Dr. Nguyen Quoc Hung - Vice President cum General Secretary of VNBA attended and chaired the meeting.
Also attending the meeting were Mr. Nguyen Hung Quang, President of Vietnam International Commercial Mediation Center (VICMC), Ms. Nina Mocheva, Senior Financial Expert of IFC and representatives of a number of member organizations of the Vietnam Banking Association including Agribank, BIDV, TPBank, Techcombank, Mcredit, VAMC.
Dr. Nguyen Quoc Hung - Vice President cum General Secretary of VNBA
Previously in November 2023, VNBA also had a working session on the issue of debt restructuring outside of court, promoting the development of a draft framework on bad debt settlement of members of the Vietnam Banking Association.
Speaking at the meeting and presenting some main contents of the draft guidance document, Mr. Nguyen Hung Quang, Chairman of VICMC, said that debt settlement with multiple creditors before proceeding with litigation (also known as out-of-court debt settlement procedure) is a friendly settlement process between credit institutions (lenders) and enterprises (borrowers) to settle debts, helping to restore business operations.
Debt settlement before proceeding with litigation is of great significance, helping credit institutions (CIs) reduce the rate of bad debt; helping indebted enterprises avoid bankruptcy, being able to overcome temporary financial difficulties; bringing benefits to other related parties (employees, customers, suppliers, investors, etc.) by reducing losses and helping the court reduce pressure in resolving bankruptcy cases.
Mr. Nguyen Hung Quang, Chairman of VICMC
In addition, debt settlement before litigation has a certain significance for economic and social development, contributing to ensuring the sustainability of the financial system, promoting economic growth, and reducing unemployment rates arising from the bankruptcy of borrowing enterprises.
Therefore, the guidance document on debt settlement before litigation is developed to establish an action framework for effective debt settlement and business recovery.
According to Mr. Hung, the structure of the guidance document includes a number of main contents: (i) Definitions; (ii) Conditions for the debtor to carry out debt settlement; (iii) Opening debt settlement procedures; (iv) Time for debt settlement negotiations; (v) Implementation of debt settlement contracts; (vi) Appendix on application for opening procedures and agreement on opening debt settlement procedures.
In addition, Mr. Hung also requested to clarify some contents of debt settlement guidelines before proceeding with the proceedings, including: Regulations on total value of debts; Debt repayment period; Related voting ratio and debt settlement plan; Debt settlement measures; Information security...
At the meeting, Ms. Nina Mocheva - Senior Financial Sector Expert (IFC) of the World Bank (WB) said that the general concepts have been clarified in the debt settlement guidelines before proceeding with the proceedings. However, the important thing in the debt settlement process is to assess the financial feasibility to see if the enterprise has the ability to recover, restore production and business and the ability to repay the debt, before the lenders discuss debt settlement solutions.
Ms. Mocheva also proposed that the debt settlement process should be chaired by the lead bank or the lender's council and assessed before the settlement process is implemented, and recommended that there should be an independent expert to support the mediation, negotiation, as well as an out-of-court debt restructuring expert to assess the feasibility of the enterprise in the debt settlement process.
In addition, Ms. Mocheva also noted the issue of voting, information security, etc. At the same time, to apply this process, the guidance document needs to be agreed upon by the relevant parties before implementation.
Dr. Nguyen Quoc Hung - Vice Chairman and General Secretary of the Vietnam Banking Association said that guidance on debt settlement before proceeding with litigation is one of the important contents in supporting credit institutions (CIs) to settle debts outside of court. According to Mr. Hung, the development of this process in the context of the bankruptcy law being amended and supplemented is an important premise for VNBA and member organizations to contribute opinions to the law in the coming time; at the same time, it is the basis for creating conditions to remove difficulties for businesses before proceeding with bankruptcy procedures.
Mr. Hung also agreed with the proposal that there should be independent experts to evaluate to ensure objectivity. The creditors' council is only to unify and implement the process with a head and unify the remaining creditors.
Mr. Hung emphasized that it is necessary to clearly identify the legal basis when developing the process, there must be regulations from the Circular and Decree of the Government allowing CIs to implement debt restructuring in accordance with the current situation in Vietnam. At the same time, strictly comply with the legal regulations of the National Assembly, the Government and the State Bank.
In addition, when determining that an enterprise is no longer able to restructure its debt, credit institutions need to proactively assess, appraise difficulties, develop recovery plans and agree on debt settlement solutions before putting the enterprise into bankruptcy.
Also at the meeting, member credit institutions also had discussions and contributed opinions on the Guidelines for Debt Settlement Before Proceeding with Litigation.
Agribank representative said that this document should only be a reference guide, should not be included in the law to force entities to follow it and should review the debt repayment period as well as the voting ratio.
BIDV representative suggested further clarification of the benefits of debt settlement outside of court so that credit institutions can agree to follow the guidelines; in addition, there should also be a clear legal basis.
Techcombank representative recommended further consideration and consideration of market practices, drafting contracts in accordance with Vietnamese law and encouraging members to use them. At the same time, separate regulations according to the debt settlement process, restructure debt repayment time, clarify the concept of debt settlement and carefully study the practice to propose debt settlement solutions.
VAMC representative proposed that the out-of-court debt settlement process needs an intermediary mechanism to ensure fairness between the parties.
According to TPBank representative, determining the legal status of the document is the most important. Along with that, review and review the out-of-court debt settlement process to have a unified agreement on the term, form, and nature of the loan, from which to issue general guidelines.
At the end of the meeting, Dr. Nguyen Quoc Hung thanked the credit institutions and IFC for taking the time to study the program and provide documents for VNBA to refer to in order to promulgate the debt settlement process. He said that with the sharing from IFC experts and the contributions from VNBA member organizations, today's discussion is very meaningful.
The debt settlement process before proceeding with litigation is necessary and needs to be widely disseminated to credit institutions. The Banking Association will conduct further research and discussions with members, continue to discuss the above contents to complete the guidance document and will issue a "Code" for debt settlement when the conditions and legal basis are met in accordance with legal regulations.
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