1. Financial leasing companies shall provide financial leasing to financial lessees being organizations and individuals operating in Vietnam (hereinafter referred to as lessees) that wish to hire machines, equipment, means of transport and other movables for the execution of investment projects on production, business or service provision or investment projects in service of daily life in the country.

This Circular does not provide guidance on financial leasing companies that conduct offshore financial leasing activities.

2. Financial leasing conditions

2.1. Financial leasing companies must be established and conduct financial leasing activities under the Law on Credit Institutions.

2.2. The lessees shall fully satisfy the following conditions:

a/ Having civil legal capacity and civil act capacity according to the provisions of law:

- For lessees being Vietnamese organizations and individuals: Organizations shall have civil legal capacity; individuals, owners of private enterprises, representatives of households or cooperative groups shall have civil legal capacity and civil act capacity.

- For lessees being foreign organizations and individuals: Organizations shall have civil legal capacity according to the law of the Socialist Republic of Vietnam; individuals shall have civil legal capacity and civil act capacity according to the law of the Socialist Republic of Vietnam, unless otherwise provided for by the law of the Socialist Republic of Vietnam. Bases for the application of laws to these organizations and individuals shall comply with legal provisions on civil relations involving foreign elements.

b/ Having investment projects on production, business or service provision or investment projects in service of daily life which are feasible, efficient and compliant with the provisions of law and using hired assets for the execution of such projects.

c/ Having financial capability to pay rents within the committed lease terms.

2.3. Financial-leasing transactions shall satisfy the conditions specified in Clause 1, Article 1 of the Government's Decree No. 65/2005/ND-CP of May 19, 2005, and relevant legal documents.

3. Currencies used in financial-leasing transactions

Financial leasing companies shall conduct financial-leasing transactions in Vietnam dong. Where financial-leasing transactions are conducted in foreign currencies, financial leasing companies and the lessees shall comply with the provisions of law on foreign exchange and the guidance in this Circular.

4. Foreign-currency financial-leasing transactions

4.1. Foreign-currency financial-leasing transactions mean transactions whereby financial leasing companies import and lease machines, equipment, means of transport or other movables to the lessees under financial-leasing contracts signed with the latter that shall acknowledge debts and pay rents in foreign currencies.

4.2. Apart from the conditions mentioned in Clause 2 of this Circular, foreign-currency financial-leasing transactions shall meet the following conditions:

a/ For financial leasing companies: Having registered foreign-currency financial leasing activities with the State Bank of Vietnam according to the provisions of law on foreign exchange.

b/ For the lessees:

- Using hired assets for production, business or service provision;

- Having lawful foreign-currency revenue sources or being allowed to purchase foreign currencies at credit organizations licensed to deal in foreign exchange for payment of financial-leasing amounts.

5. Financial-leasing amounts and expenses related to financial leasing activities

5.1. Financial-leasing amounts include:

a/ Principals determined on the basis of the buying prices of leased assets and reasonable expenses related to the purchase of such assets;

b/ Interests determined on the basis of the debit balance of principal, interest rate and financial lease term.

5.2. Other expenses related to financial leasing activities payable by the lessees to financial leasing companies as agreed upon by the two parties in accordance with the provisions of law.

6. Financial-leasing interest rates

6.1. Financial-leasing interest rates shall be agreed upon by financial leasing companies and lessees in financial-leasing contracts.

6.2. The interest rate applicable to overdue principals of financial-leasing amounts shall be agreed upon by financial leasing companies and lessees in financial-leasing contracts, but shall not exceed 150% of the financial-leasing interest rate to be applied during the financial lease term as stated in the already signed or adjusted financial-leasing contracts.

7. Financial lease terms and periods

7.1. Financial lease term means a period of time counting from the time a lessee acknowledges financial-leasing debts until it pays all these debts as agreed upon in the financial-leasing contract. The time of acknowledging financial-leasing debts shall be agreed upon between financial leasing companies and lessees.

Financial leasing companies and lessees shall reach agreement on financial lease terms on the basis of production and business circles, investment projects' capital retrieval periods and lessees' rent payment capability. For Vietnamese and foreign organizations, the financial lease term shall not exceed the remaining operation duration in Vietnam according to their establishment decisions or operation licenses; for foreign individuals, the financial lease term shall not exceed the permitted duration of their work and stay in Vietnam.

7.2. Financial lease period means a period of time within the financial lease term already agreed upon in a financial-leasing contract by the end of which the lessee shall pay to the financial leasing company part or the whole of the financial-leasing amount.

7.3. Financial leasing companies and lessees shall agree upon the payment of principals and interests of financial-leasing amounts as follows:

a/ Principal payment periods;

b/ Interest payment periods which either coincide with or differ from principal repayment periods.

8. Evaluation of, and decision on, financial leasing

8.1. Financial leasing companies shall consider and decide to provide financial leasing to lessees on the basis of assessing the feasibility and efficiency of investment projects on production, business or service provision or investment projects in service of daily life, financial leasing conditions and lessees' debt payment capability.

8.2. Financial leasing companies shall have to formulate a process for evaluation and approval of financial leasing on the principle of clearly defining responsibilities for evaluation of, and decision on, financial leasing and responsibilities of concerned individuals.

9. Financial leasing dossiers

9.1. The lessee's request for financial leasing, clearly stating the appellations of hired assets, enclosed with documents proving the lessee's eligibility for financial leasing.

9.2. Financial leasing companies shall specify documents which the lessees shall have to submit in accordance with the provisions of law on financial leasing activities and the companies' operation characteristics.

9.3. Lessees shall be held responsible before law for the accuracy and validity of documents sent to financial leasing companies.

10. Financial-leasing contracts

10.1. Financial-leasing contract means agreement on financial leasing made between the financial leasing company and the lessee according to the provisions of law on financial leasing activities, the guidance in the Circular and relevant provisions of law.

10.2. Financial-leasing contracts shall be made in writing in accordance with the provisions of law on civil contracts and have the following principal contents:

Names and addresses of financial leasing company and the lessee; leasing conditions; appellations, categories and quality of leased assets; use purposes of such assets; principal and interest of financial-leasing amount; and other expenses; time of debt acknowledgement and financial lease terms; periods and deadlines for payment of financial-leasing debts; rights and obligations of involved parties, measures to be applied in case of termination of the financial-leasing contract ahead of schedule. Other contents of financial-leasing contracts shall be agreed upon by financial leasing companies and lessees.

11. Rescheduling of debt payment and conversion of overdue debts

11.1. Financial leasing companies shall reschedule the payment of financial-leasing debts by the lessees by either of the following two modes:

a/ Debt payment rescheduling, which means that financial leasing companies agree to alter the financial-leasing debt payment time limit, which, however, must not go beyond the financial lease term already agreed upon in the financial-leasing contracts.

b/ Debt prolongation, which means that financial leasing companies agree to prolong the financial-leasing debt payment time limit beyond the lease term already agreed upon in the financial-leasing contracts.

11.2. Financial leasing companies shall reschedule the payment of financial-leasing debts as follows:

a/ Financial leasing companies shall decide on the rescheduling of financial-leasing debt payment at the request of the lessees and on the basis of their financial capability and the results of evaluation of the lessees' solvency in the following cases:

- For lessees that are incapable of paying principals and/or interests of financial-leasing amounts within the lease term already agreed upon in the financial-leasing contracts but that, as evaluated by the financial leasing companies, will be capable to pay their debts in subsequent periods, the financial leasing companies shall consider the rescheduling of payment of principals and/or interests of financial-leasing amounts.

- For lessees that are incapable of paying principals and/or interests of financial-leasing amounts within in the lease term already agreed upon in the financial-leasing contracts but that, as evaluated by the financial leasing companies, will be capable to pay their debts within a given period after the lease term, the financial leasing companies shall consider the prolongation of the lease term as appropriate to the lessees' solvency.

b/ Financial leasing companies shall promulgate the Process of rescheduling financial-leasing debt payment under the guidance in this Circular and the provisions of relevant legal documents then send such Process to the State Bank of Vietnam within five days after its promulgation.

11.3. Financial leasing companies shall convert overdue debts of financial-leasing amounts for the lessees as follows:

For lessees that are incapable of paying principals and/or interests of financial-leasing amounts within the lease term already agreed upon in the financial-leasing contracts, are evaluated by the financial leasing companies as having no capability to pay their debts within a given period following the lease term, and therefore, are not allowed by the financial leasing company to enjoy debt payment rescheduling, the debit balance of principals of such financial-leasing contracts shall be considered overdue debt.

12. Reduction of financial-leasing interests

12.1. Financial leasing companies may consider and decide to reduce financial-leasing interests for the lessees on the following principles:

a/ The lessees suffer from property losses, which lead to their financial difficulties and incapability to pay financial-leasing interests;

b/ The levels of reduction of financial-leasing interests shall be compatible with the financial capability of financial leasing companies;

c/ It is not permitted to reduce financial-leasing interests for the lessees being subjects specified in Clause 1, Article 78 of the Law on Credit Institutions.

12.2. Financial leasing companies shall promulgate Regulations on reduction of financial-leasing interests for the lessees. Such Regulations shall be approved by the companies' managing boards on the principles stated at Point 12.1 of this Clause or by the managing boards of credit institutions, for financial leasing companies under credit institutions. The reduction of financial-leasing interests shall be given only after a regulation on reduction of financial-leasing interests is issued.

13. Inspection and supervision of financial leasing activities

13.1. Financial leasing companies shall have the responsibility as well as the right to inspect and supervise the use of hired assets and payment of financial-leasing debts by the lessees.

13.2. Financial leasing companies shall formulate a process on, and inspect and supervise the lessees in hiring assets, using hired assets and paying debts in accordance with their operation characteristics.

14. Financial leasing companies shall classify, set aside and use provision funds to handle credit risks for financial-leasing amounts in accordance with the Vietnam State Bank's regulations on classification of debts, deduction and use of contingency funds for handling credit risks arising in banking activities of credit institutions.

15. Financial leasing companies shall make statistical reports on financial leasing activities according to the Vietnam State Bank's regulations on statistical reporting regimes applicable to credit institutions.

16. Financial-leasing entrustment service means the provision of financial leasing by financial leasing companies under the entrustment of the entrusting party.

17. The entrusting party and the entrusted party to financial leasing:

17.1. The financial leasing entrusting party includes:

a/ Financial leasing companies;

b/ Vietnamese organizations and individuals;

c/ Foreign organizations and individuals.

17.2. The entrusted party to financial leasing includes financial leasing companies licensed to be established and conduct financial leasing activities in Vietnam under the provisions of the Law on Credit Institutions.

18. Modes of financial-leasing entrustment

The entrusted party may provide financial-leasing entrustment services in one of the following forms:

18.1. Accepting the entrusting party's entrusted assets for financial leasing to the lessees.

18.2. Accepting the entrusting party's entrusted money for purchase of machines, equipment and other movables for financial leasing to the lessees.

18.3. Other entrustment services related to financial leasing activities: The entrusted party shall perform one or several financial leasing operations as agreed with the entrusting party.

19. Principles for entrustment and entrustment undertaking

19.1. The entrustment and undertaking of entrustment of financial leasing shall comply with agreements in the financial-leasing entrustment contracts between the entrusting party and the entrusted party.

19.2. Leasing conditions, rents, leasing interest rates, rescheduling of rent arrears, handling of risks and other operations related to financial leasing activities shall be agreed upon between the entrusting party and the entrusted party in accordance with the guidance in this Circular and relevant provisions of law.

19.3. Financial leasing activities shall be conducted via financial leasing companies according to the provisions of law on financial leasing activities and the guidance in Section I of this Circular.

20. Entrustment charges and benefits from entrustment contracts

The entrusted party shall enjoy entrustment charges and other benefits from entrustment contracts as agreed upon with the entrusting party.

21. Entrustment contracts

Financial leasing entrustment contracts shall have the following principal contents: Names and addresses of the entrusting party and the entrusted party, assets entrusted for financial leasing, financial-leasing amounts and term applicable to the lessee, rights and obligations of the entrusting party and the entrusted party. Other contents of financial leasing entrustment contracts shall be agreed upon between the entrusting party and the entrusted party in accordance with the provisions of law.

22. Handling of risks in entrustment and entrustment undertaking

22.1. The entrusted party shall have to handle risks arising from violations of the provisions of law on financial leasing activities and agreements with the entrusting party stated in the entrustment contract. Risks arising for other reasons shall be handled by the entrusting party.

22.2. The entrusting party and the entrusted party shall handle risks according to the current provisions of law.

23. Rights and obligations of the entrusted party

23.1. The entrusted party shall have the following rights:

a/ To reject the entrusting party's requests which are contrary to agreements in the financial-leasing entrustment contract.

b/ To initiate lawsuit against the entrusting party's breach of the financial-leasing entrustment contract according to the provisions of law.

23.2. The entrusted party shall have the following obligations:

a/ To supply the entrusting party with all truthful information on the lessees and leased assets, the lessees' financial capability and debt payment capability, and other information and documents related to the financial-leasing entrustment service; and to bear responsibility for the accuracy of supplied information and documents.

b/ To use the leased assets in strict compliance with agreements stated in the entrustment contract and relevant provisions of law.

c/ To pay in full and on schedule financial-leasing principals and interests to the entrusting party according to agreements stated in the entrustment contract.

24. Rights and obligations of the entrusting party:

24.1. The entrusting party shall have the following rights:

a/ To request the entrusted party to supply information related to the lessees and leased assets, the lessees' financial capability and debt payment capability; and other information and documents related to the financial-leasing entrustment service.

b/ To reject the entrusted party's requests which are incompliant with the provisions of law or contrary to agreements stated in the financial-leasing entrustment contract.

c/ To inspect and supervise the financial leasing by the entrusted party to the lessees and the fulfillment of commitments on payment of financial-leasing amounts by the entrusted party toward the entrusting party.

d/ To initiate a lawsuit against the entrusted party's breach of the financial-leasing entrustment contract according to the provisions of law.

24.2. The entrusting party shall have the following obligations:

a/ To comply with agreements stated in the financial-leasing entrustment contract.

b/ To transfer leased assets or money for the purchase of leased assets within the time limit agreed upon in the entrustment contract.

c/ To pay entrustment charges in full and within the time limit agreed upon with the entrusted party.

d/ To coordinate with the entrusted party in classifying debts, setting aside and using provisions for handling risks concerning financial-leasing amounts under the entrustment contract.

25. This Circular shall take effect 15 days after its publication in "CONG BAO." The following documents shall cease to be effective: Circular No. 03/2005/TT-NHNN of May 25, 2005, guiding financial leasing companies to reschedule debt payment and convert overdue debts for financial leasing activities; Official Letter No. 1358/NHNN-CSTT of November 25, 2004, on reduction of financial-leasing interests; and Official Letter No. 18/NHNN-CSTT of January 7, 2003, guiding financial-leasing transactions effected in foreign currencies.

26. On the basis of this Circular and relevant legal documents, financial leasing companies shall promulgate professional guidance in accordance with their conditions, characteristics and charters.

27. The directors of the Office and the Monetary Policy Department, heads of units under the State Bank, directors of the State Bank's provincial/municipal branches, chairmen of Managing Boards and general directors (directors) of financial leasing companies shall have to implement this Circular.