Joint Circular No. 03/2001/TTLT/NHNN-BTP-BCA-BTC-TCDC dated April 23, 2001 of the State Bank of Vietnam, Ministry of Public Security and General Department of Land Administration guiding the handling of loan security property to recover debts for credit institutions

JOINT CIRCULAR

GUIDING THE HANDLING OF LOAN SECURITY PROPERTY TO RECOVER DEBTS FOR CREDIT INSTITUTIONS

Pursuant to Clause 2, Article 39 of Decree No. 178/1999/ND-CP of December 29, 1999 of the Government on securing of loans of credit institutions and other relevant law provisions;
In order to handle the security property to recover debts for credit institutions, the Vietnam State Bank, the Ministry of Justice, the Ministry of Public Security, the Ministry of Finance and the General Land Administration hereby agree to guide the handling of loan security property in order to recover debts for credit institutions as follows:

A. GENERAL PROVISIONS

I. All customers borrowing capital at credit institutions are obliged to repay debts at due time or ahead of time as provided for by law. The party guaranteeing capital borrowing by customers at credit institutions are obliged to repay debts for the borrowing customers if the latter fail to perform or improperly perform their debt repayment obligations.

Where the borrowing customers and the guarantors fail to perform or improperly perform the debt repayment obligations, the property used as security for repayment of debts at credit institutions (hereinafter referred collectively to as security property) shall be handled to recover debts.

II. The security property shall be handled by modes already agreed upon in the credit contracts or pledge contracts, mortgage contracts, guaranty contracts (hereinafter referred collectively to as security contracts) between the credit institutions and the borrowing customers, the guarantors (hereinafter referred collectively to as the securer). Where the parties cannot handle security property by the agreed modes, the concerned credit institutions are entitled to take initiative in applying modes to handle security property. The security property shall be handled by the following modes:

1. Sale of security property: The sale of security property means the credit institutions or the securer sell or the parties coordinate in selling the property directly to buyers or authorize the third party to sell the property to the buyers.

The third party authorized to sell property may be the property auction center, the property auction enterprises or functional organizations entitled to buy property for sale.

2. Taking the very security property as replacement for the performance of secured obligations: Taking the very security property as replacement for the performance of secured obligations means the credit institutions directly take the security property, use the security property prices determined upon the handling as basis for payment of debt principals, loan interests, overdue interests by the securers after subtracting other expenses (if any) and are entitled to receive such property according to the provisions of this Circular and other provisions of law.

3. Receiving money amounts or property to be paid or handed over by the third party to the securers: Receiving money amounts or property to be paid or handed over by the third party to the securers means the credit institutions directly receive the money amounts or property, which must be paid or handed over by the third party to the securers according to procedures prescribed in this Circular and other provisions of law.

III. Credit institutions may transfer their right to recover debts or authorize the third party to handle the security property. The third party must be organizations having legal person status and shall be entitled to exercise the right to recover debts or handle security property according to law provisions.

Where the third party is transferred by a credit institution the right to recover debts, it is entitled to apply measures to recover debts or handle the security property like the credit institution. Where it is authorized by the credit institution to handle property, the third party may handle the security property within the authorized scope.

IV. The handling of security property must comply with the principle of publicity, simple procedures, convenience, promptness, protection of the parties’ rights and interests and economical expenditure.

V. Where the security property owner is prosecuted for a criminal act irrelevant to the borrowing of capital of a credit institution or irrelevant to the source of formulating the security property, such person’s security property shall not be compulsorily inventoried but handled according to the provisions of this Circular, except otherwise provided for by law.

VI. The competent State bodies shall have to create favorable conditions for and apply necessary measures to support, credit institutions in handling security property according to the provisions of this Circular and other provisions of law.

B. SOME SPECIFIC PROVISIONS ON PROCEDURES FOR HANDLING SECURITY PROPERTY

I. Handling security property as agreed upon

1.The security property shall be handled according to agreement reached between the credit institution and the securer in the credit contract or the security contract. The parties may agree to amend, supplement their agreement or reach new agreement on handling the security property. This agreement must be made in writing.

2. Before handling the security property, credit institution shall carry out the following procedures:

2.1. The credit institution shall have to notify in writing the securer of the handling of security property and register the notice on request to handle security property according to law provisions on registration of secured transactions (if such secured transactions were already registered).

a/ A written notice on handling of security property contains the following principal contents:

- The reasons for handling the security property;

- The value of the secured obligation;

- Type of to be-handled property: characteristics, quality, quantity;

- Mode of handling the security property;

- The time point for handling the security property.

- The time limit and venue for transfer of security property (if any).

b/ The credit institution shall fix the time for handling the security property in the security property-handling notice, which, however, must not be less than 7 days for pledged property and 15 days for mortgaged property, as from the date of registering the notice on request to handle security property at the secured transactions registry. For the secured transactions which require no registration or have not yet been registered due to the non-operation of the national secured transaction registry, the above-mentioned time limits of 7 days and 15 days shall be counted from the date the credit institution sends the property-handling notice to the securer. Where the security property is in danger of decay, the credit institution may handle the property immediately after the issuance of the security property-handling notice.

2.2. The securer shall coordinate with the credit institution in applying measures to prepare for the handling of security property such as the hand-over of security property to the credit institution, the hand-over of papers relating to the security property at the request of the credit institution (in cases where the securer or the third party keeps the papers, the security property), creation of conditions for the buyers to take a look at the property, and take other necessary measures to handle the security property.

Where the securer or the third party keeps the papers and/or the security property (hereinafter referred collectively to as the security property- keeping party), the credit institution shall fix the date for handing over such papers and property for handling in the notice on the handling of security property; if the security property-keeping party declines to observe it, the credit institution may request competent bodies to apply measures to force the security property- keeping party to hand over the papers and the property as provided for in Section XI of Part B.

3. The credit institution shall make record on the handling of security property, which must clearly state the hand-over and reception of security property, the mode of handling the security property, the rights and obligations of the parties and other agreements (if any).

Where the credit institution applies measures to compel the security property-keeping party to hand over the security property to it for handling, the former shall make the record on the seizure of the property according to the provisions at Point 3.3 of Clause 3, Section XI of Part B.

4. After the realization of the notice on handling of the security property, the rights of the credit institution and the obligations of the securer and the third party which keeps the security property are prescribed as follows:

4.1. The rights of the credit institution:

a/ To request the securer to coordinate with the credit institution in applying necessary measures to prepare for the handling of security property according to the provisions at Point 2.2, Clause 2, Section I of Party B;

b/ To exploit, use the security property or permit the securer or authorize the third party to exploit, use the security property as provided for in Section VI, Part B;

c/ To request the securer or the third party not to exploit, use the security property if the exploitation and use thereof threatens to cause the loss or decrease of the property value;

d/ To pay debts for the yields, benefits earned from the exploitation and use of the security property after subtracting necessary expenses for the exploitation and use thereof;

e/ To demand the property- keeping party hand over the security property, if the latter commits one of the following acts:

- Failing to hand over the security property at the request of the credit institution;

- Failing to apply or having inadequately applied measures to preserve the security property;

- Making at its own will the sale, exchange, donation, lease, lending, contribution as joint-venture capital, disbursement, damage or loss of security property;

- Other acts causing the danger of damaging, losing the security property.

Where the property-keeping party declines to hand over the property at the request of the credit institution, the latter may request competent State bodies to force the former to hand over the property as provided for in Section XI, Part B.

e/ Other rights as prescribed by law.

4.2. Obligations of the securer:

a/ To coordinate with the credit institution in applying necessary measures to prepare for the handling of security property when so requested by the credit institution as provided for at Point 2.2, Clause 2, Section I, Part B;

b/ Not to sell, exploit, use, lease or lend the security property at their own will without the approval of the credit institution;

c/ Not to destroy, disburse, exchange or donate the security property, use the security property to contribute capital to joint venture, to damage or lose the security property or to commit other acts which cause damage to the security property;

d/ To preserve and keep the security property, to hand over the security property and papers related thereto upon receiving the request of the credit institution;

e/ Other obligations as prescribed by law.

4.3. Obligations of the third party that keeps the security property:

The security property- keeping third party shall have the obligations to preserve and hand over the security property to the credit institution as prescribed for the securer at Items b, c, d and e of Point 4.2, Clause 4, Section I, Part B.

5. Security property-handling modes of agreement

5.1. Sale of security property

a/ The sale of security property shall comply with the provisions of Clause 1, Article 34 of the Government’s Decree No. 178/1999/ND-CP of December 29, 1999 on securing loans of credit institutions (hereinafter referred generally to as Decree No. 178). The parties shall agree to value the security property for sale according to the provisions in Section VII, Part B.

b/ The property sale-purchase contracts shall be made in writing between the party entitled to sell the security property and the party buying the security property. Where the securer and the credit institution do not have or fail to reach any agreement on the security property-selling party, the credit institution shall decide on the selling party according to one of the cases prescribed in Clause 1, Article 34 of Decree No.178.

5.2. The credit institution receives the security property as replacement for the performance of the secured obligations

a/ The credit institution and the securer shall make record on the reception of the security property as replacement for the performance of the secured obligations. The record must clearly state the hand-over, the reception, the valuation of the security property for handling and the payment of debts arising from the handling of security property according to the provisions of this Circular.

b/ After receiving the security property as replacement for the performance of the secured obligations, the credit institution may carry out the procedures to accept the transfer of the rights to own, to use the security property, or sell, assign the security property to the property buyer or transferee according to law provisions.

5.3. The credit institution shall receive the money amounts and/or property which the third party has to pay or hand over to the securer.

a/ The credit institution or the securer shall have to notify the third party of its eligibility to receive the above-mentioned money amounts and/or property, and at the same time request the third party to hand over those money amounts and/or property to the credit institution. The hand-over of such money amounts and/or property to the credit institution must be effected according to the time limit and location stated in the security property- handling notice, except for cases prescribed in Article 320 of the Civil Code.

For the security property prescribed at Points b, c, d, e and f of Clause 1.1, Section II, Chapter II of Circular No. 06/2000/TT-NHNN1 of April 4, 2000 of the State Bank Governor guiding the implementation of Decree No. 178, the credit institution is entitled to receive the security property and the rights arising therefrom. The third party is obliged to hand over the money amount and the property and transfer the rights arising from the security property to the credit institution.

b/ The credit institution shall make record on the reception of money amounts and/or property among the credit institution, the securer and the third party. The record on the reception of money amounts and/or property must clearly state the hand-over and reception of such money amounts, property, the valuation of the property and the payment of debts arising from the handling of property.

6. After the security property is handled to recover debts, the credit institution or the securer shall delete the property handling registration as well as the secured transaction registration according to the law provisions on secured transaction registration.

II. Handling security property according to the provisions in Clause 2, Article 34 of Decree No.178

1. When handling the security property according to cases prescribed at Clause 2, Article 34 of Decree No.178, the credit institution and the securer shall have to comply with the procedures prescribed at Clauses 2 and 3 of Section I, Part B; the rights and obligations of the parties as provided for at Clause 4, Section I, Part B.

2. The credit institution may take initiative in applying one of the following modes of handling the security property:

2.1 The credit institution shall directly sell the security property (except for the security property being the land use right and other properties which, as prescribed by law, must be sold at specialized auction organizations).

a/ The credit institution shall have to publicly announce the security property sale which shall be conducted after the time limit prescribed at Item b, Point 2.1, Clause 2, Section I, Part B.

b/ The property sale-purchase contract between the credit institution and the property buyer shall be made in writing. The credit institution decides the sale prices of security property as provided for at Section VII, Part B.

2.2. The credit institution shall authorize the property auction center or the property auction enterprises (hereinafter referred collectively to as the property auction organizations) to sell the security property.

a/ Cases of auction authorization:

- The credit institution shall opt for the security property- selling mode of authorizing the property auction organizations;

- The security property is the land use right as prescribed in Section III, Part B and other properties which, as prescribed by law, must be sold at specialized auction organizations.

b/ The property auction authorization contract shall be signed between the credit institution and the property auction organization. The credit institution and the securer may agree to let the securer to request the security property auction.

c/ The property auction procedures shall comply with the law provisions on property auction.

2.3. The credit institution shall authorize or transfer the security property handling to organizations functioning to buy property for sale.

a/ Organizations functioning to buy property for sale shall be:

- Debt-management and mortgaged property exploitation companies of the commercial banks, set up under Decision No. 305/2000/QD-NHNN5 of September 15, 2000 of the Governor of the Vietnam State Bank;

- Companies set up to manage and settle bad debts of credit institutions under the provisions of law.

b/ Organizations to which the credit institutions entrust or transfer the security property handling are entitled to handle the security property according to the provisions of Section III, Part A and other relevant provisions of law.

For the land use right and assets affixed to land, the organizations to which the credit institutions entrust or transfer the security property handling, when effecting the mode of selling the security property, must put them on auction. The auction order and procedures shall comply with the provisions in Section III, Part B.

2.4. The credit institution shall receive such very security property as replacement for the performance of the secured obligations (except for the property being the land use right, assets affixed to land):

In this case, the credit institution needs not to re-discuss with the securer. The procedures for receiving the very security property as replacement for the performance of the secured obligations shall comply with the provisions at Point 5.2, Clause 5, Section I, Part B.

2.5. The credit institution receives money amounts and/or property which the third party has to pay or hand over to the securer.

a/ The reception of money amounts and/or property, which the third party has to pay or hand over to the securer shall comply with the provisions of law or the agreement reached between the parties in the security contract. The order and procedures for reception of such money amounts and/or property shall comply with the provisions at Point 5.3, Clause 5, Section I, Part B.

b/ Where the third party declines to hand over the above-mentioned money amounts and/or property at the credit institution’s request, the latter may request competent State bodies to apply measures to force the third party to hand over the property according to the provisions in Section XI, Part B, or initiate a lawsuit at court.

3. After handling the security property, the credit institution or the securer shall effect the deletion of property handling registration as well as the deletion of secured transaction registration according to the law provisions on secured transaction registration.

4. In the process of handling the security property by modes prescribed in Clause 2, Article 34 of Decree No.178, the credit institution and the securer may reach agreement, repeat agreement or reach new agreement on property-handling modes, the parties’ rights and obligations as well as other agreements in accordance with the provisions of this Circular and other provisions of law.

III. Handling security property being the land use right, assetsaffixed to land

1. The handling of security property being the land use right, assets affixed to land shall comply with the agreement reached between the parties in the credit contracts, security contract as well as with the relevant provisions in Section I, Part B of this Circular and the provisions of the land legislation.

2. Where the security properties are the land use right, assets affixed to land, which cannot be handled according to the agreement reached between the parties in the contract, the credit institution shall put the properties on auction in order to recover debts or initiate lawsuits at court.

3. The land use right auction shall be effected in the following order:

3.1. The credit institution files the dossiers requesting the following competent State bodies to permit the auction of the land use right:

a/ The district-level People’s Committees permit the auction of the land use right already mortgaged by family households, individuals;

b/ The provincial-level People’s Committees permit the auction of the land use right already mortgaged by organizations.

3.2. A dossier requesting the permission to auction the land use right shall include:

a/ The written request for permission to auction the land use right;

b/ The copy of the credit contract, the security contract (the credit institution signs the copy);

c/ The copy of the land use right certificate or the certificate of the house ownership and residential land use right or other papers as prescribed at Point 7.3, Clause 7 of this Section (the credit institution signs the copy).

3.3. Within 15 days as from the date of receiving the above-mentioned dossiers, the competent People’s Committees shall have to:

a/ Issue the written permits to auction the land use right, for cases where the land use right can be transferred;

b/ Guide the credit institutions to carry out necessary procedures, for cases where the dossiers are incomplete, then issue written permits to auction the land use right;

c/ Reply in writing the credit institutions about the non-permission to auction the land use right for the land categories of which the land use right cannot be transferred under Article 30 of the Land Law.

3.4. Particularly for agricultural land cultivated with annual plants and assigned to family households and individuals by the State, the persons participating in the auction of the land use right must fully satisfy the conditions prescribed in Article 9 of Decree No. 17/1999/ND-CP of March 27, 1999 of the Government on the procedures for exchange, transfer, lease, sub-lease, inheritance of the land use right, the mortgage of and the contribution of capital with, the land use right value (hereinafter referred generally as Decree No.17).

3.5. After being permitted by the competent People’s Committee to auction the land use right, the credit institution shall carry out the procedures prescribed in Clauses 2 and 3, Section I, Part B, and authorize the property auction center to effect the auction of the land use right.

4. Upon the completion of the handling of the security property being the land use right, assets affixed to land, the credit institution shall have to carry out procedures for the deletion of registration of security property-handling notice, the deletion of mortgage, the deletion of mortgage registration. The credit institution shall carry out procedures for the transfer of the land use right, the transfer of the property ownership right to the property transferee, buyer, except where the property is auctioned by the property auction center, the legislation on property auction shall be complied with.

5. The granting of the land use right certificates, house ownership and residential land use right certificates shall be effected as follows:

5.1. The party responsible for carrying out the procedures to transfer the land use right as well as the property ownership right to the property transferee, buyer as provided for in Clause 4 above shall file dossiers to the competent State bodies applying for the land use right certificate, the house ownership and residential land use right certificate for the property transferee, buyer.

The dossiers of application for land use right certificates, house ownership and residential land use right certificates shall comply with the provisions at Clause 2, Section X of Part B.

5.2. Within 15 days (for the land use right certificate) or 60 days (for the house ownership and residential land use right certificate) as from the date of receiving full and valid dossiers, the competent State bodies shall have to grant the above-mentioned papers to the property transferee, buyer.

6. Obligation to pay tax on transfer of the land use right, assets affixed to land shall comply with the provisions in Section IX, Part B.

7. The provisions of this Circular shall apply to the handling of security property being the land use right, assets affixed to land, which had been mortgaged before Decree No.178 took effect in the following cases:

7.1. The land use right and assets affixed to land have been fully evidenced with papers and dossiers conformable with the law provisions at the time of mortgage or conformable with the law provisions at the time Decree No.178 took effect;

7.2. The land use right and assets affixed to land, which fully meet the conditions prescribed at Point 7.1 above but have not yet been handled due to the lack of certification by the State Notary Public or the certification of the competent People’s Committee in the mortgage contract;

7.3. The land use right and assets affixed to land, for which, the mortgagor, at the time of mortgage, has acquired the land use right certificate, or the house ownership and residential land use right certificate or one of the papers prescribed in Clause 2, Article 3 of Decree No.17, and is entitled to mortgage the land use right;

7.4. Assets affixed to land, over which, the mortgagor, at the time of mortgage, has acquired the lawful ownership and papers on the land use right as prescribed at Point 7.3 above, but is not entitled to mortgage the land use right under the provisions of the land legislation.

In this case, the credit institution shall auction the assets affixed to land at the property auction center. Upon the completion of the auction, the property auction center shall send dossiers to the competent State bodies requesting the granting of the land use right certificate to the auction winner in form of land assignment or lease by the State or reception of the transfer of the land use right according to the provisions of the land legislation.

7.5. When handling the security property being the land use right, assets affixed to land under the cases prescribed at Points 7.1, 7.2 and 7.3 above, the credit institution shall send the existing dossiers to the competent State bodies as defined in Clause 3, Section III, Part B, to ask for permission to auction the land use right. After getting the permission from the competent State body for the auction, the credit institution shall proceed with the procedures for handling the security property according to the provisions of this Circular.

IV. Handling property of divided, separated, consolidated, merged, transformed, equitized enterprises

1. The credit institution may handle property to recover debts before the enterprises are divided, separated, consolidated, merged, transformed, equitized under the cases prescribed in Clause 3, Article 13 of Decree 178.

Where the loan security property has not yet been handled to recover debts but the enterprises have already been divided, separated, consolidated, merged, transformed or equitized, the enterprises formulated after the division, separation, consolidation, merger, transformation or equitization must accept the debts and perform the duty to pay debts to the credit institutions. Where the enterprises formulated after the division, separation, consolidation, merger, transformation or equitization decline to perform the debt repayment obligation, the credit institutions are entitled to handle the security property according to the provisions in section II, Part B.

2. Where the credit institutions handle the loan security property according to the provisions in Clause 4, Article 13 of Decree No.178, the property handling and the performance of debt repayment obligation shall be based on the security contracts resigned after the enterprises are divided, separated, consolidated, merged, transformed or equitized. The credit institutions shall effect the property handling according to the provisions of this Circular.

V. Handling security property in cases where the securer has died or been away from the place of residence at the time of handling the security property

The credit institution may proceed with the handling of security property in cases where the debts turn due or must be paid ahead of schedule while the securer dies or has been deliberately away from the place of residence at the time of property handling already notified by the credit institution in advance. The security property keeper (if any) or the inheritor of the securer’s property (in case where the securer dies) is obliged to hand over the property to the credit institution for handling according to the latter’s notice. Where the security property keeper or the inheritor of the securer’s property declines to hand over the property to the credit institution for handling, the latter may request the competent State bodies to apply measures to compel the security property keeper to hand over the security property to the credit institution for handling according to the provisions in Section XI, Part B.

VI. Exploitation, use of security property pending the handling

1. While the security property is not yet handled for debt recovery, the credit institutions may exploit and/or use the security property or permit the securer or authorize the third party to exploit and/or use the security property strictly according to the functions and utility of the property. The exploitation permission or authorization, the exploitation mode and the handling of yields and benefits earned from the exploitation and/or use of the security property must be made in writing.

2. The gained yields and benefits must be accounted separately (except otherwise agreed upon by the parties); after subtracting necessary expenses for the property exploitation and/or use (including expenses for management, renovation, repair of the property, assorted taxes, property exploitation charge, and other necessary and reasonable expenses), the remaining amount shall be used for debt payment to the credit institutions as provided for in Section VIII, Part B.

VII. Valuation of security property upon the handling thereof

1. The credit institution and the securer shall agree on the property handling price at the time of handling and make record of their agreement on property valuation.

2. Where the parties cannot reach agreement on the security property handling price, the price determination shall be carried out as follows:

2.1. Before the credit institution decides on the security property handling price, it shall hire the consulting organization, the professional organization to determine the price or refer to the prices already determined by the consulting organization or the professional organization, the practical prices in the locality at the time of handling, the State-prescribed prices (if any) and other price factors.

2.2. Where the security property sale results in a big price difference among the registered buyers or where many persons simultaneously register for the property purchase, the credit institution shall decide the security property handling price on the basis of the highest price offered or put them on auction to recover debts.

3. Where the property auction organization is authorized, the determination of the security property handling price shall comply with the law provisions on property auction.

4.Where the security property handling is entrusted or transferred to the third party, the credit institution may determine the security property handling price or agree to let the third party to determine such price according to the principles prescribed at Point 2.1, Clause 2 above.

VIII. Settlement of debt recovery from the handling of security property

1. The settlement of debt recovery shall be carried out in the following order:

1.1. The necessary expenses for the handling of security property: expenses for preservation, management, price determination, property sale advertisement, property sale, commission, auction charge and fee and other necessary and reasonable expenses related to the security property handling.

1.2. Taxes and charges payable into the State budget (if any).

1.3. Debt principal, loan interest, overdue debt interest calculated to the date the securer or the security property keeper hands over the property to the credit institution for handling.

2. Where the credit institution advances money for payment of property handling expenses or tax amounts and charges payable into the State budget, it may recover this advance amount when settling the debt principal, loan interest, overdue debt interest, except where the securer has already repaid the advance amount to the credit institution.

3. Where the proceed from the property sale plus the amounts earned from the exploitation and/or use of security property pending the handling (after subtracting necessary expenses for the property exploitation and/or use) is larger than the payable debt amount, the difference shall be returned to the securer. The securer is obliged to continue to repay the debt if the revenue is not enough for the payment of payable debt and the expenses related to the security property handling.

Where the credit institution receives the very security property as replacement for the performance of the obligation or receives the money amounts and property which the third party has to hand over to the securer, the surplus difference between the security property handling price plus the amounts earned from the exploitation and/or use of the security property pending the handling (after subtracting the necessary expenses for the property exploitation and/or use) and the payable debt amount shall be returned to the securer. The securer is obliged to continue repaying the debt if the above-mentioned revenue is smaller than the debt principal, interest, overdue debt interest amount plus the expenses related to the handling of security property.

4. For security property which the buyer cannot pay immediately for the debt recovery, the credit institution may apply the method of recovering debt part by part according to the payment capability of the buyer. The credit institution shall determine the debt principal, interest and overdue debt interest amounts as well as the collectible expenses calculated to the date the credit institution receive the security property.

5. Where a property is used as security for many obligations at a credit institution, if the property must be handled to perform an obligation to pay due debt, the other debt payment obligations, though not yet mature, are considered due and the credit institution may handle the security property to recover debts. The order of payment of debts secured by a property is determined according to the order of registration at the secured transaction registry.

6. For a property used as security for many obligations in case of associated loans, if the property must be handled to perform a due debt repayment obligation, the parties joining the provision of associated loans may be paid according to their respective capital contribution percentages.

7. Where the securer increases the value of the security property (such as through repair or upgrading of property…) in the course of direct management and use of the security property, the increased value portion of the security property shall be considered part of the value of the security property used to secure the performance of the initial obligation. When the security property is handled, the credit institution shall have its debt paid also from the increased value of the security property.

8. Where the security property is insured, the indemnity paid by the insurance agency shall be paid directly to the credit institution for debt recovery. This amount shall be used for repayment of debts of the securer.

IX. The calculation of tax on transfer of the rights to own and/or to use security property

1. The calculation of tax on transfer of the rights to own and/or to use the security property shall be carried out when filling in the procedures for the transfer of ownership, use rights or when the credit institution receives the very security property as replacement for the debt repayment obligation and the rights to own and use such property are transferred to the credit institution.

2. For the tax on land use right transfer, the provisions in the Government’s Decree No.19/2000/ND-CP of June 8, 2000 detailing the implementation of the Law on the Land Use Right Transfer Tax and the Law Amending and Supplementing a Number of Articles of the Law on the Land Use Right Transfer Tax shall be complied with.

3. Where the credit institution receives the very security property as replacement for the performance of the secured obligation while the procedures for the transfer of the ownership and/or use right over such property have not been carried out, the tax on the transfer of ownership and/or use right shall not be paid.

X. Concerned bodies’ coordination responsibility

1. When the credit institution handles the security property by the modes prescribed in this Circular, the State Notary Public and the competent People’s Committee shall, within the scope of their tasks and powers, have to certify the property sale-purchase contract, the property transfer contract, the record on receipt of the property and papers related to the transfer of the ownership and use right to the property buyer, transferee.

2.The competent State bodies (the competent People’s Committees, the provincial/municipal Land Administration Services or Land Administration- House and Land Services, the Traffic Police Section of the provincial/municipal Police Offices, the waterway transportation means register; the regional sub-department for sea ship and crew registration, the Vietnam Civil Aviation Department) shall have to carry out procedures for the transfer of the property ownership and/or use right to the property buyer or transferee after receiving the request of the credit institution (or the property auction organization) and other relevant documents, including:

2.1. Copies of the credit contract; the security contract (the credit institution signs such copies);

2.2. The property ownership certificate or the property use right certificate, or the written registration of the property of the property owner, or other papers as provided for at Point 7.3, Clause 7, Section III, Part B (depending on each specific case).

2.3. The record on handling of the property or the record on seizure of the property;

2.4. The property sale/purchase contract, the property transfer contract or property reception record, or the property auction document (depending on each specific case of handling);

2.5. The paper certifying the payment of property transfer tax according to the provisions of law.

3. The procedures for transfer of security property ownership and use rights in cases where the handled security property is the judgement execution property:

The competent State bodies shall carry out procedures for transfer of the security property ownership and/or use rights to the property buyer, transferee, based on the following dossiers including:

3.1. The extract of the judgement or the copy of the judgement or the copy of the court’s decision;

3.2. The decision on judgement execution, issued by the judgment execution body;

3.3. The credit contract, the security contract (the credit institution signs the copies thereof);

3.4. The property sale/purchase contract or the property transfer contract, or the property reception contract, or the property auction document (depending on each specific handling case).

4. The dossiers for carrying out the procedures for the transfer of the security property ownership and use rights need not to include the security property owner’s written agreement on the handling of the security property (as such written agreement has already been reflected in the credit contract, security contract); need not to include the property sale/purchase contract between the property owner or the person against whom the judgment is executed and the property buyer, except for cases where the property handler is the property owner or the person subject to the judgment execution.

5. The time limit for completion of the procedures for the property ownership and/or use right transfer to the buyer, the transferee shall be 15 days (or 60 days particularly for the transfer of the house ownership and the residential land use right) as from the date of receiving the request of the credit institution (or the property auction organization) and the above-mentioned documents, except otherwise provided for by law.

XI. Procedures to compel the security property- keeping party to hand over the security property to credit institutions

Under Article 35 of Decree No.178, the procedures to compel the security property-keeping party to hand over the security property to credit institutions shall be as follows:

1. The security property-keeping party shall have to hand over the security property to the credit institution for handling according to the latter’s notice. If the time limit set in the notice has expired and the security property-keeping party declines to hand over the security property, the credit institution shall issue a written notice on the application of measures to force the security property- keeping party to hand over the property to the credit institution. The written notice must clearly state the reasons for the application, the deadline for hand-over of the security property, the to be applied- measures, the rights and obligations of the parties.

2. The credit institution may apply the following measures:

2.1. The credit institution requests the security property-keeping party to hand over the security property being under its management to the credit institution.

2.2. After applying the above measure and the security property-keeping party still declines to hand over the security property, the credit institution shall send documents to the People’s Committee and the Police Office of the place where the securer resides or the place where the security property exists, requesting coordination with and support for the credit institution in recovering the security property.

Where the third party keeps the security property, the credit institution shall notify such to the securer and request coordination in compelling the security property- keeping party to hand over the security property to the credit institution.

2.3. Upon the expiry of the time limit fixed in the notice on application of measures to force the hand-over of property, if the security property-keeping party declines to hand over the property to the credit institution for handling, the credit institution shall proceed with the seizure of the security property with the support of the concerned People’s Committee and Police Office.

3. The responsibilities of the People’s Committees and the Police Offices for coordination in supporting the credit institutions to recover the security property shall be as follows:

3.1. Upon receiving the request of the credit institution as provided for at Point 2.2, Clause 2 above, the concerned People’s Committee shall apply educative measures, persuading the security property-keeping party to hand over the security property being under its management to the credit institution. The People’s Committee fixes the time limit for the security property-keeping party to hand over the security property to the credit institution for handling, which, however, must not exceed 10 days as from the date the People’s Committee applies the educative measures.

3.2. If past the above time limit, the security property-keeping party still declines to hand over the security property as requested by the credit institution, the People’s Committee shall direct functional sections and branches to coordinate with the credit institution and proceed with necessary procedures to compel the security property-keeping party to hand over the security property to the credit institution.

a/ For security property being communication means, based on the written request of the credit institution (clearly stating the contact address, fax number, phone number):

- The Traffic Police Office shall, through the work of registration of means, if detecting cases requested by the credit institution, not transfer the owner’s name, the ownership, and request the means owners or the persons authorized by the owners to seek the opinion of the credit institution before carrying out the procedures for transferring owner’s name as well as the ownership.

- Where through patrol and inspection, the traffic police offices detect the communication means operators use the copies of the means registration certificates, as provided for in Clause 2, Article 12 of Decree 178, with the expired circulation time limit, the traffic police offices shall make record on temporary seizure of the means and send written notification (directly, by fax or by other communication and information means) to the credit institution for the hand-over of the temporarily seized means. Within 15 days after receiving the notification, the credit institution shall have to send its men to receive the property. The hand-over of property between the traffic police office and the credit institution must be recorded in writing. The credit institution must notify such hand-over of property to the means owners, operators. If past this time limit, the credit institution does not come to receive the property, the traffic police office shall return the temporarily seized means to the operators.

- The credit institution shall have to pay all expenses for the notification, temporary seizure and other reasonable expenses (if any) when coming to receive the temporarily seized means. This money amount shall be calculated into the expenses for property handling as provided for in Section VIII, Part B. Where the credit institution fails to come for the reception of the means according to the notice of the traffic police office, it shall have to pay all the above-said expenses from its own pocket.

b/ For security property being warehouses, residential houses and other constructions, the credit institution shall carry all belongings and assets being other than the security property to the property keeping agencies and receive the security property for handling. The expense for property keeping shall be paid by the property owners.

c/ For security property being machinery, equipment, raw materials, fuels, materials, consumer goods, precious metals, gems and other security property, the credit institution shall seize them for keeping.

3.3. The seize and keeping of security property must be recorded in writing to the witness of the representatives of the People’s Committee of the locality where the property-keeper resides or where exists the security property, and of concerned bodies.

3.4. While the credit institution seizes and keeps the security property for handling, if the security property keeper commits acts of opposing or obstructing officials from performing their duty, or commits other acts in order to take back the property, or infringes upon the life and health of the duty performers, fomenting public disorder and disrupting security, the Police Office shall have to apply measures as prescribed by law to prevent and handle them in time. The People’s Committee shall have to create conditions in support of the credit institution, send people for coordination and settle according to its competence all problems arising in the course of seizing and keeping the security property by the credit institution for handling.

C. IMPLEMENTATION ORGANIZATION AND EFFECT

I. This Circular shall apply to handle security property, recover debts for credit institutions of various types prescribed in Article 12 of the Law on Credit Institutions. The handling of security property to recover debts for domestic individuals and legal persons, foreign individuals and legal persons being other than credit institutions shall comply with the provisions of Decree No.165/1999/ND-CP of November 19, 1999 of the Government on secured transactions.

II. For credit contracts with the debt payment time limits having expired before this Circular takes effect but the security property having not yet been handled, the provisions of this Circular shall apply for handling.

III. Where the credit institution provides credits in other forms, if the parties have reached agreement on security measures, the provisions of this Circular shall apply for handling.

IV. For security property being material evidences in criminal cases, the provisions of Joint Circular No. 06/1998/TTLT/TANDTC-VKSNDTC-BCA-BTC-BTP of October 4, 1998 of the Supreme People’s Court, the Supreme People’s Procuracy, the Ministry of Public Security, the Ministry of Justice, the Ministry of Finance, guiding a number of issues on preservation and handling of security property being material evidences, compulsorily inventoried property in the course of investigation, prosecution and adjudication of criminal cases shall apply.

V. This Circular takes effect 15 days after its signing. Any problems arising in the course of implementation shall be reported by branches for timely explanation, supplements and amendments by the said bodies. All amendments and supplements to this Circular shall be decided by the State Bank Governor, the Justice Minister, the Public Security Minister, the Finance Minister and the General Director of Land Administration.