CIRCULAR

PRESCRIBING FACTORING AND OTHER FACTORING-RELATED SERVICES OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to the Government's Decree No. 102/2022/ND-CP dated December 12, 2022 prescribing functions, tasks, powers and organizational structure of the State Bank of Vietnam (SBV); 

At the request of the Directors of the Credit Department for Economic Sectors and the Foreign Exchange Management Department;

The Governor of the State Bank of Vietnam promulgates a Circular prescribing factoring and other factoring-related services of credit institutions and foreign bank branches.

Chapter I

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Article 1. Scope

This Circular introduces regulations on factoring and other factoring-related services rendered by credit institutions and foreign bank branches (FBBs) to their clients.

Article 2. Regulated entities 

1. Commercial banks, general finance companies, factoring finance companies and FBBs.

2. Organizations and individuals that are residents and non-residents involved in factoring and other factoring-related services.

Article 3. Definitions

For the purposes of this Circular, the terms used herein are construed as follows:

1. “factor” means a commercial bank, general finance company, factoring finance company or FBB that is licensed to provide factoring and other factoring-related services. In case of syndicated factoring, factors include foreign credit institutions (that are established in foreign countries in accordance with regulations of law of such countries).

2. “other factoring-related service providers” include commercial banks, general finance companies, factoring finance companies and FBBs.

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a) The client is the seller in case of recourse factoring;

b) The client is the buyer in case of non-recourse factoring;

c) The client is the buyer in case of reverse factoring.

4. “other factoring-related services” include services such as management and collection of accounts receivable in accordance with the law of Vietnam and commercial practices on factoring.

5. “account receivable” means an amount of money that the seller is entitled to collect from the buyer under a signed goods sales and purchase/service supply contract.

6. “factoring amount” means the amount that the factor disburses to the seller to purchase the seller's accounts receivable or pays in advance on behalf of the buyer but does not exceed the value of accounts receivable.    

7. “seller (including exporter)” means a party that sells goods and/or supplies services and is entitled to legitimate interests regarding accounts receivable as agreed upon in the goods sales and purchase/service supply contract.

8. “buyer (including importer)” means a party that buys goods and/or uses services and is obliged to pay accounts receivable as agreed upon in the goods sales and purchase/service supply contract.

9. “recourse factoring” means a form of extension of a line of credit under which the factor purchases accounts receivable from the seller.  The seller is responsible for repaying the factoring amount if the buyer fails to pay or fails to make full payment to the factor.

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11. “reverse factoring” means a form of extension of a line of credit under which the factor makes payment in advance to the seller on behalf of the buyer by means of purchase of accounts receivable. The buyer is responsible for repaying the advanced amount to the factor as agreed upon between them.

12. “goods sales and purchase/service supply contract” means an agreement between the seller and the buyer on sales and purchase of goods/supply of services in accordance with regulations of law (except the case prescribed in clause 4 Article 7 of this Circular).

13. “factoring contract” means an agreement made between the factor and its client to establish, change or terminate rights and obligations of the parties.

14. “other factoring-related service contract” means an agreement made between the other factoring-related service provider, the factor and other related parties (if any) to establish, change or terminate rights and obligations of the parties.

15. “goods sales and purchase/service supply documents” are the documents relating to the seller’s request for payment by the buyer and those relating to delivery of goods/supply of services on the basis of a goods sales and purchase/service supply contract.

16. “domestic factoring” means the factoring carried out on the basis of a goods sales and purchase/service supply contract to which both the seller and the buyer are residents.

17. “international factoring” means the factoring carried out on the basis of a goods sales and purchase/service supply contract between an exporter and an importer among which one is a resident while the other is a non-resident.

18. “factoring debt" means the unpaid factoring amount and interest thereon.

19. “repayment of factoring debt” means the repayment of the agreed-upon factoring amount and interest thereon by the seller or the buyer to the factor.

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21. “repayment term of factoring debt” means a period of time starting on the day following the final date of the payment period or term of the account receivable specified in the goods sales and purchase/service supply contract and ending on the final date of the factoring term or repayment period, unless the client may make repayment prior to the end of the payment period or term of the account receivable as agreed upon by relevant parties.

22. “repayment periods” means periods of time constituting the agreed factoring term and, at the end of each of these periods, a seller or buyer is obliged to repay the factoring debt in part or in full to the factor.

23. “overdue factoring debt” is composed of:

a) The amount of factoring debt becoming delinquent as prescribed in clause 2 Article 17 hereof;

b) The amount of factoring debt which a client fails to repay prior to the due date in the event of a factor's termination of factoring services or collection of debt prior to the due date as prescribed in clause 1 Article 19 hereof.

24. “plan to use fund” means a collection of information about use of the factoring amount by a client, including at least the following information:

a) The maximum value of the account receivable, the maximum factoring amount, and purposes of the factoring amount;

b) Client’s sources of funding for debt repayment.

25. “financial capability” means a client’s capacity with respect to capital, assets and legitimate financial resources.

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FACTORING

Article 4. Factoring rules

1. Factoring services shall be provided on the basis of compliance with provisions of the Law on Credit Institutions, relevant laws and the factor’s license issued by the State Bank of Vietnam (hereinafter referred to as “SBV”).

2. Factors shall render factoring services in foreign currencies within the scope of trading and provision of foreign exchange services in domestic and international markets as prescribed by relevant laws.

3. Factors are obliged to comply with regulations on cases of credit extension rejection, restrictions and limits on credit extension as referred to in the Law on Credit Institutions, and SBV’s regulations on prudential ratios and limits for operations of credit institutions and FBBs.

4. Syndicated factoring shall be carried out in accordance with provisions of this Circular, SBV’s regulations on grant of syndicated loans to clients, regulations on foreign borrowing and debt repayment, and relevant laws. A Vietnamese factor may participate the syndicated factoring which involves participants that are foreign credit institutions and a client that is a resident only if the client complies with regulations on foreign exchange management in foreign borrowing and debt repayment by enterprises.

5. International factoring shall be carried out in accordance with provisions of this Circular. Where a loan is granted to, and debt must be collected from, a foreign party when performing international factoring, the factor must comply with regulations on foreign exchange management in grant of loans to, and collection of debts from, foreign parties.

6. FBBs shall provide factoring services to buyers or sellers that are non-residents meeting the requirements set forth in points c, d and dd clause 1 and point b clause 2 Article 11 of this Circular.

Article 5. Language

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2. If the translation of the factoring contract and other documents concerning the factoring which are made in foreign languages into Vietnamese is requested by a competent authority, the factor shall provide translation copies which must bear certification of the factor’s lawful representative or be legally notarized).

Article 6. Internal regulations

1. Pursuant to provisions of the Law on Credit Institutions, this Circular and relevant laws, credit institutions and FBBs shall promulgate their internal regulations on factoring (including provisions on electronic factoring (if any)) which must be conformable with their business characteristics.

2. Within 10 days from the date on which its internal regulations on factoring are promulgated or modified, the factor shall send their new or modified internal regulations on factoring to the SBV (via the SBV Banking Supervision Agency or SBV’s provincial branch) in accordance with regulations of law.

Article 7. Ineligible accounts

An account receivable will not be factored if:

1. it arises from a sales and purchase/supply of goods/services which are banned by law.

2. it arises from a goods sales and purchase/service supply contract under which the remaining term of the account receivable, counting from the date of the request for factoring, is 01 year or longer.

3. it arises from a goods sales and purchase/service supply contract under which contractual rights and obligations cannot be transferred.

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5. it has been factored or used as security for other debt obligations (except cases where the factoring amount does not exceed the value of the account receivable which remains after deduction of the amounts factored and used as security for other debt obligations).

6. it is past due as prescribed by the goods sales and purchase/service supply contract.

7. it arises from a goods sales and purchase/service supply contract which is in dispute.

Article 8. Factoring methods

1. One-time factoring: the factor and its client go through factoring procedures and enter into a factoring contract in each time when the factoring is requested.

2. Funding limit-based factoring: the factor determines and agrees with its client on the maximum factoring amount which will be maintained during a specified period of time and the use thereof. At least once a year, the factor will consider re-determining the funding limit and duration of maintenance thereof.

3. Syndicated factoring: Two or more factors jointly provide factoring for one or some accounts receivable, and one of them will act as the lead factor in charge of arranging the syndicated factoring.

Article 9. Currency used for factoring and debt repayment

1. The currency used in recourse or non-recourse factoring shall be that of the account receivable or Vietnamese dong (VND).

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a) Currency used in reverse factoring shall be VND, except the case prescribed in point b of this clause;

b) A factor may consider factoring in foreign currency for an account receivable in foreign currency in accordance with regulations of law on foreign exchange management if one of the following requirements is satisfied:

(i) The buyer is a non-resident;

(ii) The buyer is a resident that will earn sufficient operating revenues in foreign currency for repaying factoring debt;

(iii) The buyer is a resident that is a major petroleum importer, has its annual import quota approved by the Ministry of Industry and Trade of Vietnam, and needs to make outward payment for imported petroleum.

3. Currency used for repaying factoring debt and factoring fee shall be the one used for factoring. The repayment of factoring debt and factoring fee in another currency shall be subject to specific agreements between the factor and its client in conformity with relevant laws.

On the due date of the factoring debt in foreign currency, if the client is able to prove that their deferred collection of operating revenues in foreign currency is caused by unexpected events, or the client fails to have or does not have sufficient foreign currency to repay the factoring debt, the client may buy foreign currency from credit institutions and FBBs that are licensed to trade in foreign exchange to repay such factoring debt.

If the client needs to buy foreign currency from the factor, the factor must sell the requested amount of foreign currency to the client. If the client buys foreign current from another credit institution or FBB, the selling credit institution or FBB shall transfer the amount of foreign currency bought by the client to the factor. When the client earns operating revenues in foreign currency, they must resell such earned amount of foreign currency to the credit institution or FBB from which they have bought foreign currency at the request of the latter.

Article 10. Factoring interest rate and fee

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In case of syndicated factoring, participants shall reach an agreement on the specific amount of factoring fee paid to each participant in conformity with regulations of law.

2. If the agreed-upon factoring debt becomes due but it is not repaid or is not fully repaid, the buyer or the seller shall be obliged to pay interest as follows:

a) The amount of interest on the unpaid factoring amount is charged at the agreed interest rate in proportion to the factoring period during which the repayment of factoring amount due has not been made;

b) If a buyer or seller fails to pay the interest due as prescribed by point a of this clause, they must pay late payment interest charged at the interest rate agreed upon between the factor and the buyer or seller which is not allowed to exceed 10%/year interest rate on the unpaid amount of interest in proportion to the period of late payment;

c) Where the factoring amount has become delinquent, the buyer or seller must pay interest on the overdue factoring amount in proportion to the period of late payment at the interest rate which is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such factoring amount becoming delinquent.

3. Where the variable interest rate is applied, the factor and the buyer or seller must enter into an agreement on principles and factors for determination of the variable interest rate, and on the time of adjustment to the factoring interest rate. In cases where referring to factors for determination of the variable interest rate results in different factoring interest rates, the factor shall apply the lowest factoring interest rate.

Article 11. Eligible clients

A factor shall consider granting a decision to provide factoring for a client that meets the following eligibility requirements:

1. In case of recourse or non-recourse factoring:

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(i) The seller has the full legal personality and legal capacity in accordance with regulations of law;  

(ii) Funds will be used for legally accepted purposes;

(iii) The seller has sound financial capability to repay debt;

(iv) The seller's plan to use fund is assessed feasible;

b) In case of non-recourse factoring for a seller that is a resident and a buyer that is also a resident, the buyer shall be required to meet the requirements set out in point a clause 1 of this Article;

c) In case of non-recourse factoring for a seller that is a resident and a buyer that is a non-resident, the buyer shall be required to meet the requirements set out in point a clause 1 of this Article and any of the following:

(i) The buyer is an enterprise that is duly established and operating in a foreign country with capital contributed by Vietnamese enterprises in the form of investments prescribed in points a, c clause 1 Article 52 of the Investment Law or in other investment form prescribed in point dd clause 1 Article 52 of the Investment Law;

(ii) A part or whole of value of the account receivable is secured by a third party that is a credit institution, FBB or foreign credit institution, or insured by a third party, or secured by money deposited by the client and/or a third party at the factor. If only a part of the account receivable is secured or insured, the maximum factoring amount shall not exceed the secured or insured value of the account receivable;

d) In case of recourse factoring for a seller that is a non-resident, the seller shall be required to meet the requirements set out in point a clause 1 of this Article and any of the following:

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(ii) The seller meets the requirement in point c(ii) clause 1 of this Article;

dd) In case of non-recourse factoring for a seller that is a non-resident, the buyer that is a resident shall be required to meet the requirements set out in point a clause 1 of this Article.

2. In case of reverse factoring:

a) The buyer that is a resident meets the requirements set forth in point a clause 1 of this Article;

b) The buyer that is a non-resident meets the requirements set forth in point c clause 1 of this Article.

Article 12. Application for factoring

1. When there is a demand for factoring, a client must submit an application for factoring to the factor. Such application includes:

a) Documents proving that the client meets eligibility requirements set forth in Article 11 of this Circular and other documents as required by the factor, including at least the following:

(i) The original copies of the goods sales and purchase/service supply contract and documents; or a copy of the goods sales and purchase/service supply contract and the statement of goods sales and purchase/service supply documents in case the factor and its client have reached an agreement on assurance of the accuracy, truthfulness and adequacy of that copy or statement in comparison to their originals; or

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b) Information on related persons of the client that is a resident as prescribed by the Law on Credit Institutions in case the client’s total outstanding debt arising from credit extension owed to the factor (including the factoring amount for which the client is applying) is higher than or equal to 0,1% of the equity of the factor that is a commercial bank or FBB (if the factor is a general finance company or factoring finance company, this rate shall be 0,5%). If the factor’s equity is a negative number, this rate shall be applied to its charter capital or allocated capital (for an FBB); information on related persons of the client that is a non-resident if these related persons are getting loans from the factor. Information on a related person includes:

 (i) In case of a related person that is an individual: full name, personal identification number (for a Vietnamese citizen); nationality, passport number, number of immigrant visa or another document of equivalent validity or documents proving immigrant visa exemption, issue date and issuing authority (for a non-resident); relationship with the client;

 (ii) In case of a related person that is an organization: name, enterprise ID number, and headquarters address of the enterprise, number of enterprise registration certificate or another document of equivalent legal effect; information on its legal representative as prescribed in point b(i) clause 1 of this Article, and relationship with the client;

c) Other documents as required by the factor.

2. The client is responsible for providing the information, data and documents prescribed in clause 1 of this Article for the factor in truthful, exact, adequate and timely manner, and updating the factor on any changes in such information, data and documents during the credit extension, and shall assume responsibility for such provided information, data and documents.

Article 13. Security for factoring

1. The factor and its client shall agree on whether or not a security is provided. Agreement on provision of security between the factor and its client must conform to regulations of law on secured transactions and relevant laws.

2. The client and guarantor must liaise with the factor to treat the provided security when there are sufficient grounds for such treatment under terms and conditions of the factoring contract, the agreement on provision of security, and relevant laws.

Article 14. Requirements to be satisfied by factor

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a) The factor shall agree with the seller on sending of a written notice of factoring or data message which has the same validity as the written notice to the buyer and other relevant parties incurring obligations (if any). Such notice shall inter alia indicate information on assignment of rights and obligations arising from the account receivable between the seller and the factor, and request for payment made by the buyer and other relevant parties incurring obligations (if any) to the factor;

b) If the seller fails to send a notice as prescribed in point a of this clause, the factor shall provide factoring for the seller only when the factor and the seller reach an agreement on measures adopted to enable the factor’s control of payments made by the buyer or other relevant parties incurring obligations (if any) to the seller.

2. In case of non-recourse factoring or reverse factoring, the factor shall provide factoring only when the seller gives its written consent, or a data message which has the same validity as such written consent, to assignment of its legitimate rights and interests arising from the account receivable to the factor; the buyer gives a commitment to make full repayment to the factor.

Article 15. Assessment of applications for factoring and grant of decision to provide factoring

1. In case of factoring for a seller, a factor shall:

a) In case of recourse factoring, the factor shall assess the seller’s ability to meet the requirements set forth in points a, d clause 1 Article 11 of this Circular;

b) In case of non-recourse factoring, the factor shall assess the buyer’s ability to meet the requirements set forth in points b, c, dd clause 1 Article 11 of this Circular.

2. In case of reverse factoring, the factor shall assess the buyer’s ability to meet the requirements set forth in clause 2 Article 11 of this Circular.

3. The factor must establish procedures for approval of applications for factoring according to the principle of assignment of responsibilities in the assessment and decision-making stages. During its assessment, the factor may concurrently use its internal credit rating system and the information available at the National Credit Information Center of Vietnam and other communications channels.

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1. The factoring contract must be made in writing in conformity with provisions of this Circular and other relevant laws. If the factoring contract is made in the form of electronic data message, it shall comply with provisions of law on electronic transactions. A factoring contract shall, inter alia, include:

a) Information on the parties involved in the factoring relationship;

b) The maximum value of the account receivable, the maximum factoring amount or funding limit (in case of funding limit-based factoring);

c) Purposes of factoring amount;

d) Currency used for factoring and repaying factoring debt and fee;

dd) Factoring method;

e) Factoring term, repayment term of factoring amount, duration of maintenance of funding limit (in case of funding limit-based factoring);

g) Factoring interests (including rate of interest on overdue factoring amount), factoring fee;

h) Repayment of factoring debt, priority order of recovery of unpaid factoring amount and interest, early repayment of factoring debt;

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k) Debt treatment;

l) Responsibility to send notice to buyer or other relevant parties incurring obligations (if any);

m) Rights and obligations of the parties, including the seller’s commitment not to use the account receivable as security for other debt obligations or loan application without the factor’s consent;

n) Dispute settlement;

o) Validity of the factoring contract;

p) Other contents which must not be contrary to regulations of law.

2. Modification or termination of the factoring contract shall be agreed upon by the parties in conformity with provisions of this Circular and relevant laws.

Article 17. Determination of factoring term, repayment periods and debt delinquency

1. The factoring term and repayment periods are determined on the basis of the remaining term or payment periods of the account receivable specified in the goods sales and purchase/service supply contract, and the repayment term of factoring amount.  The factoring term shall be agreed upon by the factor and its client and specified in the factoring contract, and shall be less than 01 year.

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3. With respect to overdue factoring debt, the factor shall observe the order in which the factoring amount will be collected first, and then interest.

Article 18. Disbursement methods

1. The factor shall make disbursement to the seller’s designated account.

2. A factor shall be required to open and use checking accounts at payment service providers in Vietnam to serve its disbursement, collection of factoring debts and fees when rendering international factoring services according to the following rules:

a) The checking account prescribed in this clause is dedicated to factoring operations which should comply with regulations of law on foreign exchange management in grant of loans to, and collection of debts from, foreign parties by credit institutions and FBBs. The factor shall not be allowed to use this account to remit, transfer or receive money arising from any transactions other than factoring-related transactions;

b) Each international factoring amount shall only be provided via 01 account-based payment service provider. A factor may use 01 account prescribed in this clause to serve one or multiple international factoring amounts;

c) Where the currency used for repaying factoring debt and fees is not the one used for factoring, the factor may open and use another dedicated checking account provided that the rules in points a and b of this clause must be observed;

d) The factor is responsible for clearly specifying and requesting its client to clearly specify the purpose of money remittance which is aimed at serving factoring operations so as to establish grounds for the account-based payment service provider's submission of reports according to SBV’s regulations.

3. When rendering international factoring services, a factor that is a commercial bank or FBB shall not be required to open a dedicated checking account at an account-based payment service provider in Vietnam to serve its disbursement of factoring amount and collection of factoring debts to and from a non-resident as prescribed in clause 2 of this Article but shall monitor factoring-related remittance transactions in accordance with regulations of law on accounting by credit institutions and FBBs.

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Article 19. Factoring termination, debt treatment, factoring interest and fee exemption and reduction

1. A factor shall be accorded the right to terminate a factoring process and collect debt prior to the payment due date as agreed upon with its client when it has established that the seller or buyer has provided false information or violated terms and conditions of the signed factoring contract and/or agreement on provision of security.  When terminating the factoring process and collecting debt prior to the payment due date under terms and conditions of the factoring contract, the factor shall notify the seller or buyer of such events. Such a notice shall, inter alia, include the date of termination of factoring process, the factoring debt amount to be collected prior to the due date and deadline for repayment thereof, time of delinquency and interest rate charged on the factoring debt amount to be collected prior to the due date, and return of the account receivable to the seller or buyer.

2. Where the seller or buyer fails to make repayment of debt due, the factor shall be entitled to apply debt collection measures under terms and conditions of the factoring contract and/or agreement on provision of security, and regulations of relevant laws. If the debt is still not yet fully repaid to the factor after the debt collection measures have been implemented, the seller or buyer shall keep on assuming responsibility for paying off the factoring debt and fees (if any) in full to the factor.

3. Where the seller or buyer or guarantor is affected by the court’s decision to open the bankruptcy proceedings or declaration of bankruptcy, the factor's recovery of debt owed by the client and guarantor shall be carried out under regulations of the law on bankruptcy.

4. The factor shall have the right to decide to offer the seller or buyer factoring interest and fee exemption and/or reduction in accordance with its internal regulations.

Article 20. Penalty and compensation for damage

The factor and its client shall be allowed to agree on penalty and compensation for damage in accordance with regulations of law in the event that either the factor or the client fails to strictly comply with terms and conditions of the signed factoring contract.

Article 21. Classification, establishment and use of provisions for credit losses

Factors shall classify, establish and use provisions for credit losses for managing risks associated with their factoring operations in accordance with regulations of law on asset classification, amounts and method of establishing risk provisions, and use of provisions for managing risks in operations of credit institutions and FBBs.

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Article 22. Electronic factoring

1. Factors and their clients are entitled to carry out factoring by electronic means (hereinafter referred to as “e-factoring”). E-factoring operations must comply with provisions of this Circular, laws on anti-money laundering, electronic transactions and protection of personal data, and regulations on security and confidentiality in provision of online banking services, and other relevant laws.

2. When following eKYC (electronic Know Your Customer) procedures for identifying a client that establishes relationship with the factor for the first time (except cases where the client sends information/data messages via the SWIFT network or the client uses electronic signature as prescribed by law), the factor shall comply with the following provisions:

a) If the client is a resident, the factor shall follow KYC procedures according to SBV’s regulations on opening and use of checking accounts at payment service providers.

b) If the client is a non-resident, the factor shall follow KYC procedures by carrying out self-assessment of risk levels for selecting or deciding to apply appropriate methods, forms or technologies for authenticating electronic transactions, ensure safety and incur all risks.

3. Each factor shall decide methods, forms and technologies employed to provide e-factoring in respect of the entire or each stage of the factoring process, incur all risks and meet the following requirements:

a) The methods, forms and technologies employed by the factor must meet security, safety and confidentiality standards as required by SBV;

b) Electronic transaction authentication forms must be employed to confirm a client’s consent given to the factor when conducting electronic transactions during the e-factoring in accordance with regulations of relevant laws.

c) All documents, information and data used for identifying clients during the e-factoring process must be retained. Information and data must be stored safely, kept confidential, duly backed up and have their adequacy and integrity ensured to serve information inspection and comparison, and verification of clients during the e-factoring process, and resolution of trace requests, complaints and disputes, and shall be provided at the request of competent authorities. The retention period of information and data relating to e-factoring shall comply with provisions of the Law on anti-money laundering and the Law on electronic transactions;

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dd) Specific responsibilities are assigned to each individual or department in charge of building, establishing and operating the information system in service of assessment of loan applications and making of decisions to grant loans in e-factoring operations. If any risk arises, the factor must adopt a mechanism for determining responsibilities of each individual or department and promptly handling the risk and any other issues that arise to ensure efficiency and safety during its provision of e-factoring services.

4. The information system serving e-factoring operations must satisfy level-3 or higher-level information system security requirements set forth in the Government’s regulations on security of information systems by classification and SBV’s regulations on security of information systems serving banking operations.

Article 23. Rights and obligations of factors

1. A factor has the following rights:

a) Receive legitimate rights and interests arising from accounts receivable as agreed upon between the parties;

b) Use other factoring-related services rendered by other factors or other factoring-related service providers;

c) Request clients and other relevant parties to provide information, documents and data necessary for its assessment of applications for factoring;

d) Request clients and other relevant parties to provide information, documents and data on security in case security is provided;

dd) Monitor recovery of factoring debts, collection of factoring fees, adjustment of factoring fees, interest rates and late payment interests;

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g) Request the seller or buyer to repay the agreed-upon factoring debts;

h) Inspect and supervise debt repayment by the seller or buyer;

i) Perform other rights as agreed upon between the parties in conformity with regulations of law.

2. A factor has the following obligations:

a) Provide information, documents and data on authority to issue factoring decisions at the request of competent authorities;

b) Retain factoring-related documents in accordance with regulations of law and its internal regulations;

c) Discharge other obligations as agreed upon between the parties in conformity with regulations of law.

Article 24. Rights and obligations of clients

1. A client has the following rights:

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b) Perform other rights as agreed upon between the parties in conformity with regulations of law.

2. A client has the following obligations:

a) Provide information, documents and data on accounts receivable in a adequate, accurate and truthful manner; ensure that their accounts receivable are neither used as security for any other debt obligations nor involved in dispute; assume legal responsibility for the accuracy, truthfulness, adequacy and validity of their provided information, documents, data and applications;

b) Carry out assignment of legitimate rights and interests arising from accounts receivable as agreed upon between the parties;

c) Fully discharge obligations and responsibilities by the deadlines specified in the signed factoring contract;

d) Use funds for lawfully predetermined purposes and repay debts as agreed upon between the parties;

dd) Cooperate with the factor and relevant parties during the validity period of the security provided (if any);

e) Send notice of factoring to the buyer or other relevant parties incurring obligations (if any);

g) Discharge other obligations as agreed upon between the parties in conformity with regulations of law.

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OTHER FACTORING-RELATED SERVICES

Article 25. Rules for providing other factoring-related services

1. Other factoring-related services shall be provided under terms and conditions of the other factoring-related service contract signed by and between the other factoring-related service provider and related parties in conformity with provisions of relevant laws and commercial practices on factoring which are not contrary to fundamental principles of the law of Vietnam.

2. When rendering other factoring-related services, other factoring-related service providers shall comply with provisions of the Law on Credit Institutions, relevant laws and their licenses issued by SBV.

Article 26. Other factoring-related services

1. Other factoring-related service providers shall be allowed to provide factors and clients with other factoring-related services as prescribed by the Law on Credit Institutions and clause 4 Article 3 of this Circular.

2. Charges for other factoring-related services shall be agreed upon by the other factoring-related service provider and relevant parties in conformity with regulations of law.

Article 27. Other factoring-related service contracts

1. Other factoring-related service contract shall be made in Vietnamese, or in a foreign language, or in both Vietnamese and a foreign language. The other factoring-related service provider may reach an agreement with the factor and other relevant parties (if any) on use of a foreign language in the other factoring-related service contract involving foreign elements as prescribed by the Civil Code.

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2. Other factoring-related service contract shall, inter alia, include:

a) Names and addresses of the factor, the other factoring-related service provider and relevant parties (if any);

b) Information on the goods sales and purchase/service supply contract, and other information necessary to establish grounds for performing factoring and providing other factoring-related services;

c) Scope and contents of provision of other factoring-related services;

d) Other factoring-related service charges;

dd) Rights and obligations of the parties;

e) Dispute settlement.

3. In addition to provisions set forth in clause 2 of this Article, the parties to the contract may agree on other terms and conditions of the other factoring-related service contract in conformity with provisions of this Circular and relevant laws.

Article 28. Rights and obligations of other factoring-related service providers

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Chapter IV

REPORTING AND IMPLEMENTATION ORGANIZATION

Article 29. Accounting, reporting and document retention

1. Factors shall carry out accounting for factoring operations in accordance with regulations of law on accounting in force.

2. Factors shall submit reports on their provision of factoring services according to SBV’s regulations on statistical reporting.

3. Factors shall retain factoring-related documents in accordance with provisions of the Law on Credit Institutions. Retention period shall comply with regulations of law on archives.

Article 30. Responsibilities of SBV’s affiliated units

1. The Department of Credit for Economic Sectors shall:

a) Monitor and prepare consolidated reports on performance of factoring operations by factors;

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c) Formulate plans for inspection of compliance with regulations on factoring and other factoring-related services (except regulations on foreign exchange management) and implement such plans within the ambit of its assigned functions and tasks.

2. The Department of Foreign Exchange Management shall:

a) Monitor, review and inspect provision of factoring services for non-residents;

b) Act as a conduit for resolution of queries and difficulties that arise from provision of factoring services for non-residents, and propose amendments to or replacement of regulations on foreign exchange management in factoring operations;

c) Formulate plans for inspection of compliance with regulations on foreign exchange management in provision of factoring and other factoring-related services for non-residents, and implement such plans in accordance with regulations on inspection of compliance with regulations of law on money and banking.

3. The Department of Finance and Accounting shall instruct credit institutions and FBBs to do accounting for transactions related to factoring and other factoring-related services as prescribed in this Circular.

4. The SBV Banking Supervision Agency shall play the leading role and cooperate with relevant units in inspecting and supervising provision of factoring and other factoring-related services by banks and take actions against violations within its competence.

5. SBV’s provincial branches shall inspect and supervise the compliance with provisions of this Circular by factors within their competence.

Chapter V

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Article 31. Transition

1. Factoring contracts which are concluded before the effective date of this Circular in conformity with regulations of law in force at the time of contract conclusion shall remain valid until their expiration dates.

2. Any amendments to or extension of the factoring contracts mentioned in clause 1 of this Article must be conformable with provisions of this Circular and relevant laws.

Article 32. Effect

1. This Circular comes into force from July 01, 2024.

2. The Circular No. 02/2017/TT-NHNN dated May 17, 2017 of the Governor of the State Bank of Vietnam prescribing factoring operations of credit institutions and foreign bank branches is abrogated.

Article 33. Implementation organization

Head of the Department of Credit for Economic Sectors, Director of the Department of Foreign Exchange Management, heads of SBV’s affiliated units, Directors of SBV’s provincial branches, credit institutions and FBBs are responsible for the implementation of this Circular./.

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PP. GOVERNOR
DEPUTY GOVERNOR




Dao Minh Tu