Decree No. 65/2005/ND-CP dated May 19, 2005 of the Government on amendment of and addition to a number of articles of Decree 16/2001/ND-CP of the Government Dated May 02, 2001 on organization and operation of finance leasing companies

DECREE

ON AMENDMENT OF AND ADDITION TO A NUMBER OF ARTICLES OF DECREE 16-2001-ND-CP OF THE GOVERNMENT DATED 2 MAY 2001 ON ORGANIZATION AND OPERATION OF FINANCE LEASING COMPANIES

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated 25 December 2001; Pursuant to the Law on the State Bank of Vietnam 01-1997-QH10 dated 12 December

^{1997 as amended by Law 10-2003-QH11 dated 17 June 2003;}

Pursuant to the Law on Credit Institutions 02-1997-QH10 dated 12 December 1997 as amended by Law 20-2004-QH11 dated 15 June 2004;

On the proposal of the Governor of the State Bank of Vietnam:

DECREES:

Article 1. To amend and add to a number of articles of Decree 16/2001/ND-CP of the Government dated 2 May 2001 on organization and operation of finance leasing companies as follows:

1. To amend article 1.2 as follows:

"A finance leasing transaction must satisfy one of the following conditions:

(a) Upon expiry of the lease duration under the contract, ownership of the leased assets is transferred to the lessee or the lessee continues to lease the assets as agreed by the two parties;

(b) Upon expiry of the lease duration under the contract, the lessee has the preferential right to purchase the leased assets at a par price less than the actual value at the time of [such] acquisition;

(c) The lease duration of each leased asset must be at least sixty (60) per cent of the period required for amortization of the leased asset;

(d) The total lease payments for each asset set out in the finance leasing contract must be at least equivalent to the value of such asset at the time of signing of the contract1."

2. To add the following clauses 4 and 5 to article 7:

"4. Lease payments are the purchase price of the leased assets plus reasonable leasing fees and interest which the lessee must pay to the lessor in accordance with the leasing contract.

5. Operational leasing is a form of leasing assets under which the lessee uses the leased assets of the lessor for a fixed duration returns such assets to the lessor upon expiry of the lease duration. The lessor retains ownership of the leased assets and receives lease payments in accordance with a leasing contract."

3. To amend article 10 as follows:

"A finance leasing company to which the State Bank issues an establishment and perating licence shall be liable to pay a fee in accordance with the provisions of the law on fees and charges."

4. To add the following paragraph to clause 3 of article 16:

"The Ministry of Finance shall provide guidelines on payment of tax pursuant to the tax laws by finance leasing companies applicable to purchase-and-lease-back in the form of finance leasing."

5. To add the following clauses 7 and 8 to article 16:

"7. Provide operational leasing services in accordance with regulations of the State Bank.

8. Sell items receivable from finance leasing contracts to organizations and individuals in accordance with regulations of the State Bank."

6. To amend article 19 as follows:

"All finance leasing transactions must be registered at the centre for registration of security transactions. The Ministry of Justice shall provide detailed guidelines on registration of finance leasing transactions and on the legal validity of such registration.

If finance leased assets the subject of a registered security transaction are seized by a competent State body due to a breach of law by the lessee, the finance leasing company shall be entitled to receive back the leased assets in order to continue to lease them. The lessee shall bear all responsibility for breach of law during the process of use of the assets."

7. To add the following paragraph to article 20:

"A finance leasing company shall register ownership of leased assets at the competent body in the place where the finance leasing company has its head office or branch or in the place where the lessee resides or has its operational office. The Ministry of Police, the Ministry of Justice and the Ministry of Transport and Communications shall be responsible to provide guidelines on implementation of this provision."

8. To amend article 23.7 as follows:

"7. To reduce lease interest payments, to extend or amend the time-limit for lease payments, or to transfer debts being overdue lease payments in accordance with the regulations of the State Bank."

9. To amend article 28.1 as follows:

"In the event of a finance leasing contract being terminated prior to its expiry in any of the circumstances stipulated in article 27.1 of Decree No. 16-2001-ND-CP of the Government dated 2 May 2001 on organization and operation of finance leasing companies, the lessee shall pay immediately all outstanding lease payments. If the lessee fails to pay the lease payments then the finance leasing company shall deal with the leased assets as follows:

(a) The finance leasing company shall have the right to recover the leased assets immediately without waiting for a court decision and to require the lessee to pay immediately all lease payments remaining unpaid under the contract. It shall be strictly prohibited to detain, withhold or use leased assets without returning them to the lessor;

(b) Within a time-limit of sixty (60) days after the date of recovery of leased assets, the lessor must complete realization of the leased assets. The proceeds collected from

realization of leased assets shall be used to pay items remaining unpaid by the lessee plus the expenses arising during the process of realization of the leased assets. If the proceeds collected are insufficient to pay out these items, then the lessee shall be liable to pay the deficit to the lessor;

(c) Where the lessee pays part of the payable lease payments and on realization of the leased assets the lessor collects proceeds in excess of the lease payments due under the contract plus expenses arising during the process of realization of the leased assets, the lessor must repay such excess to the lessee;

(d) If the lessee pays all sums payable under the contract while the lessor is realizing the leased assets, then the lessor shall transfer ownership of the leased assets to the lessee the same as on completion of the leasing contract;

(dd) Within a time-limit of thirty (30) days from the date of receipt of a request to return leased assets to the lessor, the lessee shall be responsible to return the leased assets to the lessor;

(e) The State Bank of Vietnam, the Ministry of Police, the Ministry of Justice and relevant local authorities are assigned the task of guiding finance leasing companies to recover and realize leased assets."

10. To amend article 37 as follows:

"A finance leasing company may not purchase or invest in fixed assets the value of which exceeds fifty (50) per cent of its equity. Assets used for finance leasing and for operational leasing shall not be included when calculating the fixed assets to which the above provision applies."

11. To add the following clause 3 to article 39:

"3. A foreign credit institution [owning] a one hundred (100) per cent foreign owned finance leasing company shall conduct inspections of internal operations of the (100) per cent foreign owned finance leasing company in Vietnam.

Prior to conducting an internal inspection, a foreign credit institution shall provide written notice to the State Bank of the matters to be inspected and of the times for commencing and finishing the inspection. Within a time-limit of thirty (30) days from the date of finishing an internal inspection of a (100) per cent foreign owned finance leasing company in Vietnam, the foreign credit institution shall forward a report on the results of the inspection to the State Bank."

Article 2

The expressions "the total value of the assets leased" in article 30.2 and "the total amount of finance leasing" in article 31.2(a) shall be changed to "the total balance of outstanding finance leasing".

Article 3

1. This Decree shall be of full force and effect after fifteen (15) days from the date of its proclamation in the Official Gazette.

2. The State Bank and relevant ministries and branches shall be responsible to provide guidelines for the implementation of this Decree.

3. Ministers, heads of ministerial equivalent bodies, heads of Government bodies and chairmen of peoples committees of provinces and cities under central authority shall be responsible for the implementation of this Decree.