During the course of business operations, you may have a demand for advice and support in handling legal matters related to fund transfer transactions for foreign investments into Vietnam; foreign loans & repayments; conversion of short-term loans into medium- and long-term loans, conversion of loans into capital contributions; or other related issues. The services that We have been providing to businesses nationwide as well as for domestic and foreign investors are as follows:
- Advising, assisting in preparing documents and working with commercial banks so that domestic enterprises can receive foreign short-term loans;
- Advising on the registration of short-term loan conversion to medium- and long-term loans (typically encountering risks related to loan registration terms and proving the purpose of short-term loan usage);
- Advising on registration for medium and long-term foreign loans to implement large investment projects, projects without Investment Certificates, and business production plans;
- Advising on legalizing debts into foreign loans;
- Advising on money transfer transactions related to foreign investment activities in Vietnam: carrying out procedures and transactions for transferring capital into Vietnam; transferring capital and profits abroad; carrying out transactions for capital transfer and transferring investment projects;
- Advising on legalizing fund transfer transactions prior to the investment phase.
In the current economic context, one of the effective forms of capital mobilization that most businesses are applying is using external financial resources through foreign loan and debt repayment agreements.
Although the increase in the foreign loan value of businesses may be a positive sign in the overall picture of foreign loans in Vietnam, the limited risk management capacity and understanding of legal policies on foreign loan repayment of Vietnamese businesses may affect the management of capital flows, legal risks and the reputation of Vietnamese enterprises with foreign lending partners.
Through our experience in working, communicating and providing legal consulting services, as well as handling foreign loan registration and debt repayment procedures for various enterprises, We have observed that many businesses face issues related to this procedure. Many businesses have been fined for administrative violations, and there are cases where the State Bank has not confirmed the registration of foreign loans, because they have not thoroughy researched the legal regulations regarding the management of foreign loans and repayment.
Below are some of the issues that businesses commonly encounter:
Firstly, for short-term foreign loans:
According to the State Bank’s regulations, short-term foreign loans do not require to be registered with the State Bank, just need to be withdrawn and repaid through a commercial bank.
Most businesses seek to withdraw loan funds as quickly as possible to implement their business and investment plans, have applied this regulation to enter into short-term foreign loan agreements. When the one-year term expires, businesses that do not have the funds to repay the debt often seek to restructure the original loan, either converting it into a medium or long-term loan or converting it into capital contribution.
When registering a short-term foreign loan to be converted into a medium or long-term loan, businesses must present all supporting documents proving the withdrawal of foreign loan capital and the specific use of the funds in the registration dossier with the State Bank. Businesses often face risks when registering with the State Bank: they may be fined for administrative violations or their foreign loan registration may be rejected:
- Registering short-term loans to convert to medium or long-term loans not within the prescribed time limit;
- Improper restructuring of foreign loans;
- Using short-term foreign loan in violation of regulations; not aligned with the business lines; investing in shares, stocks, bonds, etc.
- Using accounts to withdraw capital, repay debts, and use loan capital for short-term periods in violation of regulations;
- The use of short-term foreign loans is not in accordance with the initial foreign loan usage plan.
Secondly, for medium and long-term foreign loans:
The State Bank may refuse to confirm foreign loan registration in cases such as:
- Foreign loans used for investment projects that do not have Investment Certificates; used for business operations: The plan for using foreign loan capital is not well-defined, and does not comply with regulations on foreign borrowing and debt repayment conditions;
- Foreign loans used for investment in purchasing shares, capital contributions, or establishing subsidiaries;
- Enterprises with registered business line of “management consulting activities” borrowing foreign loans for unclear business plans;
- Legalizing debts into medium or long-term foreign loans but with incomplete or unconvincing registration documents;
- Incorrectly identifying the residency status of the Lender;
- Converting loan capital into capital contribution, but the registration documents do not sufficiently prove the conditions for foreign borrowing.
Thirdly, foreign investment in Vietnam:
Foreign investors often encounter issues with not being able to transfer investment capital and profits back to their home countries due to non-compliance with legal regulations regarding capital contributions transfer transactions into Vietnam.
Fourthly, administrative sanctions for violations in the following cases:
- Using foreign loans in ways that do not comply with the conditions specified in Circular 08/2023/TT-NHNN; using foreign loans for purposes that do not align with the plan for using foreign loan capital submitted to the Commercial Bank or not align with the State Bank’s approval document; violating regulations on foreign loan requirements, etc. (this act is subject to a fine of VND 300–400 million);
- Failing to register or amend foreign loan registrations within the prescribed term (this act is subject to a fine of up to VND 60 million);
- Improper withdrawal and repayment of foreign loans or executing guarantee payment transactions in ways that do not comply with legal regulations (this act is subject to a fine of up to VND 100 million);
- Non-compliance with legal regulations on opening, closing, and using accounts in Vietnam for activities such as: foreign investment in Vietnam, foreign loan borrowing and repayment, and other capital transactions (this act is subject to a fine of up to VND 100 million);
- Disbursing and repaying foreign loans; transferring funds for foreign investment into Vietnam or outbound investment from Vietnam in violation of legal regulations (this act is subject to a fine of up to 100 million VND), etc.
As a law firm with a team of experienced lawyers and experts in this field, along with strong relationships with government agencies, the State Bank, and major domestic and international commercial banks, we respectfully submit a proposal for cooperation to assist your Company in handling legal issues related to this field. Should your Company require advise, please feel free to contact us at:
- Address: No. 32 Xo Viet Nghe Tinh, Ward 19, Binh Thanh District, Ho Chi Minh City, Vietnam
- Email: [email protected]
- Tel/ WhatsApp/ WeChat/ Zalo: (+84) 907 008 722 (Lawyer Steven Long)
- Email: [email protected]
