When lending to borrowers

Except for the case where credit institutions and foreign bank branches in Vietnam are permitted to issue subordinated debts pursuant to the regulations on prudential ratios and limits for operations of credit institutions and foreign bank branches of the SBV, Vietnamese law is silent on the subordination debt of enterprises. Vietnamese laws only provide that the order of priority for payment between the jointly secured parties may be changed if the jointly secured parties reach an agreement on changing the order of priority for payment between themselves. As a matter of practice, a creditor is entitled to contractually agree that its rights are subordinated to the rights of another creditor, subject to the fact that the rights of the parties may be limited by bankruptcy, insolvency, liquidation, reorganization and other laws of general application relating to or affecting the rights of creditors. The manner in which a subordination agreement is treated may be affected by how the Vietnamese courts exercise their inherent discretion.

If a bankruptcy process has been initiated in respect of the borrower, its indebtedness is paid in accordance with the hierarchy set out in the bankruptcy regulations (and therefore not necessarily as agreed between the lenders and borrowers). For the hierarchy of payments in relation to bankruptcy, see the answer to question 10 of this section.