Nghị định 21/2021/ND-CP

DECREE

ON ELABORATING TO THE CIVIL CODE REGARDING SECURITY FOR FULFILLMENT OF OBLIGATIONS

Pursuant to Law on Governmental Organization dated June 19, 2015; Law on amendments to Law on Government Organization and Law on Local Governmental Organization dated November 22, 2019;

Pursuant to Civil Code dated November 24, 2015;

At request of Minister of Justice;

The Government promulgates Decree on elaborating to the Civil Code regarding security for fulfillment of obligations.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Decree elaborates on implementation of the Civil Code regarding security for fulfillment of obligations, including collateral; establishment and implementation of security for fulfillment of obligations (hereinafter referred to as “security measures”) and realization of collateral.  

Article 2. Regulated entities

1. Securing parties, secured parties and persons with secured obligations.

2. Relevant agencies, organizations and individuals.

Article 3. Term interpretation

In this Decree, terms below are construed as follows:

1. “securing party” consists of pledger, mortgagor, depositor, party putting up collateral, party making escrow deposit or buyer under property sale agreement with ownership retention, guaranteeing party, local socio-political organization in case of fidelity guarantee, party holding obligations in bilateral contracts for lien measure.

2. “secured party” consists of pledgee, mortgagee, depositee, party receiving collateral, party receiving escrow deposit or seller under property sale agreement with ownership retention, obligees, credit institution in case of fidelity guarantee, party holding rights in bilateral contracts for lien measure.

3. “person with secured obligations” refers to an individual whose obligations are secured for fulfillment via security measures. Persons with secured obligations may or may not be securing parties.

4. “assets attached to land” include houses, constructions built under investment projects for construction of houses; detached houses according to Law on Housing; other constructions; perennial plants and cultivated production forests or other items attached to land as per the law.

5. “security contract” includes property pledge agreement, property mortgage agreement, deposit agreement, collateral agreement, escrow agreement, property sale agreement with ownership retention, guarantee contract or fidelity guarantee contract.  

Security contracts can be agreement between securing parties and secured parties or agreement among securing parties, secured parties and persons with secured obligations.

Security contracts can be displayed in separate contracts or clauses regarding security for fulfillment of obligations in other civil transactions conforming to regulations and law.

6. “certificate” includes property ownership certificate, land use right certificate or other document verifying property ownership as per the law.

7. “reasonable period” refers to a period formed by habit established among parties or a period, in normal conditions, in which parties to a security contract, security measure or other subjects having relevant rights, benefits can exercise their rights and obligations.

Article 4. Adoption of regulations and law, and agreement on security for obligation fulfillment

1. In case regulations and law on land, houses, investment, enterprises, securities, insurance, financial institutions, natural resources, fisheries, forestry, aviation, maritime, Intellectual property, science, technology or other fields prescribe collateral, establishment, implementation of security measures or realization of collateral specifically, these specific regulations shall prevail.

In case securing parties, secured parties or persons with secured obligations are declared bankrupt, fulfillment of obligations regarding properties and settlement of guaranteed debt and property preservation measures shall conform to regulations and law on bankruptcy. 

2. In case parties to security for fulfillment of obligations have agreements other than those specified under this Decree and conforming to basic principles of civil laws, not violating conditions for effectiveness of civil transaction and not violating limitations on execution of civil rights according to the Civil Code and/or other relevant law provisions, conform to agreements of the parties.

3. In case property owners and secured parties employ properties to guarantee fulfillment of obligations of other individuals, comply with regulations and law on pledging, mortgaging properties. 

4. In case agreements contain details regarding security for obligation fulfillment where parties fail to accurately define security measures which are compatible with the agreements according to the Civil Code, comply with regulations on security measures satisfactory to these agreements. 

Article 5. Security for fulfillment of obligations with multiple security measures, multiple properties

1. Fulfillment of an obligation can be secured by multiple security measures.  In case this obligation is breached and both securing parties, secured parties have no agreements on selecting and adopting security measures, secured parties shall select security measures for application or apply all security measures.  

2. Fulfillment of an obligation can be secured by multiple properties.   Scope of security for obligation fulfillment of each property among collateral is determined according to agreement between securing parties and secured parties.  In case no agreement is available, any property can be used to secure fulfillment of all obligations.

Article 6. Retention, use, transfer and receipt of certificates

1. In case collateral is used to secure fulfillment of other obligations or implement other civil transactions while secured parties are retaining master registers of certificates, the secured parties shall transfer master registers of the certificates to entities in charge of relevant transactions or exercise other obligations according to agreements to enable entities in charge of relevant transactions to adopt procedures as per the law.

In case secured parties transfer master registers of certificates to entities in charge of relevant transactions, entities that receive the master registers must return the master registers as soon as they finish procedures. Failure to return master registers of certificates in a timely fashion will result in compensation incurred by secured parties.

Securing parties may use copies of certificates and master registers of valid written confirmation of secured parties regarding retention of master registers of certificates for use or circulation of properties.

2. Retention and use of certificates regarding aircraft and watercrafts shall conform to Law on Vietnam Civil Aviation and Vietnam Maritime Code.

Article 7. Entitlement for reclaiming collateral

1. Rights of secured parties for collateral in security measures that have taken effect against a third party are not changed or terminated in case collateral is transferred to other individuals as a result of gift, trade, exchange, transfer, other change in ownership, appropriation, use or benefit gain of collateral that lacks legal ground and is not specified under Clause 2 of this Article.

2. Entitlement for reclaiming of secured parties for collateral does not apply to following properties:

a) Collateral that has been sold, transferred or changed in terms of ownership under consent of secured parties and is no longer used as security for fulfillment of obligations;

b) Mortgaged properties that have been sold, replaced or exchanged according to Clause 4 Article 321 of the Civil Code;

c) Collateral is no longer available or is replaced by other collateral according to Article 21 hereof;

d) Other cases according to the Civil Code and other relevant law provisions.

3. In case securing parties are individuals who have deceased or juridical persons who have ceased to exist, entitlement for reclaiming collateral of secured parties shall not be terminated but conform to Article 658 of the Civil Code and other regulations on inheritance in the Civil Code in case securing parties are individuals who have deceased or conform to regulations and law on dissolution of juridical persons and bankruptcy in case securing parties are juridical persons who have dissolved or declared bankrupt.

Chapter II

COLLATERAL

Article 8. Collateral for security for obligation fulfillment

Collateral for security for obligation fulfillment includes:

1. Current properties or off-plan properties, except for cases where the Civil Code or other relevant laws forbid sale, transfer or other change of ownership at the time of establishing security contracts, security measures;

2. Properties sold under property sale agreements with retention of ownership;

3. Properties considered as subjects of obligations under infringed bilateral contracts in case of lien measures;

4. Properties under general public’s ownership if prescribed by relevant laws.

Article 9. Description of collateral

1. Description of collateral shall be agreed upon by securing parties and secured parties in a manner satisfactory to Clause 2, Clause 3 of this Article, Articles 12, 13, 18, and  19 hereof.

2. In case collateral is immovable property or movable property which is required by the law for registration, information described as agreed upon must conform to information on certificates.

3. In case collateral is property rights, information described as agreed upon must include name and legal basis for emergence of property rights.  

Article 10. Land use right and assets attached to land

1. Employment of land use right to guarantee fulfillment of obligations may not occur simultaneously with employment of assets attached to land; employment of assets attached to land to guarantee fulfillment of obligations may not occur simultaneously with employment of land use right.

2. In case owners and secured parties employ assets attached to land that are not required by the law for registration and have not been registered at request as security for obligation fulfillment, rights and obligations of parties shall conform to agreements in security contracts.

In case owners and secured parties agree to employ assets attached to land that are perennial plants according to Law on Cultivation, temporary constructions according to Law on Construction as security for obligation fulfillment, comply with regulations and law on security for obligation fulfillment in form of movable properties that are not aircrafts or watercrafts.

3. In case land use right or assets attached to land that are immovable properties benefiting from adjacent immovable property rights is used as security for obligation fulfillment, rights for adjacent immovable properties shall remain effective for all individuals and juridical persons.

4. Security for obligation fulfillment in form of off-plan properties does not apply to land use right.

Article 11. Property created from surface right, usufruct right

1. Properties owned by holders of surface rights according to Clause 2 Article 271 of the Civil Code shall be used as security for obligation fulfillment.

In case properties specified under this Clause are assets attached to land, conform to Clause 1 and Clause 2 Article 9, Clause 1, Clause 2, and Clause 3 Article 10 hereof.

2. Profit, interest or other properties gained from extraction or use of properties that are subjects of usufruct rights shall be used as security for obligation fulfillment. 

Article 12. Objects with auxiliary objects, integrated objects, distinctive objects

Properties used as security for obligation fulfillment include auxiliary objects, integrated objects or distinctive objects, description must include characteristics to determine these objects according to the Civil Code.

Article 13. Valuable instruments, securities, deposit balance

Valuable instruments, securities and deposit balance in credit institution, branches of foreign banks are used as security for obligation fulfillment while description of collateral must conform to regulations and law on valuable instruments, securities and financial institutions.

Article 14. Property right arising from contracts

Parties holding rights in contracts may exercise their rights to ask for debt repayment, collectibles or request payments; rights to extract, manage investment projects; rights to lease, sublet; rights to benefit from commissions, profit or other interests formed by money arising from contracts; rights to receive damages; 

Article 15. Properties formed from contribution

Contributors may use shares, stakes, right to purchase stakes or interests arising from shares, stakes in commercial juridical persons, non-commercial juridical persons that are social enterprises as security for obligation fulfillment as per relevant laws and regulations of juridical persons (if any).

Article 16. Right to extract natural resources

Entities holding right to extract natural resources as per relevant law may use such right to extract minerals; natural forestry products other than animals; natural sea products (including animals and plants); water resources (including surface water, sea water, groundwater other than natural water used for agriculture, forestry, fishery, salt industry); natural swallow nest; other natural resources having monetary value as security for obligation fulfillment.

Employment of right to extract minerals, other natural resources as security or obligation fulfillment specified under this Article must conform to regulations and law on minerals, and other regulations and law on natural resources.

Article 17. Property rights deriving from intellectual property rights, information technology, science and technology activities

Owners of property rights deriving from intellectual property rights, information technology, science technology, science and technology activities may use property rights regarding subjects of author’s rights, relevant rights, industrial ownership rights, cultivar rights; ownership right and use right of science research, technology development, technology transfer; other rights whose value is assessed in monetary value deriving from intellectual property rights, science and technology activities as security for obligation fulfillment.

Article 18. Investment project and affiliated properties

Project developers may utilize investment projects that are not prohibited by Law on Investment and other relevant laws from transfer as security for obligation fulfillment.

Project developers may use all investment projects their property rights regarding extraction, management of investment projects and other property rights or other properties affiliated to investment projects as security for obligation fulfillment.

In case investment projects used as security for obligation fulfillment are construction projects for houses, construction projects for structures other than houses or other projects that are required by relevant law provisions to obtain certificates, decisions of competent authorities or other legal basis, description under security contracts must be able to display this legal basis.

Article 19. Commodities rotating during manufacturing, business and storage processes

Commodities rotating during manufacturing, business and storage processes used as security for obligation fulfillment can be described by value or type.   Description of collateral that is warehouse must include address and code of warehouse (if any) or other signs of warehouse location.

Commodities rotating during manufacturing, business processes can be commodities in storage or commodities participating in manufacturing, business processes.

Article 20. Investment in mortgaged properties

1. In case mortgagors exercise investment rights to increase value of mortgaged properties according to Clause 2 Article 321 of the Civil Code, the increased value is included in mortgaged properties.

2. Investment in mortgaged properties requires consent of mortgagees in case:

a) A third party invests mortgaged properties;

b) Mortgagor invests in mortgaged properties thereby creates new properties that are not included in mortgaged properties agreed upon under mortgage agreements.

3. Mortgagees have the right to request termination of investment if investment specified under Clause 1 and Clause 2 of this Article reduces value of mortgaged properties.

4. In case mortgagors or third parties investing in mortgaged properties fail to comply with Clause 2 and Clause 3 of this Article and cause damage, pay damages to mortgagees.

5. In case securing parties or third parties invest in collateral within other security measures and parties have no other agreements or are not regulated otherwise by the law, comply with Clauses 1, 2, 3, and 4 of this Article.

Article 21. Fluctuation in collateral

1. In case securing parties and secured parties agree on dividing, separating collateral into multiple properties according to relevant law provisions, proceed as follows:

a) If division, separation of properties that does not alter ownership, properties that form as results of such division, separation shall remain collateral; 

b) If division, separation of properties that alters ownership, properties that form as results of such division, separation under new ownership shall no longer remain collateral. 

2. In case securing parties and secured parties agree on acquisition, merge or mix of collateral with other properties or collateral is processed into new properties, collateral shall be determined as follows:

a) If new properties are formed as results of acquisition, merge or mix and cannot be separated, the collateral acquired, merged or mixed into the new properties shall become collateral; 

b) If new objects created as results of processing are owned by securing parties, the new objects shall remain collateral.  In case new objects are not owned by securing parties, value of processed collateral shall become collateral.

3. In case securing parties and secured parties agree on using collateral to contribute to commercial juridical persons, non-commercial juridical persons that are social enterprises, shares or stakes shall be collateral, except for cases where securing parties and contributed juridical persons agree on using contributed collateral as security for obligation fulfillment.

4. In case securing parties and secured parties agree on using properties under insurance as security for obligation fulfillment or properties that are being used as security for obligation fulfillment are put under insurance and an insured event occurs, compensation or replacement properties that must be paid to insurance beneficiaries of insurance enterprises shall become collateral.

5. In case collateral is perennial plants according to Law on Cultivation are harvested or auxiliary constructions according to Law on Construction are deconstructed, yield or other properties gained from the harvest or deconstruction shall become collateral.

6. In case securing parties install, integrate software or software system for properties that are being used as security for obligation fulfillment as per relevant law provisions, property rights for the software and software system within the scope of this collateral shall be collateral.

7. In case collateral is called because securing parties violate relevant laws, securing parties must pay damages for secured parties as agreed upon under security contracts. In case securing parties receive payment and/or compensation from the Government according to relevant law provisions, properties that are paid or compensated shall become collateral.

8. In case collateral is recalled for national defense, security purposes, socio-economic development for national and public interest, compensation or replacement properties or exchanged properties according to relevant law provisions shall become collateral.

9. In case collateral is disposed, damaged entirely or deconstructed, confiscated according to decisions of competent authorities, collateral shall be considered no longer available, except for cases under Clauses 4, 5, 7, and 8 of this Article.

10. Other cases according to the Civil Code or relevant law provisions where collateral is unavailable or replaced and new properties arise or replacement properties are available, these properties shall become collateral.

Chapter III

ESTABLISHMENT AND IMPLEMENTATION OF SECURITY MEASURES

Section 1. SECURITY MEASURES ESTABLISHED UNDER AGREEMENT

Sub-section 1. EFFECTIVENESS OF SECURITY CONTRACTS AND SECURITY MEASURES

Article 22. Effectiveness of security contracts

1. Security contracts certified, verified under the Civil Code or relevant law provisions or at request shall enter into force from the date on which they are certified, verified.

2. Security contracts not specified under Clause 1 of this Article shall enter into force from the date agreed upon by all parties.  In case no agreement is made, security contracts shall enter into force from the date on which the contracts are signed.

3. In case collateral is withdrawn under agreement, sections of security contracts that relate to the withdrawn collateral shall no longer be effective; in case collateral is added or replaced, revision of security contracts relating to this collateral shall be implemented according to the Civil Code and other relevant law provisions.

4. Security measures that have not entered into effect against a third individual shall not alter or nullify security contracts.

Article 23. Effects of security measures against a third individual

1. Security measures shall only take effect against a third individual when security contracts have legally entered into force.

2. In case security measures require registration according to the Civil Code or other relevant law provisions or are registered under agreement or at request of secured parties, registration shall be carried out in competent agencies as per relevant law provisions when security measures take effect against a third individual.

3. For cases not specified under Clause 2 of this Article, effect against a third individual in case of pledge of property, deposit or security collateral measure shall start from the date on which secured parties hold collateral. 

“holding of collateral” specified under this Clause refers to when secure parties directly manage and control collateral or when other individuals manage collateral according to agreements or regulations and law and secured parties control the collateral.

4. In case collateral under security measures specified under Clause 3 of this Article is given to other individuals for management, effect against a third individual of security measures shall start from the date on which:

a) Pledgees, depositees or security collateral receiving parties hold collateral;

b) Individuals managing collateral receive collateral directly from pledgers, depositors or security collateral making parties;

c) Security contracts take effect when other individuals are directly managing properties which are used as pledge, deposit or security collateral.

5. Effect against a third individual of escrow deposit measure shall start from the date on which escrow deposit is sent to escrow accounts in credit institutions where escrow deposit is made.

Article 24. Security in form of off-plan properties

1. Secured parties shall establish rights for parts or all of collateral that is off-plan properties from the point in which parts or all of the collateral is formed.

2. Effect against a third individual of security measure in form of off-plan properties shall conform to Clauses 1, 2, 3, and 4 Article 23 hereof.

Article 25. Security for fulfillment of future obligations

1. Effectiveness of security contracts, effects against a third individual of security measures specified under Article 22 and Article 23 hereof shall remain effective for all future obligations. 

In case parties establish new security contracts or new security measures for future obligations, effects of security measures against a third individual deriving from new security contracts or new security measures shall be established again. 

2. Effectiveness of security contracts, effects of security measures against a third individual shall not be altered or nullified in case parties do not reach specific agreements on scope of future obligations, deadline for fulfilling secured obligations or period of security for obligation fulfillment. 

Article 26. Security in form of land use right, assets attached to land, properties created from surface rights, usufruct rights

1. In case of mortgaging land use right or assets attached to land according to Article 325 and Article 326 of the Civil Code, mortgage agreements and mortgage measures shall remain effective against a third individual when assets attached to land or land use right that is not collateral is traded, transferred, otherwise altered in terms of ownership or used as security for obligation fulfillment.   

2. Effectiveness of security contracts, effects of security measures in form of properties created from surface rights and/or usufruct rights against a third individual shall not be altered or nullified in case land use right with surface rights, properties subject to usufruct rights are traded, transferred, otherwise altered in terms of ownership or used as security for obligation fulfillment.

Article 27. Establishment and implementation of security contracts, security measures in form of marital property

1. In case marital properties used as security for obligation fulfillment are balance of deposit in credit institutions, branches of foreign banks, securities or other movable properties that are not required by the law for registration, either spouse who makes deposit in form of money or securities or possesses movable properties may, by themselves, establish and implement security contracts and/or security measures, except for following cases:  

a) Property policies under agreements regulate otherwise or spouses agree otherwise and secured parties have been informed of these regulations or agreements; or

b) Spouses and secured parties agree otherwise.

2. In case spouses agree on unilaterally contributing marital properties to commercial juridical persons, non-commercial juridical persons that are social enterprises or to establishment of sole proprietorships, contributors and legal owners of sole proprietorships may, by themselves, implement security contracts and security measures relating to their contributions in juridical persons and properties owned by sole proprietorships.

Cases where spouses do not produce written agreements on contributing marital properties as specified under this Clause while the contribution has been implemented as per relevant law provisions and persons who do not directly conduct business know or are supposed to know about the contribution but do not object to the contribution shall be considered to have had agreements produced.

3. In case security contracts or security measures have been established according to Clause 1 and Clause 2 of this Article and spouses divorce, persons who have established security contracts or security measures shall continue to execute said security contracts and security measures unless otherwise decided by legally valid judgments or decisions of courts.

Article 28. Change of securing parties, secured parties

1. Buyers, transferees or receivers of other transfer in terms of ownership shall become secured parties in case right for demanding debt repayment, payables or right for demanding other payments has security measures sold, transferred or otherwise altered in terms of ownership.

New secured parties must inform securing parties about change of secured parties before secured obligations are implemented according to agreements or regulations and law.

2. Inheriting parties shall become securing parties, secured parties or persons with secured obligations in case securing parties, secured parties or persons with secured obligations are reorganized juridical persons.

3. Sale, transfer or other alteration in terms of rights and/or obligations under this Article and other relevant law provisions regarding transfer of demanding right with security measures, transfer of obligations with security measures shall not require re-establishment of security contracts.

Article 29. Relationship between security contracts and contracts with secured obligations

1. Security contracts that are nullified, annulled or unilaterally terminated shall not terminate contracts with secured obligations.

2. In case contracts with secured obligations are nullified, annulled or terminated, proceed as follows:

a) terminate security contracts in case parties have not executed contracts with secured obligations;

b) do not terminate security contracts when parties have executed parts or all of contracts with secured obligations.  Secured parties have the right to realize collateral to pay for repayment obligations with parties which they have obligations to. 

Article 30. Dealing with partially nullified security contracts

1. In case a part of a security contract is nullified according to the Civil Code or other relevant regulations and law, obligations secured for implementation under nullified sections shall become unsecured obligations, including:

a) Contract sections within rights of individuals who do not participate in security contracts in case collateral is under collective ownership, except for cases specified under Article 27 hereof;

b) Contract sections related to one or multiple individuals who do not possess legal personality or legal capacity in conformity with security contracts in case securing parties or secured parties consist of multiple individuals;

c) Contract sections related to one or multiple properties ineligible for being used as security for obligation fulfillment in case an obligation is secured for fulfillment by multiple properties;

d) Contract sections violating prohibitions, contradicting social morals or restricting right execution according to the Civil Code or other relevant law provisions in case other contract sections do not commit any violation;

dd) Other sections according to the Civil Code and other relevant law provisions.

2. In case an obligation is secured by multiple individuals or secured for fulfillment by multiple properties where one or many of these individuals and/or properties under a security contract are nullified, security for obligation fulfillment under this security contract shall conform to Article 338 of the Civil Code and Clause 2 Article 5 hereof.  

Sub-section 2. PLEDGE OF PROPERTY

Article 31. Delivery of pledged property

1. Agreements on delivery of pledged property specified under Clause 1 Article 311 of the Civil Code can be the case where pledgers deliver pledged properties to pledgees or to third individuals for temporary hold. Pledges may hold pledged properties here the properties are located or in location of their choice.

2. In case pledged properties are items whose value can be lost or reduced, the pledgees that are holding the properties must inform the pledgers and request the pledgers to provide resolution within a reasonable period; if the pledgers fail to respond within the period, pledgees shall adopt necessary preventive measures.   

3. In case pledged properties held by third individuals that are facing risks of being lost, damaged, lost of value or reduced of value, rights and obligations between the third individuals and pledgees shall conform to property hold agreements.

4. Regulations under Clause 2 and Clause 3 of this Article are not applicable in case pledged properties are naturally corroded.

Article 32. Sale, replacement, exchange or gift of pledged properties

In case pledgees agree or otherwise permitted by other relevant law provisions to sell, replace, exchange or gift pledged properties, pledging measures shall be terminated from the point in time where buyers or receivers of properties establish ownership of pledged properties according to Article 161 of the Civil Code. 

Sub-section 3. MORTGAGE OF PROPERTY

Article 33. Mortgage in form of right for demanding debt repayment, collectible, other payments

Mortgage in form of right for demanding debt repayment, collectible, other payments do not require consent of persons with obligations as long as these persons must be informed by mortgagees prior to obligation fulfillment as per agreements or regulations and law.

Article 34. Mortgage relating to leased properties, lent properties

1. In case leased properties or lent properties are used for mortgaging, mortgagors must inform mortgagees.

2. In case mortgaged properties that are being leased or lent are dealt with according to Article 299 of the Civil Code, lease agreements and loan agreements shall not be terminated, and hiring parties and borrowing parties shall continue to hire and borrow the properties until the agreements expire.

3. In case mortgage has entered into effect against third individuals and mortgagors lease or lend mortgaged properties without informing mortgagees, lease agreements and loan agreements shall be terminated at the time in which mortgaged properties are dealt with.  Rights and obligations between mortgagors and hiring parties, borrowing parties shall be dealt with according to property lease agreements, property loan agreements, the Civil Code and other relevant law provisions.

Article 35. Accepting mortgage of individuals and business entities that are not credit institutions in form of land use right and assets attached to land belonging to households and individuals using land

Mortgage of individuals and business entities that are not credit institutions in form of land use right and assets attached to land belonging to households and individuals using land shall be accepted when all following conditions are met:

1. Mortgagees are business entities according to Land Law, individuals are Vietnamese nationals with full legal capacity;

2. Accepting mortgage as security for obligation fulfillment does not violate any prohibitions of the Civil Code and other relevant law provisions, and not contradict social morals in contract relationships relating to investment projects, construction projects, outsourcing projects, services and other transactions;

3. In case secured obligations include interest payment, interests that arise as a result of late payment, interest of principle of undue debt, interest of principle of due debt, interest of unpaid interest or other interests shall not exceed agreed limit of interest under Clause 2 Article 357, Clause 5 Article 466 and Article 468 of the Civil Code.    In case agreements on taking actions against failure to repay debt within the deadline of parties with obligations are produced while no other regulations and law, take actions against each case of failure to repay debt in a timely manner only once;

4. Other conditions for entering into effect of civil transactions according to the Civil Code and other relevant law provisions.

Article 36. Resolutions for cases where mortgaged properties are subjects of nullified civil transactions

1. In case properties that are subjects of nullified civil transactions are mortgaged and have been transferred to mortgagees in cases specified under Clause 1 and Clause 2 Article 133 of the Civil Code, mortgage agreements shall not be nullified; rights and obligations of relevant parties shall conform to Clause 3 Article 133 of the Civil Code.

2. Transfer of mortgaged properties specified under Clause 1 of this Article refers to when mortgagors do not deliver mortgaged properties while mortgagees have obtained certificates for mortgaged properties as agreed upon or while mortgagees have adopted other necessary practical measures to prevent mortgagors from violating obligations under Article 320 of the Civil Code.

Sub-section 4. DEPOSIT AND SECURITY COLLATERAL

Article 37. Cases where deposit and advance are unidentifiable

In case a party to a contract hands an amount of money to the other party without identifying whether the money is deposit or advance, the money shall be considered advance.

Article 38. Rights and obligations of parties in deposit, security collateral

1. Depositors and parties putting up collateral have the rights and obligations to:

a) request depositees and parties receiving collateral to cease extracting, using or establishing civil transactions for deposited properties and security collateral properties; preserve and keep deposited properties and security collateral properties from losing value;

b) exchange and replace deposited properties, security collateral properties or include deposited properties, security collateral properties in other civil transactions when depositees and parties receiving security collateral agree;

c) pay for depositees, parties receiving security collateral appropriate costs for managing, preserving deposited properties and security collateral properties.

Appropriate costs specified under this Point are necessary, legitimate expenditure which, in normal conditions, depositees and parties receiving security collateral must pay for to prevent deposited properties and security collateral properties from going missing, being damaged or destroyed;

d) register property ownership or fulfill other obligations as per the law to enable depositees and parties receiving security collateral to possess deposited properties and security collateral properties specified under Point b Clause 2 of this Article;

dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

2. Depositees and parties receiving collateral have the rights and obligations to:

a) request depositors and parties putting up security collateral to cease exchanging, replacing or establishing other civil transactions with deposited properties and security collateral properties without consent of depositees and parties receiving security collateral;

b) possess deposited properties in case depositors violate commitment regarding contract conclusion and execution; possess security collateral properties in case hired properties are no longer available to be returned to depositees;

c) preserve deposited properties and security collateral properties;

d) refrain from establishing civil transactions, extracting, using deposited properties or security collateral without  consent of properties of depositors, parties putting up security collateral;

dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

Sub-section 5. ESCROW DEPOSIT

Article 39. Submission and payment for escrow deposit

1. Money for escrow deposit (hereinafter referred to as “escrow deposit”) is deposited in escrow accounts in credit institutions as agreed upon or by parties holding right to appoint to secure obligation fulfillment.

2. Escrow deposit and single or multiple escrow instances shall be agreed upon by parties or prescribed by the law.

3. In case secured obligations are infringed, escrow deposit shall be used for paying for obligations and damages minus service fee (hereinafter referred to as “payment for obligations”).

Article 40. Rights and obligations of parties in escrow deposit

1. Credit institutions where escrow deposits are made have the rights and obligations to:

a) benefit from service fee;

b) request parties holding rights to comply with agreements on escrow deposits to receive payment for obligations from escrow deposits;

c) pay for obligations at request of parties holding rights within the scope of escrow deposits;

d) return remaining escrow deposits to parties making deposit after paying for obligations at request of parties holding rights and when terminating escrow deposit;

dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

2. Parties making escrow deposit have rights and obligations:

a) agree with credit institutions where escrow deposits are made regarding payment conditions as per commitment with parties holding rights;

b) request credit institutions where escrow deposits are made to return deposits according to Point d Clause 1 of this Article; may return interest in case agreed upon with credit institutions where escrow deposits are made;

c) withdraw, add deposits or include deposits in other civil transactions under consent of parties holding rights;

d) submit deposits in credit institutions where deposits are made;

dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

3. Parties holding rights in escrow deposits have rights and obligations to:

a) request credit institutions where deposits are made to pay for obligations in an adequate and timely manner;

b) comply with procedures at request of credit institutions where escrow deposits are made when executing right under Point of this Clause;

c) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

Sub-section 6. RETENTION OF OWNERSHIP

Article 41. Rights and obligations related to purchased properties

1. In case the buyers must return purchased properties to the sellers as a result of infringing payment obligation and property value is greater than original property value because the buyers or third parties invest in property value, the sellers must return the difference to individuals who invest in the properties.

Investment in properties must conform to Clause 2 Article 20 hereof.

2. Buyers are not responsible for natural depreciation of properties with retained ownership.

Article 42. Transfer of rights and obligations regarding retention of ownership

1. If the sellers transfer the right to demand payment from the buyers, right to retain ownership shall also be transferred to receivers of right to demand payment. 

2. If a buyer sells or otherwise alters rights for purchased properties after retaining registered ownership, individual(s) who buys or receives rights for purchased properties must inherit obligations to retain ownership. 

Sub-section 7. GUARANTEE

Article 43. Guarantee agreement

1. Guarantors may agree with obligees on adopting security measures in form of properties to secure fulfillment of their obligations. 

2. In case guarantors commit to conduct tasks on behalf of obligors, guarantors must possess legal personality and/or legal capacity suitable for secured obligations.

3. Guarantee agreements can be displayed in separate contracts for guarantee, letters of guarantee or other forms.

Article 44. Fulfillment of secured obligations

1. Guarantors must fulfill secured obligations when secured obligations are infringed as a result of:

a) obligors fail to fulfill obligations in a timely manner; or

b) obligors fail to fulfill obligations before the deadline agreed upon; or

c) obligors fail to adequately fulfill obligations; or

d) obligors fail to correctly fulfill obligations; or

dd) obligors lack capacity for fulfilling obligations according to Clause 2 Article 335 and Clause 1 Article 339 of the Civil Code; or

e) other cases agreed upon or prescribed by the Civil Code and relevant law provisions.

2. If basis for any case under Clause 1 of this Article is present, obligees shall inform guarantors for fulfillment of secured obligations.  Guarantors have the rights to refuse fulfilling obligations in case basis provided by obligees is not within scope of security.

3. Guarantors must perform guarantee obligations within deadline agreed upon. In case no agreement is reached, guarantors must fulfill obligations within a reasonable period from the date on which they receive notice of obligees.

4. If guarantors have fulfilled guarantee obligations, obligees must inform obligors. In case obligors fulfill secured obligations, guarantors have the rights to request obligees to return received properties or value corresponding to the fulfilled obligations.

Sub-section 8. FIDELITY GUARANTEE

Article 45. Guarantee in form of fidelity

In case of security for obligation fulfillment in form of fidelity guarantee, organizations in communes or wards of Vietnam Farmers' Union, Ho Chi Minh Communist Youth Union, Vietnam Women's Union, Vietnam Veterans Association, Vietnam Fatherland Front or local Trade Unions shall act as securing parties utilizing fidelity guarantee, unless otherwise prescribed by Regulations of these bodies.

Article 46. Rights and obligations of parties in fidelity guarantee

1. Securing parties utilizing fidelity guarantee have rights and obligations to:

a) take charge or cooperate with lending credit institutions in assisting, guiding, enabling debtors; supervise purposeful and effective use of loan; expedite adequate and timely debt repayment; 

b) verify at request of lending credit institutions regarding conditions of debtors;

c) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

2. Lending credit institutions have the rights and obligations to:

a) request securing parties that utilize fidelity guarantee to cooperate in examining use of debt and expedite debt repayment;

b) cooperate with securing parties that utilize fidelity guarantee in granting loan and recovering debt;

c) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

3. Debtors have the rights and obligations:

a) use loan for business operation, daily necessities or consumption suitable with loan purposes;

b) enable lending credit institutions and securing parties that utilize fidelity guarantee to inspect the use of loan;

c) fully repay principal and interest (if any) in a timely manner to lending credit institutions;

d) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.

Section 2. LIEN IN PROPERTY

Article 47. Lien right guarantee

1. In case competent agencies or competent individuals as per relevant law provisions request lienors to hand over held properties to settle the case as per the law, handing over of held properties in such case shall not at as the basis for termination of lien in properties.

2. In case property owners or other competent individuals include held properties in civil transactions, lienors shall not have obligations to hand properties to parties that participate in the civil transactions, except for following cases: 

a) obligations to lienors have been fulfilled;

b) obligations to lienors have not been fulfilled but cases where lien in properties is terminated according to Clauses 1, 2, or 5 Article 350 of the Civil Code are applied.

Article 48. Lien right execution

1. Lienors shall only hold properties or parts of properties directly related to infringed obligations. In case subjects of infringed obligations include multiple properties, lienors have the rights to select properties to hold.

2. In case subjects of infringed obligations are works that create products, lienors shall hold created products or materials necessary for production.   In case subjects of infringed obligations are works that do not create products, lienors shall hold tools and equipment handed over by obligors to conduct tasks.

3. In case held properties generate profit that is not a result of extraction of held properties, lienors must hand the generated profit to obligors.   In case lienors are managing profit where subjects of obligations have been handed over to obligors before the obligors infringe obligations, lienors shall hold the profit until obligations to the lienors have been fulfilled.

Chapter IV

REALIZATION OF COLLATERAL

Article 49. General provisions regarding realization of collateral

1. Realization of collateral must conform to agreement of parties, this Decree and relevant law provisions.

In case collateral is right to extract minerals or right to extract other natural resources, realization of collateral must conform to regulations and law on minerals, other natural resources and relevant law provisions. 

2. In case secured parties realize collateral on the basis of agreements under security contracts, letter of attorney or written consent of securing parties is not required.

3. In case the Civil Code or other relevant law provisions prescribe properties used as security must be realized to enable securing parties to fulfill other obligations, the properties shall then be realized according to said regulations.

4. Realization of collateral conducted by secured parties to recover debt is not a business activity involving properties of the secured parties. 

Article 50. Resolution for cases where securing parties or persons with secured obligations are deceased or decided by courts to have been deceased

In case securing parties or persons with secured obligations are deceased or decided by courts to have been deceased, fulfillment of obligations and realization of collateral shall conform to security contracts or other agreements established prior to the point where securing parties or persons with secured obligations are deceased or decided by courts to have been deceased.

In case individuals inheriting the properties which is collateral or individuals managing the properties that are collateral are identified, secured parties must inform these individuals about realization of collateral using defined address in a manner similar to how they would inform securing parties according to Article 51 hereof.  

In case individuals inheriting the properties which is collateral or individuals managing the properties which is collateral are not identified while secured obligations reach deadline for fulfillment, secured parties have the rights to request courts for resolution.

Article 51. Notice on realization of collateral

1. Written notice on realization of collateral shall contain following basic details:

a) Reasons for realization of collateral;

b) Collateral to be realized;

c) Time and location of realizing collateral.

2. Methods of informing about realization of collateral shall conform to agreements. In case no agreement is reached, secured parties shall send written notice in person to securing parties or via authorized personnel, post service, data message or other methods to address provided by securing parties.

In case securing parties change address without informing secured parties, address of securing parties shall be determined to be the originally provided address, address under contracts or according to information stored in agencies registering security measures.  

3. In case a property is used as security for multiple obligations or held by other individuals, written notice must be sent simultaneously to all securing parties, co-secured parties (if any) and individuals holding collateral.

In case a property is used as security for multiple obligations under multiple secured parties, in addition to informing methods under Clause 2 of this Article, registration for notice on realization of collateral is also available according to regulations and law on registration for security measures.

4. Deadline for informing securing parties about realization of collateral must conform to security contracts or other agreements. In case no agreement is reached, perform within a reasonable period but not more than 10 days for movable properties or 15 days for immovable properties until the point of realizing collateral, except for cases of immediate realization according to Clause 1 Article 300 of the Civil Code.

In case collateral is posted securities, commodities on the market or other movable properties that can be specifically evaluated on the market, conform to Clause 3 Article 52 hereof.

Article 52. Delivery of collateral, realization of pledged properties, mortgaged properties

1. Parties may agree on delivering and/or realizing parts or all of collateral.

In case an obligation is secured by multiple properties while parties do not reach agreements on selecting collateral for realization and relevant law provisions do not specify otherwise, secured parties have the rights to select collateral for realization or realize all collateral.

2. In case parties agree on realizing pledged properties or mortgaged properties in form of bidding and produce separate agreements on bidding procedures and/or organizing property bidding, property realization shall conform to these agreements.  In case no separate agreements are produced, conform to regulations and law on property bidding.

3. In case parties do not produce agreements on methods of realizing collateral which is posted securities, commodities on the market or other movable properties that can be specifically evaluated on the market, secured parties may realize according to price of stock market or relevant trading platforms as long as they must inform securing parties and other co-secured parties (if any) before realizing the properties. 

4. Deadline for realizing collateral must conform to security contracts or other agreements. In case no agreements are produced, secured parties shall decide on deadline for realization after informing as specified under Clause 4 Article 51 hereof.

5. Securing parties or individuals holding collateral are obliged to hand over collateral to secured parties according to notice on realization of collateral specified under Article 51 hereof.

6. In case securing parties or individuals holding properties do not hand over collateral, secured parties have the rights to consider and conduct physical inspection of collateral to prevent dispersion of collateral, realize or request courts for resolution.

7. In case individuals holding collateral are third individuals, securing parties and individuals holding properties are responsible for cooperating with secured parties in considering and conducting physical inspection of collateral.

8. Securing parties or individuals holding collateral that do not hand over collateral according to agreements, do not hand over collateral according to Article 301 of the Civil Code, do not cooperate or obstruct consideration or physical inspection of collateral thereby causing damage to secured parties must pay damages. 

Article 53. Rights and obligations of secured parties during the period where collateral has not been realized

1. Secured parties are responsible for preserving collateral in case they hold collateral for realization.

2. While waiting for realization of collateral, secured parties may extract, use collateral or allow securing parties or authorize third parties to extract, use collateral according to characteristics and functions of the collateral.  Permission, authorization or disposal of profit generated from extraction and use of collateral must be recorded in written form.

3. Profit generated from extraction and use of collateral shall be used for paying secured parties for secured obligations after subtracting necessary costs for extraction and use of collateral.

Article 54. Realization of collateral that is integrated objects; properties with attaching properties; rights for demanding debt repayment, collectible, other payments; valuable instruments, securities, deposit balance; bill of lading and transport documents   

1. Secured parties may simultaneously realize all parts and sections of collateral that is integrated objects.  In case collateral includes multiple attaching properties which can be divided, realize each property individually otherwise realize all properties simultaneously.

2. Secured parties have the rights to request third parties who hold obligations to make payments, repay debt or other obligations to transfer money or other properties to the secured parties. Secured parties must prove their rights at request of obligors.

3. Secured parties shall realize collateral that is valuable instruments, securities, balance of deposit in credit institutions or branches of foreign banks according to agreements of parties or Article 52 hereof.

4. Secured parties upon exercising possessory right for commodities specified on collateral which is bill of lading or transport documents shall have obligations to present bill of lading or transport documents according to maritime laws, aviation laws or relevant law provisions. In case law provisions mentioned above do not prescribe, realization of commodities specified bill of lading or transport documents shall conform to Article 52 hereof.

5. In case secured parties are also persons with payment obligations, secured parties may offset obligations originating from generated money or properties specified under this Article. 

Article 55. Realization of collateral that is off-plan properties

Realization of collateral that is off-plan properties shall conform to agreements of parties. These agreements may contain following details:

1. In case collateral that has not been created or has not been issued with certificates after being created are required by the law for registration, secured parties may transfer property sale agreements and other contracts regarding establishing rights for off-plan properties, receiving collateral to replace fulfillment of secured obligations or realizing off-plan properties as per the law; 

2. In case collateral has been created and securing parties have established ownership for the collateral, secured parties may receive this collateral as substitute for fulfillment of secured obligations or realize currently available properties according to general provisions on realizing collateral.

Article 56. Realization of mortgaged properties under investment  

1. In case investment in mortgaged properties specified under Article 20 hereof results in creation of new properties or additional properties created from investment (hereinafter referred to as “created properties”) are not affiliated to mortgaged properties according to mortgage agreements, proceed as follows: 

a) In case created properties can be separated from mortgaged properties without causing loss or reduction in value of mortgage properties, realization of properties shall not include created properties which are handed over to investors by the secured parties;

b) In case created properties cannot be separated as specified under Point a of this Clause, properties to be realized shall include the created properties and investors shall receive payment for the created properties incurred by the secured parties.

2. In case created projects are used both for mortgaging and as security for fulfillment of other obligations simultaneously, comply with regulations on one property used as security for fulfillment of multiple obligations.

3. In case created properties are no longer used for mortgaging but are still used as security for fulfillment of other obligations, proceed as follows:

a) In case created properties can be separated from mortgaged properties without causing loss or reduction in value of the mortgaged properties, secured parties may then separate the properties which they receive as security;  

b) In case created properties cannot be separated as specified under Point a of this Clause, properties shall be realized according to Point b Clause 1 of this Article.  Value of created projects shall be paid by mortgagees to other secured parties.

4. Mortgagees shall receive damages according to Clause 4 Article 20 hereof taken from profits generated by realization of collateral.

5. In case of realization of  invested collateral within other security measures where parties have no other agreements or the law does not otherwise regulate, comply with Clauses 1, 2, 3, and 4 of this Article.

Article 57. Receiving returned collateral

1. Secured parties shall receive returned collateral in case:

a) obligations have been fulfilled according to Article 302 of the Civil Code; or

b) collateral has been replaced or substituted by other properties;

c) secured obligations have been paid for by offsetting obligations;

d) other cases were collateral is not realized according to agreements, the Civil Code or other regulations and law.

2. For cases under Clause 1 of this Article where regulations and law on property bidding or other relevant laws prescribe obligations to be fulfilled before receiving returned collateral, securing parties shall only receive properties again after these obligations are fulfilled. 

Article 58. Purchase, receipt of transfer or receipt of other change regarding ownership of collateral

1. Buyers, receivers of transfer and receivers of other change regarding ownership of collateral (hereinafter collectively referred to as “transfer receivers”) holding ownership of properties shall be issued with certificates by competent agencies as per the law.

Transfer receivers for collateral that is shares and/or stakes in commercial juridical persons, non-commercial juridical persons that are social enterprises shall inherit rights and obligations of securing parties for these shares and/or stakes in the juridical persons.

2. In case collateral has been realized and eligible for ownership transfer, competent agencies shall comply with any of the following documents to adopt procedures for transferring ownership to transfer receivers:

a) Sale contracts, transfer contracts, other transfer contracts for ownership of collateral between property owners or individuals holding right to sell properties and transfer receivers;

b) Sale contracts of bidding properties;

c) Security contracts or other documents proving transfer of collateral ownership.

3. In case regulations and law require transfer of ownership to include written consent of owners, written agreements between property owners, individuals holding right to sell properties with transfer receivers or between judgment debtors with transfer receivers regarding realization of collateral, documents specified under Clause 2 of this Article shall be used instead of the aforementioned written instruments.

4. Buyers who buy collateral via property bidding in competent organizations shall receive protection for their rights according to the Civil Code, Law on Property Bidding and other relevant law provisions.

Article 59. Accepting collateral as substitutes for fulfillment of secured obligations

1. In case securing parties and secured parties agree on realizing collateral in a manner where secured parties accept collateral as substitutes for fulfillment of secured obligations, secured parties may establish ownership according to article 223 of the Civil Code.

2. Secured parties must provide security contracts or other documents proving that they hold the right to accept collateral as substitutes for fulfillment, certificates regarding collateral (if any) for competent agencies to adopt procedures for transferring property ownership, land use right as per relevant laws.  

Chapter V

IMPLEMENTATION

Article 60. Entry into force

1. This Decree comes into force from May 15, 2021.

2. Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions, Decree No. 11/2012/ND-CP dated February 22, 2012 of the Government on amendment to Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions expire from the effective date hereof.

Article 61. Transition clauses

1. Security contracts and security measures established and/or executed before effective date hereof shall comply with Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions, Decree No. 11/2012/ND-CP dated February 22, 2012 of the Government on amendment to Decree No. 163/2006/ND-CP dated December 29, 2006 of the Government on secured transactions expire from the effective date hereof.

2. In case of security contracts and security measures specified under Clause 1 of this Article that are not being executed in conformity with this Decree, parties may agree on revising security contracts and/or security measures according to this Decree and in order to comply with this Decree. 

Article 62. Responsibilities for implementation

1. Minister of Justice shall organize implementation of this Decree.

2. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities, relevant agencies, organizations and individuals are responsible for the implementation of this Decree.