Short answer: Yes. Vietnamese law does not prohibit an overseas parent from guaranteeing its Vietnamese subsidiary’s bank borrowings. But for the guarantee to be effective and bankable, three layers of conditions must be met: (1) a valid guarantee under the Civil Code 2015; (2) related-party transaction approval on the subsidiary’s side under the Law on Enterprises; and (3) a valid internal corporate decision on the parent’s side under its home-country law.
1. What is a parent guarantee in legal terms?
Under Article 335 of the Civil Code 2015 (No. 91/2015/QH13, in force), a guarantee is a commitment by a third party (the guarantor) to the creditor (here, the lending bank) to perform the obligation on behalf of the obligor (the subsidiary) if, when due, the subsidiary fails to perform or performs improperly.
The key point: the parent is not the borrower — it stands behind the subsidiary, promising to repay if the subsidiary defaults. This comfort is why banks lend to newly established subsidiaries with no credit history.
2. Scope of the guarantee — what can the bank claim?
Article 336 of the Civil Code 2015 provides:
- The guarantor may guarantee part or all of the obligation;
- The guaranteed obligation includes interest on the principal, penalties, damages and interest on late payment — unless the parties agree otherwise;
- The parties may agree to secure the guarantee obligation itself with collateral.
In practice, Vietnamese banks typically demand an unconditional, irrevocable on-demand guarantee: once the subsidiary misses a payment, the bank may call on the parent immediately without first proving it pursued the subsidiary. Read this clause carefully before signing.
Important distinction: a “letter of comfort” expressing general moral support is not automatically a binding guarantee, unless its content meets the elements of a guarantee commitment under Article 335.
3. The subsidiary’s side: related-party transaction approval
A parent company qualifies as a “related person” of its subsidiary (Article 4, Law on Enterprises 59/2020/QH14, as amended by Law 76/2025/QH15 effective 01/7/2025). A subsidiary receiving its parent’s guarantee — tied to its own borrowing — is therefore entering a related-party transaction, which requires approval under the charter and:
- Multi-member LLCs: approval by the Members’ Council (Article 162). The person signing for the company must notify the Members’ Council of the related parties and interests, attaching the draft contract; the Council decides within 15 days unless the charter provides otherwise. A contract signed in breach of this procedure may be declared void by a court.
- Single-member LLCs owned by an organization (the common model for 100% foreign-owned subsidiaries): approval by the Members’ Council / Company President, the Director/General Director and the Controller (Article 86).
- Joint-stock companies: approval by the General Meeting of Shareholders or the Board of Directors depending on transaction value (Article 167).
Approval conditions: the parties are independent legal subjects; pricing is at market price at signing; full disclosure obligations are observed.
4. The parent’s side
The parent’s guarantee must comply with the law of the parent’s home jurisdiction and its own charter: whether the board or shareholders have authority, maximum guarantee limits, and form requirements. Vietnamese banks commonly require a legal opinion from home-country counsel confirming the guarantee is valid and binding on the parent.
5. Is State Bank registration required?
Two separate matters:
- The loan taken by the subsidiary: if it is a medium- or long-term foreign loan, the subsidiary must register the loan with the State Bank of Vietnam under Circular 12/2022/TT-NHNN (Article 11).
- The guarantee commitment by the parent: a civil-law security undertaking under the Civil Code — there is no standalone “guarantee registration” procedure with the State Bank under the Circular 12/2022 framework.
In other words, any foreign-exchange registration obligation (if applicable) attaches to the loan, not to the guarantee instrument.
6. Practical risks to anticipate
- Guarantees beyond internal authority may be challenged for validity in the parent’s home jurisdiction — always obtain the competent corporate resolution before signing.
- The substitute-payment obligation is comprehensive (principal + interest + penalties + late-payment interest) unless expressly capped — never sign the bank’s template without reviewing scope.
- Governing law and dispute resolution: cross-border guarantees should specify applicable law and the dispute forum (arbitration or courts) to avoid the parent being sued abroad under unexpected law.
- Financial reporting: the guarantee is a contingent liability that must be disclosed in the parent’s financial statements under applicable accounting standards.
Frequently asked questions
Q: Can an individual (not a corporation) act as the parent guarantor?
A: Yes — the Civil Code does not require the guarantor to be a legal entity. In practice, however, banks only accept guarantees from entities with demonstrable financial capacity.
Q: Must the guarantee be notarized?
A: The Civil Code 2015 does not require notarization for guarantees. But if the parties agree to secure the guarantee with collateral, notarization/registration follows the rules for that type of security.
Q: With a parent guarantee, does the subsidiary still need collateral?
A: Depends on each bank’s credit policy. A strong parent guarantee may replace part or all collateral, but banks retain the right to require more.
Q: When does the guarantee terminate?
A: Under Article 343 of the Civil Code: when the guaranteed obligation ends (the loan is fully repaid), when the guarantee is cancelled or replaced by another security, when the guarantor has performed, or as otherwise agreed.
Sources
- Civil Code 2015, No. 91/2015/QH13 (in force as of 15/10/2026) — Article 335 (guarantee), Article 336 (scope), Article 342 (liability), Article 343 (termination).
- Law on Enterprises 59/2020/QH14, amended by Law 76/2025/QH15 (effective 01/7/2025) — Articles 4, 86, 162, 167.
- Circular 12/2022/TT-NHNN (effective 15/11/2022, in force) — Article 11 (loans subject to SBV registration).
Related
- Parent considering a direct loan instead of a guarantee? See our <a href=”https://flaw.vn/en/”>guide to interest-free parent-to-subsidiary loans</a>.
- Need a guarantee instrument reviewed before signing with a bank? <a href=”https://flaw.vn/en/”>Contact FLAT Law Firm</a>.
FLAT Law Firm — Business and investment legal counsel. This article is for general information only and does not constitute legal advice for any specific case. This draft is pending review by the QA Council (FLAW AI Legal Council) before submission for approval.