On 25 December 2018, the State Bank of Vietnam (SBV) issued Circular No. 36/2018/TT-NHNN regulating lending activities for outbound investment by credit institutions and foreign bank branches in Vietnam (credit institutions) (Circular No. 36). Circular No. 36 repeals Circular No. 10/2006/TT-NHNN issued by the SBV on 21 December 2006 (Circular No. 10) and will take effect from 15 February 2019.1
For credit agreements executed before 15 February 2019, credit institutions and the borrowers are entitled to (i) keep complying with the terms and conditions of the credit agreements signed in accordance with the legal provisions in force as at the signing date of such credit agreements; or (ii) agree on revision(s) to such credit agreements in accordance with the provisions of Circular No. 36.2
Some notable points of Circular No. 36 are as follows:
- Broader scope
Previously, Circular No. 10 stipulated the provision of loans by credit institutions to the borrowers for direct outbound investment.3 Circular No. 36 stipulates lending activities by credit institutions for outbound investment in the following forms as specified in Clauses 52.1(a), 52.1(b), 52.1(c) and 52.1(dd) of the Investment Law: 45
- Establishment of an economic organization in accordance with the law of the investment recipient country;
- Performance of an offshore BCC contract;
- Purchase of all or part of the charter capital of an offshore economic organization to participate in management and conduct business investment activities in a foreign country; and/or
- Other investment forms in accordance with the laws of the investment recipient country.
- New lending conditions
The lending conditions under Circular No. 36 are different from those under Circular No. 10. For example, a borrower for outbound investment must be granted a Certificate of outbound investment registration and the investment must be approved or licensed by a competent agency of the investment recipient country;6 and the borrower must have no bad debts from at least two (02) consecutive years from the date of request for the loan.7
Specific lending conditions under Circular No. 36 are as follows:8
- The borrower is a legal entity with civil legal capacity as prescribed by law. An individual borrower (namely an individual member of or the authorized person of a family household, cooperative or other organization without legal entity status) must be aged 18 years or more and have full civil legal capacity as prescribed by law.
- The borrower must be granted a Certificate of outbound investment registration and the investment must be approved or licensed by competent agency of the investment recipient country. If the investment recipient country does not have any regulations on consent or permission for investment, then the investor (i.e., the borrower) must provide proof of its right to invest in the investment recipient country.
- The borrower must have an outbound investment project or plan and the credit institution must assess the same as feasible and assess the borrower as capable of repaying the loan.
- The borrower must, up until the date of request for the loan, have no bad
debts in at least two (02) consecutive years.
- Loan limit
Previously, Circular No. 10 sets no loan limit to the loans for outbound direct investment. Circular No. 36 stipulates that the maximum loan is not over 70% of outbound investment capital of the borrower.
1 Circular No. 36, Article 13.1
2 Circular No. 36, Article 13.2.
3 Circular No. 10, Article 1(a).
4 Investment Law No. 67/2014/QH13 as passed by the National Assembly on 26 November 2014, as amended from time to time (Investment Law).
5 Circular No. 36, Article 1.
6 Circular No. 36, Article 5.2.
7 Circular No. 36, Article 5.4.
8 Circular No. 36, Article 5.