On 15th September 2014, the State Bank of Vietnam issued the Circular No. 25/2014/TT-NHNN guiding procedures for registration, registration for change of Non-Government guaranteed foreign loans borrowed by enterprises (“Circular 25”). Circular 25 takes effect as from 1st November 2014, abrogating Article 1 of the Circular No. 25/2011/TT-NHNN dated 31st August 2011 and Chapter I, Section I Chapter IV of the Circular No. 09/2004/TT- NHNN dated 21st December 2014.

According to Circular 25, Non - Government guaranteed foreign loans which must be registered to the State Bank comprise:

  1. Medium, long term foreign loans (with the loan term above 01 (one) year which is determined as from the date proposed for the initial capital drawdown until the date proposed for the last loan repayment as stated in the foreign loan agreement);
  2. Short term foreign loans (with the loan term up to 01 (one) year which is determined as from the date of the initial capital drawdown until the date proposed for the last loan repayment as stated in the foreign loan agreement, the agreement on extension) which have been extended that leads to the total loan term of over 01 (one) year;
  3. Short term foreign loans without a contract for extension but which still have a loan balance at the first anniversary of the initial capital drawdown, except where the Borrower completes repayment of the loan within 10 days after such anniversary (the loan term is determined as from the date of the initial capital drawdown until the date prosed for the last loan repayment).

Comparing with the previous regulations on foreign loans registration, request for registration of short term foreign loans without a contract for extension but which still have a loan balance at the first anniversary of the initial capital drawdown with the State Bank is newly provided. The supplement of this provision enhances the State control on foreign loans borrowing and repayment activities and restricts the cases under which the parties intentionally avoid to sign contract on extension and to not register with the State Bank even though the repayment lasts for over 01 (one) year.

Under the Circular No. 12/2014/TT-NHNN dated 31st March 2014, foreign loan in Vietnamese Dong is only permitted in the following cases: (x) Borrower is a micro-finance institution; (y) Borrower is an enterprise with foreign direct investment capital borrowing from profit sharing in Vietnamese Dong from direct investment activities of Lender being foreign investor contributing capital in the Borrower; (z) the other cases to which the Governor of the State Bank provides consent based on actual situation and the necessity in each case. Accordingly, Circular No. 25 supplements provisions on application dossier for registration of these foreign loans in Vietnamese Dong which require document proving lawful distribution of profit in Vietnamese Dong from direct investment activities; certification from credit institution where the Borrower opened its direct investment capital account on the status of distribution and remittance of profit of Lender back to its home country; and explanation letter on the need for foreign loan in Vietnamese Dong if such loan is subject to consent of the Governor.

The application dossier for registration of foreign loans is added with news documents, including: Legal document of the party using the loan capital (if the borrower is not the party using the loan capital); Plan on restructuring foreign debt in case the foreign loan is used for restructuring the foreign debt; Official letter of the credit institution where the Borrower withdrew capital, made repayments of the foreign loan, confirming the status of such drawdowns or repayment of the loan debt (principal and interest) up to the time of registration of the foreign loans stated in (ii) and (iii) above and also in the case of medium, long term foreign loan arising where that part of the foreign investor remitted into Vietnam for cover costs of investment preparation is converted into a medium, long term loan of the enterprise with foreign direct invested capital.

The time limit for the State Bank to grant written confirmation of registration of foreign loan is 20 (twenty) days (longer than the time limit of 15 (fifteen) days) under previous provisions) from the receipt date of a complete and valid dossier from the Borrower. In case of the foreign loan in Vietnamese Dong subject to Governor’s consent, the time limit is 60 (sixty) days.