New Law on Credit Institutions 2024 (Part 3)

This post continues discussing some additional changes of the Law on Credit Institution 2024 (LCI 2024). For changes discussed in our Part 1, please see here, in Part 2, please see here.

1.         More comment on security agent

As discussed in Part 2, LCI 2024 allows security agent operation. However, the relevant provision of LCI 2024 has the following limitations:

1.1.      such provision does not clarify the nature of security agent and whether it is the relation of representative (đại diện) or authorization (ủy quyền) as stipulated under the Civil Code. Under LCI 2024, the activity of security agent is implemented under the provisions of relevant laws, without further clarifying which relevant laws are; and

1.2.      LCI 2024 does not provide any details on what a security agent can do (such as definition of security agent or the role of the security agent).

2.         New classification for letter of credit

LCI 2024 no longer classifies letter of credit operation as a payment service provided via account (dịch vụ thanh toán qua tài khoản). LCI 2024 now defines letter of credit as a form of credit extension through the issuance, confirmation, negotiation, payment and return of letter of credit.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In

Use Of Houses And Buildings To Secure For Performance Of Obligations Under Vietnamese Law

The most common form of security which is created over houses and buildings is mortgage (thế chấp). However, the Civil Code 2015 also provides for other forms of securities. In this blog, we will discuss whether other forms of securities could be created over houses and buildings.

Pledge (Cầm cố) – Unlikely

Pledge of property means the delivery by one party of “property” under its ownership to another party as security for the performance of an obligation. Since the term “property” includes both moveable properties and immovable properties, it is arguable that a pledge could be created over houses and buildings being immovable properties. However, Article 310.2 of the Civil Code 2015 provides that “Where an immoveable property is the subject matter of a pledge in accordance with law, the pledge of the immoveable property shall be enforceable against a third person as from the time of registration.”

Reference to “in accordance with law” suggests that pledge could only be created over an immovable property if a law specifically allows it. However, currently the Land Law 2024 and the Residentially Housing Law 2023 only specifically allow mortgages to be created over residential houses or assets attached to land.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Rights Of Dissenting Bondholders Who Disagree With A Restructuring Proposal For Corporate Bonds Issued Before September 2022

The corporate bond crisis in Vietnam started in 2022 during which many corporate bonds issued before September 2022 under Decree 153/2020 were defaulted by the issuers (Pre-2022 Bonds). To facilitate the potential restructuring of Pre-2022 Bonds, in 2023, the Government issued Decree 8/2023 which allows for the bond issuers and the bondholders to agree to amend the terms of a Pre-2022 Bonds including the extension of the duration for the Pre-2022 Bonds to up to two years. However, the rights of a bondholder who disagrees with a restructuring proposal for a Pre-2022 Bond are not clear. 

Under Decree 8/2023, the duration and the repayment schedule of a Pre-2022 Bond could be extended if the proposed extension is approved by bondholders representing 65% or more of the total number of outstanding bonds. Decree 8/2023 further provides that for bondholders who do not agree to changes in the conditions and terms of a Pre-2022 Bond (dissenting bondholders), the issuer is required to negotiate with the dissenting bondholders. If a dissenting bondholder does not accept the proposed negotiation plan, the issuer must fully fulfill its obligations to that dissenting bondholder in accordance with the original bond issuance plan. This requirement holds even if the proposed changes have been approved by the other bondholders who hold 65% of the outstanding bonds.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Essential Watchlists For Compliance With Anti-Money Laundering Regulations In Vietnam

Under anti-money laundering (AML) regulations, reporting entities (e.g., credit institutions) are required to be aware of several key watchlists, maintained by relevant Vietnamese authorities, to ensure compliance with their AML obligations. This blog will introduce those watchlists and discuss specific requirements related to them.

Essential watchlists under AML regulations

Under AML regulations, the Vietnamese Government maintains the following watchlists:

(1)             A Blacklist (danh sách đen in Vietnamese): including (a) list of organizations and individuals involved in terrorism and terrorism financing compiled by the Ministry of Public Security (MPS), and (b) a list of organizations and individuals designated as being involved in the proliferation and financing of the proliferation of weapons of mass destruction, compiled by the Ministry of National Defense (MND);

(2)             A warning list/Grey list (danh sách cảnh báo in Vietnamese): A list of organizations and individuals compiled by the State Bank of Vietnam (SBV) to warn about those with a high risk of money laundering; and

(3)             A list of Foreign politically exposed person (PEP List) (danh sách cá nhân nước ngoài có ảnh hưởng chính trị in Vietnamese): A list of foreigners who hold a senior position in foreign agencies, organizations, and international organizations, notified by the SBV.

There are no specific guidelines on how to access these watchlists or the procedure for screening data against them. However, except for the Grey List, which has not yet been published by the SBV, the Blacklist ((1)(a) and (1)(b)) and PEP List can be found via the national portals of the MPS, MND, and SBV (see embedded links).

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In