DECISION

PROMULGATING THE REGULATION ON THE PROVISION OF GUARANTEE FOR ENTERPRISES TO BORROW LOANS FROM COMMERCIAL BANKS

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the December 16, 2002 Law on State Budget;
Pursuant to the February 12, 1997 Law on Credit Institutions and the May 16, 2004 Law
Amending and Supplementing a Number of Articles of the Law on Credit Institutions:
Pursuant to the November 29, 2005 Enterprise Law;
Pursuant to the Government's Decree No. 30/ 2008/NQ-CP of December 11, 2008. on urgent measures to curb economic decline, maintain economic growth and ensure social welfare;
At the proposal of the Minister of Finance,

DECIDES:

Article 1. To promulgate together with this Decision the Regulation on the provision of loan guarantee for enterprises to borrow loans from commercial banks lawfully operating in Vietnam.

Article 2. To assign the Vietnam Development Bank to provide guarantee for enterprises wishing to borrow loans from commercial banks for implementing investment projects or production and business plans under the Regulation issued together with this Decision.

Article 3. Local credit guarantee funds for small- and medium-sized enterprises shall operate under the Prime Minister's Decision No. 193/ 200l/QD-TTg of December 20. 2001, promulgating the Regulation on establishment and operation of credit guarantee funds for small- and medium-sized enterprises and Decision No. 115/2004/QD-TTg of June 25, 2004. amending and supplementing Decision No. 193/200l/QD-TTg of December 20, 2001. with some articles to be amended and supplemented as follows:

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2. To replace Clause I, Article 16 of Decision No. 193/2001/QD-TTg of December 20, 2001, with Article 6 of the Regulation issued together with this Decision.

Article 4. This Decision takes effect on the dale of its signing.

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, presidents of provincial-level People's Committees and the Chairman of the Management Board and the Director General of the Vietnam Development Bank shall implement this Decision.

PRIME MINISTER





Nguyen Tan Dung

REGULATION

ON PROVISION OF GUARANTEE FOR ENTERPRISES TO BORROW LOANS FROM COMMERCIAL BANKS
(Issued together with the Prime Minister's Decision No. 14/2009/QD-TTg of January 21, 2009)

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GENERAL PROVISIONS

Article 1. Subjects eligible for loan guarantee

Subjects eligible for the Vietnam Development Bank's loan guarantee are enterprises of all economic sectors (including cooperatives) which have a maximum charter capital of VND 20 billion and employ up to 500 laborers (below referred to as enterprises).

Article 2. Scope of loan guarantee

1. The Vietnam Development Bank shall provide guarantee for enterprises to borrow loans from commercial banks lawfully operating in Vietnam to carry out investment projects on production and business development (borrowing loans for investment in fixed assets) or to implement production and business plans (borrowing working capital) in accordance with law.

2. Guarantee will not be provided to real estate consultancy and dealing and securities trading enterprises and enterprises providing services (excluding transportation, education and training and healthcare); and enterprises borrowing loans to pay debts owed under other credit contracts.

Article 3. Interpretation of terms

In this Regulation, the terms below a construed as follows:

1. Parties involved in a guarantee:

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- The guaranteed is an enterprise.

- The guarantee is a commercial bank lawfully operating in Vietnam.

2. Guarantee deed means a written unilateral commitment of the guarantor to the guarantee that the guarantor shall perform financial obligations for the guaranteed if the guaranteed is unable to pay debts or fully pay debts as committed to the guarantee.

3. Loan guarantee contract means a written agreement conducted between the guarantor and the guaranteed under which the guarantor shall perform financial obligations for the guaranteed if the guaranteed is unable pay debts or fully pay debts as committed to the guarantee.

Article 4. Principles on loan guarantee

1. All conditions for loan guarantee prescribed by law and this Regulation must be fully met.

2. Involved parties shall exercise all rights and perform all obligations related to the guarantee in accordance with law.

3. The guaranteed may neither transfer assets formed from loans borrowed for investment projects nor use assets formed from loan capital in other credit and guarantee activities.

4. The guarantor may sell assets mortgaged as guarantee security to retrieve debt amounts already paid for the guaranteed.

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1. Falling within the eligible subjects and scope of guarantee prescribed in Articles 1 and 2 of this Regulation.

2. Having an efficient investment project on production and business development or production and business plan. An investment project on production and business development must be capitalized at least VND I(K) million.

3. Owing no overdue debts to credit institutions and economic organizations.

4. Having no tax arrears. If an enterprise has tax arrears but comes up with an efficient production and business development project or production and business plan, the guarantor may proceed with evaluating its project or plan and decide to provide loan guarantee under this Regulation.

5. Having at least 10% of equity in the production or business development project or production or business plan.

6. Mortgaging the whole value of assets formed from loan capital (up to 90%) and equity (at least 10%) to secure the guarantee at the guarantor.

Chapter II

SPECIFIC PROVISIONS

Article 6. Guarantee levels and currencies used for loan guarantee

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2. Currencies used for loan guarantee are Vietnam dong and freely convertible foreign currencies.

Article 7. Loan guarantee term

The loan guarantee term must match the term of loans provided by the guarantee which, however, must not be longer than the capital recovery term (for cases of borrowing loans for investment in fixed assets) and the production and business cycle (for cases of borrowing working capital).

Article 8. Loan guarantee charges

1. Annual guarantee charges must not exceed 0.5% of the guaranteed amount. ('harges shall be collected according to the guarantee term as agreed upon in the loan guarantee contract. The guarantor may exempt or reduce guarantee charges in case the guaranteed encounters force majeure risks (natural disasters, fires.)

2. The guarantor may use 25% of the collected charge amounts to cover management expenses related to guarantee activities and remit the remaining amount into the loan guarantee risk reserve fund.

Article 9. A dossier of request for loan guarantee

1. The enterprise's written request for loan guarantee.

2. Documents proving the enterprise's eligibility for guarantee as prescribed in Article 5 above.

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1. When wishing to borrow loans eligible for guarantee, enterprises shall send a dossier of request for loan guarantee to the Vietnam Development Bank.

2. Within 20 working days after receiving a complete dossier, the Vietnam Development Bank shall evaluate the dossier. If all conditions are met. it shall issue a notice of guarantee approval to the loan-borrowing enterprise. In case of refusal to grant guarantee, the Vietnam Development Bank shall notify the enterprise thereof and clearly explain reasons for the refusal.

3. On the basis of the enterprise's loan request and the guarantor's written notice of guarantee approval, the guarantee shall consider and sign a credit contract with the enterprise.

4. After a credit contract is concluded between the guarantee and the guaranteed, the guarantor shall sign a loan guarantee contract, a guarantee security contract and issue a guarantee deed for the guaranteed to borrow loans from the guarantee.

5. The guarantee:

- The guarantee shall provide loans to the guaranteed according to the State Bank of Vietnam's regulations on the mechanism on the provision of loans by commercial banks to borrowers.

- To apply all measures to retrieve debts according to current regulations (adjusting the debt-payment time limit and level and extending debts) when the guaranteed encounters temporary difficulties.

- To immediately notify the guarantor of changes in the credit contract, adjustments of the debt-payment time limit and level, debt extension or breaches of the contract committed by the guaranteed which may affect the debt retrieval capability, for coordinated handling.

- After measures have been taken to retrieve overdue debts, if the guaranteed still fails to pay debts or fully pay debts, the guarantee shall request the guarantor to perform guarantee obligations as committed.

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1. Within 60 days after receiving a request for performance of guarantee obligations, the guarantor shall negotiate with the guarantee on the performance or non-performance of guarantee obligations committed in the guarantee deed and prescribed in this Regulation.

2. If having to perform guarantee obligations as committed, the guarantor may:

- Use the loan guarantee risk reserve fund to perform guarantee obligations.

- Request the guaranteed to acknowledge as compulsory debts the sum of money which the guarantor has paid for it with an interest rate of equal to 150% of the rate for due debts prescribed by the guarantee at the time of debt acknowledgement. The guaranteed shall pay their compulsory debts to the guarantor.

- Further apply measures to retrieve debts; bring the case to economic arbitration or initiate a lawsuit at an economic court.

Article 12. Loan guarantee risk reserve fund

1. The loan guarantee risk reserve fund is formed from the following sources:

a/ The start-up amount of VND 200 billion allocated from the state budget.

b/ Loan guarantee charges.

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d/ Proceeds from sale of assets formed from loans.

dd/ Lawful donations (including official development assistance) of organizations and individuals at home and abroad for the enterprise development;

e/ Deposit interests.

2. The loan guarantee risk reserves fund shall be used to offset guarantee risks.

3. The year-end balance of the loan guarantee risk reserve fund may be carried forward to subsequent years for use. In case the loan guarantee risk reserve fund is not enough to offset guarantee risks, the Ministry of Finance shall propose the Prime Minister to allocate additional amounts from the state budget to the fund.

4. The Ministry of Finance shall guide the management and use of the loan guarantee risk reserve fund.

Article 13. Capital sources and financial mechanisms

1. The Vietnam Development Bank may use its charier capital and other lawfully mobilized capital sources to provide guarantee; access and use technical and financial assistance from international organizations and the Government to improve its credit guarantee capability.

2. The Vietnam Development Bank shall conduct separate accounting for loan guarantee activities.

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1. Rights and obligations of the guarantor:

a/ To request the guaranteed to supply documents included in the dossier of request for guarantee and relevant documents proving its eligibility for guarantee prescribed in Article 5 above.

b/ To appraise loan guarantee.

c/ To collect loan guarantee charges according to regulations.

d/ To coordinate with the guarantee in examining and supervising the process of using loans and paying debts by the guaranteed.

dd/ To exercise its rights and perform its obligations as committed with the guarantee and the guaranteed.

e/ To refuse to provide loan guarantee to ineligible enterprises or enterprises that fail to meet the conditions prescribed in Article 5 of this Regulation.

g/ To initiate a lawsuit at court in accordance with law when the guaranteed violates the loan guarantee contract or credit contract.

h/ To request the guaranteed and the guarantee to supply information and make periodical or irregular reports on the guaranteed's operations concerning loan guarantee.

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k/ To refuse to perform guarantee obligations when the guaranteed or the guarantee commits one of the following violations:

- Violating the loan guarantee contract or the guarantee deed;

- The guaranteed uses the loan for improper purposes other than those stated in the credit contract signed with the guarantee;

- The guarantee fails to notify the guarantor when the guaranteed suffers from business losses or is unable to pay tax obligations to the State.

- The guarantee fails to notify the guarantor within 7 working days after the dale when the guaranteed falls into insolvency or fails to fully pay debts in time.

l/ To supply information and make periodical or irregular loan guarantee reports to state management agencies according to regulations.

2. Rights and obligations of the guarantee:

a/ To request the guaranteed to abide by its commitments in the credit contract and relevant current regulations.

b/ To examine and supervise the use of loan capital by the guaranteed so as to ensure thai loan capital shall be used properly, safely and efficiently.

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d/ To notify the guarantor when the guaranteed violates the credit contract or relevant current regulations.

dd/ To notify the guarantor within 7 working days from the date the guaranteed falls into insolvency or fails to fully pay debts in time.

e/ To exercise the rights and perform the obligations of a commercial bank towards the guaranteed in accordance with law (adjusting the debt-payment time limit and level or extending debts) when the guaranteed encounters temporary difficulties.

g/ To request the guarantor to perform its commitments in the deed of loan guarantee.

h/ To coordinate with the guarantor in performing the guarantee obligations towards the guaranteed.

i/ To supply information and make periodical and irregular loan guarantee reports to state management agencies according to regulations.

3. Rights and obligations of the guaranteed:

a/ To supply adequate documents related to loan guarantee at the request of the guarantor and the guarantee and take responsibility for the accuracy and lawfulness of supplied information and documents.

b/ To efficiently use loan capital for proper purposes.

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d/ To submit to the examination and supervision by the guarantor and guarantee.

dd/ To fully commitments in the loan guarantee contract and credit contract.

e/ To fully pay guarantee charges to the guarantor within the prescribed time limit.

g/ To request the guarantor and guarantee to perform commitments in the loan guarantee contract and credit contract.

h/ To fully pay to the guarantor debts (principal and interest) which the guarantor has paid for it and other expenses related to the performance of guarantee obligations by the guarantor.

i/ To supply information and make periodical and irregular reports on the implementation of investment projects, the production and business situation and the performance of financial obligations towards the State and the situation of loan borrowing and payment of debts to the guarantor, the guarantee, relevant units and management agencies in accordance with regulations.

Article 15. Responsibilities of concerned ministries, branches and agencies

1. The Ministry of Finance shall:

- Assume the prime responsibility for, and coordinate with concerned ministries and branches in, proposing the Prime Minister to promulgate or supplement or adjust mechanisms and policies on loan guarantee for enterprises.

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- Assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment in, further allocating capital for the loan guarantee risk reserve fund in accordance with the State Budget Law.

- Examine and supervise the provision of loan guarantee by the Vietnam Development Bank.

2. The Ministry of Planning and Investment shall coordinate with the Ministry of Finance in further allocating capital for the loan guarantee risk reserve fund in accordance with the State Budget Law.

3. The State Bank of Vietnam shall:

- Guide commercial banks to apply the interest rates for guaranteed loans which are lower than their ordinary interest rates so as to ensure the provision of actual loan interest incentives to enterprises;

- Coordinate with the Ministry of Finance in promulgating documents to guide mechanisms and policies on loan guarantee for enterprises;

- Guide commercial banks in coordinating with the Vietnam Development Bank in implementing mechanisms and policies on the provision of loan guarantee for enterprises.

- Examine and supervise commercial banks in credit operations targeting enterprises so as to ensure the effective provision of guarantee for enterprises.

Chapter III

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Article 16. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, presidents of provincial-level People's Committees and the chairman of the Management Board and the general director of the Vietnam Development Bank shall implement this Regulation.

Article 17. For any problems arising in the course of implementing this Regulation, the Ministry of Finance shall sum up opinions of concerned ministries, branches and localities thereon and propose amendments and supplementations to the Prime Minister for consideration and decision.