaches terms of the financial leasing contract;

c) The lessee goes bankrupt or is dissolved;

d) The guarantor goes bankrupt or is dissolved and the lessor rejects the lessee’s request to terminate the guarantee or to replace the guarantor.

31.2. The lessee shall have the right to terminate the financial leasing contracts before the expiry of the leasing term in one of the following cases:

a) The lessor fails to hand over the leased assets in time due to the lessor’s faults;

b) The lessor breaches terms of the financial leasing contract.

31.3. The financial leasing contracts may terminate before the expiry of the leasing term in cases where the leased assets are lost or irreparably damaged.

31.4. The financial leasing contracts may terminate before the expiry of the leasing term in cases where the lessor agrees to let the lessee pay the whole rental before the leasing time limit inscribed in the financial leasing contracts.

32. Handling the financial leasing contracts which terminate ahead of time due to the lessee’s faults:

32.1. In cases where the lessee breaches Items a and b of Point 31.1:

a) When the lessee breaches the financial leasing contracts, the financial leasing companies may recover the leased assets and request the lessee to immediately pay the rental amounts not yet paid under the contracts.

b) The financial leasing companies may handle the leased assets by leasing them to other parties or assigning the leased assets. The proceeds from the lease of assets to other parties or the assignment of assets shall be used to offset the debt amounts to be collected from the previous financial leasing contracts.

c) The lessee shall be obliged to continue to repay the outstanding debts according to the financial leasing contracts when the financial leasing companies have not yet assigned or leased the leased assets to other parties, or be obliged to repay the outstanding debt amounts after subtracting the money amounts earned from the assignment or lease of assets to other parties.

d) In cases where the lessee has already paid a part of the payable rentals and the financial leasing company has already assigned or leased the assets to the other party, if the paid rental amount plus the money amount from the assignment or lease of assets to the other party exceeds the rental amount to be paid according to the contract, the financial leasing company must reimburse the excessive amount to the lessee.

e) In cases where the lessee repays the whole rental amount to be paid under the contract and the remaining value of the assets upon the expiry of the contract as agreed upon therein, the lessee may transfer the ownership over the rented assets like the cases where the leasing contracts have been completed. The conditions and time limit for rental payment must be accepted by the financial leasing companies.

32.2. The handling of financial leasing contracts which terminate ahead of time in cases where the lessee goes bankrupt or dissolves shall comply with the law provisions on bankruptcy and dissolution.

Section V. FINANCE, ACCOUNTING AND REPORTING REGIME

33. Finance:

33.1. The fiscal year of financial leasing companies begins on January 1 and ends at the end of December 31 of the calendar year. The first fiscal year shall start on the date of commencing operation and end at the end of December 31 of that calendar year.

33.2. The financial revenues and expenditures of the financial leasing companies shall strictly comply with the current law provisions on financial regimes of the credit institutions;

33.3. In cases where joint-venture financial leasing companies or financial leasing companies with 100% foreign capital wish to apply the fiscal year of the original countries in order to draft financial reports for the original credit institutions, such must be approved in writing by the State Bank.

34. Accounting:

34.1. The financial leasing companies accounting must be carried out in accordance with the Law on Credit Institutions and the system of book-keeping accounts promulgated by the State Bank;

34.2. For newly added operations of financial leasing companies, which have not yet prescribed in the account system, the State Bank shall have to add new accounts to the book-keeping account system of the credit institutions.

35. Deduction for setting up and use of funds:

35.1. The profits earned in the year are the business results of the financial leasing companies after the payment of income tax according to the current law provisions;

35.2. The deduction for setting up, the maintenance and use of funds of the financial leasing companies shall comply with the current law provisions on the financial regime of the credit institutions;

35.3. The financial leasing companies must make deductions for risk reserves and account them into their operation expenses. The deduction for setting up and use of risk reserves shall comply with the State Bank’s regulations;

35.4. The financial leasing companies must not use the funds prescribed at Point 35.2 of this Section for dividend payment or distribution to owners and/or shareholders in any form, except for cases where the financial leasing companies are dissolved and liquidated, but priority must be given to the payment to creditors before making reimbursement to owners and/or shareholders;

35.5. The transfer abroad of profits and assets after liquidation or operation termination by foreign parties in the joint-venture financial leasing companies or the financial leasing companies with 100% foreign capital shall comply with the provisions of the Law on Credit Institutions and current legislation.

36.The regime of information, reporting, statistics: The reports of the financial leasing companies must be made in Vietnamese language and reflected in Vietnam dong. The financial leasing companies must follow the regime of information, reporting and statistics according to the current regulations and guidance of the State Bank.

37.Within 30 (thirty) days as from the date the following changes are made, the financial leasing companies attached to credit institutions, the joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital must send written notices thereon to the State Bank:

a) The change of the Managing Board chairman, general director (director) by the capital-contributing parties.

b) Changes of names and addresses of the capital- contributing parties.

c) The division, separation, merger, consolidation, dissolution, bankruptcy of the capital-contributing parties.

38. Auditing:

38.1. Within 30 (thirty) days before the end of a fiscal year, the financial leasing companies must choose the auditing organizations other than the internal audits to audit their activities. Such auditing organizations must be approved by the State Bank.

38.2. Within 120 (one hundred and twenty) days as from the date of ending a fiscal year, the financial leasing companies must send their audited financial reports to the State Bank.

Section VI. INSPECTION, SPECIAL CONTROL, BANKRUPTCY, DISSOLUTION, LIQUIDATION AND SETTLEMENT OF DISPUTES

39. Inspection:

39.1. The financial leasing companies must be subject to the inspection and examination by the State Bank;

39.2. The State Bank’s inspection of the operations of financial leasing companies in Vietnam shall comply with the provisions in the Law on Credit Institutions and the regulations of the State Bank’s inspectorate.

40. The special control, bankruptcy, dissolution and liquidation of financial leasing companies shall comply with the provisions in the Law on Credit Institutions and the current law provisions.

41. The commendation and handling of violations related to the financial leasing activities shall comply with the provisions of the Law on Credit Institutions, the provisions on sanctioning administrative violations in the monetary field and banking operations, the regulations of the State Bank and other provisions of the current legislation.

42. The disputes between financial leasing companies and the lessees as well as disputes between capital-contributing parties to joint-stock financial leasing companies, joint-venture financial leasing companies and financial leasing companies with 100% foreign capital shall be settled according to the current provisions of Vietnamese law.

Section VII. IMPLEMENTATION PROVISIONS

43. Within 12 months as from the effective date of the Government’s Decree No. 16/2001/ND-CP of May 2, 2001 on the organization and operation of financial leasing companies, the financial leasing companies set up and operating under the operation licenses which had been granted by the State Bank before this Decree took effect must adjust their organizational structures and operation to conform to the provisions of this Circular and relevant guiding documents.

44. This Circular takes effect 15 days after its signing.

45.The director of the Office, the director of the Department for Banks and Non-Bank Credit Institutions, the heads of the units, of the State Bank, directors of the State Bank’s provincial/municipal branches, the Managing Board chairmen and general directors (directors) of the financial leasing companies shall, within the scope of their respective powers and tasks, have to deploy the implementation of this Circular.

46.The amendment and supplementation of this Circular shall be decided by the State Bank Governor.