On July 1st 2016, Decree No. 69/2016/ND-CP on required condition for operating debt trading service (“Decree 69”) is promulgated by the Government. It is expected to create a foundation for the development of professional debt trading market in Vietnam. Previously, bad debt trading has mainly carried out by VAMC (Asset Management Company of Vietnam Credit Institutions) and DATC (Debt and Asset Trading Corporation). This is the first time all enterprises belongs to different economic sectors are allowed to equally participate in operating debt trading service, a field is quite inceptive but very potentially in the future. Therefore, most of enterprises concern about what is the condition for operating debt trading service under Decree 69.

(Deputy Prime Minister Vuong Dinh Hue presides at the meeting about summarizing required condition on debt trading service in Vietnam)

Under Decree 69, operating debt trading service refers to the continuous execution of one or certain activities related to the debt trading for profit purpose, including: debt purchase, debt sale, debt brokerage, debt trading consultancy and debt trading floor services. The above activities are conducted by debt trading service companies. All organizations and individuals demand on operating debt-trading service have to establish an enterprise. The enterprise running debt-trading service must register business sectors and satisfy all conditions upon the law.
Regarding general conditions for enterprises running debt trading service, Article 5, Decree 69 stipulated as follows:
- The enterprise has to promulgate internal management rules in conformity with the Decree;
- The enterprise has to meet all requirements related to charter capital or minimum investment capital as stipulated in Clause 2 Article 6, Clause 2 Article 7 and Clause 2 Article 8 of this Decree. In case enterprise conducts several or all of such activities, the minimum charter capital or investment capital shall be the highest minimum charter capital or investment capital among those.
- Manager of enterprise must satisfy the following requirements:
+ Have full legal capacity and be not prohibited from management of enterprise as stipulated in the Law on enterprises;
+ Hold bachelor’s degree or a degree of higher level in either economics, or business administration, or law, or a specialty of which he/she is going to be in charge;
+ Hold the position of manager or have at least 05 years of experience in financial, banking, accounting, auditing, law, asset valuation or debt trading;
+ Person worked for an enterprise running debt-trading service whose certificate of business registration has been revoked must also meet the following conditions: He/she is not the manager of the enterprise running debt trading service whose certificate of business registration has been revoked for 03 consecutive years before.
Regarding requirements for enterprise operating debt trading brokerage service and debt trading consultancy service, apart from meeting the general requirements above, these enterprises must have the minimum charter capital or investment capital is VND 5 billion at the establishing time (Article 6 Decree 69).
Regarding requirements for enterprises running debt trading service, apart from meeting the general requirements above, must also meet requirements as follow:
- The minimum charter capital, investment capital is VND 100 billion.
- A debt must have all of the following elements:
+ There is no written agreement stating that the debt trading is unpermitted;
+ The debt is not used as a security measure for performance of a civil obligation at the time of trading debt, unless there is written agreement of secured party regarding selling the debt;
+ The buyer and the seller of the debt is not related person as stipulated in Law on enterprises.
- A written contract for debt trading must be created base on the contractual parties and must ensure lawful rights and interests of the parties, including specific rights and obligations of the buyer and the seller.
- Enterprise running debt trading service is not allowed to get credit granted by a credit institution/foreign bank’s branch in order to buy debts of customers of such credit institution/foreign bank’s branch; or receive warranty from a credit institution/foreign bank’s branch to get credit granted by another credit institution/foreign bank’s branch for the purpose of buying debts from customers of securing credit institution/foreign bank’s branch.
- The buyer, the seller, debtor and involved parties must comply with current regulations of the law on foreign exchange control in cases where the debt trading related to foreign loan and using foreign exchange in debt trading.
Regarding requirements for operating debt trading floor service, apart from the general requirements, these enterprises must have the minimum investment capital is VND 500 billion, in addition must meet requirements as follow:
- Practicing debt trading service for at least 01 year and the minimum revenue from the debt trading service of the previous year is VND 500 billion.
- Employ at least 02 staffs who possess certificate of auditor or at least 02 staff who have obtained practicing card in valuation in accordance with the law.
- Regulations on operations of debt trading floor service must be available.
- Prepare facilities, techniques and appropriate information technology systems to receive, update and provide information about debt trading activities to its participants.
- Perform annually independent audit in compliance with the law
Upon many experts, required conditions for enterprises running debt trading service under Decree 69 is relatively satisfy with the requirement and characteristics of debt trading service. It not only encourages establishment and operation of enterprises debt trading service but also ensure the management of State as well as the interests of relevant parties.
Besides, other experts believe that some conditions applied to enterprise operating debt trading service is unreasonable. For example, under Clause 5 Article 7 of Decree 69: “Enterprise operating debt trading service is not allowed to get credit granted by a bank to buy the debts of customers of such bank”. This regulation’s purpose is to prevent enterprises from getting credit from bank to buy the old debt in order to create new debt (or in fact, roll over the debt). However, it is assumed that an enterprise gets credit from a credit institution in order to buy a debt of customer at another credit institution, that is certainly suitable with market rule and enterprise must be responsible itself for all obligations arising from independent loans. It should not prohibit or restrict such operation.
Or, Clause 3, Article 5 of Decree 69 regulates: “Manager of an enterprise running debt trading service must possess bachelor’s degree or higher level degree; hold the position of manager or have at least 05 consecutive years of experience in financial, banking, accounting, auditing, law, asset valuation or debt trading”. Some experts analyzes that the above regulations are rigorous and inappropriate, because after all, the debt is considered as a kind of commodity and can be circulated, transferred, so the important is financing capacity of buyer as well as their resale ability. Most of debt trading enterprise having low capital is not financial institut, thus, unable to mobilize capital and grant loan, so it is inappropiate  if the requirement of manager is quite similar with the requirement of bank’s manager.
In addition, the experts also believe that a number of conditions should be supplemented into Decree 69 in order to ensure the completeness of the regulation, such as conditions applied to enterprise purchasing bad debt offered by VAMC or Debt management and asset  exploitation Companies belongs to credit institutions; as well as condition applied to foreign organizations and individuals engaging debt trading in Vietnam.
Futhermore, it should be noted that the requirements as stipulated at Decree 69 will be only applied to enterprises operating debt trading service in respect of ordinary debts. And with respect to enterprises operating debt trading service of credit institution or other debt, it is necessary to comply with requirements stipulated at other specialized legal documents. In detail, Credit institutions, branches of foreign banks executes debts trading under the Law on credit institutions and relevant laws; Organizations, individuals executes bond trading under the Law on securities; Asset management corporation of Vietnam credit institution executes debts trading under regulations of the Government, Prime Minister on establishment and operation of Vietnam Debt Trading Corporation; Stock Exchanges shall hold market to trade securities in compliance with the Law on Securities./.
Lawyer. Nguyen Thi Tho – Vietthink Law Firm