Stipulation on government guarantee issuance and management

On June 26, 2018, the Government promulgates Decree No. 91/2018/ND-CP regarding government guarantee issuance and management. This Decree deals with the issuance and management of government guarantees, including: appraisal, approval and issuance of government guarantees; Management of government guarantees; and responsibility of authorities, organizations and individuals involved in issuing and managing government guarantees.
 An enterprise wishing to get a government guarantee for executing an investment project is required to satisfy all requirements as follow:
- It must have a legal status, is duly established under the law of Vietnam and has been continuously operating for at least 03 years before the date of submission of an application for approval for its proposal for government guarantee or an application for issuance of government guarantee.
- It has not incurred any loss for the last 03 consecutive years according to the auditor’s report, except the loss incurred during the implementation of state policies as approved by a competent authority;
- It has no overdue debt at the date of application for a government guarantee, including overdue debts owed to institutions under on-lending agreements as laid down in Clause 2 Article 33 of the Law on public debt management, overdue debts owed to the Accumulation Fund for Debt Payment, overdue debts owed to lenders of government-guaranteed loans, and those owed to other credit institutions.
- It has a feasible financial plan which has been duly appraised and submitted by the Ministry of Finance to the Prime Minister for approval as prescribed in Clause 1 Article 15 and Clause 1 Article 20 of this Decree;
- Its ratio of owner’s equity to total investment of the project is at least 20% as approved by a competent authority, accompanied by the plan for allocation of owner’s equity according to the progress of the project;
- In case of bond issuance, the enterprise is also required to meet eligibility requirements for public offering of bonds in accordance with applicable law regulations on securities and securities market.
The Decree also stipulated the guaranteed amounts. With regard to a project of which the investment policy is approved by the National Assembly, or the Government, the guaranteed amount equals the loan principal, or the price of bonds issued, but does not exceed 70% of total investment as defined in the investment decision issued by a competent authority. With regard to a project in which investment is decided by the Prime Minister, the guaranteed amount equals the loan principal, or the price of bonds issued, but does not exceed 60% of total investment specified in the investment decision.
Government guarantee limits are determined for enterprises and state banks for social policies for a 05-year period or every year. Any enterprise that wishes to apply for a loan or an issuance of government-guaranteed bonds in the following 05-year period for executing its investment project will submit an application for government guarantee to the Ministry of Finance by June 30 of the fifth year of the previous 05-year period. The application includes: name of the investment project; borrowed amounts for each project; form of loan (loan or bonds issued); the estimated period for which the government guarantee is applied for and project’s execution period.
The Decree gives details of the procedures relating to validity of a government-guaranteed foreign loan. Accordingly, the obligor will conduct procedures specified in the loan agreement to validate the letter of guarantee and the loan agreement. The obligor will contact the Ministry of Justice to obtain legal opinions about the letter of guarantee for the government-guaranteed foreign loan. The obligor will carry out procedures for registration of a foreign loan with the State Bank of Vietnam (SBV) in accordance with the SBV’s regulations on management of foreign loans and debt repayment by enterprises. If legal procedures specified in the foreign loan agreement and the letter of guarantee require recipients of documents in legal proceedings: The obligor shall provide the Ministry of Finance with information concerning organizations authorized as recipients of documents in legal proceedings on behalf of the borrower (also the obligor) and the guarantor (if any) as required in the loan agreement, and ask for opinions from the Ministry of Finance or an approval from the Ministry of Foreign Affairs if such proposed recipient is an overseas representative mission of Vietnam during the negotiation; After entering into the loan agreement and getting the government guarantee, the obligor shall send the letters of authorization made by the borrower (also the obligor) and by the guarantor (if any) to organizations which are authorized as recipients of documents in legal proceedings for certification by signing. The obligor shall send the signed letters of authorization to the obligee and its copies to the Ministry of Finance.
This Decree comes into force from July 01, 2018. This Decree supersedes the Government’s Decree No. 04/2017/ND-CP dated January 16, 2017, regulations in Clause 1 Article 3, Clause 2 Article 4, Article 6, Article 9 Chapter I, Section 2 Chapter II, Section 2 Chapter III and Chapter IV on government-backed bonds of the Government’s Decree No. 01/2011/ND-CP dated January 05, 2011.