LEGAL UPDATES VOL 19, SEPTEMBER 2021

LEGAL UPDATES
VOL 19, SEPTEMBER 2021

Dear Valued Clients and Partners,

ADK & Co Vietnam Lawyers would like to introduce to you the Legal Updates, Vol 19 of October 2021 with new legal provisions with notable contents as follows:

1. Small and medium-sized enterprises receive many new support policies

On August 26, 2021, the Government issued Decree No. 80/2021/ND-CP detailing and guiding the implementation of a number of articles of the Law on Supporting Small and Medium-Sized Enterprises. Decree 80/2021/ND-CP shall take effect from October 15, 2021.

In which, some new policies to support small and medium-sized enterprises can be mentioned with the following notable contents:

(i) Strongly increase the support level for consulting small and medium-sized enterprises: Micro-sized enterprises are supported up to no more than 50 million VND/year/enterprise (previously only 03 million VND); small-sized enterprises no more than 100 million VND/year/enterprise (previously not more than 05 million VND), etc.

(ii) More policies to support female-owned small and medium-sized enterprises: 100% support of consulting contract value (no more than 70 million VND/year/enterprise) with micro-sized enterprises; For small-sized businesses, the support level is 50% of the consulting contract value but not more than 150 million VND/year/enterprise, etc.

(iii) Support 100% of the total cost of a training course on starting a business and up to 70% of the total cost of a business administration course for small and medium-sized enterprises; free access to and participation in online lectures available on the online training system of the Ministry of Planning and Investment and the Provincial People's Committee; etc.

(iv) Innovative start-up small and medium-sized enterprises and small and medium-sized enterprises participating in industrial clusters and value chains receive interest rate support from the State budget when borrowing medium and long-term loans at credit institutions to implement production and business plans and projects. The difference in interest rates provided by the State Bank for loans of small and medium-sized creative enterprises, small and medium-sized enterprises participating in industrial clusters and value chains through credit institutions is 2 years.

2. Credit institutions and foreign bank branches must classify assets, make provision for risks and use of provisions for risks in certain cases.

On July 30, 2021, the State Bank of Vietnam issued Circular 11/2021/TT-NHNN stipulating the classification of assets, the amount of deductions, the method of setting aside the risk provision and the use of the provision for handling risks in the operation of credit institutions, foreign bank branches. Circular 11/2021/TT-NHNN shall take effect from October 1, 2021.

Accordingly, credit institutions, foreign bank branches shall classify debts into the following five groups: Group 1, qualified debts; Group 2, debt needs attention; Group 3, subprime debt; Group 4, doubtful debt; Group 5, debt is likely to lose capital. In addition, there are debts that are classified into debt group with lower or higher risk based on the criteria of profitability, solvency, debt repayment ability of customers, etc. Debt classification must meet the following requirements: Having an internal credit rating system suitable to business activities, customers, the risk nature of the debt and having a trial period of at least 01 year. ; Have a backup policy as prescribed; …

In addition, credit institutions and foreign bank branches shall use provisions to handle risks in the following cases: Customers being organizations are dissolved, bankrupt, individuals are dead or missing; Debts are classified into group 5 (possibility of loss of capital).

In addition, after a minimum period of 5 (five) years from the date of using provisions to deal with risks and after taking all measures to recover debts but cannot be recovered, the credit institution will foreign banks are entitled to decide to remove the risk-resolved debt off the off-balance sheet.

3. On October 1, 2021, reducing the on-lending rate of ODA loans and concessional loans for Provincial People's Committees

On August 16, 2021, the Government issued Decree 79/2021/ND-CP amending and supplementing a number of articles of Decree 97/2018/ND-CP dated June 30, 2018 on the on-lending of official development assistance (ODA) loans and foreign concessional loans of the Government. Decree 79/2021/ND-CP officially takes effect from October 1, 2021.

Accordingly, from October 1, 2021, the rate of on-lending of ODA loans and concessional loans to Provincial People's Committees will decrease according to regulations.

Specifically, for localities where the proportion of the balance supplement from the central budget to the total expenditures to balance the local budget is 70% or more, the on-lending rate will be reduced to 10% of ODA loans, concessional loans. For localities where the proportion of supplementary balance from the central budget to the total expenditures to balance the local budget is from 50% to less than 70%, the on-lending rate is 30% of ODA loans or concessional loans (that reduced by 10% compared to the provisions of Decree 97/2018/ND-CP dated June 30, 2018 on on-lending of ODA loans, foreign concessional loans of the Government).

In addition, for some programs and projects related to sustainable development and adaptation to climate change of some localities in the Mekong Delta that the Government needs to support under the direction of the Government in Resolution 41/NQ-CP, the on-lending rate will be decided by the Government but not lower than 10%.

In addition, cases where loan security is not required include: Re-lending to the Provincial People's Committee; Loans are received by the project management boards of the ministries, and then transferred to the Provincial People's Committees.

We hope you found this brief legal update informative.

Kind regards.

Download full vesion