DECISION

ON THE ISSUANCE OF THE TEMPORARY REGULATION ON THE OPERATION LEASE OF FINANCE LEASING COMPANIES

THE GOVERNOR OF THE STATE BANK

- Upon the proposal of the Director of the Banks and Non-bank Credit Institutions Department,

DECIDES:

Article 1. To issue in conjunction with this Decision the temporary Regulation on the operation lease of finance leasing companies.

Article 2. This Decision shall be effective after 15 days from its publication in the Official Gazette.

Article 3. The Director of Administrative Department, the Director of Banks and Non-Bank Credit Institutions Department, Heads of units of the State Bank, General Managers of the State Bank's branches in provinces, cities under the central Government's management, Chairperson of the Board of Directors and General Directors (Directors) of Finance Leasing Companies shall be responsible for the implementation of this Decision.

FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR




Tran Minh Tuan

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ON THE OPERATION LEASE OF FINANCE LEASING COMPANIES
(issued in conjunction with the Decision No. 731/2004/QD-NHNN dated 15 June, 2004 of the Governor of The State Bank)

Chapter I.

GENERAL PROVISIONS

Article 1. Governing Scope And Subjects

This Regulation Shall Govern The Operation Lease Of Finance Leasing Companies, Which are granted with the establishment and operation license in Vietnam by the State Bank.

Article 2. Definition of operation lease

Operation lease is a form of assets lease whereby the lessee shall use assets of the lessor for a certain duration and be obliged to return those assets to the lessor at the end of the assets lease term. The lessor shall assume its ownership over leased assets and be entitled to receive lease payment in accordance with leasing contract.

Article 3. Criteria for determination of operation lease transactions

A lease transaction shall be determined as the operation lease transaction whenever:

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3.2. The leasing contract does not provide for the agreement on the purchase of the leased assets between the lessee and lessor.

3.3. The leasing term accounts for only one part of the useful lifetime of the leased assets

3.4. The total value of leasing amount accounts for only one part of the value of the leased assets.

Article 4. Interpretation

Terms stated in this Regulation shall be construed as follows:

4.1. Lease payment shall be the amount periodically paid by the lessee to the lessor as agreed in the leasing contract.

4.2. Leased assets shall be the assets permitted for operation lease, including machines, equipment, transport means and other movable assets.

4.3. Lessor shall be finance leasing companies permitted to establish and operate in Vietnam

4.4. Lessee shall be organizations, individuals being operating in Vietnam, including:

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b. Other organizations being borrowing subjects of Credit institutions;

c. Family households;

d. Individuals.

4.5. Supplier shall be organizations, which, individuals, who supply assets for operation lease to the lessor;

4.6. Leasing term shall be the duration during which the lessee uses the leased assets and make lease payments as agreed upon by the lessor and the lessee in the leasing contract.

Article 5. Agency, which approves the operation lease

Finance leasing companies permitted to establish and operate in Vietnam, which wants to carry out the operation lease, shall be accepted in writing by the State Bank

Chapter II

OPERATION LEASE ACTIVITY

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Article 6. Conditions for operation lease approval

Finance leasing companies, which wish to perform the operation lease, should satisfy following conditions:

6.1. There is a demand for the operation lease;

6.2. Having operated for at least 2 years from the date of their official opening for business;

6.3. Their business is profitable, ratio of overdue debt at the time prior to the previous quarter is less than 5%, they do not violate prudential provisions;

6.4. They must ensure conditions of material foundation for the operation lease activity, such as: warehouse, maintenance for leased assets

Article 7. Application file for the operation lease

The file applying for the approval of the State Bank for the operation lease of finance leasing companies shall include:

7.1. Written application letter of the Chairman of the Board of Directors of the company or of the authorized person, which requests the State Bank to approve the operation lease of the finance leasing company. In respect of an authorization, a written authorization of the Chairman of the Board of Directors is required;

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7.3. A financial statement of the finance company in the most recent 2 years enclosed with the auditing report of an independent auditing organization. These documents must be original, in case of copy, they must be confirmed by the agency that grants those originals or certified by the State Notary Agency.

Article 8. Sequences and procedures for the approval of the operation lease

The sequences and procedures of the application for the State Bank's approval of the operation lease of the finance leasing company:

8.1. The joint stock finance leasing company shall submit 2 sets of application files for the operation lease to the State Bank's branch in province, city where its Head office is located.

Within a maximum period of 15 working days from the full receipt of file, the State Bank's branch in province, city shall consider and give their written opinion on the conditions, application file for the operation lease in accordance with provisions in Article 6 and Article 7 of this Regulation and send it to the State Bank (Banks and Non-bank Credit Institutions Department) enclosed with 1 set of the application file of the joint stock finance leasing company.

8.2. The State owned Finance leasing companies, finance leasing companies, which are a subsidiary of a credit institution, joint venture finance leasing companies and finance leasing companies with 100% foreign invested capital shall submit two sets of application files for the operation lease to the State Bank (Banks and Non-bank Credit Institutions Department).

8.3. Within a maximum period of 30 working days from the full receipt of files from the State Finance leasing companies, finance leasing, which are a subsidiary of a credit institution, joint venture finance leasing companies and finance leasing companies with 100% foreign invested capital, 15 working days from the full receipt of files of joint stock finance leasing companies which are sent by the State Bank branches in provinces, cities, the State Bank shall consider and approve or refuse to approve, in writing, the operation lease of applying companies. In case of non-approval, the State Bank shall clearly state the reasons thereof in writing.

Article 9. Conditions for carrying out the operation lease

9.1. Finance leasing company shall, prior to the performance of the operation lease, register with the business registration agency and publish in the central, local paper in 3 consecutive issues in Vietnamese in accordance with provisions of current laws.

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Section 2. PROVISIONS ON THE OPERATION LEASE

Article 10. Provisions on the currency used in the operation lease transactions

10.1 The operation lease transactions of the finance leasing companies shall be made in VND

10.2 In respect of the operation lease transactions made in foreign currency, finance leasing companies shall comply with current provisions on foreign exchange control as for the case of finance leasing transactions made in foreign currency.

Article 11. Provisions on the period of lease payment, rescheduling of lease payment and overdue debt classification in the operation lease

Provisions on the period of lease payment, rescheduling of lease payment and overdue debt classification in the operation lease shall be applied as for the case of finance leasing transactions.

Article 12. Provisions on accounting

12.1. Leased assets shall belong to the ownership of the lessor and recorded as assets in the balance sheet of the lessor.

12.2. Leased asset shall not be considered an asset in the balance sheet of the lessee.

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12.4. The lease payment shall be considered as an income of the lessor and the operating cost of the lessee.

12.5. The accounting for the operation lease shall be made in accordance with the guidance of the State Bank.

Article 13. Provisions on tax

Provisions on tax applicable to the operation lease shall be applicable in accordance with current provisions and guidance of the Ministry of Finance.

Article 14. Prudential provision

14.1. The activity of operation lease must ensure to comply with provisions on the prudence stated in the Law on Credit Institutions and guiding documents of the State Bank

14.2. The total value of assets used for the operation lease to a single customer shall not be in excess of 30% of the own capital of a finance leasing company.

14.3. The total value of assets used for the operation lease shall not be in excess of 5 times of the own capital of the finance leasing company

Chapter III.

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Article 15. The rights of the lessor

The lessor shall have following rights:

15.1 To request the lessee to fully, timely provide with annual, quarterly reports on the performance of the finance, business and production activity and all matter concerning the leased assets;

15.2. To examine the management and use or leased assets;

15.3. To affix the ownership stamps on leased assets;

15.4. To request the lessee to compensate for all damages resulting from his violation of the leasing contract;

15.5. To assign his rights and obligations stated in the leasing contract to another finance leasing company which is permitted to engage in the operation lease activity. In this case, the lessor shall give written notice to the lessee before the assignment.

15.6. To request the lessee to place money as deposit or have the guarantee by the third party's assets for the performance of the leasing contract if it is agreed upon by the parties.

15.7. To exempt from, reduce, extend the period of lease payment and sell leased assets.

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Article 16. Obligations of the lessor

The lessor shall have following obligations:

16.1. To enter into the contract on the purchase of leased assets with the supplier;

16.2. To purchase, or directly import leased assets if it is necessary for the lessor or upon the requirement of the lessee;

16.3. To register the ownership, complete procedures of insurance for leased assets

16.4. To ensure that the leased assets are maintained and repaired within the leasing term;

16.5. To fully and correctly comply with agreements undertaken in the leasing contract.

Article 17. Rights of the lessee

The lessee shall have following rights:

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17.2. To directly receive the leased assets from the lessor or a representative authorized by the lessor in accordance with the agreements stated in the leasing contract.

17.3. To request the lessor to compensate for damages resulting from his breach of leasing contract.

Article 18. Obligations of the lessee

18.1 To take responsibility for his selection, negotiation and agreements stipulated in paragraph 1, Article 17 of this Regulation;

18.2. To use leased assets for the right purposes as agreed in the leasing contracts; not to be permitted to transfer the right to use leased assets to other individuals, organizations within the effective term of the leasing contract if it is not accepted by the lessor in writing;

18.3. To fully provide reports on the performance of the finance, business production activity and other matters relating to the leased assets upon the request of the lessor; to ensure the honesty, accuracy of information, data so provided; to facilitate the lessor to examine the leased assets;

18.4. To make lease payment in accordance with provisions stated in the leasing contract;

18.5 To return the leased assets to the lessor upon the expiry of the leasing contract;

18.6. To accept all risks relating to the loss, damage of leased assets caused by his fault and take responsibility for all consequences the leased assets cause to other organizations, individuals during the use of leased assets;

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18.8. Not to be permitted to use leased assets to pledge, mortgage or secure for any obligation; and not to be permitted to use leased assets as a payment to other creditors;

18.9. To fully and correctly comply with agreements undertaken in the leasing contract;

18.10. To well preserve the leased assets, strictly comply with the technical procedures; to be responsible for repairing or replacing lost, damaged parts in accordance with the quality, technical standards of leased assets

Chapter IV.

THE OPERATION LEASE CONTRACT

Article 19. Leasing contract

19.1. The contract of the operation lease shall be a type of assets leasing contract entered into between the lessor and the lessee on the leasing of one or several leased assets in accordance with the provisions in the Article 4 paragraph 4.2 of this Regulation, in line with the rights and obligations of related parties. The leasing contract shall be effective from the date agreed upon by the two parties in the leasing contract.

19.2. The leasing contract must clearly provide for the settlement in case where the leasing contract is terminated prior to the term.

19.3. The parties shall not be entitled to unilaterally cancel the leasing contract (except for the case, which is stipulated in the Article 20 of this Regulation).

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20.1. The lessor shall have the right to terminate the leasing contract prior to its expiry date in one of following cases:

a. The lessee fails to make the lease payment in accordance with provisions in the leasing contract;

b. The lessee violates several agreements stated in the leasing contract;

c. The lessee goes bankrupt or is dissolved;

d. The guarantor of the lessee goes bankrupt and the lessor does not accept the request by the lessee for guarantee termination or the request for the acceptance of another guarantor;

20.2. The lessee shall have the right to terminate the leasing contract prior to its expiry date when the lessor violates one of following cases:

a. The lessor fails to deliver the leased assets to the lessee in due course due to the lessor's fault

b. The lessor breaches the leasing contract;

20.3. The leasing contract shall be terminated prior to its expiry date in following cases:

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b. The parties agree and terminate the leasing contract prior to its expiry date

20.4. The leasing contract shall be terminated prior to its expiry date in case where the lessor accepts that the lessee makes the entire lease payment prior to the leasing term stated in the leasing contract and hand over the leased assets to the lessor

Article 21. Dealing with the leasing contract which is terminated prior to its expiry date

21.1. In case where the lessee violates point a, b paragraph 20.1 of Article 20:

a. The lessor shall have the right to repossess the leased assets and request the lessee to immediately make the entire lease payment, which he does not yet pay under the leasing contract;

b. The lessor shall be entitled to deal with the leased assets by leasing them to other party or transfer of the leased assets.

c. The leesee shall be obliged to make the payment of the unpaid lease payment pending transfer or leasing of leased assets by the lessor to another party.

21.2 The dealing with the leasing contract, which is terminated prior to its expiry date due to the lessee being bankrupt, dissolved, shall be performed in accordance with provisions of applicable laws on bankruptcy and dissolution.

Chapter V.

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Article 22. Organization of implementation

1. Responsibilities of the finance leasing companies:

Based on this Regulation and applicable provisions of related legal documents, finance leasing companies shall issue specific guiding documents on the operation of the operation lease in line with their conditions, characteristics and Charter.

2. Responsibilities of units of the State Bank:

a. The Banks and Non-bank Credit Institutions Department, the State Bank's branches in provinces, cities shall:

- Receive the application file for the performance of the operation lease of finance leasing companies in accordance with sequences and procedures stipulated in Chapter II, section 1 of this Regulation.

- Coordinate with related Departments of the State Bank to consider and submit to the State Bank's Governor for his decision on the approval of the operation lease by finance leasing companies.

b. The State Bank Inspectors shall:

- Coordinate with and provide the Banks Department with the performance of finance leasing companies to submit to the State Bank's Governor for his consideration and decision on the approval of the operation lease by finance leasing companies.

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c. The Monetary and Policy Department shall:

Provide for the periodical reporting regime on the operation lease to the competent unit of the State Bank

d. The Finance - Accounting Department shall provide guidance on the accounting of the operation lease of finance leasing companies.

Article 23. The amendment, supplement of this Regulation shall be decided upon by the State Bank's Governor.

FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR




Tran Minh Tuan