What is a credit commitment? Regulations on credit commitments of joint venture contractors

Credit commitment is a commitment between banks and legal credit institutions in Vietnam with businesses. This is a type of conditional commitment document, which commits to providing credit to the contractor to carry out the bidding package under consideration, with a minimum limit equal to the required value according to the bidding documents throughout the term. contract performance period. From there, the contractor is assessed to meet the financial resource requirements for the bidding package.

Customers who use credit commitments with banks include:

1. Enterprises participating in bidding whose bidding documents stipulate that the contractor must have a credit commitment.
2. Customers apply for an investment license and the application requires a credit commitment to implement an approved investment project.
3. Customers who enter into joint ventures, partnerships, or invite investment partners need to demonstrate financial capacity to implement investment/business plans.
4. Other customers or businesses but with a legitimate purpose and sufficient basis.

Classification of credit commitments for businesses

There are 2 types of credit commitments issued by banks:

• Conditional credit commitment: can be revocable, the bank will disburse credit in case the contractor fully meets the regulations between the business and the bank. This means that the bank agrees to provide the customer to carry out the bidding package under the conditions that the customer's feasible and legal business plan fully meets the credit requirements according to regulations.
• Unconditional credit commitment: The bank will agree to disburse credit in accordance with the commitment without any accompanying terms, irrevocable but the business must have collateral.

Regulations on contractors credit commitments in bidding

The contractor's credit commitment is specified as follows.

Commitment to investment credit and project financing

According to Article 33 of Investment Law 61/2020/QH14, having at least one of the following documents will help investors prove their financial capacity:

• Investor's most recent 2-year financial statements;
• Commitment to financial support of the parent company;
• Commitment to financial support from financial institutions;
• Guarantee of investor's financial capacity;
• Other documents proving the investor's financial capacity.

As stipulated above, a credit commitment document is a document that, according to the law, can prove the investor's financial capacity and is also a document that demonstrates the financial support of a financial institution.

Commitment to bidding credit and implementation of bidding package

When participating in a bid, if the contractor does not have highly liquid assets, it can use a credit commitment issued by a bank or credit institution for that bid package with an appropriate value and time. with the requirements of the bidding documents, it will be considered satisfactory

Credit commitment of the joint venture contractor

Credit commitments will generally include information about the committed amount, credit limit, commitment period and liability and legal terms. So how is the credit commitment of a joint venture contractor regulated?

What is a joint venture contractor?

A joint venture contractor (or Joint venture contractor) is the act of two or more businesses bidding together as a joint venture contractor and implementing a bidding package that is part or all of the project according to the invitation documents. contractor.

Contractors must join together to form a joint venture because each member does not have the capacity to carry out that bidding package. Or because the bidding package is large and the members of the consortium want to optimize the work in the bidding documents to suit their capabilities without having to take responsibility as in the case of using subcontractors.

When is a joint venture contractor's credit commitment valid?

Depending on the joint venture agreement agreed upon by the parties, the joint venture contractor will need to prove the financial capacity of their unit. Each joint venture member must satisfy the requirements corresponding to the work undertaken or authorize a member of the joint venture to arrange credit commitments for the entire joint venture.

Thus, this article DauThau.info has brought you useful information about contractors' credit commitments and the case of credit commitments for joint venture contractors. DauThau.info will continue to send you articles about contractor appointment as well as the latest regulations on the Bidding Law 2023 in the next articles. Please follow the News section of DauThau.info to receive the earliest information!

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