To implement a production and business plan, besides a good idea and a comprehensive plan, fund resource is also an aspect that the company needs to consider. According to the current law, enterprises can choose to use capital from many sources such as capital, and assets of the company itself, or mobilized from other sources such as banks, partners, the public, etc. to operate their business activities. In particular, the method of borrowing foreign loans not guaranteed by the government under a loan contract is more and more popular among enterprises. With the expectation that readers have a more general view of this form of capital raising, the article will provide legal notices for enterprises that have a plan to conduct the said loan.
1. Medium and long-term foreign loans without government guarantees
A medium and long-term foreign loan not guaranteed by the government, also known as a self-repaying loan is a loan that the Borrower borrows from abroad in the form of self-borrowing and self-responsibility for payment to the foreign lender during more than one (01) year.
According to regulations, this loan must be agreed upon by the parties in writing and under foreign currency (Vietnam Dong is only allowed to be used in some special cases). The interest of the said loan is considered the expense of the loan and agreed upon by the involved parties. However, please note that this content may be limited by the expense ceiling of foreign loans announced by the State Bank in each period. Now, there is no regulation on that matter, therefore, the parties may freely agree on this content in the contract but must ensure compliance with the Civil Code.
2. Conditions and requirements for obtaining foreign loans
To conduct a medium- and long-term foreign loan not guaranteed by the government, in addition to the notes on the form of the loan contract and the currency used, the company also needs to meet other conditions such as:
- borrowing and repayment must be made through the bank account with the corresponding purpose opened at the commercial bank or foreign bank branches are allowed to operate in Vietnam
- the loan must be used for the purposes permitted by law such as the implementation of the borrower’s production and business plan, the restructuring of foreign debts without increasing costs, etc
- the procedures for registration of medium and long-term foreign loans must be carried out at the state bank branch where the headquarters of the borrower locates and must be approved by the State bank for the said registration.
3. Registration and approval process
After medium and long-term foreign loans have been approved by the State Bank, the company can start to receive loans from abroad and use them to serve their production and business plans. During the implementation of this loan, the company must conduct correctly all the contents registered with the State bank, such as the interest payment periods, the time of repayment of the principal, etc. If there are any changes related to the registered content, the company must carry out procedures for change of the foreign loan at the State bank.
According to regulations, the time to carry out the said procedure is within 30 (thirty) days from the date of signing the relevant agreement or before the time of the change (in case the changed content of the loan does not require signing an agreement but still ensures compliance with the foreign loan agreement).
4. Obligations and reporting requirements
In addition, one of the obligations that are often “forgotten” by the company to perform properly in the process of the loans but can be the basis for handling administrative violations with a fine of up to VND 40,000,000, is the obligation to report periodically the situation of loan performance, repayment of medium-long term foreign debts not guaranteed by the government to the competent authority.
According to regulations, the company must submit the above reports to the State Bank within the first 05 days of the first month of the next quarter. Regarding the form of submission, according to the regulations, the company can choose between online submission through the system of the State Bank or direct one. However, currently, most branches of state banks in provinces and cities will require companies to register online accounts and submit reports on them.
In addition to the notices stated in the article, the company also needs to search and understand the relevant regulations governing the implementation of medium and long-term foreign loans not guaranteed by the government to ensure compliance with the law.
