THE
STATE BANK OF VIETNAM
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SOCIALIST
REPUBLIC OF VIETNAM
Independence- Freedom – Happiness
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No.
1096/QD-NHNN
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Hanoi,
September 6, 2004
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DECISION
ON THE ISSUANCE OF THE REGULATION ON FACTORING ACTIVITY OF
CREDIT INSTITUTIONS
THE GOVERNOR OF THE STATE BANK
- Pursuant to the Law on the
State Bank of Vietnam No. 01/1997/QH10 dated 12 December, 1997 and the Law on
the amendment, supplement of several Articles of the Law on the State Bank of
Vietnam No. 10/2003/QH11 dated 17 June, 2003;
- Pursuant to the Law on Credit Institutions No. 02/1997/QH10 dated 12
December, 1997; and the Law on the amendment, supplement of several Articles of
the Law on Credit Institutions No. 20/2004/QH11 dated 15 June, 2004;
- Pursuant to the Decree No. 86/2002/ND-CP dated 05 November, 2002 of the
Government providing for the function, assignment, authority and organizational
structure of the ministries and ministerial level agencies;
- Upon the proposal of the Director of the Banks and Non-bank Credit
Institution Department,
DECIDES:
Article 1.
To issue in conjunction with this Decision “the
Regulation on factoring activity of credit institutions”
Article 2.
This Decision shall be effective from 01 October, 2004.
Article 3.
The Director of Administrative Department, the Director
of the 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, Chairpersons of the Board of
Directors and General Directors (Directors) of Credit Institutions shall be
responsible for the implementation of this Decision.
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FOR
THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR
Tran Minh Tuan
REGULATION
ON FACTORING ACTIVITY OF CREDIT INSTITUTIONS
(Issued in conjunction with the Decision No. 1096/20004/QD-NHNN dated 6
September 2004 of the Governor of the State Bank)
Chapter I
GENERAL PROVISIONS
Article 1.
Governing scope and subjects of application
1. Governing scope: This
Regulation provides for the implementation of factoring operation of credit
institutions for customers in order to diversify credit activity, provide additional
working capital for customers, promote domestic and international trade
activities.
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2.1. Credit institutions
entitled to carry out the factoring operation shall be credit institutions that
are set up and operating in accordance with the Law on Credit Institutions,
including:
- The State owned commercial
banks;
- Joint-stock commercial banks;
- Joint-venture banks;
- Banks with 100% foreign owned
capital;
- Branches of foreign banks;
- Finance companies;
2.2. Customers entitled to the
factoring facility provided by credit institutions shall be Vietnamese and
foreign economic organizations that supply goods and are entitled to enjoy
receivables arising from the purchase, sale of goods under the agreement stated
in the goods purchase and sale contract between the selling party and buying
party (hereinafter referred to as the selling party).
Article 2.
Definition
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Article 3.
Principle of factoring performance
The factoring activity shall
ensure following principles:
1. Ensuring the safety in the
activities of the credit institution entitled to carry out factoring activity
and to be in conformity with applicable provisions of Vietnam’s laws;
2. Securing the legal rights,
obligations and interests of parties to the factoring contract and the parties
involved in the receivables.
3. The receivables, which are
factored, must originate from goods purchase and sale contracts in accordance
with provisions of applicable laws.
Article 4.
Interpretation
In this Regulation following
terms shall be construed as follows:
1. Factoring unit shall be
credit institutions as stipulated in point 2.1, paragraph 2, Article 1 of this
Regulation, which are approved by the State Bank to carry out the factoring
activity.
2. Domestic factoring shall be
the factoring performed on the basis of a goods purchase and sale contract
where the selling party and the buying party are residents in accordance with
provisions of applicable laws on foreign exchange control.
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4. Export factoring unit shall
be a unit that performs the factoring to the selling party being an exporter in
the export-import contract.
5. Import factoring unit shall
be a unit that is permitted to engage in the factoring activity and
participates in the process of export-import factoring.
6. The buying party shall be an
organization which is entitled to receive goods from the selling party and
obliged to make payment of receivables as stipulated in the goods purchase and
sale contract
7. The goods purchase and sale
contract shall be a written agreement between the selling party and the buying
party on the purchase, sale of goods in accordance with provisions of
applicable laws where the term to carry out the payment obligation of the
buying party does not expire.
8. Sale documents shall be
documents relating to the goods delivery and payment claim of the selling party
to the buying party on the basis of the goods purchase and sale contract.
9. Factoring balance shall be an
amount advanced by the factoring unit to the selling party in accordance with
agreements stated in the factoring contract.
10. Receivable shall be the
amount the selling party must collect from the buying party under the goods
purchase and sale contract.
11. Factoring limit shall be the
maximum outstanding receivables, which have been factored for a certain period
of time in accordance with the agreement between the factoring unit and the selling
party in the factoring contract.
Article 5.
Agency that permits the factoring activity
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Article 6.
Application of international treaties and customs
1. If international treaties on
the factoring activity to which the Socialist Republic of Vietnam is signatory
or has acceded, contain provisions other than those stated in this Regulation,
they shall be applicable.
2. Parties may agree on the
application of regulations, customs and rules on the factoring, provided that
they are not in contrary to Vietnam’s laws.
Chapter
II.
FACTORING ACTIVITY
Section 1.
APPROVAL OF THE FACTORING ACTIVITY
Article 7.
Conditions for engaging in the factoring activity:
1. The State Bank shall permit
the domestic factoring activity when credit institutions fully satisfy
following conditions:
a. There is a demand for
factoring activity;
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c. They are not subjects being
considered for administrative punishment in the financial, banking area or have
already been subject to the administrative punishment in the financial, banking
area but have overcome their violation act.
2. In respect of the
export-import factoring activity:
Credit institutions applying for
export-import factoring activity must, in addition to conditions provided for
in paragraph 1 of this Article, be credit institutions, which are permitted to
engage in foreign exchange activity.
Article 8.
File for the approval of the factoring activity
1. The application file for the
approval of the factoring activity from the State Bank shall include:
a. A written application letter
of the Chairman of the Board of Directors of the credit institution or of
authorized person requesting the State Bank to approve the engagement of the
credit institution in the factoring activity. In case of authorization, the
application letter must be supported by the letter of authorization of the
Chairman of the Board of Directors;
For branches of foreign banks in
Vietnam, there must be a written application letter of their General Manager
(Manager);
b. A factoring business plan,
which clearly states the requirement for the performance of the factoring
operation, expected customers and operational plan;
c. A copy of the establishment
and operation Licence; a copy of the Business Registration Certificate;
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2. In respect of the
export-import factoring activity
In addition to documents
provided for in paragraph 1of this Article, the application file for the
export-import factoring activity shall include a copy of the foreign exchange
activity permit issued by the State Bank.
Article 9.
Sequence and procedure for the approval of the factoring activity
The application sequences and
procedure for the approval of the State Bank for the factoring activity of the
credit institution:
1. Joint stock credit
institutions shall submit 2 sets of application file for the approval of the
factoring activity to the State Bank’s branches in provinces, cities where
their head offices are located.
The State Bank’s branches in
provinces, cities shall, within a maximum period of 15 working days from the
full receipt of files, consider and give their opinion in writing on the conditions,
application file for the factoring activity in accordance with provisions in
Articles 7 and 8 of this Regulation then send to the State Bank (the Banks and
Non-Bank Credit institution Department) enclosed with 01 set of file of the
joint-stock credit institution.
2. Credit institutions (except
for joint-stock credit institutions) shall submit 01 set of application file to
the State Bank (the Banks and Non-Bank Credit institution Department) for its
approval of the factoring activity.
3. The State Bank shall, within
a maximum period of 30 working days from the full receipt of files from credit
institutions (except for the joint-stock credit institutions) and 15 working
days from the full receipt of files of joint-stock credit institutions, which are
delivered by the State Bank’s branches in provinces, cities, consider and give
its written opinion on the approval or non-approval of the factoring activity
of credit institutions which desire to perform the factoring activity. In case
of non-approval, the State Bank shall give out clear reason thereof.
Article 10.
Conditions for the performance of the factoring activity
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2. Credit institutions shall
submit their registration with the business registration agency and other
related documents to the State Bank.
Section 2.
PROVISIONS ON THE FACTORING ACTIVITY
Article 11.
Types of factoring
1. Factoring units shall be
entitled to carry out following types of factoring:
a. Factoring with recourse
right: the factoring units shall have the right to recourse to the selling
party for the advance, when the buying party is not capable to perform its
payment obligation for the receivable.
b. Factoring without recourse
right: factoring units shall take the entire risks when the buying party is not
capable to perform its payment obligation for the receivable. The factoring
units shall only have the right to recourse to the selling party in case where
the buying party refuses to make payment of the receivable due to the selling
party failing to deliver goods in accordance with agreements stated in the
goods purchase and sale contract or because of another reason, which is not
related to the payment capacity of the buying party.
2. A factoring unit shall be
entitled to carry out domestic and export-import factoring activity.
Article 12.
Modes of factoring
1. Factoring for each receivable
item: The factoring unit and the selling party shall complete required
procedures and sign the factoring contract for receivables of the selling
party.
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3. Co-factoring: two or several
factoring units shall together carry out the factoring activity for a goods
purchase and sale contract where a factoring unit shall act a coordinator in
the organization of the co-factoring activity.
Article 13.
Process of factoring activity
1. The factoring activity shall
be carried out under following main steps:
a. The selling party shall
request the factoring unit to factor receivables;
b. The factoring unit shall
analyze receivables, the operation and financial capacity of the selling party
and the buying party;
c. The factoring unit and the
selling party shall agree and enter into a factoring contract;
d. Both the factoring unit and
the selling party shall sign a written notice of the factoring contract, which
clearly states the fact that the selling party has transferred its right to
claim the payment to the factoring unit and provides the buying party with the
guidance on the direct payment to the factoring party, then send it to the
buying party and related parties;
dd. The buying party shall send
the selling party and the factoring unit a written confirmation of its receipt
of the notice and its commitment on the performance of its payment obligation
to the factoring unit;
e. The selling party shall hand
over the original copy of the goods purchase, sale contract, sale vouchers and
other documents concerning the receivables to the factoring unit;
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h. The factoring unit shall
follow up and collect debts from the buying party;
i. The factoring unit shall
settle payment with the selling party in accordance with provisions stated in
the factoring contract;
k. To deal with other
outstanding issues, which may arise.
2. For the export-import
factoring activity: The process of factoring operation may be performed in
accordance with provisions in paragraph 1 of this Article or carried out
through the import factoring unit. The import factoring unit shall be
responsible for analysis of receivables, the operation and financial capacity
of the buying party that is the importer in the export-import contract; perform
the debt collection under the authorization of the export factoring unit and
undertake, on behalf of the importer, to make payment in case where the
importer is not capable of making payment of the receivables.
In case where the factoring
activity is performed through an import factoring unit, the export factoring
unit and the import factoring unit shall agree and enter into a separate
contract, which specifically stipulates the rights and obligations of each party,
in line with provisions of applicable laws.
Article 14.
Provisions on the currency used in the factoring activity
Factoring transactions shall be
performed in VND. For factoring transactions made in foreign currency, the
factoring unit, the selling party and the buying party shall comply with
current provisions on foreign exchange control.
Article 15.
Interests and fees in the factoring activity
Interests and fees in the
factoring activity agreed by the parties in the factoring contract shall
consist of:
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2. Fees on the value of the
receivables to make up for credit risks, management cost of sale books and
other costs.
Article 16.
Security for the factoring activity
The factoring unit and the
selling party shall agree on the application or non-application of security
measures to the factoring activity. Security forms shall include: deposit,
mortgage and pledge of assets, guarantees secured by assets of a third party
and other security measures in compliance with provisions of applicable laws.
Provisions on payment
rescheduling, and overdue debt classification in the factoring activity shall
comply with the guidance of the State Bank.
Article 18.
Provisions on tax
Provisions on tax applicable to
the factoring activity shall comply with provisions of applicable laws.
Article 19.
Receivables not qualified for factoring
Following receivables shall not
be qualified for factoring:
1. Receivable arising from the
purchase and sale contract of goods forbidden by applicable laws;
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3. Receivable arising from
transactions and agreements being in dispute
4. Receivable arising from
contracts of goods sale in form of consignment
5. Receivable arising from the
goods purchase and sale contract, the remaining payment period of which is more
than 180 days.
6. Receivables set off or
mortgaged, pledged;
7. Receivables, which are
overdue according to the goods purchase and sale contract.
Article 20.
Prudential provisions
1. The factoring activity must ensure
prudential provisions stated in the Law on Credit institutions and guiding
documents of the State Bank;
2. Total factoring balance for a
single customer shall not be in excess of 15% of the own capital of the
factoring unit. For a branch of foreign bank, it shall not be in excess of 15%
of the own capital of the foreign bank.
3. The balance of receivables,
the payment of which is guaranteed by an import-factoring unit for an importer,
shall be within the limit of the total guarantees outstanding a credit
institution has made to a customer in accordance with the Regulation on banking
guarantee.
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5. The total factoring value
outstanding shall not be in excess of the own capital of a factoring unit.
Chapter
III.
FACTORING CONTRACT
Article 21.
Factoring contract
1. Factoring contract shall be a
written agreement between a factoring unit and a selling party on the purchase
of receivables in compliance with provisions of applicable laws.
2. Factoring contract may be
amended, supplemented or cancelled if related parties agree to do so.
Article 22.
Contents of a factoring contract
A factoring contract shall
consist of following main contents:
1. Name, address, tel, fax, etc…
of parties signing the factoring contract
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3. Factoring interests and fees;
4. The selling, buying price of
the receivable shall be determined on the basis of the value of the receivable
after the factoring interests and fees are deducted;
5. Advanced amount and payment
mode;
6. Notice of the factoring to
the buying party and related parties;
7. Forms of security to secure
the factoring unit of its recourse on the advanced amount, value of security
assets;
8. Effective term of the
factoring contract;
9. Rights and obligations of
parties;
10. The mode to hand over the
goods purchase and sale contract, sale vouchers, the rights, interest and
documents relating to the receivable, which is factored;
11. Provisions on the recourse
of the factoring unit;
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13. Other agreements.
Chapter
IV.
RIGHTS AND OBLIGATIONS
OF PARTIES
Article 23.
Rights and obligations of the factoring unit
1. The factoring unit shall have
the right:
a. To request the selling party
to provide information and documents relating to the receivable, its financial
capacity and its business performance;
b. To request the selling party
to hand over the original copy of the goods purchase and sale contract, sale
vouchers, rights, interests and documents in relation to the receivable, which
is factored;
c. To claim a debt from the
buying party in line with the value of the receivable being factored and enjoy
other rights and interests the selling party does have according to provisions
in the goods purchase and sale contract;
d. To transfer the right to
claim a debt, except for the case where the parties in the factoring contract
have agreed otherwise.
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a. To give notice to the buying
party and related parties in accordance with provisions in point d, paragraph
1, Article 13 of this Regulation;
b. To make payment of the
receivable to the selling party at the purchase price agreed in the factoring
contract;
c. To bear all the risk when the
buying party is not capable to perform its payment obligation for the
receivable in case of factoring without recourse.
d. To correctly and fully comply
with clauses agreed in the factoring contract.
Article 24.
Rights and obligations of the selling party
1. The selling party shall have
the right
To receive the payment made by
the factoring unit at the buying, selling price of the receivable as agreed in
the factoring contract.
2. The selling party shall be
obliged
a. To fully, accurately and
honestly provide the factoring unit with information, documents and reports
upon its request;
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c. To bear risks when the buying
party is not capable of completing its payment obligation for the receivable in
case of factoring with recourse.
d. To fully and timely hand over
the goods purchase and sale contract, sale vouchers, rights, interests and
other documents relating to the receivable factored to the factoring unit in
accordance with agreements stated in the factoring contract;
e. To correctly and fully comply
with clauses agreed in the factoring contract and goods purchase, sale
contract.
Article 25.
Rights and obligations of the buying party
1. The buying party shall have
the right
a. To be informed of the
factoring;
b. Not to change its rights and
obligations stipulated in the goods purchase and sale contract, but the party,
which is entitled to receive the payment of the receivable. The adjustment of
clauses stipulated in the goods purchase and sale contract must be accepted in
writing by the buying party.
2. The buying party shall be
obliged
a. to confirm in writing on its
receipt of the notice and commitment on making payment in accordance with
provisions in point d, paragraph 1, Article 13; in case of payment refusal, the
buying party must clearly state the true reason thereof and immediately give a
written notice to the selling party and the factoring unit.
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c. Not to request the repayment
of the amount, which it has already paid to the factoring unit, in case where
the selling party fails to, do not correctly, sufficiently comply with clauses
stipulated in the goods purchase and sale contract, except for the case where
the factoring unit deliberately makes payment of that amount to the selling
party after it has been notified of violation committed by the selling party to
the goods purchase and sale contract
Chapter V.
DEALING WITH VIOLATION
Article 26.
Dealing with violation
Organizations, individuals
violating any provision in this Regulation shall, depending on the nature and
seriousness of the violation, be subject to discipline, administrative
punishment or prosecuted for criminal liability in accordance with provisions
of applicable laws.
Chapter
VI.
IMPLEMENTING PROVISIONS
Article 27.
Organisation of implementation
1. Responsibility of the
factoring unit: based on this Regulation and provisions of related legal
documents, the factoring unit shall issue specific documents to guide the
factoring operation in line with its conditions, characteristics and Charter.
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a. The Banks Department and the
State Bank’s branches in provinces, cities:
- To receive application files
for the factoring activity from credit institutions in compliance with the
sequence, procedure stipulated in Chapter II, Section 1 of this Regulation.
- To coordinate with related
Departments of the State Bank to consider and submit the Governor for his
decision on the approval of credit institutions to perform factoring operation.
b. The State Bank Inspectorate:
- To coordinate with and provide
the Banks Department with the operation situation of credit institutions to
submit to the Governor of the State Bank for his consideration, decision on the
permission to credit institutions to perform factoring operation.
- To organize inspection,
supervision for the implementation of the factoring operation; To deal with
under its competence and make recommendation to the Governor of the State Bank
to deal with violations of this Regulation.
c. The Monetary Policy Department:
- To guide provisions on the
payment rescheduling and overdue debt classification in the factoring activity
of credit institutions
- To provide for the periodical
reporting regime on the factoring activity to competent units of the State
Bank.
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- to provide guidance on the
accounting of the factoring operation of credit institutions.
e. The Credit Department:
- To provide guidance to the
factoring units on the implementation of co-factoring operation.
Article 28.
Amendment of, supplement to this Regulation
The amendment of, supplement to
this Regulation shall be decided upon by the Governor of the State Bank