| Place of issuance: | The bank of Viet Nam | Effective date: | 15/01/2019 |
| Date of issue: | 15/01/2019 | Status: | Still in effect |
| STATE BANK VIETNAM | SOCIAL REPUBLIC OF VIETNAM Independence - Freedom - Happiness |
| Number: 899/NHNN-QLNH Regarding administrative violations during the implementation of foreign loans. | Hanoi, date 15 month 01 year 2019 |
Dear: Golden Cake Company Limited
Regarding the proposal from Golden Cake Company Limited (hereinafter referred to as the Company) in công văn (official letter) No. 15/2018/CV.BV-CP dated December 18, 2018, the State Bank of Vietnam (SBV) has the following opinion:
1. According to the aforementioned document No. 15/2018/CV.BV-CP, the Company has a foreign loan worth 2.500.000 EUR, with interest paid every three months; the first payment on March 1, 2016, and the last on September 1, 2019. Due to the inability to arrange funds to repay the debt, the interest payment for September 2018 was made by the Company on October 9, 2018, through its payment account at Vietnam Maritime Commercial Bank (Maritime Bank).
2. Legal basis:
2.1. Relevant regulations on the management of foreign borrowing and repayment.
a. Regarding the responsibility for registering and registering changes to foreign loans.
The company's loan is a medium- to long-term foreign loan not guaranteed by the Government, and therefore is subject to registration with the State Bank of Vietnam.
– Clause 1, Article 31 of Circular 03/2016/TT-NHNN dated February 26, 2016, guiding some contents on foreign exchange management for foreign borrowing and debt repayment by enterprises (Circular 03) stipulates: “1. For foreign loans that must be registered with the State Bank of Vietnam, the borrower may only withdraw funds or repay principal and interest of the foreign loan after the loan has been registered and confirmed by the State Bank of Vietnam, except in cases of withdrawing funds or repaying a portion of the principal and interest in the first year of a short-term loan converted to a medium or long-term loan.”
– Clause 1, Article 15 of Circular 03 stipulates: “…in the event of any changes to the content related to the loan as stated in the State Bank of Vietnam's foreign loan registration confirmation document, the borrower is responsible for registering the changes to the foreign loan with the State Bank of Vietnam in accordance with the provisions of this Circular.”
b. Regarding foreign debt repayment accounts:
– Clause 1, Article 24 of Circular 03 stipulates "An 'Foreign Loan and Debt Repayment Account' is a payment account opened by the borrower at a bank providing account services to withdraw funds, repay foreign loans, and conduct other money transfer transactions related to foreign borrowing, debt repayment, and guarantees for foreign loans."
– Clause 1, Article 28 of Circular 03 stipulates "In cases where there is a change in the foreign loan or debt repayment account due to a change in the account service provider, the borrower, if not a commercial bank or a branch of a foreign bank, shall request the current account service provider to confirm the withdrawal of funds and debt repayment related to the foreign loan so that the new account service provider can continue to monitor the implementation of the foreign loan in accordance with current regulations on the management of foreign loans and debt repayment."
– Clause 2, Article 1 of Circular 05/2016/TT-NHNN amending and supplementing Circular 03 (Circular 05) stipulates: 2. For borrowers that are enterprises with foreign direct investment:
a) For medium and long-term foreign loans: The foreign loan and debt repayment account is the direct investment capital account (...)”
– Clause 1, Article 6 of Circular 19/2014/TT-NHNN dated August 11, 2014, guiding foreign exchange management for foreign direct investment activities in Vietnam (Circular 19) stipulates "To carry out foreign direct investment activities in Vietnam, enterprises with foreign direct investment capital and foreign investors participating in business cooperation contracts may open foreign currency or Vietnamese Dong direct investment capital accounts at one authorized bank to conduct the revenue and expenditure transactions stipulated in Articles 7 and 8 of this Circular."
– Clause 4, Article 6 of Circular 19 stipulates “In cases where there is a need to open a direct investment capital account at another authorized bank, foreign direct investment enterprises and foreign investors participating in business cooperation contracts must close the opened direct investment capital account and transfer the entire balance in this account to the new account…”.
2.2. Relevant regulations on handling administrative violations
– Point h, Clause 2, Article 24 of Decree 96/2014/ND-CP dated October 17, 2014, regulating administrative sanctions in the field of currency and banking (Decree 96) stipulates:
2. A fine of VND 40.000.000 to VND 80.000.000 shall be imposed for any of the following violations:
(...)
d) Failure to comply with legal regulations on administrative procedures for the registration and registration of changes to foreign loans, international bond issuances; registration and registration of changes to overseas loans, recovery of guaranteed debts for non-residents; registration and registration of changes to accounts, capital transfer schedules and other administrative procedures related to capital transactions;
h) Carrying out capital withdrawals and debt repayments for foreign loans; disbursing and recovering debts for loans to foreign countries; recovering guaranteed debts for non-residents; transferring funds for foreign investment in Vietnam and Vietnamese investment abroad in violation of the law;
– Point b, Clause 3, Article 3 of Decree 96 stipulates “b) The fines stipulated in Chapter II of this Decree are the fines applicable to individuals, except in cases where the violator is an organization. The fine for an organization is twice the fine for an individual;”.
3. Regarding the Company's actual transactions:
Based on the above legal regulations and the relevant transaction documents of the Company provided by the State Bank of Vietnam, Ho Chi Minh City Branch (the Branch), if the Company is unable to arrange the funds when the interest payment is due on September 1, 2018 and postpones the payment to October 5, the Company needs to:
(i) Register the change in interest repayment plan for the September 2018 interest payment period with the Branch;
(ii) After receiving written confirmation of the registration of the interest repayment plan change from the Branch, the Company shall present this document to Sacombank – where the Company has opened a direct investment capital account, which is also a foreign debt repayment account – so that Sacombank has a basis to transfer the interest repayment funds.
However, the Company did not register the change in interest repayment plan, and because Sacombank refused to make the payment, the Company transferred the money to a payment account opened at Maritime Bank. Thus, the Company violated the following regulations:
– The company failed to register the change in foreign loans with the State Bank of Vietnam as required by Clause 1, Article 15 of Circular 03. Therefore, the company did not comply with the legal regulations on administrative procedures for registering and registering changes to foreign loans as stipulated in Point d, Clause 2, Article 24 of Decree 96.
– The company did not make loans through foreign loan accounts as stipulated in Clause 1, Article 24 of Circular 03 and Clause 2, Article 1 of Circular 05. Therefore, the company made debt repayments for foreign loans in violation of the law as stipulated in Point h, Clause 2, Article 24 of Decree 96.
4. Because the Company violated the aforementioned legal regulations during the process of obtaining the foreign loan, the State Bank of Vietnam will consider imposing administrative penalties on the Company in accordance with current legal regulations on administrative sanctions in the monetary and banking sector as referenced above.
In addition, because Maritime Bank transferred interest payments to the Company, the State Bank of Vietnam also imposed administrative penalties on Maritime Bank for providing payment and money transfer services for transactions related to foreign loans in violation of the law.
The State Bank of Vietnam hereby informs Banh Vang Company Limited.
Recipients: | GOVERNOR Nguyen Thi Minh Nguyet |