Current Regulations on Debt Purchase and Sale Transactions

Regulations on debt purchase and sale transactions are a system of legal provisions designed to ensure the safety and transparency of the financial market. Essentially, a debt purchase and sale transaction is the process of transferring a debt to another party with the goal of recovering that amount. Debt recovery transactions occur in the financial environment and carry various risks. Parties involved in these transactions need to understand and comply with the regulations governing them. The following article provides an overview and detailed information on the current regulations related to debt purchase and sale transactions.

What is a debt purchase and sale transactions?

What is Debt Purchase and Sale?

A debt purchase and sale transaction is a written agreement in which the seller of the debt transfers the right to collect on a specific debt to the buyer of the debt. In this transaction, the seller receives a payment from the buyer, and the buyer becomes the new owner of the debt, having the right to recover the amount owed from the debtor.

Based on the provisions of Clause 1, Article 3 of Circular 09/2015/TT-NHNN.

Debt purchase and sale is the process in which one party (usually a financial institution) buys debts from another party (usually an individual or business) with the aim of recovering the debt amount. This occurs when the debtor fails to repay the lender on time.

Debt purchase and sale transactions are legal activities recognized by law under Clause 1, Article 3 of Circular 09/2015/TT-NHNN. Specifically:

A debt purchase and sale transaction is a written agreement where the seller transfers the right to collect on a specific debt to the buyer. In this transaction, the seller receives payment from the buyer, and the buyer becomes the new owner of the debt, having the right to collect the debt amount from the debtor.

Therefore, current laws permit businesses to engage in debt purchase and sale activities. However, such transactions must adhere to certain regulations.

Regulations on Debt Purchase and Sale

Entities Involved in Debt Purchase and Sale

Entities involved in debt purchase and sale include the following:

Seller: Credit institutions, foreign bank branches.

Buyer: Credit institutions, foreign bank branches authorized by the State Bank of Vietnam to engage in debt purchases, as well as other organizations and individuals, including residents and non-residents.

Debtor: Organization or individual responsible for repaying the debt that has been purchased as specified in the credit agreement.

Based on the provisions in Clause 2, Article 1 of Circular 18/2022/TT-NHNN amending and supplementing Circular 09/2015/TT-NHNN; Clauses 3 and 5, Article 3 of Circular 09/2019/TT-NHNN.

Objects of Debt Purchase and Sale Transactions

The object of a debt purchase and sale transaction is the “debt being bought or sold.”

These are debts arising from lending activities and substitute payments in guarantee transactions, according to signed credit agreements. These debts are recorded in the seller’s balance sheet, meeting the necessary conditions as follows:

The seller provides documents, records, and related materials that must fully and accurately reflect the status of the debt according to legal regulations.

There must be no written agreements prohibiting the purchase or sale of the debt.

The debt must not be used to secure the performance of civil obligations at the time of the debt purchase or sale, unless the secured party agrees in writing.

Based on the provisions in Clause 2, Article 3, and Article 4 of Circular 09/2015/TT-NHNN.

Debt Purchase and Sale Procedures

Documents

Credit institutions and foreign bank branches must prepare the following documents for requesting approval to engage in debt purchases:

Application for approval of debt purchase activities, using the form specified in Appendix 01 of Circular 09/2015/TT-NHNN.

Resolution from the Board of Directors (Board of Members) of the credit institution approving the request for debt purchase activity.

A letter and a translation from the parent bank, signed by a legal representative, agreeing to the request for approval of debt purchase activity for the foreign bank branch.

Based on the provisions in Clause 2 Article 6 of Circular 09/2015/TT-NHNN.

Prepare debt purchase and sale documents

Procedure

Step 1: Prepare Documents

Credit institutions and foreign bank branches must prepare a set of documents requesting approval for debt purchase activities and submit them directly or via postal service to the headquarters of the State Bank of Vietnam (One-Stop Unit).

Step 2: Valuation of Debt

Credit institutions and foreign bank branches can choose one of the following methods for valuing the debt:

Self-Determine Debt Value: Based on factors such as the book value of the debt and the interest payable by the debtor at the time of valuation. Consider other factors like the classification of the debt, the presence of collateral, the financial situation of the borrower, and other elements affecting the value of the debt at the time of valuation.

Hire an Appraisal Company: To carry out the valuation of the debt to be bought or sold.

Step 3: Negotiate or Auction the Debt

The parties involved will discuss and negotiate the specific terms of the debt purchase and sale transaction or may organize an auction process. This may include determining the value of the debt, payment terms, collateral conditions, and other terms related to the transaction. The goal is to reach an agreement or the best value for both parties in the debt purchase and sale transaction.

Step 4: Execute the Debt Purchase and Sale Contract

After agreeing on the purchase price of the debt, the parties will enter into a debt purchase and sale contract with content as stipulated in Article 13 of Circular 09/2015/TT-NHNN.

Based on the provisions in Article 6 of Circular 09/2015/TT-NHNN; Clauses 4 and 8, Article 1 of Circular 18/2022/TT-NHNN amending and supplementing Circular 09/2015/TT-NHNN.

Debt Purchase and Sale Consulting Services

With a team of experienced professionals, Long Phan offers debt purchase and sale consulting services to optimize debts for organizations and individuals, including:

• Providing information on legal regulations and debt purchase and sale transactions to ensure legal compliance and adherence to the law.
• Analyzing and assessing the risks associated with debts to develop effective risk management strategies.
• Developing debt purchase and sale strategies to maximize benefits and minimize risks for clients.
• Representing clients in negotiations with relevant parties, including debtors and debt buyers, to achieve the best terms and conditions.
• Assisting in resolving disputes arising from debt purchase and sale transactions, including negotiation and representation in court if necessary.
• Addressing other arising issues (if any).

Debt Purchase and Sale Transactions consulting

In conclusion, current regulations on debt purchase and sale play a crucial role in ensuring transparency and fairness in financial market activities. However, the ongoing development of the financial market requires these regulations to be continually updated and adjusted to meet the practical needs of the parties involved.

We hope the information provided helps address some of your questions. If you need consulting services, please contact Long Phan at Hotline 0906.735.386 for prompt and dedicated support. Thank you very much!