Decree No. 39/2014/ND-CP dated May 07, 2014 of the Government on operation of financial company and financial leasing company

DECREE

On operation of financial companies and
financial leasing companies[1]

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to June 16, 2010 Law on Credit Institutions;

At the proposal of the Governor of the State Bank of Vietnam,

The Government promulgates the Decree on operation of financial companies and financial leasing companies.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides the operation of financial companies and financial leasing companies.

Article 2. Subjects of application

1. Financial companies and financial leasing companies established and operating in Vietnam.

2. Organizations and individuals related to the operation of financial companies and financial leasing companies specified in Clause 1 of this Article.

Article 3. Interpretation of terms

In this Decree, the terms and phrases below are construed as follows:

1. General financial company means a financial company which may perform activities prescribed in the Law on Credit Institutions and this Decree.

2. Specialized financial companies include factoring financial companies, consumer credit financial companies and financial leasing companies as defined in this Decree and guided by the State Bank of Vietnam (below referred to as the State Bank).

3. Factoring financial company means a specialized financial company mainly engaged in factoring activities under this Decree.

4. Consumer credit financial company means a specialized financial company mainly engaged in consumer credit activities under this Decree.

5. Financial leasing company means a specialized financial company mainly engaged in financial leasing under this Decree. Financial leasing debit balance must make up at least 70% of the total credit balance.

6. Consumer credit means a form of credit provided to individuals for their consumption purpose through provision of loans, including amortized loans, consumer loans and issuance of credit cards.

7. Financial leasing means medium-term and long-term credit activities based on financial leasing contracts between the lessors and the lessees. The lessors commit to buying assets for financial leasing at the request of the lessees and hold the ownership over financially leased assets during the lease term. The lessees use the leased assets and pay rents therefor during the lease term under the financial leasing contracts.

8. Assets for financial leasing (below referred to as leased assets) means machinery, equipment and other assets prescribed by the State Bank. The State Bank shall guide in detail types of leased asset in each period.

9. Financial lessor (below referred to as lessor) means a financial leasing company or financial company.

10. Financial lessee (below referred to as lessee) means an organization or individual that is operating in Vietnam and directly uses the leased assets for its/his/her operation.

11. Rent means an amount payable by a lessee to a lessor as agreed upon in a financial leasing contract.

12. Financial leasing contract means an irrevocable contract between a lessor and a lessee on financial leasing of one or some leased assets.

13. Purchase and sub-lease in the form of financial leasing (below referred to as purchase and sub-lease) means that a financial lessor purchases machinery, equipment or other assets which are lawfully owned by a lessee and sub-leases such assets to the lessee in the form of financial leasing for continued use to serve their activities. In the purchase and sub-lease transactions, the lessee is also the supplier of assets for leasing.

Article 4. Transformation

1. General financial companies may add or modify contents of their operation under this Decree to be transformed into specialized financial companies.

2. Specialized financial companies may not add contents of operation to be transformed into general financial companies.

3. Based on results of the State Bank’s inspection, examination and supervision and in the course of restructuring of financial companies, the State Bank shall decide on the merger or transformation of financial companies.

Chapter II

OPERATION OF FINANCIAL COMPANIES

Article 5. Banking operations of financial companies

The general conditions for a financial company to conduct banking operations prescribed in Clause 1, Article 108 of the Law on Credit Institutions include:

 1. Its banking operations are indicated in its establishment and operation license granted by the State Bank (below referred to as the license).

2. It has a contingent of professionally qualified employees, physical facilities, technologies, means, equipment and internal regulations in accordance with law for conducting banking operations indicated in the license.

3. For banking operations related to foreign exchange activities, it shall comply with the law on foreign exchange management.

4. It satisfies all professional conditions for banking operations prescribed by the State Bank.

Article 6.  Issuance of deposit certificates, promissory notes, bills or bonds to raise capital from organizations

Financial companies may issue deposit certificates, promissory notes, bills or bonds to raise capital from organizations if satisfying all the following conditions:

1. The conditions prescribed in Article 5 of this Decree.

2. Their minimum operation duration, operation and business results are prescribed by the State Bank.

3. Their long-term valuable paper issuance plans are approved by the Shareholders’ General Meeting, the Board of Directors or the Members’ Council in accordance with law.

Article 7. Borrowing loans from domestic and overseas credit institutions and financial institutions

Financial companies may borrow loans from domestic and overseas credit institutions and financial institutions if satisfying all the following conditions:

1. The conditions prescribed in Article 5 of this Decree.

2. They do not fall into the cases in which the State Bank applies methods to minimize, terminate or suspend the borrowing of loans on the inter-bank market and have no overdue debts at credit institutions and other foreign bank branches under the State Bank’s regulations.

Article 8. Borrowing loans from the State Bank in the re-financing form

Financial companies may borrow loans from the State Bank in the form of re-financing if satisfying all the following conditions:

1. The conditions prescribed in Article 5 of this Decree.

2. They satisfy all the conditions for borrowing loans in the form of re-financing prescribed by the State Bank.

3. Their loan borrowing purposes comply with the objectives of the State Bank’s monetary policy management for each period.

Article 9. Provision of loans, including amortized loans and consumer loans

Financial companies may provide loans, including amortized loans and consumer loans, if satisfying all the conditions prescribed in Article 5 of this Decree.

Article 10. Bank guarantee

Financial companies may provide bank guarantee if satisfying all the following conditions:

1. The conditions prescribed in Article 5 of this Decree.

2. They satisfy all the conditions on the guaranteed and the guarantors prescribed by the State Bank.

Article 11. Factoring

1. Financial companies may provide factoring if satisfying all the following conditions:

a/ The conditions prescribed in Article 5 of this Decree;

b/ They have internal regulations on process, procedures and principles of client identification to strictly supervise and prevent the abuse of financial companies for money laundering, terrorism financing and other criminal activities.

2. Financial companies established and operating before the effective date of this Decree may add factoring operation if meeting all the conditions prescribed in Clause 1 of this Article and the following conditions:

a/ Conducting profitable business operation in the year preceding the year of requesting the operation addition;

b/ Having a minimum operation duration and factoring operation plan prescribed by the State Bank;

c/ Complying with regulations on safety ratios in banking activities, classification of debts and deduction for setting up risk provisions in all quarters of the year preceding the year of requesting the operation addition;

d/ The ratio of non-performing loans is below the level prescribed by the State Bank;

dd/ Not being sanctioned for administrative violations in the monetary and banking fields in the year preceding the time of requesting the operation addition.

Article 12. Issuance of credit cards

1. Financial companies may issue credit cards if meeting all the conditions prescribed in Clause 1, Article 11 of this Decree.

2. Financial companies established and operating before the effective date of this Decree may add the issuance of credit cards if meeting all the conditions prescribed in Clause 1 of this Article and the following conditions:

a/ The conditions prescribed at Points c, d and dd, Clause 2, Article 11 of this Decree;

b/ Having profitable business operation for at least two consecutive years preceding the year of requesting the operation addition;

c/ Having a minimum operation duration and a credit card issuance operation plan prescribed by the State Bank.

Article 13. Financial leasing

1. Financial companies may conduct financial leasing activities under the provisions on financial leasing in Chapter III of this Decree if satisfying all the following conditions:

a/ The conditions prescribed in Clauses 1, 2 and 4, Article 5 of this Decree;

b/ Having internal regulations on process, procedures and principles of client identification to strictly supervise and prevent the abuse of financial companies for money laundering, terrorism financing and other criminal activities.

2. Financial companies established and operating before the effective date of this Decree may add the operation of financial leasing if meeting all the conditions prescribed in Clause 1 of this Article and the following conditions:

a/ The conditions prescribed at Points a and b, Clause 2, Article 12 of this Decree;

b/ Having a minimum operation duration and a financial leasing plan prescribed by the State Bank.

Article 14. Other activities of financial companies

Financial companies may perform other activities specified in Articles 109 thru 111 of the Law on Credit Institutions.

Article 15. Operations of factoring financial companies and consumer credit financial companies

1. Conditions for factoring financial companies to conduct factoring activities:

a/ The conditions prescribed in Clause 1, Article 11 of this Decree;

b/ The factoring debit balance makes up at least 70% of the total credit balance or equals another ratio prescribed by the State Bank for each period.

2. Factoring financial companies may perform the activities specified at Points a and e, Clause 1, Article 108 of the Law on Credit Institutions, Articles 6, 7, 8, 11 and 14 of this Decree if satisfying all the conditions prescribed in this Decree, except the following:

a/ Guaranteeing the issuance of corporate bonds and buying and selling corporate bonds;

b/ Receiving entrusted capital from the Government, organizations and individuals for investment in production and business projects;

c/ Entrust capital to other credit institutions to grant credits.

3. Conditions for consumer credit financial companies to provide consumer credit:

a/ The conditions prescribed in Article 9 and/or Article 12 of this Decree;

b/ The consumer credit debit balance makes up at least 70% of the total credit balance or equals another ratio prescribed by the State Bank for each period.

4. Consumer credit financial companies may conduct the activities specified at Points a and e, Clause 1, Article 108 of the Law on Credit Institutions, Articles 6, 7, 8, 9, 12 and 14 of this Decree if satisfying all the conditions prescribed in this Decree, except those prescribed at Points a, b and c, Clause 2 of this Article.

Chapter III

OPERATION OF FINANCIAL LEASING COMPANIES

Article 16. Operation of financial leasing companies

1. Financial leasing companies may conduct the operations specified in Articles 112 thru 116 of the Law on Credit Institutions and this Decree.

2. Purchase and sub-lease.

3. Sale of payable amounts from financial leasing contracts to organizations and individuals under the State Bank’s regulations.

Article 17. Rights of lessors

1. To own leased assets throughout the lease term and not to be affected in case the lessee goes bankrupt, is dissolved or involved in a dispute or lawsuit at court related to a third party. Leased assets are not regarded as assets of the lessee upon the handling of assets for payment of debts to other creditors.

2. To affix their ownership signs onto leased assets throughout the lease term.

3. To request lessees to pay deposits or to apply other security methods in accordance with law if necessary.

4. To request lessees to provide information on suppliers, quarterly reports on their production and business activities, annual financial settlement as well as matters related to lessees and leased assets.

5. To examine the management and use of leased assets.

6. To transfer their rights and obligations in financial leasing contracts to other financial lessors. In this case, lessors shall notify such in writing to lessees.

7. To request lessees to pay compensations when the latter violates terms and conditions of financial leasing contracts.

8. To terminate leasing contracts ahead of schedule and request lessees to pay the remaining rent and expenses arising during the termination of financial leasing contracts ahead of schedule as lessees violate terms and conditions which constitute grounds for termination of contracts as prescribed in financial leasing contracts.

9. To recover leased assets if lessees use and exploit leased assets in contravention of provisions of financial leasing contracts; to request competent state agencies to apply methods in accordance with law to ensure that lessors exercise the owner’s rights to leased assets.

10. To recover irreparably damaged leased assets, request lessees to pay their remaining rent and expenses arising in the course of recovery of leased assets.

11. Other rights prescribed in financial leasing contracts.

Article 18. Obligations of lessors

1. To assess the financial capacity and prestige of legally operating suppliers; leased assets, including their technical specifications, types, prices and time limits for delivery, installation and warranty; the feasibility and efficiency of production and business investment projects, conditions on financial leasing, leased asset use purpose and lessees’ debt payment capacity.

2. To purchase and import assets already agreed upon by both parties in financial leasing contracts.

3. To register the ownership of, and carry out the procedures for buying insurance for, leased assets in accordance with law.

4. To take no responsibility for the non-delivery of assets or failure to deliver the assets under the conditions already agreed upon between lessees and suppliers.

5. To implement properly other terms and conditions in financial leasing contracts.

Article 19. Rights of lessees

1. To receive and use leased assets under provisions of financial leasing contracts.

2. To decide on purchase or continued lease of assets upon the expiry of the lease term.

3. To request lessors to pay compensations for their violation of terms and conditions of financial leasing contracts.

4. Other rights prescribed by financial leasing contracts.

Article 20. Obligations of lessees

1. To be responsible for the selection of leased assets, suppliers, terms and conditions relating to leased assets, including technical specifications, types, prices and time limits for delivery, installation and warranty and other leased asset-related terms and conditions.

2. To use leased assets for right purposes as agreed upon in financial leasing contracts; to refrain from selling or transferring the right to use leased assets to other individuals and organizations, unless otherwise agreed between lessors and lessees in financial leasing contracts.

3. To provide information on suppliers, quarterly reports on their production and business activities, annual financial settlement as well as matters related to leased assets at lessors’ request; to create conditions for lessors to check leased assets.

4. To pay rents and pay other expenses related to leased assets under provisions of financial leasing contracts.

5. To bear all risks of loss of leased assets, all expenses for maintenance, repair or replacement of leased assets throughout the lease term and be responsible for all consequences caused by the use of leased assets to other organizations and individuals in the course of using leased assets.

6. To refrain from erasing or damaging lessors’ ownership signs affixed on leased assets.

7. To refrain from using leased assets for mortgage, pledge or use as security for performance of other obligations.

8. To pay the remaining rent and expenses incurred to lost or irreparably damaged leased assets or upon the termination of financial leasing contracts ahead of schedule as lessees violate terms and conditions which constitute grounds for terminating contracts prescribed in financial leasing contracts.

9. To properly implement other terms and conditions in financial leasing contracts.

Article 21. Termination of financial leasing contracts ahead of schedule

1. A financial leasing contract may terminate ahead of schedule in one of the following cases:

a/ The lessee fails to pay the rent or violates one of other terms and conditions constituting grounds for terminating the contract under provisions of the financial leasing contract;

b/ The lessee is declared bankrupt or dissolved;

c/ The lessor violates one of other terms and conditions constituting grounds for terminating the contract under provisions of the financial leasing contract;

d/ The leased assets are lost or irreparably damaged;

dd/ The lessor and lessee agree to the latter’s payment of the remaining rent ahead of schedule prescribed by the financial leasing contract.

2. Lessors and lessees shall provide in detail the termination of contracts in financial leasing contracts specified in Clause 1 of this Article.

Article 22. Handling of financial leasing contracts terminated ahead of schedule

1. In case a financial leasing contract is terminated ahead of schedule under Points a and b, Clause 1, Article 21 of this Decree, the lessee shall immediately pay the remaining rent. If the lessee fails to pay the rent, the lessor shall handle the leased assets as follows:

a/ The lessor shall notify in writing to the lessee, the People’s Committee and the public security office of the place where the lessee’s head office and leased assets are located the recovery of the leased assets and request such agencies, within the ambit of their functions, tasks and powers, to apply methods in accordance with law to maintain security and order in the course of recovery of the leased assets, to ensure the lessor’s exercise of the owner rights to the leased assets; immediately recover the leased assets (except the leased assets being subjects and material evidences of criminal cases handled in accordance with the criminal law); grant compulsory loans to the lessee to pay the cost of recovering the leased assets upon its/his/her breach of the financial leasing contract and involuntary transfer of assets;

b/ The lessee shall immediately cease the use and return the leased assets to the lessor at the latter’s request, refrain from any act to hinder the recovery of the leased assets or continued possession or use of the leased assets; pay the remaining rent under provisions of the financial leasing contract and expenses arising from the recovery of the leased assets; accept compulsory loans offered by the lessor to pay for the cost of recovering the leased assets upon the lessee’s breach of the financial leasing contract and involuntary transfer of assets.

2. In case a financial leasing contract is terminated ahead of schedule specified at Points c and dd, Clause 1, Article 21 of this Decree, its provisions shall be complied with.

3. In case a financial leasing contract is terminated ahead of schedule under Point d, Clause 1, Article 21 of this Decree:

a/ If the leased assets are lost or irreparably damaged, the lessor shall notify in writing the administration of the locality where the lessee’s head office and leased assets are located of the lost or irreparably damaged assets and request the application of methods within its competence in accordance with law to ensure the lessor’s exercise of the owner rights to the leased assets; send the lessee a notice of recovery of the lost assets and request its/him/her to pay the remaining rent under provisions of the financial leasing contract and expenses relating to the recovery of the leased assets;

b/ The lessee shall transfer the damaged leased assets at the request of the lessor, pay the latter the remaining rent under provisions of the financial leasing contract and expenses arising from the recovery of the leased assets.

Article 23. Certificates of leased asset ownership

In the course of leasing term, the lessor shall keep the original of the certificate of ownership of the leased assets. The lessee may use copies certified by competent state agencies in legal relations involving the use of leased assets.

Article 24. Registration of financial leasing contracts

The registration of financial leasing contracts complies with law.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 25. Transitional provisions

1. Within 12 months from the effective date of this Decree, financial companies and financial leasing companies established and operating with licenses granted by the State Bank before the effective date of this Decree must fully satisfy the conditions on conditional operations prescribed in this Decree.

2. Within 18 months from the effective date of this Decree, general financial companies, consumer credit financial companies and financial leasing companies already established and operating with licenses granted by the State Bank before the effective date of this Decree shall terminate their activities conducted not under this Decree.

3. For financial leasing contracts and loan contracts signed before the effective date of this Decree, financial leasing companies and clients shall comply with signed agreements until the expiry of such contracts. The above contracts shall be modified or supplemented if the amended and modified contents comply with provisions of this Decree.

4. For financial leasing contracts in which the leased assets are ships and boats operating on domestic and international routes signed before the effective date of this Decree, the lessees may keep and use original certificates of ownerships of leased assets in international legal relations involving the use of leased assets, while lessors shall keep copies certified by competent state agencies.

5. The State Bank shall guide in detail the transition of financial companies specified in Clause 1 and 2 of this Article.

Article 26. Responsibilities of ministries and sectors

1. The Ministry of Public Security, the Ministry of Justice and the Ministry of Transport shall, based on their functions and tasks, guide or coordinate in guiding, and prescribe the grant and use of the certificate of ownership of leased assets and copies of such certificate, the registration of ownership of leased assets to ensure the owner’s right to the leased assets during the lease term.

2. The Ministry of Justice shall, based on its functions and tasks, guide or coordinate with the State Bank and related ministries and sectors in guiding the registration of financial leasing contracts.

3. The Ministry of Justice, the Ministry of Public Security, the State Bank and related local authorities shall, based on their functions and tasks, guide or coordinate in guiding the recovery and handling of leased assets.

4. People’s Committees and public security offices of localities where lessees’ head offices and leased assets are located shall, within their functions, tasks and power, apply methods in accordance with law to maintain security and order in the course of recovery of leased assets to ensure lessors’ exercise of the owner rights to leased assets.

Article 27. Effect

1. This Decree takes effect on June 25, 2014.

2. This Decree replaces the Government’s Decrees No. 79/2002/ND-CP of October 4, 2002, on organization and operation of financial companies, No. 81/2008/ND-CP of July 29, 2008, amending and supplementing a number of articles of the Government’s Decree No. 79/2002/ND-CP of October 4, 2002, on organization and operation of financial companies, No. 16/2001/ND-CP of May 2, 2001, on organization and operation of financial leasing companies, No. 65/2005/ND-CP of May 19, 2005, amending and supplementing a number of articles of the Government’s Decree No. 16/2001/ND-CP of May 2, 2001, on organization and operation of financial leasing companies, and No. 95/2008/ND-CP of August 25, 2008, amending and supplementing a number of articles of the Government’s Decree No. 16/2001/ND-CP of May 2, 2001, on organization and operation of financial leasing companies.

Article 28. Implementation responsibility

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees and the subjects defined in Article 2 of this Decree shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG