Law Regulation on high purchase investment In Vietnam

Article 1. To promulgate in connection with this Decree Temporary regulations on the organization and operation of finance leasing companies in Vietnam.

Article 2. These Regulations are applied to finance leasing activities and comes into effect from the signing date.

Article 3. The State Bank Governor is responsible for providing detailed guidance on implementation, and after a time will draw experience and make additions in order to complete and promulgate the Regulation officially.

Article 4. Minister, Heads of Ministerial - ranking bodies, Governmental bodies, Chair people of provincial People's Committees under Central management, are responsible for the implementation of this Decree.

For the Government
For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI

TEMPORARY REGULATIONS ON THE ORGANIZATION AND
OPERATION OF FINANCE LEASING COMPANIES IN VIETNAM
(Promulgated in connection with Decree No. 64/CP dated 9 October 1995 of the Government)

CHAPTER I
GENERAL PROVISIONS .

Article 1. Providing finance is a short and medium term credit activity through which machinery, equipment and other moveable assets are leased. The leaser pledges to buy machinery, equipment. and moveable assets according to the lease-holder's requests, and take ownership right on the leased assets. The lease-holder will use the rented property and pay rent for the rent duration agreed upon by the two sides and must not break the contract before the deadline. When the rent duration comes to an end, the lease-holder can receive ownership right, or continue to lease the property under the conditions agreed upon in the contract.

Article 2. In this Regulation, the concepts below can be understood as follows :

1. The leaser : is a finance leasing Company with a legal status that has been granted and operation license according to this Regulation;

2. The Lease-holder : is all enterprise founded under Vietnamese law, directly using the leased property during the lease use time for the purpose of' its legal business operations.

3. Leased property : is machinery, equipment and other moveable assets of' advanced technical standard, with an effectively usable value for over a year, manufactured domestically or imported.

4. Lease duration: is the time during which the lease holder uses the rented property and pays the rent, and it is agreed upon by both sides in the contract.

Article 3. A leasing transaction must satisfy one of the following conditions :

1. When the lease period comes to an end according to the contract, the lease holder will receive ownership right on the leased property, or can continue to be leased under the two sides' agreement;

2. The lease contract stipulates : When the rent duration comes to an end, the lease-holder has the right to choose to buy the rented property at a nominal price that is lower than its real value at the time of rebuying

3. The lease duration for property must be as long as at least 60% of the necessary duration for deduction of the leased property;

4. The total amount of the lease for a sort of property regulated in the contract must be at least as much as the price of that property on the market at the time of the contract signing.

Article 4 : The State Bank of Vietnam, hereinafter referred to as the State Bank, the State management body covering the finance leasing activities is responsible for granting and recovering the operation license, promulgating documents providing regulations on the profession, management, control and inspection over the activities of finance leasing companies in Vietnam.

CHAPTER II

FINANCE LEASING COMPANY

PART 1 : FINANCE LEASING COMPANY

Article 5. Finance leasing company is a sort of financial company with the main activity of leasing machinery, equipment and other moveable assets.

Finance leasing companies founded and operating in Vietnam include :

1. Finance leasing company founded by the Bank and financial company or Bank, financial company and another enterprise of Vietnam;

2. Finance leasing company, a joint venture between the Vietnamese partner including one or more Banks, financial company and another enterprise, and the foreign partner including one or more Banks, finance company, finance leasing company and international financial organizations.

3.Finance leasing company, with 100% foreign capital, of foreign bank, financial company and finance leasing company.

Article 6. The legal capital of the finance leasing company is stipulated as follows :

1. For finance leasing companies of the sort mentioned in point 1, Article 5 of this regulation, the legal capital is VND 55 billion.

2. For joint venture finance leasing companies of the sort mentioned in point 2, Article 5 of this Regulation, and finance leasing company with 100% foreign capital mentioned in point 3, Article 5 of this Regulation, the legal capital is US$ 5 million.

Article 7. The duration of a finance leasing company in Vietnam does not exceed 70 years. If its to be extended the extension must be agreed by the State Bank. Every extension must not exceed the duration of the first operation license.

PART II : CONDITIONS OF AND PROCEDURES ON GRANTING AN OPERATION LICENCE

Article 8. Banks, financial companies and other enterprises wishing to operate finance leasing activities must be content enough, having three years of beneficial continuous operation, and can become an independent finance leasing company according to regulation of the law.

Article 9. Procedures and dossiers for an operation license of a finance leasing company, stated in point 1, Article 5 of this Regulation are carried out as credit organization activities in Vietnam.

Article 10.

1. Partners who together found joint venture finance leasing companies mentioned in point 2, Article 5 of this Regulation and 100% foreign capitalized finance leasing company mentioned in point 3, Article 5 of this Regulation, must submit an application and dossiers to the State Bank for a principal agreement according to the guidance of the State Bank.

2. A principal agreement is valid within 12 months of the granting date. During this time, the partners must complete the dossiers for an operation license according to the guidance of the State Bank;

Article 11. Within three months of receiving full dossiers for an operation license from a finance leasing company, the State Bank considers and grants an operation license to the finance company.

Article 12. After being granted an operation license, the finance leasing company must :

1. Pay to the State Bank a fee for the license grant of 0.l% (one thousandth) of the legal capital, within 15 days from the date written on the operation license;

2. Register for operation according to existing regulations;

3. Have 100% of the legal capital.

4. Announce the operation license, operation registration and its operation activities in the Vietnamese press for five consecutive issues before the operation opens, according to the regulation of the State Bank.

5. Only after having carried out all of the above mentioned regulations is the company able to start operation, with the opening ceremony to be held within six months of the date written in the operation license.

Article 13. Operation license of a finance leasing company must not be transferred.

PART III : OPERATION ACTIVITIES AND AREA

Article 14. Capital source

1. Available capital, legal capital, funds and non divided benefit.

2. Loaned capital : Loans from financial and/or credit organization at home and abroad; issuing bonds and/or other valuable papers if permitted by the State Bank;

3. The finance leasing company must not accept savings in any way;

4. The finance leasing company can open a savings at the state bank and/or at other banks operating in Vietnam's internality. If' it wishes to open an account at an overseas bank, this must be agreed to by the State Bank.

Article 15. Finance leasing company must obey the following regulations on the capital source use :

1. Must not spend more than 25% of the legal capital on buying fixed assets for the company.

2. Loaned capital must not exceed 20 times as much as the available capital.

3. The total value of the leased property to one customer must not exceed 30% of the available capital. The figure can exceed this regulated level if the State Bank agrees to it in writing.

4. Obey other regulations of the existing law and of the State Bank.

Article 16. Finance leasing company is allowed to carry out the following activities :

1. Financial lease

2. Constancy; sponsor for customers on services relating to financial leasing;

3. To implement other activities it agreed upon by the State Bank and/or other State competent bodies.

Article 17. The finance leasing company has the right to collect a lease fee according to the guidance of the State Bank.

CHAPTER III: CONTRACT ON FINANCIAL LEASE

Article 18. Contract on financial lease (hereinafter referred to as the contract) is a sort of economic contract signed between the leaser and the lease-holder on the lease of one or more machines, equipment and/or other moveable assets in a certain time (lease duration ) according to the stipulations of Article 3 of this Regulation.

Article 19. The contract must fulfill the following requirements :

1. Be formed in writing;

2. Be registered at the State Bank and the contract managing body of the place where the finance leasing company's office is located according to the regulations of the law;

3. Must not cease before the deadline of the lease duration, as agreed upon in the contract.

Article 20. The contract must include the content stated in Chapter IV of this Regulation and the content according to the contract, formula provided by the State Bank.

Article 21. The contract comes into effect from the date agreed upon by the two sides in the contract.

CHAPTER IV: AUTHORITY AND OBLIGATIONS OF THE PARTIES

Article 22. Authority and obligations of finance leasing company :

1. Having the right to require the lease-holder to provide fully quarterly and yearly reports on the production operation activities and the matters relating to the leased property.

2. Having the right to own and attach the ownership logo on the leased property during the lease time.

3. Having the right to require the lease - holder to compensate damage caused by the lease holder who does not or does but. incompletely carry out their responsibility to preserve, repair and pay insurance for the rented property during the lease time.

4. Having the right to transfer their authority as stated in the contract, to another finance leasing company without the agreement of the lease- holder. In this case, the finance leasing company must announce it in writing to the lease-holder.

5. Having the right to require the lease-holder to make a deposit for signing a fund insuring the contract or require someone to sponsor the lease-holder.

6. Taking the responsibility to register the contract, carry out the procedures on the buying of insurance for the leased property.

7. Taking responsibility to sign contracts on commodity purchases and pay for the property for let to the suppliers according to the conditions agreed upon in the contract on the commodity purchase. The finance leasing company is not responsible if the property is not delivered or is delivered but not tender the conditions agreed upon by the lease-holder and the supplier. It the leased property is imported, the finance leasing company is obliged to carry out all necessary procedures on import.

8. To carry out their obligations and compensate the damage for the lease-holder, if the leased property is not delivered in time for the lease- holder due to the finance leasing company violating the contract on commodities purchases.

Article 23. Authority and obligations of the lease holder.

1. Having the right to choose, negotiate and agree with the rented property supplier on technical characteristics, sort, price, mode of insurance, mode and time of delivery, installation and warranty of' the rented property;

2. To directly receive rented property from the supplier;

3. If the contract is abrogated before the rented property is delivered to the lease-holder for their faulty, they must compensate the damage for the finance leasing company.

4. Must use the rented property for the purpose agreed to in the contract;

5. Must bear the risk of loss, damage of the rented property and the risks caused by the rented property to a third party;

6. Taking the responsibility to service and repair the rented property during the lease period;

7. Must not transfer the right to use the rented property to a third party if it is not agreed upon earlier by the finance leasing company in writing;

8. Must not use the rented property for mortgage or pawning purposes;

9. To be obliged to pay the rent at the time regulated in the contract and on principle, must pay the costs relating to the leased property such as import costs tax cost for contract registration and insurance of the leased property;

10. To be obliged to give back the leased property to the finance leasing company when the rent duration comes to an end and to cover all expenses relating to the giving back of the rented property, excluding the case if the lease-holder has the right to own, buy or continue to lease the property according to the regulations of' the contract.

Article 24. Ceasing the contract before the deadline :

1. The finance leasing company can cease the contract better the lease duration comes to an end it

- The lease holder does not pay the rent according to regulations in the contract;
- The lease holder is not able to pay, is bankrupt or is no longer present.
- The lease holder is sponsored but the sponsor is not able to pay, is bankrupt or is no longer present and the lease holder is not able to find another sponsor agreeable to the finance leasing company.

2. The lease-holder can cease the contract before the rent duration comes to an end it.

- The rented property is not delivered in time, caused by the finance leasing company.
- The leaser violates the contract. .

3. The contract is ceased better the rent duration comes to an end if the rented property is lost or damage beyond repair.

Article 25. Measures that can be taken when the contract ceases before the rent duration comes to an end :

1. If the contract ceases before the deadline according to point 1 Article 24, the lease-holder must fully pay the rent according to the contract, to the finance leasing company.

The finance leasing company has the right to recover immediately the leased property without announcing the incident to any court or legal body.

2. The ownership of' the finance leasing company over the leased property is not violated if the lease-holder is bankrupt, departed or is unable to pity. The rented property is not considered to belong to the lease-holder when it is dealt with to cover the debt for other lenders;

3. It the contract ceases according to point 3 Article 24, the lease-holder must immediately pay full lease costs according to the contract, or, if the contract does not regulated that the lease-holder can own the rented property, the lease-holder will have to pay the remaining value of the rented property to the finance leasing company. The leaser is responsible to give back to the lease holder the insurance fee for the property when he/her is paid by the insurance body, if the lease-holder has made full payment to tilt finance leasing company the sum to be paid;

4. If the contract ceases before the deadline due to the finance leasing company violating the contract, it must compensate all damages to the loose-holder.

CHAPTER V: FINANCE, CALCULATION

Article 26. If the rented property is imported machinery, equipment, and moveable assets, the applied tax level is the same as that for enterprises who import directly.

It the rented property is re-exported, it does not bear export tax when the contract comes to an end.

Article 27. Tax applied to finance leasing company activities is at the same level as that applied to banks and credit organizations according to the existing law.

Article 28. The finance leasing company can deduct expenditure in order to set up a fund to cover risk. This fund is regulated by the State Bank depending on the specific situation and time, but must not exceed 5% of the total unpaid rent.

Article 29. The transaction of the foreign partners profit abroad is carried out under Vietnam's Law on Foreign Investment.

Article 30. The fiscal year of finance leasing company starts on 1 January and ends on 31 December.

Article 31. Calculation :

1. The finance leasing company must carry out calculations and accounting according to the accounting system promulgated by the State Bank.

2. The finance leasing company must make correct and complete calculations and keep concerned papers and documents according to the regulation of' the Ordinance on accountancy and statistics.

Article 32. Report regulation

1. The finance leasing company must produce regular reports as stipulated by the Bank. All violations of the report regulations will be dealt with according to existing regulations.

2. The summary list. of assets and annual financial reports of the find lice leasing company must be certified by the auditing body. The choice of' auditing body must. be agreed to by the State Bank.

CHAPTER VI: SUPERVISING, INSPECTING AND DEALING WITH VIOLATIONS AND DISPUTES

Article 33. The finance leasing company is tinder the supervision, control and inspection of the State Bank in its operation activities, and the implementation of the existing regulation of the law.

Article 34. All violations of the finance leasing company will be dealt with according to regulations of the Ordinance off Banks, Credit cooperative, financial companies and others, concerning the regulations of the law,

Article 35. All disputes between finance leasing company and Vietnamese with legal status will be dealt with in Vietnam's Economic Court. Disputes between the partners participating in the joint venture finance leasing company is dealt with through negotiations and reconciliation. If the dispute can not be reconciled, it will be dealt with according to the agreements in the contract.

CHAPTER VII: ALTERING, EXTENDING, CEASING, AND SETTING THE LEASE CONTRACT

Article 36.

1. If it wishes to change the location, operation area and regulations iii the operation license, the finance leasing company must make application to the State Bank for agreement.

2. If it wishes to extend the operation duration, the finance leasing company must submit an application to the State Bank six months before the operation duration written in the license or the previous extension agreement, comes to an end,

Article 37. The State Bank provides regulations on license recovery of finance leasing companies in accordance with the Ordinance on Banks, Credit Cooperatives and finance companies,

Article 38.

1. The finance leasing company which must cease operations, ends operation due to the operations duration expiring must carry out procedures on settlement and departure according to the regulations of Vietnamese law,

2. If it voluntarily departs before the deadline written in the license, the finance leasing company must submit a written request to the State Bank for agreement and can only do otherwise if this is agreed to in writing by the State Bank.

3. The State Bank provides detailed guidance on the order and procedures of implementation of finance leasing company ending its activities according to the existing regulations of Vietnamese law.

Article 39. If the finance leasing company meets a difficulty or is bankrupted in business operations, or is unable to make payment when it must, bankruptcy will be announced; The order and procedures of the bankruptcy are carried out according to regulations of the law on bankruptcy.

CHAPTER VIII: FINAL PROVISIONS

Article 40. Organizations which are running finance leasing activities within 12 months of this Regulations coming into effect must amend their organization and operation according to this Regulation.

Article 41. Amendments of and additions to this Regulations will be decided by the Government.

For the Government
For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI

./.

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