Decree No. 19/2019/ND-CP regulations on tontine

DECREE

On tontine^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the November 24, 2015 Civil Code;

At the proposal of the Minister of Justice,

The Government promulgates the Decree on tontine.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Government prescribes principles of organizing tontine; conditions for becoming tontine members or tontine holders; participation in and withdrawal from tontine; tontine agreements; annuity-receiving order and interest rates; and rights, obligations and legal liabilities of tontine members and tontine holders.

Article 2.Subjects of application

This Decree applies to:

1. Tontine participants, including tontine members and tontine holders;

2. Other related agencies, organizations and individuals.

Article 3.Principles of organizing tontine

1. The organization of tontine must strictly comply with the fundamental principles of civil law prescribed in Article 3 of the Civil Code.

2. Tontine may be organized only for the purpose of mutual assistance among tontine participants.

3. It is prohibited to organize tontine to practice usury, appropriate property by swindle or abuse of trust, illegally raise funds, or commit other violations of law.

Article 4.Interpretation of terms

In this Decree, the terms below are construed as follows:

1. Tontine group means a tontine formed according to specific agreements between tontine participants on time, annuity share, annuity-contributing and -receiving procedures, and rights and obligations of the tontine holder (if any) and tontine members.

2. Tontine member means a person who participates in a tontine group, contributes annuity shares and receives annuities and interests (if any).

3. Tontine holder means a person who organizes and manages a tontine group, collects annuity shares and hands over those shares to the member entitled to receive them in each tontine opening time till the closing of the tontine group.  The tontine holder may also be a tontine member in the same tontine group.

4. Annuity share means a determined sum of money or another asset (below referred to as money) which, as agreed upon, a member must contribute at each tontine opening time.

5. Tontine opening time means the time when tontine members contribute annuity shares and a tontine member receives the annuities as agreed upon by all tontine members.

6. Interest-free tontine means a tontine whereby members receive annuities at the tontine opening time without having to pay interests to other members.

7. Interest-bearing tontine means a tontine whereby members receiving annuities at the tontine opening time shall pay interests to other members.

8. Commission tontine means an interest-bearing or interest-free tontine whereby the annuity-receiving member shall pay a commission to the tontine holder at a rate agreed upon among tontine members.

Article 5.Conditions for becoming tontine members

1. A member is a person who is aged full 18 years or older and does not fall into the case of losing civil act capacity, having limited civil act capacity or having difficulty in cognition or act control as prescribed in the Civil Code.

A person aged from full 15 years to under 18 years and having private property may become a tontine group’s member. If he/she uses his/her private property being immovable property or movable property subject to registration for participating in a tontine group, he/she shall obtain the consent of his/her at-law representative.

2. Other conditions as agreed upon among tontine participants.

Article 6.Conditions for acting as tontine holders

1. Tontine holder is a person who is aged full 18 years or older and does not fall into the case of losing civil act capacity, having limited civil act capacity or having difficulty in cognition or act control as prescribed in the Civil Code.

2. In case members self-organize a tontine group, the tontine holder is a person who is elected by more than a half of the total members, unless otherwise agreed upon by the members.

3. Other conditions as agreed upon among tontine participants.

Article 7.Forms of tontine agreement

1. Tontine agreements shall be expressed in writing.  Written agreements on tontine may be notarized or certified if so requested by tontine participants.

2. If a tontine agreement is revised, the revised agreement shall be made in accordance with Clause 1 of this Article.

Article 8.Contents of a tontine agreement

1. A tontine agreement must contain the following principal contents:

a/ Full name, people’s identity card or citizen identity card or passport number; date of birth; and place of residence of the tontine holder (where the tontine holder permanently lives or currently lives if it is impossible to determine his/her permanent place of residence);

b/ Number of members, full name, people’s identity card or citizen identity card or passport number, date of birth, and place of residence of each member;

c/ Annuity share;

d/ Tontine group duration, and tontine opening time;

dd/ Annuity-contributing and -receiving procedures.

2. Apart from the contents specified in Clause 1 of this Article, a tontine agreement may also state:

a/ Commission rate for the tontine holder, for a commission tontine;

b/ Interest rate, for an interest-bearing tontine;

c/ Responsibility for making a deposit or another measure to secure the tontine holder’s performance of his/her obligations;

d/ Handover of annuity shares;

dd/ Participation in, withdrawal from, and termination of the tontine group;

e/ Liabilities for breach of obligations;

g/ Other contents as agreed upon.

Article 9.Participation in a tontine group

Unless otherwise agreed upon, a person may become a new tontine member when:

1. He/she obtains the consent of the tontine holder and all tontine members.

2. He/she has fully contributed annuity shares by the time of participation as agreed upon.

Article 10.Withdrawal from a tontine group

1. A member who has received the annuities may withdraw from the tontine group provided that he/she contributes outstanding annuity shares to the tontine holder or to the tontine book keeper in case there is no tontine holder under Clause 1, Article 12 of this Decree.

2. If a member who has contributed annuity shares but has not received annuities wishes to withdraw from the tontine group, he/she:

a/ May receive back the annuity shares as agreed upon. If there is no such agreement, he/she may receive back the contributed annuity shares at the time of completion of the tontine group; or receive back the contributed annuity shares at the time of withdrawal if he/she can give plausible reasons;

b/ Must reimburse part of the received interests (if any) and fulfill other obligations as agreed upon; or pay compensation for any damage caused in accordance with the Civil Code.

3. In case a tontine participant dies, his/her rights and obligations established in the tontine shall be settled in accordance with the law on inheritance. The heir may participate in the tontine as agreed upon between him/her and tontine participants.

Article 11.Termination of a tontine group

1. A tontine group shall terminate in any of the following cases:

a/ As agreed upon by the tontine participants;

b/ The members’ purpose for participation in the tontine group has been achieved;

c/ Other cases as prescribed by law.

2. If a tontine group terminates, the rights and obligations of the tontine participants shall be settled in accordance with the tontine agreement and the Civil Code.

Article 12.Tontine books

1. The tontine holder shall open and keep a tontine book, unless it is agreed upon by tontine members that one of them shall open and keep the tontine book. In case a tontine group has no tontine holder, tontine members may authorize a member to open and keep the tontine book.

2. A tontine book must contain the following details:

a/ Contents of the tontine agreement prescribed in Clause 1, Article 8 of this Decree;

b/ Annuity share contribution date, contributed amount of each member;

c/ Annuity-receiving date, received amount of each annuity-receiving member;

d/ Signatures or fingerprints of tontine members when they contribute and receive annuities;

dd/ Other contents relating to activities of the tontine group.

Article 13.Receipt

When contributing or receiving annuity shares, receiving or paying interests, or conducting any other related transactions, a tontine member is entitled to require the tontine holder or the tontine book keeper to issue a receipt.

Article 14.Notification of organization of a tontine group

1. The tontine holder shall notify in writing the commune-level People’s Committee of the place where he/she resides of the organization of a tontine group in any of the following cases:

a/ Organizing a tontine group with the value of annuity shares of at least VND 100 million at a tontine opening time;

b/ Organizing two or more tontine groups.

2. Contents of a written notice:

a/ Full name, people’s identity card or citizen identity card or passport number, date of birth, and place of residence of the tontine holder;

b/ Tontine group starting time and closing time;

c/ Total value of annuity shares at the tontine opening time;

d/ Total number of members.

3. If there is any change in the information on the tontine group which has been notified under Clauses 1 and 2 of this Article, the tontine holder shall notify such change in writing to the commune-level People’s Committee of his/her place of residence.

4. A tontine holder who fails to fulfill the obligation prescribed in Clause 1 of this Article shall be administratively sanctioned in accordance with law.

Chapter II

RIGHTS AND OBLIGATIONS OF TONTINE MEMBERS AND TONTINE HOLDERS

Article 15.Rights of tontine members

1. A member of an interest-free tontine has the following rights:

a/ To contribute one or more than one annuity share at a tontine opening time;

b/ To receive annuities;

c/ To transfer one or all of annuity shares to another person in accordance with the Civil Code;

d/ To request the tontine holder or tontine book keeper to let him/her see and copy the tontine book and to provide information relating to the tontine group;

dd/ To request the tontine holder to contribute the annuity share which a member has not contributed on due date, unless otherwise agreed upon;

e/ To request the tontine holder to properly perform his/her obligations prescribed in Article 18 of this Decree;

g/ To request other members to perform their obligations prescribed in Article 16 of this Decree;

h/ The rights of members prescribed in Clause 1, Article 7, and Articles 9, 10 and 13, of this Decree;

i/ To send notices as prescribed in Article 14 of this Decree in case the tontine holder fails to do so;

k/ Other rights as prescribed by law and the tontine agreement.

2. A member of an interest-bearing tontine has the following rights:

a/ The rights prescribed in Clause 1 of this Article;

b/ To offer interest rates at each tontine opening time, except the case specified in Clause 3, Article 20 of this Decree;

c/ To receive the annuities before other members if he/she offers the highest interest rate at the tontine opening time, unless otherwise agreed upon;

d/ To enjoy interests from the annuity-receiving members.

3. A member of a commission tontine has the following rights:

a/ The rights prescribed in Clause 1 of this Article in case of interest-free tontine, or the rights prescribed in Clause 2 of this Article in case of interest-bearing tontine;

b/ To agree on the commission for the tontine holder.

Article 16.Obligations of tontine members

1. A member of an interest-free tontine has the obligations:

a/ To contribute annuity shares as agreed upon;

b/ To notify his/her new place of residence, if any, to other participants in the tontine group;

c/ If having received the annuities before other members, to contribute his/her annuity shares so that other members can receive them until the last member receives the annuities;

d/ The obligations of members in implementing the provisions of Article 10, and Clause 2, Article 11, of this Decree;

dd/ In case of absence of a tontine holder, the member authorized to open and keep the tontine book has the obligations prescribed in Clause 1, Article 12, and Clauses 5 and 6, Article 18, of this Decree.

2. A member of an interest-bearing tontine has the following obligations:

a/ The obligations prescribed in Clause 1 of this Article;

b/ To pay, upon receipt of annuities, interests to other members who have not yet received the annuities.

3. A member of a commission tontine has the following obligations:

a/ The obligations prescribed in Clause 1 of this Article in case of interest-free tontine or the obligations prescribed in Clause 2 of this Article in case of interest-bearing tontine;

b/ To pay commission to the tontine holder upon receipt of annuities as agreed upon.

Article 17.Rights of tontine holders

1. The holder of an interest-free tontine has the following rights:

a/ To collect annuity shares of members;

b/ To request members who fail to contribute their annuity shares to refund the annuity shares he/she has contributed on their behalf;

c/ The rights of a tontine holder in implementing the provisions of Clause 1, Article 7, and Articles 9 and 10, of this Decree;

d/ Other rights as agreed upon.

2. The holder of an interest-bearing tontine has the following rights:

a/ The rights prescribed in Clause 1 of this Article;

b/ To receive annuity shares in the first tontine opening time without having to pay interests to other members if he/she is also a member, unless otherwise agreed upon.

3. The holder of a commission tontine has the following rights:

a/ The rights prescribed in Clause 1 of this Article in case of interest-free tontine or the rights prescribed in Clause 2 of this Article in case of interest-bearing tontine;

b/ To enjoy commission from annuity-receiving members.

Article 18.Obligations of a tontine holder

1. To notify members of his/her new place of residence, if any.

2. To fully notify those who wish to participate in the tontine group of the number of tontine groups; annuity shares and tontine opening time; and number of members of each tontine group of which he/she acts as the tontine holder.

3. To hand over the annuities to the annuity-receiving members at each tontine opening time.

4. To pay annuity shares on behalf of members who fail to contribute their shares at a tontine opening time, unless otherwise agreed upon.

5. To let members see and copy the tontine book and to provide information relating to the tontine group upon request.

6. To send notices as prescribed in Clause 1, Article 14 of this Decree.

7. The obligations prescribed in Clause 1, Article 12, and Article 13, of this Decree.

8. Other obligations as agreed upon or prescribed by law.

Chapter III

ANNUITY-RECEIVING ORDER AND INTEREST RATES

Section 1

ANNUITY-RECEIVING ORDER

Article 19.Annuity-receiving order in an interest-free tontine

1. The annuity-receiving order at each tontine opening time shall be determined by drawing lots, voting or selection, or in other forms as agreed upon by tontine participants.

2. If tontine participants cannot reach an agreement on the annuity-receiving order, the drawing of lots shall apply.

Article 20.Annuity-receiving order in an interest-bearing tontine

1. Unless otherwise agreed upon, the annuity-receiving member in a tontine opening time is the one who offers the highest interest rate.

2. Unless otherwise agreed upon, if in a tontine opening time, many members offer the same highest interest rate, they will draw lots to identify the member to receive the annuities.

3. Except the case specified in Clause 4 of this Article, members who have received the annuities may not participate in offering interest rates in subsequent tontine opening times.

4. If a member contributes more than one annuity share at a tontine opening time, he/she is entitled to offer interest rates until the number of times of annuity receipt corresponds to the number of annuity shares he/she has contributed at a tontine opening time.

Section 2

INTEREST RATES

Article 21.Interest rate in an interest-bearing tontine

1. Interest rate in an interest-bearing tontine may be agreed upon by the tontine members or offered by every tontine member in order to receive the annuities in each tontine opening time but must not exceed 20%/year of the total value of to-be-contributed annuity shares minus the contributed annuity shares of the remaining period of the tontine group. If the maximum interest rate is adjusted by a competent agency under Clause 1, Article 468 of the Civil Code, the adjusted interest rate shall prevail.

2. If the interest rate agreed upon by the tontine members or offered by every tontine member in order to receive the annuities in each tontine opening time exceeds the maximum interest rate prescribed in Clause 1 of this Article, the excessive rate shall not apply.

Article 22.Interest rate in case of late contribution or late handover of annuity shares

1. If the tontine holder fails to hand over or fully hand over annuity shares to the annuity-receiving member in a tontine opening time, and if members who have not received annuities fail to contribute annuity shares or fully contribute annuity shares, they shall pay late-payment interest corresponding to the late payment duration.

Interest rates applicable to late contribution or late handover of annuity shares shall be agreed upon by members but must not exceed the maximum interest rate prescribed in Clause 1, Article 21 of this Decree for the late-paid amount based on the late payment duration. If there is no such agreement, the interest rate is 50% of the maximum interest rate prescribed in Clause 1, Article 21 of this Decree for the late-paid amount based on the late payment duration.

2. If a member who has received annuities fails to contribute annuity shares or fully contribute annuity shares at a tontine opening time, he/she shall pay an interest as follows:

a/ In case of interest-free tontine, the interest rate shall be agreed upon by members but must not exceed the maximum interest rate prescribed in Clause 1, Article 21 of this Decree for the late-paid amount based on the late payment duration. If there is no such agreement, the interest rate is 50%/year of the maximum interest rate prescribed in Clause 1, Article 21 of this Decree of the late-paid amount based on the late payment duration.

b/ In case of interest-bearing tontine, the interest rate is equal to the rate prescribed in Clause 5, Article 466 of the Civil Code applicable to interest-bearing tontine.

Chapter IV

LEGAL LIABILITIES OF TONTINE HOLDERS AND TONTINE MEMBERS

Article 23.Liabilities of tontine holders for failure to hand over or fully hand over annuities to annuity-receiving members

If a tontine holder fails to hand over annuity shares to an annuity-receiving member at a tontine opening time, he/she shall take liability to such member as follows:

1. To properly perform the obligations prescribed in Clauses 3 and 4, Article 18 of this Decree.

2. To pay a late-payment interest to the annuity-receiving member as prescribed in Clause 1, Article 22 of this Decree.

3. To pay a fine if so agreed upon by tontine participants as prescribed in Article 418 of the Civil Code.

4. To pay compensation for any damage caused.

Article 24.Liabilities of members for failure to contribute annuity shares

If a member fails to contribute or fully contribute annuity shares at a tontine opening time, he/she shall take liability to the tontine holder as follows:

1. To reimburse the amount that the tontine holder has contributed on his/her behalf.

2. To pay a late-payment interest as prescribed in Article 22 of this Decree.

3. To pay a fine if so agreed upon by tontine participants as prescribed in Article 418 of the Civil Code.

4. To pay compensation for any damage caused.

Article 25.Settlement of disputes and handling of violations

1. Disputes that arise over or from tontine shall be settled through negotiation or conciliation or brought to court for settlement in accordance with law.

2. Tontine holders, tontine members, and related individuals and organizations are entitled to request competent agencies to impose administrative sanctions on or examine penal liability for those who practice usury, appropriate property by swindle or abuse of trust, illegally raise funds, or commit other violations of law in tontine relations.

Chapter V

IMPLEMENTATION PROVISIONS

Article 26.Effect

1. This Decree takes effect on April 5, 2019.

2. The Government’s Decree No. 144/2006/ND-CP of November 27, 2006, on tontine, ceases to be effective on the date this Decree takes effect.

Article 27.Transitional provisions

1. Tontine groups established and operating before the effective date of this Decree shall comply with the Government’s Decree No. 144/2006/ND-CP of November 27, 2006, on tontine.

2. For tontine groups established before the effective date of this Decree and operating with contents and forms different from those prescribed in this Decree, their members may agree to revise them in accordance with this Decree in order to apply this Decree.

3. Tontine groups established before the effective date of this Decree but not yet operated or currently operating with contents and forms consistent with the provisions of this Decree may apply this Decree.

Article 28.Implementation responsibility

1. The Ministry of Justice shall:

a/ Direct, guide, inspect and organize the implementation of this Decree;

b/ Popularize this Decree and relevant legal provisions.

2. The Ministry of Public Security shall investigate and handle according to its competence acts of organizing tontine to appropriate property by swindle or abuse of trust, practice usury, or commit other violations of law.

3. The People’s Committees at all levels shall:

a/ Make summary reports on local tontines upon request of competent state agencies;

b/ Popularize this Decree and relevant legal provisions.

4. Commune-level People’s Committees shall receive information and make statistics on tontine in accordance with Article 14 of this Decree and promptly report signs of violations of the law on tontine to competent public security agencies.

5. Ministries, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of People’s Committees at all levels and related individuals and organizations shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC