JOINT CIRCULAR

GUIDING THE RECOVERY AND DISPOSAL OF FINANCIALLY LEASED ASSETS BY FINANCIAL LEASING COMPANIES

Pursuant to the Governments Decree No. 52/2003/ND CP of May 19, 2003, defining the Junctions, tasks, powers and organizational structure of the State Bank of Vietnam;
Pursuant to the Governments Decree No. 136/2003/ND-CP of November 14, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Public Security;
Pursuant to the Governments Decree No. 62/2003/ND-CP of June 6, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Justice;
Pursuant to the Governments Decree No. 16/2001/ND-CP of May 2, 2001, on the organization and operation of financial leasing companies;
Pursuant to the Governments Decree No. 65/2005/ND-CP of May 19, 2005, amending and supplementing a number of articles of the Governments Decree No. 16/2001/ND-CP of May 2, 2001, on the organization and operation of financial leasing companies;
The State Bank of Vietnam, the Ministry of Public Security and the Ministry of Justice jointly guide the recovery and disposal of financially leased assets by financial leasing companies as follows:

I. GENERAL PROVISIONS

1. Scope of regulation

This Circular guides the order of and procedures for the recovery and disposal of financially leased assets (below referred to as leased assets) by financial leasing companies, the procedures for request for, and provision of, support of state agencies in the process of recovering and disposing of leased assets.

2. Subjects of application

This Circular applies to financial leasing companies set up and operating under the Law on Credit Institutions, state agencies, Vietnamese organizations and individuals, and foreign organizations and individuals engaged in financial leasing in Vietnam.

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a/ Leased assets must be recovered and disposed of in an objective, public and transparent manner, ensuring lawful rights and interests of involved parties and concerned organizations and individuals, and in conformity with the provisions of this Circular.

b/ The disposal of leased assets for collection of rents does not constitute an asset trading activity of lessors.

c/ Leased assets shall be disposed of according to agreements between involved parties. If the involved parties has reached no agreement on the disposal of leased assets, leased assets shall be disposed of under the provisions of this Circular and relevant provisions of law.

d/ Peoples Committees and police offices in localities where exist leased assets (below collectively referred to as competent agencies) shall assist financial leasing companies in order to ensure security and order in the process of recovering leased assets.

II. SPECIFIC PROVISIONS ON THE ORDER OF AND PROCEDURES FOR THE RECOVERY AND DISPOSAL OF LEASED ASSETS

4. A financial leasing company may immediately recover a leased asset if the lessee fails to pay the remaining rent money after the financial leasing company has made a notice of ahead-of-schedule termination of the lease contract in one of the following cases:

a/ The lessee fails to pay rent money as agreed upon in the financial leasing contract;

b/ The lessee breaches terms of the financial leasing contract;

c/ The lessee dissolves or falls bankrupt;

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5. The lessor may recover leased assets under the conditions defined in Clause 4 of this Circular without having to obtain a court judgment and request the lessee to immediately pay the contractual rent amounts not yet paid.

6. Procedures for notification of the recovery of leased assets:

a/ Before organizing the recovery of leased assets, the financial leasing company shall send a written request for recovery of leased assets (referred to as asset recovery request) to the lessee, the Peoples Committee and the police office of the commune where exist the leased assets. In case of necessity, the financial leasing company may send the asset recovery request to other competent agencies of the locality where exist leased assets. The asset recover, request may be forwarded directly or sent as registered mail and must have the following contents:

- The reason for recovery of the asset.

- Description of the asset;

- Methods, time and place of asset recovery

b/ Within 30 (thirty) days after receiving an asset recovery request, the lessee shall hand over the leased asset and related papers to the financial leasing company.

- The time of receipt of the asset recovery request is agreed upon in the financial leasing contract. If there is no such agreement, the time of receipt of the asset recovery request is the date when.

- The lessee receives the asset recovery request directly from the lessor or signs and certifies the receipt of the registered mail; or

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c/ In case of recovery of leased assets which are means of transport, apart from sending an asset recovery request as prescribed at Point a, Clause 6, of this Circular, the financial leasing company may send it to the state agency in charge of registration of means of transport with which the leased assets have been registered and competent agencies in localities where the leased assets are operating for coordination in the recovery of leased assets.

7. The recovery of leased assets is organized as follows:

a/ Past the time limit of 30 days prescribed at Point b, Clause 6, of this Article, if the lessee still fails to hand over leased assets and related papers, the financial leasing company may directly recover or authorize a third party to recover leased assets.

b/ The recovery of leased assets shall be conducted at the place where exist leased assets in the presence of the lessee (or the person authorized by the lessee to manage leased assets) and at least a representative of a competent agency.

If the lessee is present at but representatives of competent agencies are absent from the recovery of a leased asset, the financial leasing company may still conduct the recovery but in the presence of a witness and shall record it in writing. If the lessee is absent, the financial leasing company may only recover the leased asset in the presence of a representative of a competent agency.

c/ When recovering a leased asset, competent agencies may request the financial leasing company to produce copies of one or several of the following papers:

- The financial leasing contract;

- The certificate of security transaction registration or the document supplying information on the financial leasing contract, issued by the Transaction and Asset Registration Center;

- The document on the ahead-of-schedule termination of the lease contract;

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Competent agencies may not request the financial leasing company to supply papers other than those prescribed above.

d/ When recovering a leased asset, the financial leasing companys representative shall read aloud the notice of recovery of the leased asset and make a written record of the recovery of the leased asset, stating the time and date of the recovery; place of recovery; reason for recovery; name of the recovered asset; description of the state of the asset and documents related to the recovered asset.

dd/ Representatives of the financial leasing company, the lessee and competent agencies or the witness (in case of absence of representatives of competent agencies) shall sign the written record of the recovery of the leased asset. In case the above representatives are present but refuse to sign the written record, such refusal and its reason must be indicated in the written record of the recovery of the leased asset.

e/ The written record and the notice of the recovery of the leased asset shall be handed to representatives of the financial leasing company, the lessee and competent agencies, one copy each party.

g/ After reading the notice of recovery of the leased asset and making the written record of recovery of the leased asset as prescribed at Points d and e of this Clause, the financial leasing company will take the leased asset. The lessee is obliged to hand over the leased asset to the financial leasing company and sign the written record of the recovery of the leased asset. If the lessee is absent, the financial leasing company will still take the leased asset in the presence of at least a representative of a competent agency who will sign the written record of the recovery of the leased asset.

In case the leased asset cannot be taken as it is attached to an immovable, the time of completion of its recovery is the time the parties engaged in the recovery of the asset apply measures to suspend the operation of and seal the asset and make a written record of the sealing. In this case, the written record of asset scaling constitutes an integral part of the asset recovery written record.

h/ In case the lessee has authorized a third party to manage the leased asset, the financial leasing company shall notify the asset recovery to the lessee and the third party according to the procedures specified in this Circular. The lessee shall cooperate with the financial leasing company in order to request the third party to hand over the leased asset and related papers to the financial leasing company. If the lessee or the third party is absent or fails to cooperate with the financial leasing company in recovering the leased asset, the financial leasing company may still conduct the recovery in the presence of at least a representative of a competent agency who will sign the written record of the recovery of the asset.

In case the third party that keeps the leased asset is an unlawful possessor, the financial leasing company may request the third party to return the asset in accordance with Article 256 of the 2005 Civil Code. In this case, the financial leasing company shall carry out the procedures for recovery of leased assets in accordance with Point h of this Clause.

i/ If the leased asset is an exhibit of a case which is under investigation or involved in a prosecution or trial, the disposal thereof complies with Article 76 of the 2003 Criminal Procedure Code.

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l/ In the process of recovering a leased asset, if the lessee, the third party keeping the asset or any individual or organization commits acts of threatening, resisting or obstructing, disrupting security or causing disorder or committing other illegal acts in order to appropriate or take back the asset, or infringing upon life, health or properties of the financial leasing companys employees or other persons engaged in the recovery of leased assets, the financial leasing company may request competent agencies in the locality where the recovery of leased assets is conducted to apply, within the scope of their functions, tasks and powers, coercive measures prescribed by law to maintain security and order for the financial leasing company to exercise its right to recover the leased asset.

m/ The financial leasing company shall take responsibility for the legality of the recovery of leased assets. Competent agencies shall take no liability for the unavailability of legal grounds for the recovery of leased assets as prescribed by law.

8. The lessee or the third party keeping leased assets shall pay all reasonable and necessary expenses for the recovery of leased assets; in case of failure to hand over the leased assets for disposal or committing acts of obstructing the lawful recovery of the leased assets, causing damage to the lessor, he/she/it shall pay compensation in accordance with law.

9. The financial leasing company shall submit an application for deletion of the registration of the financial leasing contract to the Transaction and Asset Registration Center under the Justice Ministrys National Security Transaction Registry in accordance with law on registration of security transactions.

10. Forms of disposal of leased assets

a/ Within 60 days after recovering a leased asset, the financial leasing company shall complete the disposal thereof as agreed in writing by involved parties. If there is no such agreement or the asset cannot be disposed of as agreed upon, the financial leasing company may handle the leased asset in one of the following forms:

- Selling the leased asset;

- Leasing the asset to another lessee;

- Directly using the leased asset;

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- Other forms which are not contrary to law.

b/ While the financial leasing company is disposing of leased asset, if the lessee manages to pay the whole contractual rent money and reasonable expenses arising in the process of disposing of the leased asset, the financial leasing company shall transfer the ownership of the leased asset to the lessee as in the case of completion of the lease contract, unless otherwise agreed by the parties in the lease contract.

11. While disposing of leased assets, the prices of these assets shall be determined on the following principles:

a/ The prices of leased assets must be determined prior to their disposal, unless otherwise agreed by the parties.

b/ The prices of leased assets must be determined as agreed upon between the lessor and the lessee. In case the parties cannot reach an agreement on the prices, the financial leasing company shall hire a price appraisal agency or organization in accordance with current law.

c/ The parties shall determine the prices of leased assets based on market prices at the time of price determination. For assets which have their prices uniformly managed by the State, their prices shall be based on those prescribed by the State.

d/ For leased assets which are machinery, equipment, means of transport and other movables with specific prices on the market, the financial leasing company may sell these assets at market prices without having to carry out the procedures prescribed at Points a and b of this Clause, unless otherwise agreed by the parties.

12. Modes and order of selling leased assets:

a/ The financial leasing company may sell leased assets by the following modes:

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- Authorizing an auction organization to sell leased assets.

b/ In ease of directly selling leased assets, the financial leasing company and the purchaser shall reach agreement on terms of the contract. The contract on the purchase of a leased asset between the financial leasing company and the purchaser shall be made in writing. The details of the contract must comply with legal provisions on contracts.

c/ In case of auction of the assets, the financial leasing company shall sign a contract on authorization of the asset auction with auction organization in accordance with legal provisions on auction.

13. In case of subsequently leasing a leased asset to another lessee: Depending on the remaining
depreciation period of the leased asset, the financial leasing company may apply cither of the following
two modes of asset lease:

a/ Financial lease: The financial leasing company shall apply the mode of financial lease to the lessee in accordance with law on financial lease.

b/ Operating lease: The financial leasing company shall apply the mode of operating lease to the lessee in accordance with law on operating lease.

14. The financial leasing company may directly use leased asset according to the following provisions:

a/ The financial leasing company may use recovered leased assets for its business activities.

b/ In case of using a leased asset, the financial leasing company shall abide by the provisions of law on limits on investment in and procurement of fixed assets and capital sources for asset purchase.

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a/ The financial leasing company may re-export leased assets in case the leased assets are imported from foreign countries and the foreign party agrees to purchase leased assets recovered from the lessee.

b/ The financial leasing company and the foreign purchaser shall agree upon the purchase price of the assets and sign a contract on export of the assets in accordance with law.

16. Money amounts collected from the disposal of leased assets are disposed of as follows:

a/ The financial leasing company may manage the whole money amount collected from the disposal of leased assets, including amounts collected from the sale of leased assets, subsequent lease, the transfer of leased assets, re-export of leased assets, and disposal of leased assets, unless otherwise agreed by the parties. In case the leased assets are auctioned, money amounts collected from the auction of leased assets shall be transferred to the financial leasing company after auction expenses are subtracted.

b/ After subtracting preservation and repair expenses and reasonable expenses arising in the process of recovering and disposing of leased assets, the amount collected from the disposal of leased assets shall be used to pay the amounts still owed by the lessee in the following order: principal, due interests, overdue interests. If the collected amount is not enough to make these payments, the guarantor (if any) shall pay the deficit amount to the financial leasing company.

c/ In case the lessee has partially paid the payable rent money and the financial leasing company has completed the disposal of leased assets, if the collected amount exceeds the payable contractual rent money plus reasonable expenses arising in the process of recovering leased assets, the financial leasing company shall return the excessive amount to the lessee.

III. FINANCIAL ACCOUNTING

17. Financial accounting work in the process of recovering and disposing of leased assets by financial leasing companies complies with current regulations of the State Bank of Vietnam.

IV. ORGANIZATION OF IMPLEMENTATION

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19. This Circular takes effect 15 day after its publication in CONG BAO. Any amendments and supplements to this Circular shall be decided by the Governor of the State Bank of Vietnam, the Minister of Public Security and the Minister of Justice.

FOR THE GOVERNOR OF THE STATE BANK OF VIETNAM
DEPUTY GOVERNOR





Dang Thanh Binh

FOR THE MINISTER OF PUBLIC SECURITY
VICE MINISTER
LIEUTENANT GENERAL




Nguyen Khanh Toan

FOR THE MINISTER OF JUSTICE
VICE MINISTER





Dinh Trung Tung