Laws of Vietnam

THE GOVERNMENT

Article 1.- Governing scope

This Decree details the implementation of a number of articles of the Civil Code regarding the establishment and execution of security transactions to secure the performance of civil obligations and the disposal of security assets.

Article 2.- Application of law

The establishment and execution of security transactions and the disposal of security assets shall comply with the provisions of the Civil Code, this Decree and relevant legal documents.

Article 3.- Interpretation of terms

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

1. Securer means an obligor or a third party that commits to secure the performance of civil obligations, that may be a pledgor, mortgagor, depositor, escrow account depositor, collateral payer, guarantor or a grassroots socio-political organization in case of trust.

2. Securee means a right holder (obligee) in a civil relation whereby the exercise of that right is secured with one or more than one security transaction, that may be a pledgee, mortgagee, deposit receiver, escrow account receiver, guarantee or a credit institution in case of trust, or a party entitled to a payment by bank or to a damages in case of collateral.

3. Bona fide securee means a securee that is ignorant or unable to know that the securer is not entitled to use an asset to secure the performance of civil obligations.

4. Obligor means a party that is supposed to perform the secured obligation toward the obligee.

5. Secured obligation means part or the whole of a civil obligation, which may be a present obligation, a future obligation or a conditional obligation, of which the performance is secured with one or more than one security transaction.

6. Future obligation means a civil obligation arising from a civil transaction that is established after a security transaction is entered into.

7. Security asset means an asset used by the securer to secure the performance of a civil obligation toward the securee.

8. Goods circulated in the production or business process means a movable asset used for exchange, sale, purchase or lease within the scope of production or business activities of the securer.

9. Valuable papers means stocks, bonds, bills of exchange, promissory notes, deposit certificates, checks and other valuable papers that are specified by law, can be monetized and are allowed to be transacted.

10. Asset allowed to be transacted means an asset not banned from transactions under law at the time a security transaction is established.

Article 4.- Security assets

1. Security assets are agreed upon by the involved parties and owned by the obligor or by a third party that commits to use those assets to secure the performance of obligations of the obligor toward the obligee. Security assets may be current assets or future assets which are allowed to be transacted.

2. Future assets means those owned by the securer after the time the obligation is established or the security transaction is entered into. Future assets also include those formed at the time the security transaction is entered into, which, however, shall belong to the securer's ownership only after the security transaction is entered into.

3. Unless otherwise provided for by law, state enterprises are entitled to use assets under their management to secure the performance of civil obligations.

4. If a security transaction is lawfully entered into and binding on a third party, the court or a competent state agency may not distrain security assets for the performance of another obligation by the securer, unless otherwise provided for by law.

Article 5.- Value of assets used to secure the performance of many civil obligations

In case the securer uses an asset to secure the performance of many civil obligations according to Clause 1, Article 324 of the Civil Code, the involved parties may agree to use an asset of a value smaller than, equal to or larger than the total value of the secured obligations, unless otherwise provided for by law.

Article 6.- Payment priority order

1. The payment priority order upon the disposal of security assets is determined in accordance with Article 325 of the Civil Code.

2. Parties secured with the same asset may agree on the interchange of the payment priority order between them. The party succeeding the top payment priority shall be given priority to be paid within the scope of security of its predecessor.

3. If the proceeds from the disposal of the security asset is not enough to pay the securees with the same payment priority, that amount shall be paid to those parties in proportion to the values of secured obligations.

Article 7.- Selection of security transactions to secure the performance of civil obligations

When a civil obligation is secured with many security transactions but the obligor fails to perform or improperly performs that obligation when it comes due, the securee may select a security transaction to dispose of or dispose of all security transactions, unless otherwise agreed by involved parties.

Article 8.- Security for performance of obligations with future assets

In case the performance of an obligation is secured with a future asset, when the securer owns part or the whole of the security asset, the securee will have the right to part or the whole of that asset. For assets that are, under law, subject to the ownership registration but have not yet been registered by the securer, the securee may still dispose thereof when the time for disposal comes due.

Article 9.- Notarization or certification of security transactions

1. The notarization or certification of security transactions shall be agreed upon by the involved parties.

2. When it is so provided for by law, security transactions must be notarized or certified.

Article 10.- Effect of security transactions

1. A security transaction which is lawfully entered into takes effect as from the time it is entered into, except for the following cases:

a/ The involved parties otherwise agree;

b/ The asset pledge takes effect as from the time the asset is transferred to the pledgee;

c/ The mortgage of land use rights, forest use right, ownership over planted production forests, aircraft or seagoing vessels becomes valid as from the time of mortgage registration;

d/ The security transaction becomes valid as from the time it is notarized or certified under law.

2. The general description of security assets does not affect the validity of security transactions.

Article 11.- Time when a security transaction is legally valid for a third party

1. A security transaction shall be legally valid for a third party as from the time it is registered. The time of registration is determined according to the provisions of law on registration of security transactions.

2. The change of a party or parties to a security transaction shall not change the time that security transaction is legally valid for a third party.

Article 12.- Registration of security transactions

1. Cases where registration is required include:

a/ The mortgage of land use rights;

b/ The mortgage of forest use rights, ownership right to planted production forests;

c/ The mortgage of aircraft or seagoing vessels;

d/ The mortgage of an asset to secure the performance of many obligations;

e/ Other cases specified by law.

2. Security transactions not falling into the cases specified in Clause 1 of this Article shall be registered upon requests of organizations or individuals.

3. The order, procedures and competence for registering security transactions shall comply with the provisions of law on registration of security transactions.

Article 13.- Cases where security assets are not owned by securers

1. When a securer uses an asset not under its ownership to secure the performance of civil obligations, the owner may reclaim that asset according to Articles 256, 257 and 258 of the Civil Code and Clause 2 of this Article.

2. When a security asset is purchased on a deferred payment, payment in installments or is rented for a term of one year or more by an enterprise or an individual that has made business registration, i.e., machinery, equipment or another movable not subject to the ownership registration and the contract on purchase on deferred payment, payment in installments or rent registered at a competent security transaction registry within fifteen days after that contract is entered into, the seller may retain the ownership and the renter is on the top payment priority upon the disposal of security assets. If no registration is made or the registration is made after the above time limit and after the security transaction is registered, the securee is considered as a bona fide securee and on the top payment priority upon the disposal of security assets.

3. Organizations or individuals that are secured with assets purchased on a deferred payment, payment in installments or rented shall not be considered bona fide securees after the contracts on purchase on deferred payment, payment in installments or rent are registered.

Article 14.- Cases where securers are reorganized legal entities

1. A securer being a reorganized legal entity shall notify the securee of its reorganization before it is divided, separated, consolidated, merged or transformed.

2. Involved parties shall agree on the inheritance and performance of secured obligations and security transactions in the process of reorganization of legal entities. If no agreement is reached, the securee may request the obligor to fulfill the obligations ahead of time. If it does not so request, the security transaction shall be executed as follows:

a/ In case of division of the legal entity, new legal entities shall jointly execute the security transaction;

b/ In case of separation of the legal entity, the separated legal entity and separating legal entities shall jointly execute the security transaction;

c/ In case of consolidation or merger, the consolidating legal entity or the merging legal entity shall execute the security transaction;

d/ In case of transformation of an enterprise or state company, the transformed enterprise shall execute the security transaction.

3. For security transaction established before the reorganization of legal entities and still within the execution time limit, the involved parties are not required to re-enter into those transactions. They may record in writing the change of securers.

For registered security transactions, the registration of change of securers shall be made within a time limit specified by law.

Article 15.- Relationship between security transactions and contracts involving secured obligations

1. When a contract involving secured obligations is invalidated but the contracting parties have not yet performed it, the security transaction shall terminate. If the contract involving secured obligations has been partially or wholly performed, the security transaction shall not terminate, unless otherwise agreed upon.

2. Unless otherwise agreed upon, invalid security transaction shall not terminate the contract involving the secured obligations.

3. When a contract involving secured obligations is cancelled or unilaterally terminated but the contracting parties have not yet performed it, the security transaction shall terminate. If the contract involving secured obligations has been partially or wholly performed, the security transaction shall not terminate, unless otherwise agreed upon.

4. Unless otherwise agreed upon, cancelled or unilaterally terminated security transaction shall not terminate the contract involving the secured obligations.

5. If a security transaction does not terminate according to the provisions of Clauses 1 and 3 of this Article, the securee may dispose of the security assets for settling the refunding obligation of the obligor toward the securee.

Article 16.- Holding of pledged assets

After taking the transfer of the pledged asset, the pledgee shall directly hold that asset or authorize a third party to hold it. In case of authorizing a third party to hold the asset, the pledgee shall still be responsible before the pledgor for the performance of obligations specified in Article 332 of the Civil Code and other obligations as agreed with the pledgor.

Article 17.- Responsibilities of the pledgee in case the pledged asset is lost, damaged, deteriorated or devalued

1. In case the pledged asset is an object in danger of deterioration or devaluation, the pledgee currently holding that asset shall notify the pledgor of the danger and request the latter to give the handling methods within a given time limit. If past that time limit the pledgor fails to reply, the pledgee shall take necessary preventive measures. The pledgee may request the pledgor to pay reasonable expenses if the former is not at fault for the danger.

When the pledged asset is lost, damaged, deteriorated or devalued due to fault of the pledgee, the pledgee shall pay damages to the pledgor.

2. In case the pledged asset is an object held by a third party and in danger of loss, damage, deterioration or devaluation, the rights and obligations between the third party and the pledgee shall comply with the asset custody contract.

3. The provisions of Clauses 1 and 2 of this Article do not apply in case the pledged asset suffers natural wear.

Article 18.- Responsibilities of the pledgee in case of sale, exchange, donation, lease or lending of the pledged asset or use of the pledged asset to secure the performance of other obligations

1. When the pledgee sells, exchanges, donates, leases or lends the pledged asset or uses the pledged asset to secure the performance of other obligations in contravention of the provisions of Clause 2, Article 332 of the Civil Code, the pledgor may claim back that asset and request the pledgee to pay damages. The pledgor does not have the right to reclaim the asset in the following cases:

a/ The asset buyer, exchangee and donee may establish the ownership within the statute of limitations specified in Clause 1, Article 247 of the Civil Code;

b/ The buyer or exchangee of assets being movables is not required to register the asset ownership and considered a bona fide party according to the provisions of Article 257 of the Civil Code.

2. If the pledgor does not have the right to reclaim the asset from the asset buyer, exchangee or donee according to the provisions of Clause 1, this Article, the pledgee shall pay damages to the pledgor.

Article 19.- Rights of the pledgee in case of pledge of bills of lading, savings cards or valuable papers

1. In case of pledge of an ordered bill of lading or a bearer bill of lading (complete set of bills of lading) according to the provisions of Article 89 of the Maritime Code of Vietnam, the pledgee has the rights to the cargo stated in that bill of lading.

2. In case of pledge of a savings card, the pledgee may request the organization receiving savings deposits to freeze the savings deposit account of the pledgor.

3. In case of pledge of a valuable paper, the pledgee may request the issuer of that valuable paper or the Securities Depositary Center to guarantee the pledgee's right to supervise the asset value stated in that paper.

If the valuable paper issuer or the Securities Depositary Center breaches the commitment to guarantee the pledgee's supervision right, it shall pay damages equivalent to the decreased portion of the asset value stated in that paper, unless otherwise agreed upon by the parties.

Article 20.- Rights of the mortgagee in case the mortgagor sells, exchanges or donates the mortgaged asset

1. In case the mortgagor sells, exchanges or donates the mortgaged asset that is not a goods circulated in the production or business process without the consent of the mortgagee, the mortgagee may recover the mortgaged asset, except for the following cases:

a/ The asset purchase or exchange is conducted before the time of mortgage registration, and the buyer or the exchangee of the mortgaged asset is a bona fide party;

b/ For the buyer or the exchangee of a motorized vehicle which has been registered for mortgage, the content of the mortgage registration does not accurately describe the frame number and engine number of that motorized vehicle and the mortgaged asset buyer or exchangee is a bona fide party.

2. If the mortgagee does not exercise the right to recover the mortgaged asset, the proceeds, the right to claim payment or other assets obtained from the sale, purchase or exchange of the mortgaged asset will become the mortgaged asset in replacement of the sold or exchanged asset.

For a registered security transaction, the mortgagee may take initiative in requesting the registration of change of the security asset. The registration of change of the security asset in this case does not change the time of registration.

3. If the mortgagor sells or exchanges the mortgaged asset being a goods circulated in the production or business process within the scope of its production or business activities; sells or exchanges the mortgaged asset of other types with the consent of the mortgagee and in the cases specified at Points a and b, Clause 1 of this Article, the buyer or the exchangee may have the ownership over that asset.

Article 21.- Rights of the holding party in case of holding of assets currently used for mortgage

When the obligee holds the asset according to the provisions of Article 416 of the Civil Code and that asset is currently used for mortgage, the rights of the holding party are preferred over those of the mortgagee.

Article 22.- Mortgage of the right to claim debts

1. The debt claim holder may mortgage part or the whole of that claim, including also the future claim, without the consent of the debtor.

2. The debt claim mortgagee has the following rights and obligations:

a/ To request the debtor to pay the due debt, if the debtor fails to perform or improperly performs the debt payment obligation;

b/ To supply information on the mortgage of the debt claim, when so requested by the debtor.

3. The debtor has the following rights and obligations:

a/ To pay the debt to the mortgagee according to the provisions of Point a, Clause 2 of this Article;

b/ To request the mortgagee to supply information on the mortgage of the debt claim; if no information is supplied by the mortgagee, to refuse to pay the debt to the mortgagee.

4. When the debt claim is transferred according to the provisions of Article 309 of the Civil Code, the order of priority between the debt claim transferee and mortgagee is determined according to the time of registration of transfer and mortgage transactions at the competent security transaction registry.

Article 23.- Lease or lending of mortgaged assets

1. When the mortgagor leases or lends the mortgaged asset without notifying the lesser or the borrower of the current mortgage of that asset according to the provisions of Clause 5, Article 349 of the Civil Code, thus causing damage, it shall pay damages to the lessee or the borrower.

2. The contract on lease or lending of the mortgaged asset shall terminate when the mortgaged asset is disposed of for the obligation performance. The lessee or the borrower shall hand over the asset to the mortgagee for disposal, unless otherwise agreed upon by the mortgagee and the lessee or the borrower.

Article 24.- Mortgage of currently leased assets

In case of mortgage of currently leased assets, the mortgagor shall notify the mortgagee of the lease. If that asset is disposed of for the obligation performance, the lessee may continue leasing it until the expiration of the contracted lease term, unless otherwise agreed upon by the parties.

Article 25.- Responsibilities of the mortgagor or a third party holding the mortgaged asset

1. If the mortgaged asset is lost, damaged, deteriorated or devalued, the mortgagor shall promptly notify such to the mortgagee and repair, supplement or replace that asset with another asset of equivalent value or add or replace the mortgage with another security measure, unless otherwise agreed upon by the parties.

2. When the third party holding the mortgaged asset pays damages for the loss, deterioration or devaluation of the mortgaged asset according to the provisions of Clause 1, Article 352 of the Civil Code, the paid damages shall become the security asset.

3. The third party holding the mortgaged asset is not required to pay damages if the mortgaged asset suffers natural wear.

Article 26.- Supervision and inspection of mortgaged future assets

The mortgagor is obliged to create conditions for the mortgagee to exercise the right to supervise and inspect the process of asset formation. The supervision and inspection by the mortgagee must neither obstruct nor cause troubles for the formation of the asset.

Article 27.- Investment in mortgaged assets

1. The mortgagee must not restrict the investment by the mortgagor or a third party in the mortgaged asset to increase that asset's value.

2. When the mortgagor invests in the mortgaged asset and uses the asset portion increased thanks to investment to secure the performance of another obligation or when a third party invests in the mortgaged asset and takes up the mortgage of the very asset portion increased thanks to investment, the case shall be handled as follows:

a/ If the increased asset portion can be detached from the mortgaged asset without devaluing the mortgaged asset compared with its value before investment, the securees may detach asset portions they receive as security for disposal.

b/ If the asset portion increased thanks to investment cannot be detached from the mortgaged asset, that mortgaged asset shall be disposed of as a whole for the obligation performance. The order of payment priority between the co-securees is determined according to the time of registration.

Article 28.- Return of land use right certificates or asset ownership certificates to mortgage registration applicants

1. When it is agreed by the parties or permitted by law to use the land use rights or assets with ownership registration to secure the performance of many civil obligations, the mortgagee or a third party currently holding the land use right certificate or the asset ownership certificate shall return such certificate to the registration applicant for carrying out procedures for mortgage registration, unless the registration of security transaction is otherwise agreed upon by the co-securees.

2. Within five days after the completion of the security transaction registration, the registration applicant shall return the land use right certificate or the asset ownership certificate to the mortgagee or a third party entitled to hold such certificate, unless otherwise agreed upon by the parties.

Article 29.- Cases where deposits or advances are not clearly identified

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, that sum of money shall be considered an advance.

Article 30.- Obligations of the depositor or the escrow account depositor

1. To pay to the deposit receiver or escrow account receiver reasonable expenses for preservation and maintenance of the deposited asset or the asset put in escrow account, unless otherwise agreed upon.

2. To carry out the registration of the ownership over the deposited asset or the asset put in escrow account for the deposit receiver or escrow account receiver, for assets of which the ownership must be registered as required by law, in case the ownership over that asset is transferred to the deposit or escrow account receiver as provided for by law or agreed upon.

Article 31.- Rights of the depositor or escrow account depositor

The depositor or escrow account depositor may request the deposit receiver or escrow account receiver to stop using the deposited asset or the asset put in the escrow account if the use of such asset may pose a danger of deterioration or devaluation.

Article 32.- Obligations of the deposit receiver or escrow account receiver

1. To preserve or maintain the deposited asset or the asset put in the escrow account; not to exploit or use that asset, unless otherwise agreed upon by the parties.

2. Not to establish any transaction on the deposited asset or the asset put in the escrow account, unless it is so agreed by the depositor or the escrow account depositor.

Article 33.- Rights of the deposit receiver or escrow account receiver

Unless otherwise agreed upon, the deposit receiver may own the deposited asset if the depositor refuses to enter into or perform the contract.

The escrow account receiver may own the asset put in the escrow account if the rented asset no longer exists for return to the escrow account receiver, unless otherwise agreed upon.

Article 34.- Collateral assets

1. Collateral assets as specified in Clause 1, Article 360 of the Civil Code are put in frozen accounts at commercial banks to secure the performance of civil obligations.

2. Collateral assets and single or multiple collaterals at banks where collaterals are made shall be agreed upon by the parties or provided for by law.

Article 35.- Obligations of the bank where collateral is made

1. To pay at the request of the obligee entitled to bank payment, and pay damages within the value of the collateral asset, after subtracting bank service charge.

2. To return the remaining collateral asset to the depositor after subtracting bank service charge and the sum of money it has paid at the request of the obligee upon the termination of the collateral.

Article 36.- Rights of the bank where the collateral is made

1. To request the obligee entitled to bank payment and damages to strictly carry out procedures for getting payment and damages.

2. To enjoy the bank service charge.

Article 37.- Obligations of the collateral maker

1. To make the collateral at the bank designated or accepted by the obligee entitled to bank payment and damages.

2. To remit fully the collateral asset in strict compliance with the agreement with the obligee entitled to bank payment and damages.

3. To agree with the bank where the collateral is made on payment terms in strict compliance with the commitment with the obligee entitled to bank payment and damages.

Article 38.- Rights of the collateral maker

The collateral maker may request the bank where the collateral is made to return the collateral asset after subtracting the bank service charge and the sum of money paid at the request of the obligee entitled to bank payment and damages upon the termination of the collateral.

Article 39.- Obligations of the obligee entitled to bank payment and damages

The obligee entitled to bank payment or damages is obliged to strictly comply with procedures for requesting payment by the bank where the collateral is made.

Article 40.- Rights of the obligee entitled to bank payment and damages

The obligee entitled to bank payment and damages may request full and timely payment by the bank where the collateral is made.

Article 41.- Grounds for the performance of guaranteed obligations

Grounds for the performance of guaranteed obligations are agreed upon by the parties or provided for by law, including the following cases:

1. When an obligation comes due but the guaranteed fails to perform or improperly performs that obligation toward the guarantee;

2. The guaranteed must fulfill the obligation toward the guarantee ahead of time due to its obligation breach but it fails to perform or improperly performs it;

3. The guaranteed is unable to perform its obligation in case it is agreed by the parties that the guarantor shall perform the guaranteed obligation only when the guaranteed is unable to perform that obligation;

4. Other grounds provided for by law.

Article 42.- Notice on the performance of guaranteed obligations

The guarantee shall notify the guarantor of the performance of guaranteed obligations when the grounds for performance of the guaranteed obligations specified in Article 41 of this Decree arise. If the guaranteed must fulfill the obligation ahead of time due to its obligation breach but fails to perform or improperly performs that obligation, the guarantee shall clearly state the reasons in the notice on premature performance of the obligation by the guaranteed.

Article 43.- Time limit for the performance of guaranteed obligations

The guarantor shall perform a guaranteed obligation within a time limit agreed upon by the parties. If there is no agreement, the guarantor shall perform the guaranteed obligation within a reasonable time limit after it is notified of the performance of the guaranteed obligation.

Article 44.- Security for the performance of guaranteed obligations and the guaranteed's obligation toward the guarantor

The parties may agree on the establishment of a security transaction to secure the performance of the guaranteed obligation and the guaranteed's obligation toward the guarantor according to the provisions of the Civil Code, this Decree and relevant legal documents.

Article 45.- The guarantor's right to request the refund

The guarantor shall notify the guaranteed of the completed performance of the guaranteed obligation. If no notice is made and the guaranteed continues performing the obligation toward the guarantee, the guarantor may not request the guaranteed to perform the obligation toward it. The guarantor may request the guaranteed to refund what the guaranteed has received from the guarantor.

Article 46.- Rights of the guaranteed

As soon as it notifies the guarantor according to the provisions of Article 42 of this Decree, the guaranteed has the following rights:

1. To request the court to apply provisional urgent measures to the guarantor's assets according to the provisions of the civil procedure law;

2. To request the person committing act of illegally obstructing the exercise of the guarantee's right to terminate that act.

Article 47.- Disposal of the guarantor's assets

In case of necessity to dispose of the guarantor's assets according to the provisions of Article 369 of the Civil Code, the parties shall agree on the assets to be disposed of, the disposal time, place and mode. If no agreement is reached, the guarantee may initiate a lawsuit at court.

Article 48.- Performance of the guaranteed obligation in case the guarantor is a bankrupt enterprise or an individual who is dead or declared dead by the court

1. If the guarantor is a bankrupt enterprise, the guarantee shall be settled as follows:

a/ When the guaranteed obligation arises, the guarantor shall perform that obligation. If the guarantor fails to fully pay within the guarantee scope, the guarantee may request the guaranteed to pay the deficit;

b/ When the guaranteed obligation has not yet arisen, the guaranteed must replace the guarantee with another security measure, unless otherwise agreed upon.

2. If the guarantor is an individual who is dead or declared dead by the court, the guarantee shall be settled as follows:

a/ If the guaranteed obligation must be performed by the guarantor itself as agreed upon or provided for by law, the guarantee terminates;

b/ If the guaranteed obligation is not performed by the guarantor itself, the guarantee does not terminate. The heir of the guarantor shall perform the guaranteed obligation for the guarantor according to the provisions of Article 637 of the Civil Code, except for case of disclaim of heritage according to the provisions of Article 642 of the Civil Code. The heir that has performed the obligation for the guarantor shall enjoy the guarantor's rights to the guaranteed.

Section 6. TRUST

Article 49.- Trust

1. Trust means a security provided by a grassroots socio-political organization with its prestige for a poor individual or household to borrow a sum of money from a credit institution for production, business or service activities.

2. Poor individuals or households secured with trust must be members of one of the socio-political organizations specified in Article 50 of this Decree.

3. The poverty line applies in each period according to law.

Article 50.- Socio-political organizations providing trust security

Grassroots units of the following socio-political organizations are trust security providers:

1. Vietnam Peasants' Association;

2. Vietnam Women's Union;

3. Vietnam Confederation of Labor;

4. Ho Chi Minh Communist Youth Union;

5. Vietnam War Veterans' Association;

6. Vietnam Fatherland Front.

Article 51.- Obligations of socio-political organizations

1. To certify at the request of credit institutions the conditions and circumstances of poor individuals or households borrowing capital from those credit institutions.

2. To take the initiative or closely coordinate with credit institutions in assisting, guiding and creating conditions for poor individuals or households to borrow capital; to supervise the use of borrowed capital for proper purposes and with efficiency; to urge the full and on-time repayment of loans to credit institutions.

Article 52.- Rights of socio-political organizations

Socio-political organizations may refuse to provide trust security if they deem that poor individuals or households are unable to use loans for production, business or service activities and to repay them to credit institutions.

Article 53.- Obligations of credit institutions

Credit institutions are obliged to coordinate with socio-political organizations providing trust security in providing and recovering loans.

Article 54.- Rights of credit institutions

Credit institutions may request socio-political organizations providing trust security to coordinate with them in inspecting the use of borrowed capital and urging the debt repayment.

Article 55.- Obligations of borrowers

1. To use borrowed capital for the committed proper purposes.

2. To create favorable conditions for credit institutions and socio-political organizations to inspect the use of borrowed capital.

3. To repay fully and on time loan principals and interests to credit institutions.

Article 56.- Cases of disposal of security assets

1. The secured obligation comes due but the obligor fails to perform or improperly performs that obligation.

2. The obligor must fulfill the secured obligation ahead of time as a result of its obligation breach, as agreed upon or provided for by law.

3. It is provided for by law that security assets must be disposed of for the performance of another obligation by the securer.

4. Other cases agreed upon by the parties or provided for by law.

Article 57.- Disposal of security assets when the securer goes bankrupt

1. If the securer being the obligor goes bankrupt, the security asset shall be disposed of according to the provisions of law on bankruptcy and this Decree for the obligation performance. If law on bankruptcy contains provisions on disposal of security assets different from those of this Decree, the provisions of law on bankruptcy prevail.

2. If the securer being a third party that pledges or mortgages its asset goes bankrupt, the security asset shall be disposed of as follows:

a/ If the secured obligation comes due but the obligor fails to perform or improperly performs the obligation, the security asset shall be disposed of according to the provisions of Clause 1 of this Article for the obligation performance;

b/ If the secured obligation is undue, the security asset shall be disposed of as agreed upon by the parties. If there is no agreement, the security asset shall be disposed of according to the provisions of law on bankruptcy for performance of another obligation of the securer.

Article 58.- Principles for disposal of security assets

1. In case an asset is used to secure the performance of an obligation, the disposal of that asset shall be carried out as agreed upon by the parties. If there is no agreement, that asset shall be put on auction according to the provisions of law.

2. In case an asset is used to secure the performance of many obligations, the disposal of that asset shall be carried out as agreed upon by the securer and the co-securees. If there is no agreement or no agreement is reached, that asset shall be auctioned according to the provisions of law.

3. The disposal of security assets must be carried out in an objective, public and transparent manner so as to ensure the legitimate rights and interests of the parties to security transactions, the concerned organizations and individuals and in compliance with the provisions of this Decree.

4. The disposer of security assets (hereinafter referred to as the asset disposer) is the securee or the person authorized by the securee, unless otherwise agreed upon by the parties to the security transaction.

5. The disposal of security assets for recovery of debts does not constitute asset trading activities of the securee.

Article 59.- Agreed modes of disposal of security assets

1. Sale of security assets.

2. Receipt by the securee of the very security assets as substitute for the obligation performance by the securer.

3. Receipt by the securee of money amounts or other assets from a third party in case of mortgage of debt claims.

4. Other modes agreed upon by the parties.

Article 60.- Obligations of the asset disposer in case an asset is used to secure the performance of many obligations

1. To notify other co-securees of the disposal of the asset according to the provisions of Article 61 of this Decree.

2. To dispose of the security asset.

3. To pay proceeds from disposal of the security asset according to the payment priority order.

Article 61.- Notification of disposal of the security asset for performance of many obligations

1. Before disposing of the security asset, the asset disposer shall notify in writing the security asset disposal to other co-securees according to their addresses kept at the security transaction registry, or register the written notice on security asset disposal according to the provisions of law on registration of security transactions.

2. For security assets in danger of deterioration or devaluation, debt claims, valuable papers, savings cards or bills of lading, the asset disposer may dispose of them immediately and concurrently notify other securees of that asset disposal.

3. A written notice on disposal of a security asset shall contain the following principal details:

a/ Reason(s) for the asset disposal;

b/ Secured obligation;

c/ Description of the asset;

d/ Mode, time and place of disposal of the security asset.

4. If the asset disposer fails to notify the security asset disposal according to the provisions of Clause 1 of this Article, thus causing damage to other co-securees in the registered security transaction, it shall pay damages.

Article 62.- Time limit for disposal of security assets

The security asset shall be disposed of within a time limit agreed upon by the parties. If there is no agreement, the asset disposer may decide on the disposal time limit, which must be at least seven days for movables or fifteen days for immovables as from the date of notification of security asset disposal, except for the cases specified in Clause 2, Article 61 of this Decree.

Article 63.- Custody of security assets for disposal

1. The holder of the security asset shall hand over that asset to the asset disposer according to the latter's notice. Upon the expiration of the time limit stated in the notice, if the asset holder fails to hand over the asset, the asset disposer may take into custody the security asset according to the provisions of Clause 2 of this Article for disposal or request the court to handle.

2. When taking into custody the security asset, the asset disposer has the following responsibilities:

a/ To notify in advance the asset holder of the application of the measure of taking into custody the security asset within a reasonable time limit. The written notice must clearly state the reason and time of the taking into custody of the security asset, rights and obligations of the parties.

b/ Not to apply measures in violation of prohibitions prescribed by law and in contravention of social ethics in the course of taking into custody of the security asset.

3. If the asset holder is a third party, the securer shall coordinate with the asset disposer in taking into custody the security asset.

4. The securer or the third party holding the security asset shall bear reasonable and necessary expenses for the taking into custody of the security asset. If it fails to hand over the security asset for disposal or commits act of obstructing the lawful custody of the security asset, thus causing damage to the securee, it shall pay damages.

5. In the course of taking into custody the security asset, if the asset holder shows signs of resisting, obstructing, causing public insecurity or disorder or commits other law-breaking acts, the security asset disposer may request the People's Committee of the commune, ward or district township and the Police Office of the locality where the security asset is taken into custody to apply, within the ambit of their respective functions, tasks and powers, measures provided for by law to maintain security and order, ensuring the exercise of the asset disposer's right to take into custody the security asset.

Article 64.- Rights and obligations of the securee pending the disposal of the security asset

1. Pending the disposal of the security asset, the securee may exploit or use the security asset or permit the securer or authorize a third party to exploit or use the security asset according to its properties and utility. The permitted or authorized exploitation, modes of exploitation and the use of yields and profits obtained from exploitation must be recorded in writing.

2. Obtained yields and profits must be separately accounted, unless otherwise agreed upon. After subtracting expenses necessary for the exploitation or use of assets, the remainder of yields and profits shall be used to pay to the securee.

Article 65.- Disposal of security assets being movables in case of no agreement on disposal mode

If there is no agreement on mode of security asset disposal, the security asset may be auctioned according to the provisions of law. Particularly for a security asset which can be specifically or clearly valued on the market, the asset disposer may sell it at the market price without carrying out auctioning procedures and shall concurrently notify such to the securer and other co-securees (if any).

Article 66.- Disposal of security assets being debt claims

1. The securee may request a third party being a debtor to transfer money amounts or other assets to it or to its authorized person. The securee shall prove the debt claim when so requested by the debtor.

2. If the securee is concurrently the debtor, it may clear such debt.

Article 67.- Disposal of security assets being valuable papers, bills of lading or savings cards

1. The disposal of security assets being bonds, stocks, bills of exchange, other valuable papers and savings cards shall comply with the provisions of law on bonds, stocks, bills of exchange, other valuable papers and savings cards.

2. Pledgees of bills of lading may produce those bills of lading according to the procedures specified by law for exercising the right to possession of cargos stated in those bills of lading. The disposal of cargoes stated in bills of lading shall comply with the provisions of Article 65 of this Decree.

If the cargo holder fails to transfer the cargo stated in the bill of lading to the securee, thus causing damage to the latter, it shall pay damages.

3. If the securee is concurrently obliged to pay, it may clear the payable amount.

Article 68.- Disposal of security assets being land use rights or assets attached to land in case of no agreement on disposal mode

1. In case of no agreement on mode of disposal of security assets being land use rights or assets attached to land, those assets shall be auctioned.

2. In case only assets attached to land are mortgaged while land use rights are not, upon the disposal of assets attached to land, the buyer or the principal receiver of those assets may continue to use the land. Rights and obligations of the mortgagor in the contract on land use rights between the mortgagor and the land user are transferred to the buyer or the principal receiver of the very assets attached to land, unless otherwise agreed upon.

Article 69.- Determination of payment priority order in case of security for performance of future obligations

When a security transaction is entered into to secure the performance of a future obligation, that future obligation will be on the payment priority order according to the registration order of that security transaction, regardless of the time of establishment of the civil transaction that gives rise to that future obligation.

Article 70.- Transfer of security asset ownership and use rights

1. The buyer or principal receiver of the security asset as substitute for the performance of the obligation by the securer to it may own that asset. The time of transfer of ownership is determined according to the provisions of Article 439 of the Civil Code.

2. In case of the security asset with the ownership or use right registration, the transferee of that asset's ownership or use rights are granted an ownership or use right certificate by a competent state agency.

Procedures for transferring security asset ownership or use rights comply with the provisions of law on registration of asset ownership and use rights. If it is provided for by law that the transfer of asset ownership or use rights must be approved in writing by the owner and on the basis of a contract on asset purchase and sale between the asset owner or the judgment debtor and the asset buyer on disposal of security asset, the asset pledge contract or the asset mortgage contract is used as a substitute for those papers.

Article 71.- Rights to receive back security assets

If the securer fulfills its obligation toward the securee and pay all expenses arising due to delayed obligation performance before the disposal of the security asset, it may receive back that asset, unless otherwise provided for by law.

Article 72.- Effect

1. This Decree takes effect 15 days after its publication in "CONG BAO."

2. This Decree replaces the Government's Decree No. 165/1999/ND-CP of November 19, 1999, on security transactions.

3. This Decree supersedes:

a/ The Government's Decree No. 178/1999/ND-CP of December 29, 1999, on security for loans of credit institutions;

b/ The Government's Decree No. 85/2002/ND-CP of October 25, 2002, amending and supplementing Government Decree No. 178/1999/ND-CP of December 29, 1999, on security for loans of credit institutions;

c/ Clause 2, Article 2 of the Government's Decree No. 08/2000/ND-CP of March 10, 2000, on registration of security transactions.

4. The guarantee with land use rights, right to use forests, ownership over planted production forests according to the provisions of the Government's Decree No. 181/2004/ND-CP of October 29, 2004, on the implementation of the Land Law, the provisions of Clause 5, Article 32; Clause 4, Article 33; Clause 4, Article 34; Clause 4, Article 35; and Clause 1, Article 36 of the Government's Decree No. 23/2006/ND-CP of March 3, 2006, on the implementation of the Law on Forest Protection and Development and guiding documents, are now converted into mortgage of land use rights, right to use forests and ownership over planted production forests by the third party.

5. Other provisions contrary to this Decree are hereby annulled.

Article 73.- Transition provisions

Security transactions entered into under the provisions of the 1995 Civil Code; the Government's Decree No. 165/1999/ND-CP of November 19, 1999, on security transactions; the Government's Decree No. 178/1999/ND-CP of December 29, 1999, on security for loans of credit institutions; the Government's Decree No. 85/2002/ND-CP of October 25, 2002, amending and supplementing the Government's Decree No. 178/1999/ND-CP of December 29, 1999, on security for loans of credit institutions; or other legal documents that continue to be effective after the effective date of this Decree, are still valid and not required to be modified or re-entered into.

Article 74.- Implementation responsibilities

Ministers, heads of ministerial-level agencies, heads of government-attached agencies and presidents of People's Committees of provinces or centrally run cities shall implement this Decree.