THIRTEEN [13] FREQUENTLY ASKED QUESTIONS ABOUT TRADING DEBT
During processes, Royal Capital frequently meets the following questions, which we capture for the convenience of our customers:
[1] Can Royal Capital purchase debt in Vietnam from banks, domestic credit institutions, and foreign banking branches?
Reply:
Business of debt trading services, Company established enterprise named is Royal Capital Debt Trading Corporation, Business code 0316460469 registered business sectors, operating complying with the industry code of other financial service activities, not elsewhere classified, {except insurance and social insurance}; details: debt trading; debt buying and selling consulting; debt buying and selling brokerage services; industry code: 6499 in accordance with the Prime Minister’s Decision No. 27/2018/QD-TTg on Promulgating the Vietnamese Economic Sector System;
The company has complied with the legal requirements for operating debt trading services and is permitted to operate this conditional business line.
As a result, and in accordance with the most recent legislation, the Company has the right to purchase all debts owed to domestic banks, credit institutions, and foreign bank branches operating in Vietnam.
[2] What are debt trading regulations of Royal Capital?
Reply:
According to Article 4 on “Principles for Debt Trading Services” in Government Decree No. 69/2016/ND-CP dated July 1, 2016, on requirements for running debt trading service. As a result, Royal Capital has developed and applied the following principles based on the application of a number of principles in Article 5 of Circular No. 09/2015/TT-NHNN dated July 17, 2015:
[1] Operating complying with the industry code of other financial service activities, not elsewhere classified, {except insurance and social insurance}; details: debt trading; debt buying and selling consulting; debt buying and selling brokerage services; industry code: 6499 in accordance with the Prime Minister’s Decision No. 27/2018/QD-TTg on Promulgating the Vietnamese Economic Sector System; [2] The company has complied with the legal requirements for operating debt trading services and is permitted to operate this conditional business line; [3] Ensuring openness, transparency, equality, and legal compliance; [4] The Company’s debt trading activities aim to contribute to the quick resolution of debt, the stable fuctioning of the financial market, the ruduction of risks for credit institutions, businesses, debt and the promotion of growth credit and reasonable development of the economy; [5] The debt trading activities of the Company adhere to the principle of using revenue to cover expenses and make a profit; [6] Debt trading activities are agreed upon by the parties and comply with relevant legal regulations; [7] The company is not allowed to sell debt to Royal Capital’s own subsidiaries or affiliated companies, expect when selling debt in accordance with an approved restructuring plan; [8] Debts trading must be monitored, accounted for, and statistically presented in accordance with the law.[3] What conditions are required for the subjects who participate in purchasing debt and assets that guarantee debt from Royal Capital?
Reply:
As stated in Clause 2, Article 3 of Circular 09/2015/TT-NHNN and Part 1, Article 2 of Circular 18/2022/TT-NHNN, Royal Capital applies the following understanding of debts purchased and/or resold by the company: “Purchased and sold debt means a debt arising from the lending operation or a debt to be paid on a third party’s behalf in the guarantee operation under a signed credit extension contract of a credit institution or foreign bank branch, monitored for accounting on the balance sheet, off the balance sheet or left off the balance sheet of the debt seller and meeting the conditions prescribed in Article 4 of this Circular, and paid by the debtor to the credit institution or foreign bank branch.”
What requirements have to be completed in order to trade debt in Royal Caital?
Royal Capital buys and sells debt in compliance with the criteria in Article 4 of Circular 09/2015/TT-NHNN, along with the Company’s own criteria and regulations. As a result, debts to be bought and sold must fulfill the following criteria:
[i] Dossier related documents and records of the debt to be purchased and sold and security contract (if any) provided by the debt seller must fully and accurately show the state of the debt in accordance with law. [ii] There is no written agreement on ban on debt purchase and sale. [iii] The debt is not used to secure the fulfillment of a civil obligation at the time of debt purchase and sale, except the case where the secured party accepts in writing the debt sale. [iv] The seller must be of full legal and civil act capacity. [v] The debtor/borrow is still alive. [vi] Debt is guaranteed by assets. [vii] Other regulations on the form of purchase and sale, assets to be sold, and purchase and sale prices defined by the Company’s Regulations.[4] How does Royal Capital purchase and sell debt or secured assets?
Reply:
Royal Capital is currently trading debt and secured debt assets through one of the following methods:
[i] Agreement: Royal Capital will gather information and relevant documents in order to negotiate and agree on debt sales, either directly between the debt seller and/or debt buyer or indirectly through the broker side. [ii] Auction: Because the Company owns the debt, Royal Capital can hire a professional auction organization or organize the auction itself.[5] How does Royal Capital carry out debt valuation?
Reply:
Royal Capital always carry out debt valuation to determine the reserve price when trading debt by auction or to negotiate the purchase and sale of debt in the case trading debt by agreement.
We will consider choosing a debt valuation method according to one of the following methods and bases:
[i] The book value of a purchased and sold debt, interest payable by the debtor at the time of valuation, debt group classification, collateral [if any], the borrower’s financial situation, and other relevant factors have an impact on the debt value [if any] at the time of valuation. [ii] Valuation in accordance with Ministry of Finance regulations on debt valuation standards; [iii] Royal Capital can hire a company with a valuation function to evaluate the debt being purchased and sold.[6] How does Royal Capital manage debt that has been purchased and sold?
Reply:
[i] For all debts, we maintain separate accounting records based on the actual purchase price of the acquired debts. This ensures a clear distinction between the purchased debts and those originating from the credit issuance activities of credit institutions and banks, also adds the accurate calculation of the amount spent on debt purchases in the total credit balance for the debtor; [ii] We classify debt and use provisions to manage credit risks and financial risks for purchased debt to comply with current law; [iii] In accordance with the provisions of Clause 10, Article 1 of this Law, we apply and comply with standards and regulations on “management and monitoring in the case of selling part of a debt or selling a debt to multiple debt buyers.” Following to Circular No. 18/2022/TT-NHNN on December 26, 2022 issued by the State Bank; [iv] We manage secured debts in ways that are not contrary the law.[7] What privileges do we/the buyer have after purchasing the debt from Royal Capital?
Reply:
After purchasing the debt from Royal Capital, the debt buyer [organizations/individuals] has full ownership of the debt as well as all rights, interests, and benefits of the creditor regarding the transferred debt like Royal Capital. If the debt to be repurchased originated previously from credit institutions or banks, the debt purchaser will have all of the same rights and obligations as the Lender itself to the previous Debtor as defined in signed Credit Contracts, including but not limited to:
[i] The right to have the Debtor pay the debt’s principal, interest, fees, and expenses, as well as other benefits, in keeping with the terms of the previously signed credit contract. [ii] The capacity to benefit from the rights and interests arising from all debt security. [iii] Other rights can be obtained according to the relevant laws.[8] Does the buyer have to pay value added tax when they purchase debt from Royal Capital?
Reply:
According to the provisions of Point d, Clause 8, Article 4 of Ministry of Finance Circular No. 219/2013/BTC dated December 31, 2013, goods and services that are not subject to VAT is: Selling debt. As a result, the buyer of Royal Capital’s debt/assets receives an invoice with a value added tax rate of 0%.
[9] Will I be considered for debt restructuring and rescheduling if Royal Capital purchases my bad debt?
Reply:
According to current regulations, the debts/secured assets of the debts purchased by Royal Capital must be handled in accordance with the regulations and nature of the bad debts and assets of debt accounts. These include the following strategies:
[i] Debt restructuring and support for borrowers [interest rate adjustment, interest exemption, rescheduling of debt repayment terms, financial support for borrowers…]; [ii] Reselling bad debts and secured debt assets; [iii] Contributing charter capital, share capital, … handled in other cases of direct investment; [iv] File a lawsuit, postpone debt judgment enforcement…Thus, your debts may be considered for restructuring and debt rescheduling if they comply with all conditions and are in accordance with Royal Capital’s debt restructuring and rescheduling criteria, which are similar to those used by other credit institutions, banks, and other financial institutions.
[10] In what situations does Royal Capital refuse to repurchase sold debt?
Reply:
In general, Royal Capital does not advocate buying back debts and collateral assets sold by the Company, except in the following situations:
[i] The Company repurchases sold debt in accordance with its obligations committed to repurchasing the debt in the restructuring plan approved by the Debt Trading Council and the Company’s Board of Management; [ii] The repurchased debt is being used as collateral for a loan or mortgage by the Company; [iii] The company is obligated to repurchase the debt and secured assets sold in accordance with the arbitrator’s definitive judgment or decision.[11] What is the transfer of debt rights and obligations when trading debt with Royal Capital?
Reply:
[i] The debt buyer becomes the subrogator, obligations related to the purchased or sold debt of the debt seller when the debt buyer receives the tranfer of the ownership from the debt seller as agreed in the debt trading contract; [ii] The debt seller transfers to the debt buyer all rights and obligations related to the debt, including any efforts to guarantee the debt [if any]. The transfer of rights and obligations regarding debt guarantees complies with the provisions of law governing secured transactions and other relevant provisions of law. The registration of a change of secured party must adhere to the provisions of the law governing secured transactions; [iii] The debt buyer, debtor, and guarantor may agree to modify the security determine for the debt being purchased or sold in accordance with legal requirements.[12] Does Royal Capital buy and sell debts arising from foreign lending operations in Vietnam, loans abroad, or debts arising from payment on behalf of the guarantee operation for the recipient who is not a person resident or not?
Reply:
[i] We carry out these operations, and when it comes to lending abroad, we collaborate with debt trading organizations, credit institutions, and banks in other countries to do soAnd, in order to ensure compliance with foreign exchange management regulations in debt trading activities, the debt seller registers changes in overseas loans and guaranteed debt recovery in accordance with current regulations on foreign exchange management regulations for overseas lending and recovery of guaranteed debt for non-residents;
[ii] According to the debt trading contract, the debt buyer uses a payment account in Vietnamese Dong to make payments to credit institutions and foreign bank branches for debt purchase and related costs. If the debt is purchased in Vietnamese Dong; [iii] In situations in which the debt purchase currency is foreign currency, the debt buyer is a non-resident who uses a foreign currency payment account opened at a credit institution or bank branch licensed to operate foreign exchange in the territory of Vietnam or a debt buyer’s foreign currency account in a foreign country to make payments to credit institutions and foreign bank branches for debt purchase and related costs according to debt trade contracts; [iv] When recovering debt from purchased debts, the debt recovery amount must be transferred to one (1) payment account in Vietnam Dong and one (1) payment account in foreign currency [in case of debt in foreign currency] of the debt buyer opened at a commercial bank or foreign bank branch permitted to conduct foreign exchange transactions on Vietnamese territory; [v] For the recovery of foreign debt arising from debt trading operations, the debt buyer who is a resident must register a debt recovery plan in accordance with current regulations on foreign exchange management.[13] Where can customers find information about Royal Capital’s debt and collateral purchases and sales?
Reply:
Customers can refer to and find basic information about debts that need to be bought, sold, and processed on the website https://www.royalcapitalfund.group or at the Company’s address: 6th Floor, the Landmark Tower – 5B Ton Duc Thang, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam, or on the media and mass media.