Circular No. 08/2006/TT-NHNN dated October 12, 2006 of the State Bank providing guidance on activity of finance leasing syndication of finance leasing companies in accordance with Provisions in the Decree No. 16/2001/ND-CP dated May 2, 2001 and the Decree No. 65/2005/ND-CP dated 19 May 2005 of the Government

CIRCULAR

PROVIDING GUIDANCE ON ACTIVITY OF FINANCE LEASING SYNDICATION OF FINANCE LEASING COMPANIES IN ACCORDANCE WITH PROVISIONS IN THE DECREE NO. 16/2001/ND-CP DATED 2 MAY 2001 AND THE DECREE NO. 65/2005/ND-CP DATED 19 MAY 2005 OF THE GOVERNMENT

Pursuant to point b, paragraph 2, Article 31 of the Decree 16/2001/ND-CP dated 2 May 2001 of the Government on organization and operation of finance leasing companies, the State Bank of Vietnam would like to provide guidance on activity of finance leasing syndication of finance leasing companies as follows:

1. Governing scope:

This Circular provides guidance on the activity of finance leasing syndication provided by finance leasing companies to Vietnamese and foreign organizations, individuals that are operating in Vietnam and have a demand for hiring assets being machines, equipment, transport means and other movable assets for performing projects of production, business, service or investment project for improvement of domestic living standard (hereinafter referred to as project). This Circular shall not guide the activity of overseas finance leasing syndication.

2. Interpretation:

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

2.1. Finance leasing syndication (hereinafter referred to as leasing syndication) means finance leasing activity provided by a group of finance leasing companies (from 2 finance leasing companies and more) to the lessee, in which there is a finance leasing company acting as a coordinator.

2.2. Syndication lessor is a group of finance leasing companies established and operating under applicable laws of Vietnam (from 2 finance leasing companies and more) coordinating with each other to provide the leasing syndication to the lessee in accordance with the provisions in this Circular.

2.3. Member is a finance leasing company or a finance leasing company’s branch which is authorized in accordance with provisions of applicable laws and accepts to participate in the leasing syndication under specific forms performed by that member in leasing syndication to a project.

2.4. Co-ordinating organisation for leasing syndication means a member that other members participating in finance leasing unanimously select and assign it the co-ordinating responsibility for the leasing syndication.

2.5. Coordinating organization for the payment is a member which is unanimously selected by other members and undertakes to perform specific payment operations in the leasing syndication activity.

2.6. The lessee means Vietnamese and foreign organizations or individuals that are stipulated in accordance with the guidance of the State Bank of Vietnam on finance leasing activity and finance leasing entrustment service.

2.7. Syndication contract is a written commitment, between members participating in the leasing syndication, on the performance of rights and obligations of each member during the whole process of leasing syndication.

2.8. Leasing syndication contract is a written commitment on rights and obligations of a group of members or of each member or a coordinating organization for the leasing syndication with respect to the lessee on the finance leasing in accordance with provision of applicable laws on finance leasing activity, guidance in this Circular and other provisions of related laws.

3. Cases where the leasing syndication is applied

3.1. Demand for finance lease by the lessee exceeds the finance leasing limit of a finance leasing company (30% of the own capital of the finance leasing company for a single customer and 80% of its own capital for a group of related customers);

3.2. The financial capacity and fund source and assets of a finance leasing company cannot satisfy the finance leasing demand;

3.3. The finance leasing company requires dispersal of risks;

3.4. The lessee has a demand for finance lease from many finance leasing companies.

4. Currency used in transactions of leasing syndication

The currency used in leasing syndication transactions shall be Vietnamese Dong. In case where a leasing syndication transaction is performed in foreign currency, the parties shall comply with provisions of applicable laws on foreign exchange control and provisions of applicable laws on finance leasing.

5. Principle for organisation of the leasing syndication

5.1. Members shall voluntarily participate in and agree with each other about the whole contents of the leasing syndication

5.2. Members shall agree to select a co-ordinating organisation for leasing syndication, a co-ordinating organisation for payment;

5.3. All transactions of the leasing syndication between members, between the syndication lessor and the lessee shall be stated in the contract of leasing syndication.

6. Principle for the implementation of leasing syndication

6.1. The leasing syndication in any specific form, conditions of the leasing syndication, application of prudential measures and other operational measures belonging to the finance leasing transaction during the process of leasing syndication shall be performed in accordance with provisions of the Government and the guidance of the State Bank of Vietnam on the finance leasing activity and finance leasing entrustment service, Charter of the finance leasing company and other related provisions of applicable laws.

6.2. Members shall agree on the mode of project appraisal by either establishing the appraisal committee or not, but the unanimity between members of the efficiency and feasibility of project must be ensured;

6.3. The syndication lessor shall regularly inspect, supervise the use of leased assets and coordinate with the lessee to deal with arising issues.

7. Leasing interest, fees and charges of the leasing syndication

7. 1. Members shall agree on the level of leasing interests and method of leasing interest collection. The level of leasing interests each member entitled to enjoy shall be appropriately determined according to the agreement between members and in line with provisions on finance leasing as well as other provisions of related laws.

7.2. Expenses incurred during the process of the leasing syndication shall be agreed upon by members and stated in the syndication contract and contract of leasing syndication in accordance with current provisions on fees and charges.

8. Proposal for leasing syndication to a project

8.1. After the full receipt of application file for finance leasing or leasing syndication from the lessee in accordance with applicable provisions, the finance leasing company that has received the file shall carry out the preliminary appraisal, assessment of the feasibility and other conditions of the project which use finance leasing assets.

8.2. Right after the preliminary appraisal, if the project is considered feasible and qualified for leasing syndication, the finance leasing company that has received the application file shall anticipate members taking part in the leasing syndication to send them a letter of invitation for leasing syndication enclosed with the preliminary appraisal result. If the project is unqualified, the organization that has received the file shall reply in writing to customers and clearly state reasons for its refusal of the finance leasing transaction. The time calculated from the full receipt of file till the reply to the lessee shall be within 7 working days at the maximum.

8.3. The letter of invitation for the leasing syndication shall contain main contents of the finance leasing project (name, address of the lessee, leasing conditions, details and value of assets, mode for the participation in the leasing syndication, the term of leasing syndication, interest rate, fees, lease amount relating to the performance of the finance leasing transaction), enclosed with business plan of the lessee.

9. Co-ordination in the leasing syndication

9.1. Within a period of time proposed by the finance leasing company that receives the invitation file for the leasing syndication, after studying the application file for finance leasing, members who are invited to participate in shall, based on the requests made by the inviting organization, attached documents, their financial capacity and current provisions, decide whether or not to participate in the leasing syndication and reply to the requests of the inviting organization in writing.

9.2. If there are not enough requirements for the leasing syndication that are accepted, the coordinating organization may continue to invite other finance leasing companies for participation.

9.3. The maximum time for the preliminary appraisal, invitation and reply to the lessee for the request of leasing syndication shall be within 20 working days since the full receipt of file.

9.4. For complex projects which need much time for consideration, appraisal, the coordinating organization for leasing syndication shall agree with members about the prolongation of the appraisal time and give a written notice to the lessee.

9.5. The leasing syndication invitation can be made in other forms, but the acceptance of members shall be made and sent in writing. When having fully invited members to take part in the leasing syndication, members shall agree with each other to select a coordinating organization for leasing syndication.

10. Appraisal of leasing syndication project

10.1. The syndication lessors shall select and agree with each other on the mode of appraisal of leasing syndication project, but in any case the original of the appraisal file shall be kept at the co-ordinating organization and the appraisal result shall be sent to members and kept at the co-ordinating organisation for leasing syndication.

10.2. The appraisal result must contain full major information of the project, financial capacity and ability of the lessee to perform obligations to the syndication lessor.

11. Syndication contract

11.1. A syndication contract should contains sufficient agreements of members about following major contents:

11.1.1. Members participating in the leasing syndication

11.1.2. Co-ordinating organisation for the leasing syndication and coordinating organization for payment

11.1.3. The lessee, structure and plan of fund source for the implementation of the leasing syndication transaction

11.1.4. Appraisal mode and result of leasing syndication project.

11.1.5. Form of leasing syndication

11.1.6. Contents of the leasing syndication

a. Type of assets used for leasing syndication and the fund source used to create assets to be broken down by each member;

b. Specific agreements on the right to bring the name of leasing assets, responsibility for registering ownership for assets, responsibility for registering finance leasing transaction, responsibility for leasing assets management, responsibility for recovery of leasing assets in the cases under provisions of applicable laws, responsibility for management of security assets for the finance lease amount.

c. Specific agreements on interests, fees and charges in the contract of leasing syndication.

d. Specific contents of each form of leasing syndication in accordance with current provisions for each type of leasing assets, value of leasing assets, leasing term, lease amount, method of assets handing over and other contents under agreements made by and between members:

11.1.7. Responsibilities of each member, of coordinating organization for leasing syndication and coordinating organization for payment for the signing and implementation of contracts of leasing syndication with the lessee and with each other.

11.1.8. Method of collection of lease amount, payment of interest, fees and charges by the lessee and between members;

11.1.9. Method of and responsibility for the information exchange between members who are related to the performance of leasing syndication transaction, business, production plan of the lessee;

11.1.10. Settlement of risks and disputes between members, principle for the settlement of arising problems during the process of implementation of leasing syndication;

11.1.11. File keeping.

11.2. Other contents in accordance with the agreement between members participating in the leasing syndication;

11.3. Specific contents of the syndication contract must be in line with provisions of the Civil Code, provisions of this Circular and other related provisions of applicable laws.

11.4. Based on the syndication contract and the leasing syndication contract, the coordinating organization for payment shall enter into a commitment on payment security with members. The payment security commitment shall include the contents related to obligations and responsibilities of each party in the performance of payment operations arising during the process of implementation of leasing syndication in line with agreements on payment in the syndication contract and leasing syndication contract.

11.5. Fees for payment operations shall be agreed upon by members and the lessee shall not be subject to the payment of these fees.

11.6. The syndication contract shall be made into several copies with the same validity and each member shall keep one copy.

12. Contract of leasing syndication

12.1. Contents of a leasing syndication contract must be in line with provisions in the Circular guiding the finance leasing activity and finance leasing entrustment service and related necessary contents agreed in the syndication contract;

12.2. Where the parties agree to sign only one contract instead of signing both syndication contract and leasing syndication contract, the contents of this contract must contain full requirements for the contents of 2 replaced contracts.

13. Carrying out the finance leasing under the contract:

13.1. Each member must correctly comply with current provisions applicable to each form of finance leasing in accordance with the commitment in the syndication contract and leasing syndication contract.

13.2. The coordinating organization for the leasing syndication shall be responsible for following up, speeding up members and the lessee to perform commitments in the leasing syndication contract.

14. Responsibility for the information supply

14.1. The lessee shall be responsible for making full report on financial status and its activities to the coordinating organization for leasing syndication for following up, inspection after carrying out the leasing syndication.

14.2. The coordinating organization for the leasing syndication must timely, fully notify members of the result of the fund use inspection and related information for discussing and unanimously taking measures for solution when necessary.

14.3.  Members shall exchange the information of the performance of the leasing syndication contract under the agreements stated in the leasing syndication contract

14.4. The coordinating organization for leasing syndication must send a copy of the leasing syndication contract to and inform the State Bank (State Bank’s Inspectorate) of related situation for supervision and support when necessary.

15. Inspecting, dealing with risks, disputes

15.1. Members must regularly inspect the implementation process of the leasing syndication contract by the lessee, the process of management and use of funds by the lessee under the contracts entered into between the parties and current provisions.

15.2. Where risk arises during the process of leasing syndication, members shall together agree with the lessee for settlement under the leasing syndication contract and current provisions.

15.3. All disputes resulting from the violation of the syndication contract or leasing syndication contract shall be settled by the parties on the basis of negotiation, agreement. If disputes cannot be solved through negotiation, agreement, one of the parties may proceed against the other in accordance with provisions of applicable laws.

16. Organization of implementation

16.1. This Circular shall be effective after 15 days since its publication in the Official Gazette.

16.2. Based on the contents of this Circular and related provisions of applicable laws, Chairman of the Board of Directors, General Directors (Directors) of finance leasing companies shall issue specific guiding documents suitable with operation characteristics of each finance leasing company and organize the implementation.

16.3. The Director of Accounting - Finance Department shall be responsible for guiding the accounting in respect of leasing syndication transactions. Heads of units of the Central State Bank, Managers of State Bank branches in provinces, cities under the central Government’s management shall be responsible for directing and supervising the implementation of this Circular based on their assigned functions and duties.