Most people are familiar with secured transactions, though they may not know them by that name. When a person buys a house, or a car using a loan–whether through the seller or a third party lender–they sign a contract offering their purchase as security. This means that, if the borrower defaults on his loan, the lender can seize the purchase–car or house–that was used as collateral and sell it on to third parties in order to recoup the losses incurred by the borrower’s default. This is a secured transaction.
In Vietnam, secured transactions are limited and not terribly well legislated with only a Decree offering guidance on how they should be handled and registered. There are two types of security registration: required and optional. Security registration is required for mortgages of land use rights and assets attached to land and mortgages of aircraft or ships. Other security arrangements may be, but are not required to be, registered. They include mortgages over movable assets, mortgage of assets attached to land that are formed in the future, and reservations of interest in assets over which mortgages are required to be registered.
Mortgages are registered with various databases in Vietnam. For land and land use rights, the cadastral register must be consulted and the land use right registered therein. Other asset types have their own databases with relevant, and specifically identified, agencies.
When registering a security transaction, lenders are very much concerned with the rules regarding the point in time when such registration is deemed effective regarding third party lenders so as to secure their loan in priority to all other lenders. In Vietnam, security transactions are deemed registered when the registering agency actually registers the security in their database.This is important to understand as, when submitting a registration request, the authorities simply issue a receipt and create an appointment for registration rather than actually registering the security at that time.The party requesting security registration needs to make sure that they attend the registration appointment to ensure that the security is registered and to obtain evidence of the fact and the time and date of the registration. Only in this way will they be able to confidently fend off third party attempts to prioritize the secured assets.
While this process of receipt and appointment may seem onerous, the registering authority is obligated to register security interests on the same day they receive valid registration requests, so long as the request is received prior to 3pm. Any requests received after that time will be processed on the subsequent business day. This required alacrity does serve to minimize the burden on parties requesting registration of security interests, though the question remains as to priority of treatment of security interests submitted for registration in the same business day.
Furthermore, once the security is registered, it remains effective until such time as the security is deregistered. Unfortunately, though it may be assumed that deregistration may be implemented only by the lender, such case is not specifically regulated. It appears, however, that deregistration may be initiated by both the lender and the borrower. The specifics are hazy. There are enumerated events that can trigger the right to deregistration.
Parties eligible to request deregistration may do so if one of the following events occur:
- (a) The secured obligation is terminated;
- (b) The registered security measure is cancelled or replaced by other security;
- (c) All [the entire] security assets are replaced/substituted with others;
- (d) On complete realization of all thele security asset/s;
- (dd) The security assets are destroyed or lost entirely; the security being assets attached to land are
dismantled or confiscated in accordance with a decision of a competent State agency;
- (e) There is a judgment or decision of a court or arbitrator which has taken legal effect and which
cancels the security measure or declares it invalid;
- (g) On unilateral termination of the security measure or on declaration of termination of the security
measure in another case as stipulated by law;
- (h) On deregistration of the mortgage of an asset right arising from a contract for the purchase and sale
of a residential house, in a case of transition to registration of the mortgage in accordance with law;
- (i) A civil judgment enforcement office or bailiffs’ office has attached and finalized realization of the
- (k) In other cases as agreed by the parties.
If the assets are registered as security for multiple mortgages, then the security will not be deregistered but remain effective until such time as all the secured parties are satisfied.
There are different procedures for registration of security transactions depending on the type of asset: aircraft, ship, land-use right, movable asset. For specific procedures depending on the type of asset contemplated, please contact your lawyer representative at Indochine Counsel of initiate contact at www.indochinecounsel.com.