Laws of Vietnam

To implement the legislation on mortgage and pledge of property, thus creating favorable conditions for enterprises to borrow capital for production and business, and to ensure the security of loaned capital of the credit institutions, the Ministry of Finance, the Ministry of Justice and the State Bank jointly provide the following guidances on the procedures for mortgage and pledge of property by State enterprises and the procedures for the notarization of mortgage, pledge and guaranty contracts for borrowing capital from banks (hereafter referred to as credit institutions) by all economic sectors:

I. PROCEDURES FOR MORTGAGE AND PLEDGE OF PROPERTY BY STATE ENTERPRISES

1. A State enterprise which needs to mortgage or pledge its assets for a loan shall have to make a list of the assets to be mortgaged or pledged already certified by the competent capital management agency.

1.1. For immovable assets which the State enterprise is entitled to mortgage as prescribed by law, a separate list must be made with the attachment of the original papers evidencing the right to use land allotted or leased to the enterprise by the State (if any).

1.2. For movable assets which the State enterprise is entitled to pledge as prescribed by law, a separate list must be attached to the original papers certifying the right to own or manage such assets (if any).

1.3 For assets the mortgage or pledge of which must be permitted by the competent management agency, such as complete production lines, important infrastructures..., the State enterprise must make a separate list and request the competent management agency to permit in writing their use as mortgage or pledge.

2. The Financial Agency (the General Department for the Management of State Capital and Property at the centrally run enterprises and the agencies managing the State capital and property at the enterprises in the provinces or cities directly under the Central Government - capital and property management agency for short) shall certify for the enterprises under its management the list of State assets managed by them, to be mortgaged or pledged for loans from credit institutions.

2.1 With regard to assets which the enterprise is entitled to mortgage or pledge as provided for in Points 1.1 and 1.2 of this Item, the Capital and Property Management Agency shall certify the list of assets and the detailed items in the list in accordance with the stipulated form.

2.2 With regard to assets stipulated in Point 1.3 of this Item, the Capital and Property Management Agency shall certify the list of assets and the detailed items in the list only after the State enterprise is permitted in writing by the competent agency to mortgage or pledge such assets.

3. The lending credit institution shall consider the list of the assets of the State enterprise to be mortgaged or pledged, which has already been certified by the Capital and Property Management Agency, except for those assets which are not qualified for mortgage or pledge; the two sides shall re-evaluate the assets which shall serve as basis for determining the size of the loan and drawing up the contract for the mortgage or pledge of property.

The evaluation of the assets to be mortgaged or pledged shall be agreed upon by the mortgagor, the pledgor and the credit organization, based on the remaining value (after depreciation) and the local market prices of such assets at the time of the signing of the contract; with regard to the value of the land-use right, it shall be determined according to the price of the transferred land or the land rent (for leased land) already paid in advance at the price set by the People’s Committee of the province or city directly under the Central Government within the current price brackets prescribed by the Government.

4. The list of the mortgaged or pledged assets shall be made in two copies: one to be kept by the credit institution that lent the capital for the entire duration of the mortgage or pledge, and the other at the Capital and Property Management Agency which certifies the list.

5. With regard to assets already certified by the Capital and Property Management Agency and being used as mortgages or pledges at a credit institution, the State enterprise is not allowed to draw up another list to apply for certification or for permission to mortgage or pledge such assets at any other credit institution. If a credit institution finds out that the State enterprise deliberately contravene this provision, it shall immediately suspend the lending and take measures to settle it in accordance with the current regulations on credit. All fraudulent acts to make many lists of the same assets in order to get loans from many credit institutions, if detected, shall be prosecuted before law.

Where a property is used as mortgage or pledge for several loans at one credit institution, the list of assets needs to be certified only for the first loan. For the subsequent loans, the credit institution shall have only to monitor and make comparisons to ensure that the total loan shall not exceed the value of the mortgaged or pledged assets agreed upon by the two parties. Where more assets are needed as mortgaged or pledged for the requested loan, the State enterprise shall have to make a list of additional assets.

Where a property is used as mortgage or pledge at several credit institutions which simultaneously give loans to the same investment project, the same list of assets can be used for signing the contract for the mortgage or pledge of property to several credit institutions.

6. Where the State enterprise cannot repay its debts or is declared bankrupt, the credit institution shall base itself on the contract for the mortgage or pledge of property and the list of the mortgaged or pledged assets to propose the competent State agency to organize an auction of such assets in accordance with the provisions of law so as to retrieve the debts.

II. PROCEDURES FOR THE NOTARIZATION OF MORTGAGE, PLEDGE OR BANK LOAN GUARANTY CONTRACTS

1. For each mortgage, pledge or guaranty, the mortgagor, the pledgor or the guarantor and the credit institution must sign a mortgage, pledge or guaranty contract with the papers evidencing the ownership over the assets or the list of the assets to be mortgaged or pledged (with regard to a State enterprise) attached thereto.

1.1 A mortgage, pledge or guaranty contract must be made in four copies with notarization by the State Notary office or certification by the People’s Committee of the district, town or provincial capital or town (hereafter referred to as district People’s Committee) as provided for in Point 1.3 of this Item. All four copies shall be equally valid. Procedures for the notarization are conducted after the lending party has ratified the loan and agreed to sign the contract.

- One copy shall be kept by the mortgagor or the pledgor (the borrowing party) or the guarantor.

- One copy shall be kept by the credit institution (the lending party), together with the original papers on the ownership over the assets or the list of the assets to be mortgaged or pledged (with regard to a State enterprise).

- One copy shall be kept by the mortgage or pledge registering agency (if the assets are registered for mortgage or pledge)

- One copy shall be kept at the State Notary office or the district People’s Committee which certifies the list of the mortgaged or pledged assets.

1.2. The notarization by the State Notary office or the certification by the district People’s Committee is the recognition of the signing of the mortgage, pledge or guaranty contract between the two parties, the legality of the attached documents which shall serve as legal basis to settle any disputes between the parties involved or to auction the mortgaged or pledged assets.

1.3. Scope of notarization:

- For assets which are immovables or movables over which the ownership rights must be registered as prescribed by law; and assets over which the ownership right needs not to be registered as prescribed by law but with a total value stated in the mortgage, pledge or guaranty contract of 50 (fifty) million VND or more, such a contract must be notarized by the State Notary office or certified by the district People’s Committee.

- For other kinds of property outside the above stipulation, the mortgagor, the pledgor or the guarantor and the credit institution shall mutually agree upon whether or not the mortgage, pledge or guaranty contract needs to be notarized by the State Notary office or certified by the district People’s Committee.

2. When notarizing or certifying a mortgage, pledge or guaranty contract, the Notary Public or the authorized officer of the district People’s Committee must inspect all the clauses of the contract and the documents attached thereto such as the original papers on the right to own or manage the assets, the list of the mortgaged or pledged assets ( with regard to a State enterprise).

3. Place of notarization:

With regard to assets over which the ownership rights have been registered, the notarization or certification of the mortgage, pledge or guaranty contract shall be conducted at the State Notary office or the Office of the district People’s Committee where such assets are registered.

III. PROVISIONS ON IMPLEMENTATION

1. This Circular takes effect from the date of its signing.

2. All provisions stipulated in the earlier circulars which are contrary to this Circular shall be no longer valid for implementation.

3. Any amendment or supplement to the provisions in this Circular shall be decided by the Minister of Finance, the Minister of Justice and the Governor of the State Bank.

4. The credit institutions, the agencies managing State capital and property at enterprises, the State Notary Public offices and the concerned agencies shall have to implement this Circular. In the process of implementation, if any difficulty or obstacle arises, it must be promptly reported to the said ministries for settlement.

NGUYEN NGOC HIEN

For the Governor of the State Bank