THE GOVERNMENT

DECREES:

Chapter I

GENERAL PROVISIONS

1. Financial lease means the medium-term and long-term credit activities through the lease of machinery, equipment and transport means and other movables on the basis of lease contracts between the lessors and the lessees. The lessors undertake to purchase machinery, equipment, transport means and other movables at the requests of the lessees and hold the ownership over the leased assets. The lessees use the leased assets and pay rents therefor during the whole leasing term as agreed upon by the two parties.

2. Upon the expiry of the leasing term, the lessees may opt to purchase the leased assets or continue to lease them under the conditions already agreed upon in the financial leasing contracts. The total rent payable for an asset determined in a financial leasing contract must be at least equal to the value of such asset at the time of signing of the contract.

3. Financial leasing activities on the Vietnamese territory must be conducted through financial leasing companies established and operating in Vietnam and comply with the provisions of this Decree.

4. Financial leasing companies� financial leasing activities overseas shall comply with the provisions of this Decree and other relevant provisions of Vietnamese law or the involved parties may agree upon the application of international practices if such practices do not run counter to Vietnamese law.

Article 2.- Financial leasing companies are non-bank credit institutions and Vietnamese legal persons. They are established and operate in Vietnam in the following forms:

1. State-run financial leasing companies.

2. Joint-stock financial leasing companies.

3. Affiliate financial leasing companies of credit institutions.

4. Joint-venture financial leasing companies.

5. Financial leasing companies with 100% foreign capital.

1. Joint-venture financial leasing companies are established with the capital contributed by the Vietnamese party consisting of one or more than one Vietnamese credit institution and/or enterprise and the foreign party consisting of one or more than one foreign credit institution, on the basis of joint-venture contracts.

2. Financial leasing companies with 100% foreign capital are established with the capital contributed by one or more than one foreign credit institution in accordance with the provisions of Vietnamese law.

1. The parties to a joint-venture financial leasing company may transfer their contributed capital amounts according to the provisions of Article 26 of the Government�s Decree No. 13/1999/ND-CP of March 17, 1999, but must give the transfer priority to other parties within the joint-venture financial leasing company. The transfer of a joint-venture financial leasing company�s capital must be provided for in the company�s charter and comply with law provisions.

2. Financial leasing companies with 100% foreign capital may transfer their capital but must give the transfer priority to Vietnamese organizations.

1. The operation term of a financial leasing company in Vietnam shall not exceed 50 years. Any extension thereof must be approved by the State Bank. Each extension shall not exceed 50 years.

2. For financial leasing companies established and granted operation licenses before this Decree takes effect, their operation term shall be as prescribed in the granted operation licenses.

Article 6.- The State Bank of Vietnam is the body which perform the State management over the financial leasing activities, having the tasks of granting and withdrawing establishment and operation licenses, supervising and inspecting the operation of financial leasing companies, submitting to the competent State bodies for promulgation or promulgating according to its competence legal documents on financial leasing activities.

Article 7.- In this Decree, the following terms are construed as follows:

1. Lessors mean financial leasing companies established and operating according to Vietnamese law.

2. Lessees mean organizations and individuals operating in Vietnam, directly using the leased assets for their operation purposes.

3. Leased assets mean machinery, equipment, transport means and other movables.

Chapter II

ORGANIZATION AND ADMINISTRATION OF FINANCIAL LEASING COMPANIES

Section I. GRANTING OF ESTABLISHMENT AND OPERATION LICENSES

1. Conditions for a financial leasing company to be granted the establishment and operation license:

a/ Wishing to conduct financial leasing activities in the geographical area where it plans to operate;

b/ Having enough legal capital as prescribed by the Government in Decree No. 82/1998/ND-CP of October 3, 1998;

c/ Its founding members being prestigious and financially capable organizations and/or individuals;

d/ Its managerial and executive staff having full civil act capacity and professional qualifications suited to its operations;

e/ Having a draft organization and operation charter compliant with the provisions of the Law on Credit Institutions and other law provisions;

f/ Having a feasible business plan.

2. Apart from the conditions specified in Clause 1 of this Article, the foreign parties to the joint-venture companies or companies with 100% foreign capital must be permitted by competent bodies under the provisions of foreign laws to enter into joint ventures or to conduct financial leasing activities in Vietnam.

Article 9.-

1. Dossiers of application for establishment and operation licenses of financial leasing companies:

a/ An application for the establishment and operation license;

b/ The draft charter;

c/ The operation plan for the first three years, clearly stating the economic efficiency and benefits of the company;

d/ The list, CVs and diplomas evidencing the professional capability and qualifications of founding members, members of the Management Board, the Control Board and the general director (director);

e/ The capital contribution plan and the list of capital-contributing individuals and organizations;

f/ The financial status and information about big share-holders;

g/ The approval of the competent-level People�s Committee of the locality where the financial leasing company�s head office is to be located.

2. Apart from the documents specified in Clause 1 of this Article, for the application for establishment and operation licenses of joint-venture financial leasing companies or financial leasing companies with 100% foreign capital, the following documents are also required:

a/ The operation charter of the foreign-based organization;

b/ The operation license of the foreign-based organization;

c/ The written permission of a competent foreign organization for the foreign party to operate in Vietnam;

d/ The audited balance sheet and profit-loss statement, the report on the situation of the last three years� operation of the foreign-based organization;

e/ The draft joint-venture contract.

3. The dossiers of application for the licenses prescribed in Clause 2 of this Article must be made in two sets, one in Vietnamese and the other in a common foreign language. The State Bank shall specify which documents in the foreign-language dossier set are required to be consularized. Vietnamese-language copies and translations from foreign languages into Vietnamese must be certified by Vietnamese notary offices or overseas Vietnamese representative missions or consulates.

Article 10.- Financial leasing companies established according to the provisions of Clauses 1, 2 and 3, Article 2 of this Decree shall have to pay a licensing fee and a fee for each extension of their establishment and operation licenses, being equal to 0.1% of their charter capital.

The fee payment by joint-venture financial leasing companies and financial leasing companies with 100% foreign capital shall comply with the provisions of Article 18 of the Government�s Decree No. 13/1999/ND-CP of March 17, 1999.

Article 11.-

1. In order to be operational, a financial leasing company shall have to meet all the following conditions:

a/ Its charter already approved by the State Bank;

b/ Having enough legal capital, its head office suited to the requirements of financial leasing activities and having been granted the business registration certificate;

c/ The cash amounts contributed to its charter capital must be deposited in a blocked account at the State Bank at least 30 days before it starts operation.

d/ Having published the contents of its license on central and local newspapers according to law provisions.

2. Within 12 months after being granted the establishment and operation license, the financial leasing company must commence its operation.

Article 12.- The withdrawal of the licenses of financial leasing companies shall comply with the provisions of Article 29 of the Law on Credit Institutions and the guidance of the State Bank.

Section 2. ORGANIZATIONAL, ADMINISTRATIVE, EXECUTIVE AND CONTROL STRUCTURE OF FINANCIAL LEASING COMPANIES

1. The opening of domestic and overseas branches and representative offices of financial leasing companies must be approved in writing by the State Bank.

2. The establishment of the financial leasing companies� independent cost-accounting affiliate companies having the legal person status to operate in the finance, banking and insurance fields shall comply with the regulations of the State Bank.

Article 14.- Dossier conditions, procedures for opening of branches and representative offices of financial leasing companies shall comply with the provisions of Article 33 of the Law on Credit Institutions and the guidance of the State Bank.

Article 15.- The administration, execution and control, the internal inspection and auditing systems of financial leasing companies shall comply with the provisions of Sections 3 and 4, Chapter II of the Law on Credit Institutions.

Chapter III

ACTIVITIES OF FINANCIAL LEASING COMPANIES

Article 16.- Professional activities of a financial leasing company include:

1. Mobilizing capital from the following sources:

a/ Accepting deposits with a one-year or longer term from organizations and individuals according to the regulations of the State Bank;

b/ Issuing bonds, deposit certificates and other valuable papers with a term of over one year with a view to mobilizing capital from organizations and individuals inside and outside the country when it is so approved by the State Bank Governor;

c/ Borrowing capital from financial and credit institutions inside and outside the country;

d/ Receiving capital from other sources according to the regulations of the State Bank.

2. Financial leasing.

3. Purchasing and sub-leasing in the form of financial leasing (hereinafter called purchasing and sub-leasing), In this form, the financial leasing company purchases machinery, equipment, transport means and movables owned by the lessee and sub-leases them to the lessee for continued use in service of their activities.

4. Advising clients on matters related to financial leasing operations.

5. Providing services of entrustment, asset management and guaranty related to financial leasing activities.

6. Other activities when permitted by the State Bank.

1. Financial leasing contracts mean arrangements between the lessor and the lessee on the lease of one or a number of machines, equipment, transport means and other movables according to the provisions of Article 1 of this Decree and suited to the rights and obligations of the parties.

2. Financial leasing contracts must be made in writing in accordance with law provisions. The contracts must clearly state the handling measures to be taken once they terminate ahead of time.

3. The lessors and the lessees must not unilaterally cancel the financial leasing contracts (except the cases specified in Article 27 of this Decree).

Article 18.- The financial leasing companies may directly import machinery, equipment, transport means and movables which the lessees have been permitted to purchase, import and use according to current law provisions (hereinafter called the leased assets permitted for import).

Article 19.- Assets for financial lease must be registered at the Center for Registration of Secured Transactions. The Ministry of Justice shall guide in detail the registration of these assets.

Article 20.- For leased assets being transport means and fishing ships and boats with registration certificates, the financial leasing companies shall keep the original registration certificates and the lessees shall, when using such means, keep the copies which are certified by the State notary public and confirmed by the financial leasing companies, in order to use the means during the leasing term. The financial leasing companies shall put their confirmation in only one copy of the means� registration certificates, which has been certified by the State notary public. If such assets are used along international routes, the financial leasing companies shall keep the copies of their registration certificates, which have been certified by the notary public.

Article 21.- For leased assets which require use permits, the competent bodies shall consider the granting of use permits to the lessees on the basis of the documents proving the financial leasing companies� ownership over such leased assets and the financial leasing contracts. The State Bank shall coordinate with the use permit-granting bodies in guiding the implementation of this provision.

1. Taxes on machinery, equipment, transport means and other movables which the financial leasing companies purchase at home or import for lease shall be the same as for cases where the lessees directly purchase or import these assets.

2. Leased assets shall be recovered according to the provisions of Clause 1, Article 28 of this Decree; if the recovered assets are those imported from abroad, they shall, when re-exported, be exempt from export duty.

3. Where the ownership over the leased assets is transferred to the lessees upon the expiry of the leasing term through the assignment or sale of the leased assets, the lessees shall not have to pay registration tax.

Article 23.- The lessors have the rights to:

1. Request the lessees to supply quarterly reports, annual financial settlements and information on the situation of the latter�s production and business activities as well as matters related to the leased assets.

2. Inspect the management and use of the leased assets.

3. Purchase and import assets at the lessees� requests.

4. Affix the ownership signs onto the leased assets throughout the leasing term.

5. Transfer their rights and obligations in the financial leasing contracts to another financial leasing company. In this case the lessors are only required to inform in writing in advance the lessees thereof.

6. Request the lessees to pay deposits or to find guarantors for the performance of the financial leasing contracts if it is deemed necessary.

7. Reduce rents, extend the time limit for rent payment, sell assets to the lessees according to the regulations of the State Bank.

8. Request the lessees to pay damage compensation if the latter breach the financial leasing contracts.

Article 24.- The lessors have the obligations to:

1. Sign asset purchase contracts with the suppliers under the conditions already agreed upon between the lessees and the suppliers. The lessors shall not be responsible for the non-delivery of the assets or the failure to deliver the assets under the conditions already agreed upon between the lessees and the suppliers.

2. Register the ownership of, and carry out the procedures to buy insurance for, the leased assets.

3. Fulfill properly all the contractual commitments.

Article 25.- The lessees have the rights to:

1. Select and agree with the suppliers upon the technical specifications, types, prices, modes and time limits for delivery, installation and warranty of the leased assets.

2. Directly receive the leased assets from the suppliers as agreed upon in the asset purchase contracts.

3. Decide on the purchase or continued lease of assets upon the expiry of the financial leasing contracts.

4. Request the lessors to pay damage compensation when the latter breach the financial leasing contracts.

Article 26.- The lessees have the obligations to:

1. Supply quarterly reports, annual financial settlements and information on the situation of their production and business activities as well as matters related to the leased assets at the lessors� request; create conditions for the lessors to check the leased assets.

2. Be responsible for the selection and agreement mentioned in Clause 1, Article 25 of this Decree.

3. Use the leased assets for the right purposes as agreed upon in the financial leasing contracts; refrain from transferring the right to use the leased assets to other individuals and/or organizations without the prior written consent of the lessors.

4. Pay the rents as agreed upon in the financial leasing contracts and pay other expenses related to the import of, taxes, ownership registration fee and buy insurance for, the leased assets.

5. Bear all risks of loss and damage of the leased assets and be responsible for all consequences caused by the use of the leased assets to other organizations and individuals in the process of using the leased assets.

6. Maintain and repair the leased assets during the leasing term. Refrain from erasing or damaging the ownership signs affixed on the leased assets.

7. Refrain from using the leased assets for mortgage, pledge or as security for performance of other obligations.

8. Fulfill properly all contractual commitments.

1. The lessors may terminate the financial leasing contracts ahead of schedule in one of the following circumstances:

a/ The lessees fail to pay rents as prescribed in the financial leasing contracts;

b/ The lessees breach the financial leasing contracts� terms;

c/ The lessees become bankrupt or dissolved;

d/ The guarantors become bankrupt or dissolved and the lessors refuse to accept the lessees� request to terminate the guaranty or substitute other guarantors.

2. The lessees may terminate the contracts ahead of schedule once the lessors commit one of the following violations:

a/ The lessors fail to deliver the leased assets on time;

b/ The lessors breach the contracts.

3. The financial leasing contracts may terminate ahead of the leasing term if the leased assets are lost or irreparably damaged.

4. The financial leasing contracts may terminate ahead of the leasing term if the lessors accept the payment by the lessees of the whole rent ahead of the time limit inscribed in the financial leasing contracts.

1. Where a financial leasing contract is terminated ahead of schedule in one of the circumstances specified in Clause 1, Article 27 of this Decree, the lessee shall have to immediately pay all the remaining rent to the lessor. If the lessee is unable to pay such amount, the lessor may immediately recover the leased assets and the lessee shall have to pay compensation for material damage to the lessor. After recovering the leased assets, the lessor may transfer or lease them to another lessee.

2. The lessor�s ownership over the leased assets throughout the leasing term shall not be affected when the lessee becomes bankrupt, dissolved or insolvent. The leased assets shall not be regarded as those of the lessee when the lessee�s assets are handled for payment of debts to other creditors.

3. Where a financial leasing contract terminates ahead of schedule as prescribed in Clause 2, Article 27 of this Decree, the lessor shall have to pay damage compensation to the lessee.

4. Where a financial leasing contract terminates ahead of schedule as prescribed in Clause 3, Article 27 of this Decree, the lessor shall have to return to the lessee the asset insurance amount when the lessee has fully paid the rent to the lessor and the lessor has already received such insurance amount from the insurance agency.

Article 29.- The financial leasing companies shall not be allowed to finance-lease assets to the subjects specified in Clause 1, Article 77 of the Law on Credit Institutions.

1. The financial leasing companies shall not be allowed to finance-lease assets under preferential conditions to the subjects specified in Clause 1, Article 78 of the Law on Credit Institutions.

2. The total value of assets leased to the subjects specified in Clause 1 of this Article must not exceed 5% of the own capital of a financial leasing company

1. The financial leasing companies shall have to maintain the safety assurance percentages specified in Article 81 of the Law on Credit Institutions and guiding documents of the State Bank.

2. The limits on financial lease to a single client:

a/ The total financial leasing amount to a single client must not exceed 30% of the own capital of a financial leasing company, except for cases where financial leasing amounts come from the entrusted capital sources of the Government, organizations, individuals or lease clients being credit institutions;

b/ Where a client�s leasing need exceeds 30% of the own capital of a financial leasing company or a client needs to lease from various sources, the financial leasing companies may effect a combined capital lease according to the regulations of the State Bank Governor. In special cases, the provisions of Point c, Clause 1, Article 79 of the Law on Credit Institutions shall apply.

Chapter IV

FINANCE, COST-ACCOUNTING AND REPORTING

Article 32.- The financial leasing companies may open deposit accounts at the State Bank and banks operating on the Vietnamese territory. The opening of deposit accounts at banks outside the Vietnamese territory must be permitted by the State Bank.

1. The fiscal year of the financial leasing companies starts from January 1 and ends on December 31 of the calendar year.

2. Financial revenue and expenditure and cost-accounting activities of the financial leasing companies shall comply with the Government�s regulations on the financial regime of credit institutions.

Article 34.- The financial leasing companies shall have to make deductions for risk reserves and account them into their operation expenses. The deduction for and use of risk reserves shall comply with the State Bank�s regulations.

Article 35.- Profits and deductions for setting up of various funds of the financial leasing companies shall comply with the Government�s regulations on the financial regime of credit institutions.

Article 36.- The transfer of profits and assets abroad by the foreign parties to the joint-venture financial leasing companies and the financial leasing companies with 100% foreign capital shall comply with the provisions of Article 112 of the Law on Credit Institutions.

Article 37.- The financial leasing companies shall not be allowed to purchase or invest in their fixed assets with over 50% of their own capital.

Article 38.- The financial leasing companies shall have to apply the accounting, statistical and auditing regimes according to the Government�s regulations on the financial regime of credit institutions.

Chapter V

INSPECTION, SPECIAL CONTROL, BANKRUPTCY, DISSOLUTION AND LIQUIDATION

1. The financial leasing companies shall submit to the inspection and supervision as prescribed by law.

2. The inspection by the State Bank of activities of the financial leasing companies in Vietnam shall comply with the provisions of Section I, Chapter IX of the Law on Credit Institutions.

Article 40.- The special control, bankruptcy, dissolution and liquidation of the financial leasing companies shall comply with the provisions of Chapter V of the Law on Credit Institutions.

Article 41.- The commendation, and handling of violations in financial leasing activities shall comply with the provisions of Chapter X of the Law on Credit Institutions.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 42.- This Decree takes effect 15 days after its signing and replaces the Government�s Decree No. 64/CP of October 9, 1995.

The State Bank of Vietnam shall assume the prime responsibility and coordinate with the concerned agencies in guiding the implementation of this Decree.

Article 43.- The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government
Prime Minister
PHAN VAN KHAI