Decree No. 21/2021/ND-CP detailing the implementation of the Civil Code’s provisions on security for performance of obligations

DECREE

Providing the implementation of the Civil Code regarding security for performance of obligations^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government; and the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration;

Pursuant to the November 24, 2015 Civil Code;

At the proposal of the Minister of Justice;

The Government promulgates the Decree providing the implementation of the Civil Code regarding security for performance of obligations.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides the implementation of the Civil Code regarding security for performance of obligations, including collateral, establishment and implementation of measures to secure performance of obligations (below referred to as security measures), and realization of collateral.

Article 2. Subjects of application

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

2. Related agencies, organizations and individuals.

Article 3. Interpretation of terms

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

1. Securing party means a pledgor, mortgagor, depositor, security collateral payer, escrow account depositor, purchaser under a purchase and sale contract with retention of title, guarantor, grassroots socio-political organization in case of pledge of trust, or obligor under a bilateral contract in case of application of the measure of lien.

2. Secured party means a pledgee, mortgagee, depositary, security collateral recipient, obligee in escrow account, seller under a purchase and sale contract with retention of title, creditor, credit institution in case of pledge of trust, and obligee under a bilateral contract in case of application of the measure of lien.

3. Person with secured obligation means a person whose obligation is secured with a security measure. A person with secured obligation may concurrently act as a securing party or not.

4. Land-attached assets include houses, construction works under housing construction investment projects; separate houses as specified in the Housing Law; other construction works; perennial trees, planted production forests, or other objects attached to land as specified by law.

5. Security contract may be a contract on pledge of property, contract on mortgage of property, deposit contract, security collateral contract, escrow contract, contract on purchase and sale of property with retention of title, guarantee contract, or contract on pledge of trust.

A security contract may be an agreement between a securing party and a secured party or an agreement among a securing party, a secured party and a person with secured obligation.

A security contract may be a separate contract or shown with terms and clauses on security for performance of obligations in another form of civil transaction in accordance with law.

6. Certificate means a property ownership certificate, land use rights certificate or another paper certifying property ownership in accordance with law.

7. Reasonable time limit means a period habitually established between involved parties or a period during which the parties to a security contract or security measure or other subjects with related rights and interests can exercise their rights and perform their obligations under normal conditions.

Article 4. Application of laws and agreements on security for performance of obligations

1. In case the law on land, housing, investment, enterprises, securities, insurance, banking, natural resources, fisheries, forestry, aviation, maritime, intellectual property, science and technology, or another field has specific provisions on collateral, establishment and implementation of security measures, or realization of collateral, such specific provisions shall apply.

In case a securing party, secured party or person with secured obligation is declared bankrupt, the performance of property-related obligations, settlement of secured debts, and application of measures to preserve property must comply with the law on bankruptcy.

2. In case the parties to an obligation performance security relationship has agreements that are different from the provisions of this Decree but adhere to the basic principles of the civil law and do neither violate regulations on conditions for civil transactions to take effect nor violate the provisions on restrictions on exercise of civic rights of the Civil Code or a relevant law, such agreements shall prevail.

3. In case a property owner and a secured party agree to use property to secure the performance of obligations of another party, regulations on pledge of property or mortgage of property shall apply.

4. In case the parties reach an agreement with a content on obligation performance security but fail to clearly or accurately determine the name of the security measure while the agreed content conforms with a security measure provided in the Civil Code, provisions on security measure relevant to such agreed content shall apply.

Article 5. Obligation performance security with multiple security measures or multiple assets

1. The performance of an obligation may be secured with multiple security measures. In case such an obligation is infringed upon while the securing party and secured party have no agreement on selection of security measures for application, the secured party shall select a security measure for application or apply all security measures.

2. The performance of an obligation may be secured with multiple assets. The scope of security of each asset for obligation performance shall be agreed upon by the securing party and secured party. If no agreement is reached, any of these assets may be used to secure the performance of the whole of such obligation.

Article 6. Holding, use, delivery and receipt of certificates

1. In case a collateral is used to secure the performance of another obligation or to perform another civil transaction while the secured party is holding the original certificate, it/he/she shall deliver such certificate to the subject being a party to a relevant transaction or perform another obligation as agreed upon for the latter to carry out procedures in accordance with law.

In case the secured party delivers the original certificate to the subject being a party to a relevant transaction, the latter shall return such certificate to the former right after completing procedures; if delaying the return of or failing to return the original certificate, thus causing damage, such subject shall pay damages. A securing party may use a copy of the certificate and the original of the secured party’s written certification, which remains valid, of the holding of the original certificate for use or sale of property.

2. The holding and use of aircraft and seagoing ship certificates must comply with the Civil Aviation Law of Vietnam and Maritime Code of Vietnam.

Article 7. Right to reclaim collateral

1. The right of a secured party to collateral in a security measure that has become effective for a third party may neither be changed nor terminated in case the collateral is delivered to another person as a result of purchase and sale, donation, exchange, transfer or otherwise assignment of ownership rights; or of possession, use or benefiting without a legal basis of collateral, except the cases specified in Clause 2 of this Article.

2. The right of secured parties to reclaim collateral shall not apply to:

a/ The collateral that has been sold, transferred or otherwise assigned in terms of ownership rights with the consent of the secured parties and is not further used to secure the performance of agreed obligations;

b/ The mortgaged property that is sold, replaced or exchanged under Clause 4, Article 321 of the Civil Code;

c/ The collateral that no longer exists or is replaced with other assets as specified in Article 21 of this Decree;

d/ Other cases specified by the Civil Code and relevant laws.

3. In case securing parties being individuals die or securing parties being legal persons terminate their existence, the right of secured parties to reclaim collaterals shall not terminate but must comply with the Civil Code’s Article 658 and other provisions on inheritance in case securing parties being individuals die, or must comply with regulations on dissolution of legal persons or bankruptcy in case securing parties being legal persons are dissolved or declared bankrupt.

Chapter II

COLLATERAL

Article 8. Property used to secure performance of obligations

Property used to secure performance of obligations includes:

1. Existing property or future property, except those banned from purchase and sale, transfer or otherwise assignment of ownership rights under the Civil Code or a relevant law at the time of establishing security contracts or security measures;

2. Sold property under contracts on purchase and sale of property with retention of title;

3. Property subject to obligations under bilateral contracts breached with regard to the measure of lien;

4. Property under ownership by the entire people as provided by relevant regulations.

Article 9. Description of collateral

1. The description of collateral shall be agreed upon by securing parties and secured parties under Clauses 2 and 3 of this Article, and Articles 12, 13, 18 and 19, of this Decree.

2. For collateral being immovables or movables subject to registration in accordance with law, information described under agreements must be consistent with that stated in certificates.

3. For collateral being property rights, information described under agreements must show names of assets and legal grounds giving rise to property rights.

Article 10. Land use rights, land-attached assets

1. The use of land use rights to secure the performance of obligations may be not concurrently with the use of land-attached assets to secure the performance of obligations and vice versa.

2. In case land-attached assets are not required by law to be subject to registration and not yet registered upon request while asset owners and secured parties to use such assets to secure the performance of obligations, rights and obligations of the parties shall be agreed upon in security contracts.

In case land-attached assets are annual trees as specified in the Law on Crop Production or makeshift works as specified in the Law on Construction while asset owners and secured parties agree to use such assets to secure the performance of obligations, regulations on security for performance of obligations with movables other than aircraft or seagoing ships shall apply.

3. In case land use rights or land-attached assets being easement-eligible immovables are used to secure the performance of obligations, the easement remains valid for all individuals and legal persons.

4. Security for performance of obligations with future property shall not apply to land use rights.

Article 11. Property established from the right of superficies or usufruct

1. Property under ownership of entities holding the right of superficies specified in Clause 2, Article 271 of the Civil Code may be used to secure the performance of obligations.

In case the property specified in this Clause are land-attached assets, Clauses 1 and 2, Article 9, and Clauses 1, 2 and 3, Article 10, of this Decree shall apply.

2. Yields and profits or other assets gained from operation and use of property subject to usufruct may be used to secure performance of obligations.

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

For property used to secure the performance of obligations which are objects with auxiliary objects, integrated objects or distinctive objects, their description must show characteristics to help identify such objects in accordance with the Civil Code.

Article 13. Valuable papers, securities, savings deposit balance

 Valuable papers, securities and savings deposit balance at credit institutions or foreign bank branches may be used to secure the performance of obligations provided that their description must comply with the regulations on valuable papers, securities, or banking.

Article 14. Property rights arising from contracts

Obligees under contracts may exercise their right to claim debts, receivables and other payments; right to operate and manage investment projects; right to lease and sublease; right to enjoy yields, profits and other interests which can be valued in money from contracts; right to receive damages; and other rights which can be valued in money from contracts to secure the performance of obligations.

Article 15. Property formed from capital contribution

Capital contributors may use their shares, contributed capital amounts or the right to purchase contributed capital amounts or profits arising from their shares or contributed capital amounts in commercial legal persons or non-commercial legal persons being social corporations to secure the performance of their obligations in accordance with relevant regulations and charters (if any) of such legal persons.

Article 16. Right to exploit natural resources

A holder of the right to exploit natural resources under relevant regulations may exercise the right to exploit minerals; products of natural forests, except animals; natural aquatic products, including sea animals and plants; resources of water, including surface water, seawater and groundwater, except natural water used for agriculture, forestry, fisheries and salt making; edible-nest swiftlets; or the right to exploit other natural resources which can be valued in money to secure the performance of obligations.

The exercise of the right to exploit minerals or the right to exploit other natural resources to secure the performance of obligations specified in this Article must comply with the law on minerals or relevant regulations on natural resources.

Article 17. Property rights arising from intellectual property rights, information technology or scientific and technological activities

Holders of property rights arising from intellectual property rights, information technology or scientific and technological activities may exercise property rights with regard to subject matters of copyright, related rights, industrial property rights, or rights to plant varieties; the right to own or the right to use scientific research, technology development or technology transfer outcomes; or other rights which can be valued in money and arise from intellectual property rights, information technology or scientific and technological activities to secure the performance of obligations.

Article 18. Investment projects, property under investment projects

Owners of investment projects may use such projects which are not banned from transfer in accordance with the Law on Investment or other relevant laws to secure the performance of obligations.

Owners of investment projects may use the whole of their projects or property rights concerning operation and management of investment projects and other property rights or use other property under their investment projects to secure the performance of obligations.

In case investment projects used to secure the performance of obligations are projects to build houses, projects to build works other than houses, or other projects for which relevant regulations require certificates or decisions of competent state agencies or other legal grounds, descriptions in security contracts must show such legal grounds.

Article 19. Goods circulated in the production and business process and goods warehouses

Goods circulated in the production and business process and goods warehouses used to secure the performance of obligations may be described based on value of property or by type of goods. The description of collateral being goods warehouses must also show addresses and codes (if any) of warehouses or other signs of locations of warehouses.

Goods circulated in the production and business process may be goods in warehouses or goods currently used in the production and business process.

Article 20. Investment in mortgaged property

1. In case mortgagors exercise their right to make investment for increasing the value of mortgaged property under Clause 2, Article 321 of the Civil Code, the increased value will belong to the mortgaged property.

2. Investment in mortgaged property is subject to consent of the mortgagee in the following cases:

a/ The investment is made by a third party;

b/ The investment is made by the mortgagor, giving rise to a new asset that does not belong to the mortgaged property as agreed upon in the mortgage contract.

3. Mortgagees may request termination of investment if the investment specified in Clauses 1 and 2 of this Article results in reduction of the value of mortgaged property.

4. Mortgagors or third parties making investment in mortgaged property that fail to comply with Clauses 2 and 3 of this Article, thus causing damage, shall pay damages to mortgagees.

5. In case securing parties or third parties making investment in collateral under other security measures for which the parties do not otherwise agree or relevant regulations do not otherwise provide, Clauses 1 thru 4 of this Article shall apply.

Article 21. Changes in collateral

1. In case a securing party and a secured party agree on the division or splitting of a collateral into different assets under relevant regulations:

a/ If the division or splitting does not change the owner of the collateral, the assets formed after the division or splitting will also be used as collateral;

b/ If the division or splitting changes the owner of the collateral, the assets formed after the division or splitting and coming under rights of new owners will not be used as collateral.

2. In case a securing party and a secured party agree on the consolidation, merger or mixture of collateral with another asset or the collateral is processed into a new asset:

a/ If the new asset formed as a result of the consolidation, merger or mixture cannot be divided, the value of the collateral’s part consolidated, merged or mixed into the new asset will become the collateral;

b/ If the new object formed as a result of the processing comes under ownership by the securing party, it will also be used as collateral; if the new object does not come under ownership by the securing party, the value of the processed part of collateral will become the collateral.

3. In case a securing party and a secured party agree on the use of collateral as capital contributed to a commercial legal person or non-commercial legal person being a social corporation, the share or contributed capital amount will be the collateral, unless the secured party and capital-receiving legal person agree that the collateral used for capital contribution may also be used to secure the performance of obligations.

4. In case a securing party and a secured party agree on the use of the insured asset to secure the performance of obligations or in case the asset currently used to secure the performance of obligations is insured, when an insured event occurs, the indemnity amount or replacing asset payable by the insurer to the insured will become the collateral.

5. In case a collateral which is an annual tree as specified in the Law on Crop Production is harvested or which is a makeshift work as specified in the Law on Construction is dismantled, yields or other assets derived from the harvest or dismantlement will become the collateral.

6. In case a securing party installs or integrates a software or software system into the asset currently used to secure the performance of obligations under relevant regulations, property rights over such software or software system within the scope of collateral will also be used as collateral.

7. In case a collateral is recovered due to the securing party’s violation of relevant regulations, the securing party shall pay damages to the secured party as agreed upon in the security contract. In case the State makes payment or pays damages to a securing party under relevant regulations, the asset eligible for such payment or damages will become the collateral.

8. In case a collateral no longer exists as it is recovered for national defense and security purposes, or for socio-economic development in favor of national or public interests, the compensated money amount, replaced asset or exchange asset under relevant regulations will become the collateral.

9. In case a collateral is destroyed, totally lost, dismantled or confiscated under a competent state agency’s decision, it shall be considered no longer existing, except the cases specified in Clauses 4, 5, 7 and 8 of this Article.

10. In other cases specified in the Civil Code or a relevant law which make a collateral no longer exist or be replaced while a new asset arises or an asset is replaced, such asset will become the collateral.

Chapter III

ESTABLISHMENT AND IMPLEMENTATION OF SECURITY MEASURES

Section 1

SECURITY MEASURES ESTABLISHED UNDER AGREEMENT

Sub-section 1

EFFECT OF SECURITY CONTRACTS AND SECURITY MEASURES

Article 22. Effect of security contracts

1. A security contract that is notarized or certified in accordance with the Civil Code or a relevant law or upon a request takes effect from the time of notarization or certification.

2. A security contract other than that specified in Clause 1 of this Article takes effect from the time agreed upon by contracting parties or from the time it is entered into if no agreement on contract effect is reached.

3. In case a collateral is partly withdrawn as agreed upon, the security contract’s contents relating to the withdrawn part of collateral will become invalidated. In case a collateral is added or replaced, the modification and supplementation of the security contract concerning collateral after the addition or replacement must comply with the Civil Code or a relevant law.

4. A security measure that has not yet become effective for a third party will neither change nor invalidate the security contract concerned.

Article 23. Effect of security measures for third parties

1. A security measure may become effective for a third party only in case the security contract concerned has taken effect.

2. In case a security measure is subject to registration in accordance with the Civil Code or a relevant law or is registered as agreed upon or is registered at the request of the secured party, such security measure becomes effective for a third party from the time it is registered at a competent agency under relevant regulations.

3. In a case other than that specified in Clause 2 of this Article, a measure of pledge of property, deposit, security collateral or escrow account may become effective for a third party from the time the secured party holds the collateral.

Holding of collateral mentioned in this Clause means that the secured party directly manages and controls the collateral, or that another person manages the collateral as agreed upon or provided by law while the secured party still controls such collateral.

4. In case a collateral under the security measure mentioned in Clause 3 of this Article is handed over to another person for management, the security measure becomes effective for a third party from the time:

a/ The pledgee, depositary or security collateral recipient holds the collateral;

b/ The collateral-managing person receives the collateral directly from the pledgor, depositor or security collateral payer;

c/ The security contract takes effect in case another person is directly managing the collateral which is used for pledge, deposit or security collateral.

5. The measure of escrow account becomes effective for a third party from the time the asset used for escrow account is deposited into a frozen account at the credit institution where the escrow account is opened.

Article 24. Security with future property

1. A secured party shall establish rights over part or the whole of collateral being a future property from the time such part or the whole of collateral is formed.

2. Effect of the measure of security with future property for a third party must comply with Clause 1, 2, 3 or 4, Article 23 of this Decree.

Article 25. Security for performance of future obligations

1. The effect of a security contract or effect of a security measure for a third party specified in Article 22 or 23 of this Decree arises for the whole of a future obligation.

In case a future obligation is formed while the parties agree to establish a new security contract or new security measure for this obligation, the effect of the security measure for a third party arises under the new security contract or security measure.

2. The effect of a security contract or effect of a security measure for a third party will neither be changed nor terminated in case the parties do not reach a specific agreement on the scope of a future obligation, time limit for performance of the secured obligation or period of security for obligation performance.

Article 26. Security with land use rights, land-attached assets, or assets formed from the right of superficies or usufruct

1. In case of mortgage of land use rights or land-attached assets under Article 325 or 326 of the Civil Code, the mortgage contract or mortgage measure remains effective for a third party when such land use rights or land-attached assets are not used as collateral which are purchased and sold, transferred, otherwise assigned in terms of ownership rights, or used to secure the performance of obligations.

2. The effect of a security contract or effect of a security measure with assets established from the right of superficies or usufruct for a third party will neither be changed nor terminated in case land use rights involving the right of superficies or property being objects of usufruct are purchased and sold, transferred, otherwise assigned in terms of ownership rights, or used to secure the performance of obligations.

Article 27. Establishment and performance of security contracts or security measures with common property of husband and wife

1. In case the common property of husband and wife used to secure the performance of obligations is savings deposit balance at a credit institution or foreign bank branch, securities or another movable asset not subject to registration in accordance with law, the husband or wife named as savings depositor, securities holder or movable asset possessor may himself/herself establish and perform a security contract or security measure, except the following cases:

a/ It is otherwise provided in the agreed property regime or the husband and wife otherwise agree, which has been informed to the secured party;

b/ It is otherwise agreed upon by the husband and wife and the secured party.

2. In case the husband and wife agree that either of them uses their common property as capital contributed to a commercial legal person or non-commercial legal person being a social corporation or for establishment of a sole proprietorship, the capital contributor or person named as the owner of the sole proprietorship may himself/herself establish and perform a security contract or security measure relating to his/her capital amount contributed to the legal person or property of the sole proprietorship.

In case the husband and wife have no written agreement on the use of their common property for capital contribution under this Clause but the capital contribution was made according to procedures specified in relevant regulations and the person not directly doing business knows or has to know such capital contribution but does not object it, such agreement shall be considered existing.

3. In case a security contract or security measure is established under Clause 1 or 2 of this Article but the husband and wife have divorced, the person who has established such contract or measure shall continue to perform it, unless otherwise decided under a legally effective court judgment or ruling.

Article 28. Change of the securing party or secured party

1. A purchaser, transferee or assignee of ownership rights may become the secured party in case the right to claim debts, receivables or other payments involves the security measure sold, transferred or otherwise assigned in terms of ownership rights.

Such new secured party shall notify the securing party of the change of the secured party before the secured obligation is performed as agreed upon or provided by law.

2. An inheriting party may become the securing party, secured party or person with secured obligation in case the latter is a reorganized legal person.

3. The sale, transfer or otherwise assignment of rights and obligations under this Article and relevant regulations on transfer of the right to claim with security measures or transfer of obligations with security measures is not subject to reestablishment of security contracts.

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

1. A security contract that is nullified, cancelled or unilaterally terminated shall not terminate a contract with secured obligation.

2. In case a contract with secured obligation is nullified, cancelled or unilaterally terminated:

a/ If the contracting parties have not yet performed such contract, the security contract shall be terminated;

b/ If the contracting parties have performed part or the whole of such contract, the security contract shall not be terminated. The secured party may realize the collateral to make payment for the obligation to return of its/his/her obligor.

Article 30. Settlement of partially null and void security contracts

1. In case part of contents of a security contract is declared null and void under the Civil Code or a relevant law, the secured obligation relevant to this part of contents shall become an unsecured obligation, including:

a/ Part of contents of the contract falling under the rights of the person not participating in the contract in case the asset used for security falls under common ownership, except the cases specified in Article 27 of this Decree;

b/ Part of contents of the contract relating to one or more than one person having no civil legal capacity or civil act capacity appropriate to the contract in case the securing party or secured party consists of more than one person;

c/ Part of contents of the contract relating to one or more than one asset not qualified to be used to secure the performance of obligations in case one obligation is secured with more than one asset;

d/ Part of contents of the contract violating prohibitory provisions of law or contravening social morality or restricting the exercise of rights as provided by the Civil Code or a relevant law in case other contents of the contract do not;

dd/ Other contents as provided by the Civil Code or a relevant law.

2. In case the performance of one obligation is guaranteed by more than one person or secured with more than one asset but only one or some joint guarantor(s) or one or some collateral(s) fall(s) under contents of the security contract declared null and void, security for performance of the obligation falling under contents of such contract shall be settled under Article 338 of the Civil Code and Clause 2, Article 5 of this Decree.

Sub-section 2

PLEDGE OF PROPERTY

Article 31. Handover of pledged property

1. An agreement on handover of pledged property under Clause 1, Article 311 of the Civil Code may be a case in which the plegdor hands over the pledged property to the pledgee or to a third party for keeping. The pledgee may keep the pledged property at the place where the property exists or a place it/he/she chooses.

2. In case the pledged property is an object likely to lose or reduce its value, the pledgee currently keeping such property shall notify such to the pledgor and request the latter to propose a solution within a reasonable time limit. Past this time limit, if the pledgor fails to give a reply, the pledgee shall take a necessary deterrent measure.

3. In case the pledged property is an object kept by a third party and likely to be lost or damaged or lose or reduce its value, rights and obligations of the third party and pledgee must comply with the contract for bailment of property.

4. Clauses 2 and 3 of this Article do not apply in case pledged objects suffer natural wear and tear.

Article 32. Sale, replacement, exchange or donation of pledged property

In case it is consented by the pledgee or provided in a relevant law that the pledgor is entitled to sell, replace, exchange or donate the pledged property, the measure of pledge shall be terminated from the time the purchaser of the property, recipient of the replaced property or donee of the property establishes ownership rights over the pledged property under Article 161 of the Civil Code.

Sub-section 3

MORTGAGE OF PROPERTY

Article 33. Mortgage of the right to claim debts, receivables and other payments

The mortgage of the right to claim debts, receivables and other payments does not require consent of obligors but these obligors shall be notified by mortgagees before performing their obligations under agreement or in accordance with law.

Article 34. Mortgage related to leased or lent assets

1. In case a currently leased or lent asset is used for mortgage, the mortgagor shall notify such to the mortgagee.

2. The realization of mortgaged property that is currently leased or lent in the cases specified in Article 299 of the Civil Code does not lead to termination of rent contracts or borrowing contracts; lessees or borrowers may continue renting or borrowing such assets until expiration of the contract term.

3. In case the measure of mortgage has become effective for a third party to whom the mortgagor leases or lends the mortgaged property without notifying such to the mortgagee, the rent contract or borrowing contract shall be terminated at the time of realization of the mortgaged property. Rights and obligations of the mortgagor and the lessee or borrower shall be settled under agreements in the property rent contract or borrowing contract, the Civil Code and relevant laws.

Article 35. Taking of mortgage by individuals or economic organizations other than credit institutions of land use rights and assets attached to land of land-using households or individuals

The taking of mortgage by an individual or an economic organization other than a credit institution of land use rights and assets attached to land of a land-using household or individual must satisfy the following conditions:

1. The mortgagee is an economic organization as defined in the Land Law or is a Vietnamese citizen with full civil act capacity;

2. The taking of mortgage to secure obligation performance does not violate prohibitions specified in the Civil Code and relevant laws and is not against social morality in contractual relations in investment projects, construction, rent, lease for exploitation, service provision and other transactions;

3. In case secured obligations include an obligation to pay interests, interest rates arising due to delayed payment of loan principals, interests on premature loan principals, interests on overdue loan principals, interests on unpaid interest debts or other interests and applied interest rates must not exceed agreed interest and interest rate limits specified in Clause 2, Article 357; Clause 5, Article 466; and Article 468, of the Civil Code. In case there is an agreement on handling of the act of failure of obligors to pay debts on time and there are no other regulations, such act shall be handled only once;

4. Other conditions for civil transactions to become effective as specified in the Civil Code and relevant laws.

Article 36. Handling of cases in which assets subject to invalid civil transactions are used for mortgage

1. In case an asset subject to an invalid civil transaction is used for mortgage and has been transferred to the bona fide mortgagee in the cases specified in Clauses 1 and 2, Article 133 of the Civil Code, the mortgage contract will not become invalid. Rights and obligations of related parties must comply with Clause 3, Article 133 of the Civil Code.

2. The transfer of a mortgaged asset as mentioned in Clause 1 of this Article means that the mortgagor does not transfer such asset but the mortgagee already holds the certificate of mortgaged asset under an agreement or has actually taken another necessary measure to prevent the mortgagor from breaching the obligations specified in Article 320 of the Civil Code.

Sub-section 4

DEPOSIT OR SECURITY COLLATERAL

Article 37. Cases in which a sum of money is not clearly identified as a deposit or an advance

When a contracting party transfers to the other party a sum of money, which is not clearly identified by the parties as a deposit or an advance, such sum of money shall be regarded as an advance.

Article 38. Rights and obligations of deposit or security collateral parties

1. Depositors or security collateral payers have the following rights and obligations:

a/ To request depositaries or security collateral recipients to stop exploiting, using, or establishing civil transactions for, deposited assets or assets used for security collateral; to preserve and maintain deposited assets or assets used for security collateral in order to prevent their value from being lost or depreciated;  

b/ To exchange or replace deposited assets or assets used for security collateral or put such assets in other civil transactions in case depositaries or security collateral recipients so agree;

c/ To pay to depositaries or security collateral recipients reasonable expenses for preservation and maintenance of deposited assets or assets used for security collateral;

Reasonable expenses specified at this Point are practically necessary and lawful expenses at the time of payment which must, under normal conditions, be paid by depositaries or security collateral recipients to ensure that deposited assets or assets used for security collateral are neither lost, destroyed nor deteriorated;

d/ To carry out asset ownership registration or perform other obligations specified by law so that depositaries or security collateral recipients can own deposited assets or assets used for security collateral under Point b, Clause 2 of this Article;

dd/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

2. Depositaries or security collateral recipients have the following rights and obligations:

a/ To request depositors or security collateral payers to stop exchanging, replacing, or establishing other civil transactions for, deposited assets or assets used for security collateral without prior consent of depositaries or security collateral recipients; 

b/ To own deposited assets in case depositors breach their commitments on entry into and performance of contracts; to own assets used for security collateral in case rented assets no longer exist to be returned to security collateral recipients;

c/ To preserve and maintain deposited assets or assets used for security collateral;

d To refrain from establishing civil transactions for, exploiting or using deposited assets or assets used for security collateral without prior consent of depositors or security collateral payers;

dd/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

Sub-section 5

ESCROW ACCOUNT

Article 39. Depositing and payment of sums of money used for escrow account

1. Sums of money used for escrow account (below referred to as escrow amounts) shall be deposited into frozen accounts at credit institutions under agreements or as designated by obligees to secure obligation performance.

2. Escrow amounts and making of single or multiple escrow accounts shall be agreed upon by parties or provided by law. 

3. In case secured obligations are breached, escrow amounts shall be used to pay for such obligations and pay damages after subtracting service charges (below referred to as payment for obligations).

Article 40. Rights and obligations of escrow parties

1. Credit institutions where escrow account is made have the following rights and obligations:

a/ To enjoy service charges;

b/ To request obligees to properly implement escrow agreements in order to get obligations paid for with escrow amounts;

c/ To pay for obligations upon request of obligees with escrow amounts;

d/ To refund the remaining escrow amounts to escrow depositors after paying for obligations upon request of obligees and upon escrow termination;

dd/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

2. Escrow account depositors have the following rights and obligations:

a/ To reach agreement with credit institutions where escrow account is made on payment terms in strict compliance with commitments with obligees;

b/ To request credit institutions where escrow account is made to refund escrow amounts under Point d, Clause 1 of this Article; to enjoy interests as agreed with credit institutions where escrow account is made;

c/ To partially withdraw or add escrow amounts or put escrow amounts in other civil transactions in case obligees so agree;

d/ To fully deposit escrow amounts at credit institutions where escrow account is made;

dd/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

3. Obligees in escrow account have the following rights and obligations:

a/ To request credit institutions where escrow account is made to pay for obligations fully and on time with escrow amounts;

b/ To properly carry out procedures as requested by credit institutions where escrow account is made when exercising the right specified at Point a of this Clause;

c/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

Sub-section 6

RETENTION OF TITLE

Article 41. Rights and obligations related to purchased assets

1. In case a purchaser is required to return a purchased asset to a seller due to the former’s breach of the payment obligation but by the time of return, the value of such asset is larger than its original value for the reason that the purchaser or a third party has made investment to increase the asset value, the seller shall return the value difference to the party that has invested in the asset.

Investment in purchased assets must comply with Clause 5, Article 20 of this Decree.

2. Purchasers are not responsible for natural wear and tear of assets over which title is retained.

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

1. If sellers transfer the right to claim payment by purchasers, the right to retain title may also be transferred to transferees of the right to claim payment.  

2. If purchasers sell or otherwise transfer rights to purchased assets after the retention of title is registered, then second purchasers or transferees of rights to purchased assets shall inherit obligations regarding the retention of title.

Sub-section 7

GUARANTEE

Article 43. Guarantee agreements

1. Guarantors may reach agreement with creditors on the use of assets as security for performance of their guaranteed obligations.

2. In case the guarantor undertakes to perform jobs on behalf of the principal, it/he/she must have civil legal capacity or civil act capacity appropriate to guaranteed obligations. 

3. Guarantee agreements may take the form of separate guarantee contracts, letters of guarantee or other guarantee commitments.

Article 44. Performance of guaranteed obligations

1. The guarantor shall perform a guaranteed obligation when such obligation is breached based on one of the following grounds:

a/ The principal fails to perform such obligation within a specified time limit;

b/ The principal fails to perform such obligation ahead of time as agreed upon;

c/ The principal fails to fully fulfill such obligation;

d/ The principal fails to properly perform such obligation;

dd/ The principal is unable to perform such obligation under Clause 2, Article 335 and Clause 1, Article 339 of the Civil Code;

e/ Other grounds as agreed upon or provided by the Civil Code and relevant laws.

2. In case there is one of the grounds specified in Clause 1 of this Article, creditors shall notify such to guarantors for performance of guaranteed obligations. Guarantors may refuse to perform obligations in case the grounds notified by creditors fall beyond the scope of guarantee commitments.

3. The guarantor shall perform a guaranteed obligation within a time limit agreed upon by parties. In case there is no agreement, the guarantor shall do so within a reasonable time limit counting from the time of receipt of the creditor’s notice.

4. If the guarantor has performed a guaranteed obligation, the creditor shall notify such to the principal. In case the principal still performs the guaranteed obligation, the guarantor may request the creditor to refund the received asset to the former or the equivalent value of parts of the performed guaranteed obligation.  

Sub-section 8

PLEDGE OF TRUST

Article 45. Parties providing security with pledge of trust

In case obligation performance is secured with pledge of trust, commune/ward/township organizations of the Vietnam Peasants’ Association, Ho Chi Minh Communist Youth Union, Vietnam Women’s Union, Vietnam War Veterans’ Association, or Vietnam Fatherland Front, or grassroots Trade Union units shall act as parties providing security with pledge of trust, unless otherwise provided by charters of these organizations.

Article 46. Rights and obligations of parties to pledge of trust

1. Parties providing security with pledge of trust have the following rights and obligations:

a/ To take the initiative or closely coordinate with lending credit institutions in assisting, guiding, and creating favorable conditions for, borrowers; to supervise the use of loans for proper purposes and with efficiency; to urge full and on-time loan repayment;

b/ To give certification as requested by lending credit institutions of conditions and circumstances of borrowers by the time of loan borrowing;

c/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

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

a/ To request parties providing security with pledge of trust to coordinate with them in examining the use of loans and urging loan repayment;

b/ To coordinate with parties providing security with pledge of trust in granting loans and collecting debts;

c/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

3. Borrowers have the following rights and obligations:

a/ To use loans for their production or business activities, daily-life needs or consumption for the purposes for which they borrow loans;

b/ To create favorable conditions for lending credit institutions and parties providing security with pledge of trust to examine the use of loans;

c/ To fully repay loan principals and interests (if any) within agreed time limits to lending credit institutions;

d/ Other rights and obligations as agreed upon or provided by the Civil Code and relevant laws.

Section 2

LIEN ON PROPERTY

Article 47. Assurance of lien right

1. In case a competent agency or competent person as defined by relevant regulations requests a lienor to hand over an asset under lien in order to resolve the case or matter in accordance with law, the handover of the asset under lien in this case does not constitute a ground for termination of lien.

2. In case an asset owner or another obligee puts an asset under lien into a civil transaction, the lienor is not obliged to hand over such asset to parties to such civil transaction, unless:

a/ Obligations toward the lienor have been fulfilled;

b/ Obligations toward the lienor have not yet been fulfilled but the lien is terminated in a case specified in Clause 1, 2 or 5, Article 350 of the Civil Code.

Article 48. Exercise of lien right

1. Lienors may only retain assets or parts of assets directly relating to breached parts of obligations. In case multiple assets are subject to breached parts of obligations, lienors may choose assets to retain.

2. In case subject to breached obligations are jobs to create products, lienors may seize the created products or materials to be used to create products. In case subject to breached obligations are jobs not to create products, lienors may seize tools and means provided by obligors to perform such jobs.

3. In case assets under lien generate yields which are not results of exploitation of such assets, lienors shall return such yields to obligors. In case lienors are managing yields while assets subject to obligations are handed over to obligors before they breach obligations, lienors may seize the yields until obligations toward them are fulfilled.

Chapter IV

REALIZATION OF COLLATERAL

Article 49. General provisions on realization of collateral

1. Realization of collateral shall be carried out in accordance with agreements of parties, provisions of this Decree and relevant regulations.

Realization of collateral being mining rights or rights to exploit other natural resources must comply with the law on minerals, other laws on natural resources and relevant laws.

2. Secured parties that realize collateral on the basis of agreements in security contracts are not required to obtain documents on authorization or written consents of securing parties.

3. In case the Civil Code and relevant laws have provisions requiring assets currently used as security to be realized for securing parties to perform other obligations, such assets shall be realized under those provisions.

4. Realization by secured parties of security assets to collect debts is not an asset trading operation of secured parties.

Article 50. Settlement of cases in which securing parties or persons with secured obligations that are individuals die or are declared dead under court rulings

In case a securing party or person with secured obligations who is an individual dies or is declared dead under a court ruling, the performance of his/her obligations and realization of collateral shall be carried out under the security contract or another agreement established before he/she dies or is declared dead under a court ruling. 

In case it is possible to identify an individual heir or manager of an inheritance currently used as collateral , the secured party shall notify the collateral realization to such individual to the address notified to the securing party under Article 51 of this Decree.

In case it is not yet possible to identify an individual heir or manager of an inheritance currently used as collateral while secured obligations become due, the secured party may request a court to settle the case.

Article 51. Notification of realization of collateral

1. A notice of realization of a collateral must have the following principal contents:

a/ Reason(s) for realization of the collateral;

b/ The collateral to be realized;

c/ Time and location of collateral realization.

2. Realization of collateral shall be notified by modes agreed upon by parties. In case of no agreement, the secured party shall send a notice of realization of collateral directly to the securing party or by mode of authorization, postal service, electronic data message or another mode to the address provided by the securing party. 

In case the securing party changes its/his/her address without notifying such to the secured party, the address previously provided by the securing party, stated in the security contract or indicated in information stored at the security measure registration office shall be used for notification.

3. In case an asset is used as security for performance of multiple obligations or is held by another party, a notice of collateral realization shall be sent concurrently to the securing party, other secured parties (if any) and collateral holder.

In case an asset is used for performance of multiple obligations and there are multiple secured parties, in addition to the notification modes specified in Clause 2 of this Article, collateral realization may be notified by mode of registration of notice of collateral realization in accordance with the law on registration of security measures.

4. The time limit for notification of collateral realization to securing parties must comply with relevant agreements in security contracts or other agreements. In case of no agreement, a reasonable time limit may be applied which must be at least 10 days for movables or at least 15 days for immovables before the expected date of collateral realization, unless the collateral is immediately realized under Clause 1, Article 300 of the Civil Code.

In case collaterals are listed securities or commodities on commodity exchanges or other movables whose prices may be specifically and clearly determined on the market, Clause 3, Article 52 of this Decree must be complied with.

Article 52. Handover of collateral and realization of pledged or mortgaged property

1. The parties may reach agreement on handover and realization of part or the whole of collateral.

In case an obligation is secured with multiple assets but the parties have no agreement on choice of collateral for realization and it is not otherwise provided by relevant laws, the secured party may choose a collateral to be realized or realize all collaterals.   

2. In case the parties agree on realization of pledged or mortgaged property by mode of auction and reach separate agreements on auction procedures and organization of property auction, the realization of such property shall be carried out under such agreements. In case of no separate agreements, they shall comply with regulations on property auction.

3. In case the parties reach no agreement on modes of realization of collaterals while the collaterals are listed securities, commodities on commodity exchanges or other movables whose prices can be specifically and clearly determined on the market, the secured party may sell such assets at prices on stock exchanges or other related exchanges but shall, before selling them, notify such in advance to the securing party and other secured parties (if any).

4. The time limit for realization of collaterals must comply with relevant agreements in security contracts or other agreements. In case of no agreement, secured parties shall decide on the realization time limit after performing the notification obligation under Clause 4, Article 51 of this Decree.

5. Securing parties or current collateral holders are obliged to hand over collaterals to secured parties according to notices of collateral realization specified in Article 51 of this Decree.

6. In case securing parties or current collateral holders fail to hand over collaterals, secured parties may check and inspect actual state of collaterals in order to prevent dispersion of collaterals, for realization thereof, or request a court to settle the case.

7. In case collateral holders are third parties, securing parties and collateral holders shall coordinate with secured parties in checking and inspecting the actual state of collaterals.

8. Securing parties or current collateral holders that fail to hand over collaterals under agreements or under Article 301 of the Civil Code, fail to coordinate with secured parties or obstruct checking and inspection of the actual state of collaterals, thus causing damage to secured parties, shall pay damages.

Article 53. Rights and obligations of the secured party pending realization of collateral

1. The secured party shall preserve and keep the collateral in case the collateral is kept for realization.

2. Pending realization of the collateral, the secured party may exploit or use the collateral or permit the securing party or authorize a third party to exploit or use the collateral in conformity with its functions and utilities. The permission or authorization for the exploitation or use of the collateral or handling of yields and profits gained from the exploitation or use of the collateral must be recorded in writing.

3. Yields and profits gained from the exploitation or use of the collateral shall be used to pay for the secured obligation to the secured party after subtracting expenses necessary for the exploitation or use of the collateral.

Article 54. Realization of the collateral being integrated objects; property with attached assets; the right to claim debts, receivables, or other payments; valuable papers, securities, savings deposit balance; bills of lading, transport documents

1. The secured party may simultaneously realize all components or parts of the collateral which are integrated objects. In case the collateral includes multiple attached assets, each of these assets shall be realized if they can be divided, or all of them shall be realized, if they cannot be divided.

2. The secured party may request a third party who has the payment obligation, debt repayment obligation or another obligation to transfer money amounts or other property to the former. The secured party shall prove its/his/her rights when so requested by the obligor.

3. The secured party shall realize the collateral being valuable papers, securities, or savings deposit balance at credit institutions or foreign bank branches as agreed upon by the parties or under Article 52 of this Decree.

4. When exercising the right to possession of cargos stated in a bill of lading or transport document used as the collateral, the secured party shall be obliged to produce such bill of lading or transport document according to the procedures provided by the maritime law, aviation law or another relevant law. In case it is not provided by any of these laws, the realization of cargos stated in the bill of lading or transport document must comply with Article 52 of this Decree.

5. In case the secured party is also the person with payment obligation, it/he/she may offset its/his/her obligation from the collected money amounts or property as specified in this Article.

Article 55. Realization of collateral being future property

The realization of collateral being future property shall be carried out as agreed upon by the parties. Such an agreement may contain the following contents:

1. In case the collateral has not yet been formed, or the collateral has been formed without a certificate granted, for the collateral subject to registration under regulations, the secured party may transfer the contract on purchase and sale of property or another contract on the establishment of rights over future property, receive the collateral as a substitute for the performance of the secured obligation, or sell future property in accordance with law;

2. In case the collateral has been formed and the securing party has established ownership rights over such collateral, the secured party may receive this collateral as a substitute for performance of the secured obligation or realize it under general regulations on the realization of collateral with regard to the existing property.

Article 56. Realization of mortgaged property in which the investment is made

1. In case the investment in mortgaged property specified in Article 20 of this Decree gives rise to a new property or results in an increase in the property (below collectively referred to as new property) which does not belong to the mortgaged property as agreed upon in the mortgage contract:

a/ If the new property can be detached from the mortgaged property without causing loss or reduction of the value of the mortgaged property as compared with the new property’s value before the investment, the new property shall not be realized but shall be transferred by the mortgagee to the investor;

b/ If the new property cannot be detached as specified at Point a of this Clause, it shall be realized and its value shall be paid by the mortgagee to the investor.

2. In case the new property is used for mortgage and concurrently for securing the performance of other obligations, regulations on one property used to secure the performance of multiple obligations shall prevail.

3. In case the new property is no longer used for mortgage but is used to secure the performance of other obligations:

a/ If the new property can be detached from the mortgaged property without causing loss or reduction of the value of the mortgaged property compared with the new property’s value before the investment, the new secured party may detach the property portion it/he/she receives as security;

b/ If the new property cannot be detached as specified at Point a of this Clause, it shall be realized under Point b, Clause 1 of this Article. The value of the new property shall be paid by the mortgagee to another secured party.

4. The mortgagee may receive damages specified in Clause 4, Article 20 of this Decree from the proceeds from the realization of the mortgaged property.

5. In case the realization of collateral in which the investment is made under another security measure for which the parties do not otherwise agree or relevant laws do not otherwise provide, Clauses 1, 2, 3 and 4 of this Article shall prevail.

Article 57. Reclaiming collateral

1. The securing party may reclaim the collateral in the following cases:

a/ It/he/she has fulfilled obligations in accordance with Article 302 of the Civil Code;

b/ The collateral has been replaced or exchanged with another property;

c/ The secured obligations have been paid by the mode of offsetting obligations;

d/ Other cases in which the collateral is not subject to realization as agreed upon or as provided by the Civil Code or another relevant law.

2. In the cases specified in Clause 1 of this Article in which the law on property auction or another relevant law requires performance of an obligation before reclaiming collateral, the securing party may reclaim the collateral only after it/he/she has fulfilled such obligation.

Article 58. Purchase, receipt of transfer or receipt of otherwise assignment of ownership rights over collateral

1. The purchaser, transferee or otherwise assignee of ownership rights over collateral (below collectively referred to as the transferee) has the ownership rights over such collateral and may be granted a certificate by a competent agency in accordance with law.

The transferee of the collateral being shares or contributed capital amounts in a commercial legal person or non-commercial legal person being a social enterprise shall take over the securing party’s rights and obligations for such shares or contributed capital amounts. 

2. In case the collateral has been realized and its ownership rights have been transferred, a competent agency shall apply one of the following documents to carry out the procedures for transfer of ownership rights to the transferee:

a/ The contract on purchase and sale, contract on transfer, contract on otherwise assignment of ownership rights over the collateral between the owner of the collateral or the person with the right to sell the collateral and the transferee;

b/ The contract on purchase and sale of auctioned property;

c/ The security contract or another document proving the transfer of ownership rights over the collateral.

3. If it is provided by law that the transfer of ownership rights over collateral requires a written approval of the owner of the collateral or a written agreement between the owner of the collateral or the person with the right to sell the collateral and the transferee, or between the judgment debtor and the transferee on the realization of collateral, a document specified in Clause 2 of this Article shall be used as a substitute for such approval or agreement.

4. The purchaser of the collateral through auction at a competent organization will have its/his/her interests protected in accordance with the Civil Code, Law on Property Auction and other relevant laws.

 Article 59. Receipt of collateral as a substitute for the performance of secured obligations

1. In case the securing party and the secured party agree on the realization of the collateral by the method that the secured party receives the collateral as a substitute for the performance of the secured obligation, the secured party may establish ownership rights over such collateral under Article 223 of the Civil Code.

2. The secured party shall provide a security contract or another document containing an agreement that it/he/she may receive the collateral as a substitute for the performance of the secured obligation and a certificate of the collateral (if any) to a competent agency for the latter to carry out the procedures for the transfer of ownership rights over the collateral or land use rights in accordance with relevant laws.

Chapter V

IMPLEMENTATION PROVISIONS

Article 60. Effect

1. This Decree takes effect on May 15, 2021.

2. The Government’s Decree No. 163/2006/ND-CP of December 29, 2006, on security transactions, and the Government’s Decree No. 11/2012/ND-CP of February 22, 2012, amending and supplementing a number of articles of the Government’s Decree No. 163/2006/ND-CP of December 29, 2006, on security transactions, cease to be effective on the effective date of this Decree.

Article 61. Transitional provisions

1. Security contracts and security measures established and implemented before the effective date of this Decree must comply with the Government’s Decree No. 163/2006/ND-CP of December 29, 2006, on security transactions, and the Government’s Decree No. 11/2012/ND-CP of February 22, 2012, amending and supplementing a number of articles of the Government’s Decree No. 163/2006/ND-CP of December 29, 2006, on security transactions.

2. If a security contract or security measure specified in Clause 1 of this Article has not yet been implemented or is being implemented with contents different from the provisions of this Decree, the parties may agree to modify or supplement such security contract or security measure in accordance with this Decree to serve the application of this Decree.

Article 62. Implementation responsibility

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

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and related agencies, organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC