Foreign loans (offshore lending) in Vietnam

1. May a foreigner lend to a Vietnamese ?

Under the laws of Vietnam, foreign lenders may lend, in foreign currency, to Vietnamese companies.  To date, there has been no regulation of law allowing Vietnamese individuals to borrow foreign loans.

2.  Is there an interest rate ceiling ?

According to the Civil Code of Vietnam, interest on loans from Vietnamese lenders that are not commercial banks is 20% per annum.  It is unclear whether this limit is applied to foreign loans.  However, it is worth noting that the State Bank of Vietnam has the power to impose limits on the interest rates of foreign loans. 

3.  What are the permitted forms of drawdown and repayment ?

Drawdown and repayment shall be made via a foreign loan account of the borrower.  A foreign loan can be repaid in the different forms, including the forms of cash, goods or services, convertible shares, or set off against payments between the borrower and the lender. 

4.  May foreign lenders take security ?

Under the laws of Vietnam, foreign lenders may not take land and real property as security.  Meanwhile, security over most other assets, such as intellectual property, shares, moveable assets, or contractual claims might be available for foreign loans.  It is also possible that the foreign lender takes corporate guarantees from the borrower’s parent company.

Other than the security over some special assets (such as real estate, aircraft, ship…), security over most other assets are not required to be registered.  However, the registration is highly recommended because, under the laws of Vietnam, registered security has priority over unregistered security. 

5.  Is there any required registration ?

Medium- and long-term foreign loans (those with a maturity of more than 12 months) must be registered by the borrower for the approval of the State Bank of Vietnam after the signing of the loan agreement and the guarantee agreement.  It is worth noting that the Vietnamese translation of those agreements is needed for the process of registration.

The registration certificate specifies important terms of the loan, such as the information of the borrower and lender, the principal, the interest rate, or the drawdown and repayment schedule.

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