Tiếng Việt| THE STATE BANK | SOCIALIST REPUBLIC OF VIET NAM |
| No. 06/2000/TT-NHNN1 | Hanoi, April 4, 2000 |
Pursuant to Clause 1, Article 39 of the Government’s Decree No.178/1999/ND-CP of December 29, 1999 on credit institutions’ loan security (hereinafter referred to as Decree No.178 for short), the State Bank Governor hereby guides the implementation of such Decree as follows:
Section 1. REGULATION OBJECTS AND APPLICATION SCOPE
1. This Circular guides loan security measures applicable to the provision of credit in the form of loan by credit institutions to borrowing customers under the Law on Credit Institutions.
1.1. The credit institutions include: State-run credit institutions, joint stock credit institutions, cooperative credit institutions (cooperative banks, people’s credit funds, credit cooperatives), joint-venture credit institutions, foreign banks’ branches operating in
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a) Legal persons other than credit institutions: State enterprises, limited liability companies, joint-stock companies, foreign-invested enterprises, cooperatives, economic organizations and other organizations meeting all conditions for being the legal persons as prescribed in Article 94 of the Civil Code;
b) Family households;
c) Cooperative teams;
d) Private enterprises;
e) Partnership companies;
f) Individuals.
2. Where credit is granted in forms other than those prescribed by the Law on Credit Institutions, the parties may come to an agreement on the application of regulations on security measures as guided by this circular, except otherwise provided for by law.
Section 2. LOAN SECURITY MEASURES
Loan security measures include measures to secure loans with properties and loan security measures in cases where loans are not secured with properties.
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1.1. Pledge or mortgage of borrowing customers’ properties;
1.2. Guarantee with the third party’s property;
1.3. Security with properties formed from loan capital.
2. Loan security measures in cases where loans are not secured with properties:
2.1. The credit institutions will take initiative in selecting borrowing customers to provide them with loans without property security;
2.2. The State credit institutions may provide loans without property security according to the Government’s designation;
2.3. The credit institutions provide loans to individuals and poor families with trust guarantee of socio-political organizations.
Section 3. PRINCIPLES FOR LOAN SECURITY
1. Credit institutions are entitled to select and decide loans with property security or loans without property security according to the provisions of Decree No. 178 and take responsibility for their decisions. Where State credit institutions provide loans without property security according to the Government’s designation, the losses caused to such loans due to objective reasons shall be handled by the Government.
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3. Credit institutions may handle property used as loan security according to the provisions of Decree No. 178 and relevant law provisions in order to recover debts when the borrowing customers or the guarantors fail to perform or have improperly performed the debt repayment obligations as committed.
4. After the handling of loan security property, if the borrowing customers or the guarantors still fail to properly perform their debt repayment obligations, they shall have to continue performing their debt repayment obligations properly as committed.
Section 4. PROTECTING LEGITIMATE RIGHTS AND INTERESTS OF PARTIES
The State protects the legitimate rights and interests of the parties in the loan security. Not any organizations or individuals are allowed to illegally intervene in the loan security and the handling of loan security properties by the parties.
1. The borrowing customers must pledge or mortgage their property or be guaranteed with the third party’s property in order to ensure the performance of debt repayment obligations towards the credit institutions, except where the borrowing customers are provided with loans secured with the property formulated from the loan capital or loans without property security under the provisions of Decree No. 178 and the guidance of this Circular.
2. The credit institutions and borrowing customers shall come to terms on the option for the application of measures of security with the borrowing customers’ pledged or mortaged property or measures of guarantee with the third party’s property.
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4. The guarantors may provide guarantee only with the property under their ownership. The credit institutions and the guarantors may come to term on measures of pledging or mortgaging the guarantors’ property to secure the performance of the guarantee obligations.
Where the guarantors are credit institutions, the guarantee provision shall comply with the provisions on banking guarantee in Articles 58, 59, 60 and 79 of the Law on Credit Institutions and the regulations of the State Bank of
5. When mortgaging property affixed to land, the borrowing customers shall also have to mortgage the land use right together with such property, except otherwise provided for by the land legislation and other relevant legislation.
1. Borrowing customers’ property used as loan security
1.1. Pledged property:
a) Machinery, equipment, raw materials, fuels, materials, consumer goods, precious metals, germstones;
b) Foreign currencies in cash, credit balance on deposit accounts at the credit institutions in Vietnamese currency, foreign currencies;
c) Bonds, shares, credit bills, debentures, deposit certificates, savings books, commercial bills and other papers valued in money; particularly for shares issued by credit institutions themselves, the credit institutions cannot receive them as pledged property;
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e) The rights to the capital contributed to enterprises, including enterprises with foreign investment capital;
f) The rights to exploit natural resources as prescribed by law;
g) Sea-going vessels under the provisions of the Maritime Code of Vietnam, aircraft under the provisions of Vietnam’s Law on Civil Aviation in cases where they can be pledged;
h) Other properties as prescribed by law.
Income and rights arising from the pledged property also belong to the pledged property if so agreed upon by the parties or prescribed by law; where the pledged property is insured, the insurance money shall also belong to the pledged property.
1.2. Mortgaged property:
a) Dwelling houses, constructions closely affixed to land, including property closely affixed to dwelling houses, constructions and other property affixed to land;
b) Land use right which can be mortgaged as prescribed by the land legislation;
c) Where the entire property with accessory is mortgaged, such accessory also belongs to the mortgaged property. Where a part of an immoveable property with accessory is mortgaged, such accessory shall belong to the mortgaged property only if the parties so agree;
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e) Other properties as prescribed by law.
Yields, incomes and rights arising from the mortgaged property also belong to the mortgaged property if it is so agreed upon by the parties or prescribed by law; where the mortgaged property is insured, the insurance money also belongs to such mortgaged property.
1.3. Guaranteed property
The third party’s properties used as the security for the performance of the guarantee obligations with property shall include the properties specified at Point 1.1 and Point 1.2 of this Section.
2. The credit institutions shall select properties for pledge, mortgage or guarantee with regard to properties which satisfy the following conditions:
2.1. The property must be under the ownership of the borrowing customers or the guarantors. Where the property is required by law to register the ownership, the borrowing customers or the guarantors must have the property ownership certificates. With regard to the land use right, the borrowing customers and the guarantors that have the land use right certificates may mortgage them according to land legislation. With regard to the property assigned by the State to State enterprises for management and use, the enterprises may pledge, mortgage or use them as guarantee according to the provision of legislation on enterprises and other relevant legislation;
2.2. Properties allowed for transaction
Properties allowed for transaction are the properties which are allowed for or not banned by law from purchase, sale, present, donation, transfer, assignment, pledge, mortgage, guarantee and other transactions;
2.3. Undisputed property
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2.4. For properties that are required by law to be insured, the borrowing customers or the guarantors shall have to buy insurance during the loan security period.
3. The selection of the third party for property guarantee
3.1. Credit institutions may select the third party for guarantee with property (called the guarantor) for the borrowing customers. The guarantors must satisfy the following conditions:
a) Having the civil-law capacity, for the guarantors being legal persons; having the civil-law and civil act capacity, for the guarantors being individuals;
b) Having the capital and property capability to perform the guarantee obligations.
3.2. That whether or not the guarantors pledge or mortage properties to secure the performance of the guarantee obligations shall be agreed upon by the credit institutions and the guarantors. Where the guarantors shall not have to pledge or mortgage properties, the parties may reach agreement on the guarantors’ commitment to apply the measure of security with property if during the guarantee period the credit institutions detect that the guarantors are incapable of performing the guarantee obligations.
Where the guarantors pledge or mortgage properties for the performance of the guarantee obligations, the contents and procedures shall comply with the regulations on pledge or mortgage of the borrowing customers’ properties.
3.3. The lending credit institutions must not accept the guarantee by subjects specified in Clause 1, Article 77 of the Law on Credit Institutions, which shall serve as basis for the provision of credit to borrowing customers, including:
a) Members of the Management Board, the Control Board, General Directors (Directors), deputy-General Directors (deputy Directors) of the lending credit institutions;
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c) Fathers, mothers, spouses and children of members of the Management Board, the Control Board, General Directors (Directors), deputy General Directors (deputy Directors) of the lending institutions.
4. The mortgage of the land use right shall comply with the provisions of land legislation.
5. The credit institutions shall examine the legality and conditions of the properties before accepting them as loan security.
6. The pledge, mortgage or guarantee contracts (referred collectively to as the security contract) must be made in writing; they may be made in separate documents or inscribed in the credit contracts; for contracts on guarantee with properties, they must be made in separate documents.
7. Procedures for pledge, mortgage and guarantee contracts
7.1. The contracts on property pledge, mortgage or guarantee shall be certified by the Public Notary or the competent People’s Committees, if so agreed upon by the parties; where the law stipulates that they must be notaried or certified, the parties shall have to comply therewith.
The People’s Committees competent to certify the pledge, mortgage or security contracts are the People’s Committees of different levels, which, as prescribed by the notary legislation, have the power to certify property pledge, mortgage or guarantee contracts.
7.2. Where a State enterprise pledges or mortgages a property being the entire principal technological chain according to the regulations of the techno-economic branch-managing agency, there must be a written consent of the agency which has decided the establishment of such enterprise.
7.3. For pledged property being commodities rotated in the production and business process, the borrowing customers or the guarantors may sell them only when it is approved in writing by the pledgee-credit institutions. For mortgaged property being houses, construction works built for sale or for lease, the borrowing customers or the guarantors may sell or lease them only when it is approved in writing by the pledgee-credit institutions.
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7.5. The registration of the security transaction for the pledged, mortgaged or guaranteed property shall comply with Decree No. 08/2000/ND-CP of March 10, 2000 of the Government on registration of security transactions and relevant legislation.
8. Major contents of the pledge, mortgage and guarantee contracts
8.1. A property pledge or mortgage contract must have the following major details:
a) Names and addresses of the parties; day, month and year;
b) Obligations to be secured;
c) Description of pledged, mortgaged property: list, quantity, catergory, technical properties, yields, arising income; if it is an immoveable property or land use right, the location, area, boundary and accessories must be clearly inscribed;
d) The value of the pledged, mortgaged property: clearly inscribing the value of the pledged, mortgaged property according to the enclosed documents determining the property value which is determined under the mutual agreement between the parties or by the hired consultancy organizations or professional organizations;
e) The parties that hold the property, papers on the pledged, mortgaged property;
f) The rights and obligations of the parties;
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h) Other agreements.
8.2. The property guarantee contract must have the following major details:
a) Names and addresses of the parties; day, month, year;
b) The obligation to be guaranteed, the scope of guarantee: inscribing the number, day, month and year of the credit contract; the amount of money to be guaranteed (part or whole of the debt repayment obligation);
c) The list, quantity, type, characters and value of the guarantee property;
d) The rights and obligations of the guarantor and the guarantee credit institution;
e) Modes of handling guarantee property;
f) The guarantor’s commitment to the performance of obligation to repay debt for the borrowing customer when it becomes due but the borrowing customer fails to perform or improperly performs the debt repayment obligation;
g) The guarantor’s commitment to the handling of guarantee property if it fails to fulfill the guarantee obligation when it is due;
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1. Rights and obligations of the parties when properties are pledged
1.1. The rights of the borrowing customers:
a) To exploit the utility of and enjoy revenue from the pledged properties if so agreed upon, except where the revenue also belongs to the pledged properties, if the borrowing customers keep the pledged properties;
b) To request the credit institutions to stop using the pledged properties, if due to such use, their value may be lost or reduced, in case the credit institutions keep and use the properties;
c) To request the credit institutions which keep the properties and papers on the pledged properties to make compensation if loss or damage is incurred;
d) To request the third party which keeps the pledged properties to make compensation if loss or damage is incured;
e) To receive back the pledged properties and papers certifying the ownership over the pledged properties (if any) when the secured obligation is fulfilled, in case they are kept by the credit institutions or the third party:
1.2. The borrowing customers’ obligations:
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b) To hand over the properties and the originals of the property ownership certificates (if any) to the credit institutions, in case the properties have been registered for their ownership as provided for at Point 1, Section 6 of this Chapter;
c) To make the security transaction registration as prescribed by law;
d) To pay the credit institutions the expenses for preservation of the pledged properties, except otherwise agreed upon;
e) Not to sell the pledged properties, excluding those being commodities rotated during the production and business process which may be sold with the approval of the pledge-credit institutions. In this case, the borrowing customers shall have to exercise their right to claim the debts, the proceeds and properties earned from the sale of rotary commodities, the new rotary commodities shall be used as the security properties in replacement of the rotary commodities already sold or debt-repaid to the credit institutions;
f) Not to exchange, give, donate, lease, lend, contribute as joint-venture capital the pledged properties; not to use the pledged properties to secure other obligations, except for the properties with ownership registration under the provisions at Point 3, Section 5 of this Chapter;
g) To stop using the pledged properties at the request of the credit institutions, if due to the continued use, such properties may be in danger of having their value lost or reduced;
h) Where the borrowing customers keep the pledged properties, they must safely preserve them and create favorable conditions for the credit institutions to check the properties; if they are lost or damaged, the security properties must be supplemented or replaced by other security measures, or debts shall be repaid ahead of time;
i) Where the pledged properties are lost or damaged, which have been insured, the borrowing customers shall have to coordinate with the credit institutions in carrying out the procedures to receive the insurance money from the insurance organizations in order to repay debts to the credit institutions. If the money amounts received from the insurance organizations are not enough for debt repayment, the borrowing customers shall have to supplement the security properties, replace them with other security measures or repay debts before schedule.
1.3. The rights of the credit institutions:
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b) To request the borrowing customers to supply information on the real status of the pledged properties, in case the borrowing customers keep the properties;
c) To exploit the utility of and enjoy revenues from the pledged properties, in case the credit institutions keep the pledged properties, if so agreed upon by the parties;
d) To request the borrowing customers or the third party that keep the pledged properties to stop using and supplement the pledged properties or replace them with other security measures if the pledged properties are lost. damaged; if the borrowing customers or the third party fail to do this, the credit institutions may recover debts ahead of time;
e) To handle the pledged properties in order to recover debts as prescribed by law.
1.4. The obligations of the credit institutions:
a) To safely preserve the properties and papers on the pledged properties, in case they are kept by the credit institutions;
b) Not to sell, exchange, give, donate, lease, lend, contribute as joint-venture capital and use the properties as security for the performance of other obligations, in case they are kept by the credit institutions;
c) Not to exploit the utility of or enjoy revenues from, the pledged properties, if not so agreed upon by the borrowing customers. Not to continue exploiting the utility of or enjoying revenue from, the pledged properties, if the continued exploitation threatens the loss or reduction of their value, in case they are kept by the credit institutions;
d) To pay compensation for damage caused to the borrowing customers if the pledged properties or the papers thereon are lost or damaged, in case they are kept by the credit institutions;
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1.5. Rights of the third party which keeps the pledged properties:
a) To receive remunerations and payment of the expense for the keeping and preservation of the properties as agreed upon by the parties;
b) To exploit the utility of and enjoy the revenue from the pledged properties, if so agreed upon by the parties, except where the revenue also belongs to the pledged properties.
1.6. Obligations of the third party that keeps the pledged properties:
The third party that keeps the pledged properties shall have the obligations like those of the credit institutions in case of keeping the pledged properties as provided for at Point 1.4 of this Section.
2. Rights and obligations of the parties when properties are mortgaged
2.1. Rights of the borrowing customers:
a) To exploit the utility of and enjoy revenue or yield from the mortgaged properties, except where the revenue or yield also belongs to the mortgaged properties, in case the borrowing customers keep the mortgaged properties;
b) To lease or lend the mortgaged properties, if so agreed upon or prescribed by law;
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d) To request the third party that keeps the properties to compensate the damage if the mortgaged properties are lost or damaged;
e) To receive back the mortgaged properties and papers thereon when the secured obligations are fulfilled, in case they are kept by the credit institutions or the third party.
2.2. Obligations of the borrowing customers:
a) To inform the mortgagee credit institutions of the right of the third party (if any) to the mortgage properties;
b) To hand over the mortgaged properties (if so agreed upon by the parties); to hand the originals of the papers on the mortgaged properties to the credit institutions;
c) To make the security transaction registration as prescribed by law;
d) Not to sell the properties if they are kept by the borrowing customers, except for the mortgaged properties being houses or projects built for sale or lease, which can be sold or leased by the borrowing customers, if it is approved in writing by the credit institutions. In this case, the borrowing customers shall have to exercise their right to claim debts, proceeds and properties earned from the property sale for use as the security properties in replacement of the properties already sold or debt-repaid to the credit institutions;
e) Not to exchange, give, donate, lease, lend, contribute as joint-venture capital the mortgaged properties; not to use the mortgaged properties as security for other obligations, except for the properties with ownership registration as prescribed at Point 3, Section 5 of this Chapter;
f) To create favorable conditions for the credit institutions to check the mortgaged properties;
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h) Where the borrowing customers keep the mortgaged properties, they shall have to preserve them safely through the application of necessary measures including the stoppage of exploitation if the continued exploitation threatens the loss or reduction of the value of the mortgaged properties. Where the borrowing customers keep the mortgaged properties and lose or damage them, they shall have to repair for the restoration of their value, supplement the security properties, replace them with other security measures or repay debts to the credit institutions before schedule;
i) Where the lost or damaged properties are insured, the borrowing customers shall have to coordinate with the credit institutions in carrying out the procedures to receive the insurance money from the insurance organizations for debt repayment to the credit institutions. If the money amounts received from the insurance organizations are not enough for debt repayment, the borrowing customers shall have to supplement the security properties, replace them with other security measures or repay debts before schedule.
2.3. Rights of the credit institutions:
a) To keep the papers on mortgaged properties, keep the mortgaged properties in cases where it is so agreed upon by the parties;
b) To request the borrowing customers to supply information on the real status of the mortgaged properties in cases where they keep the properties;
c) To exploit the utility of and enjoy revenue or yields from the mortgaged properties as agreed upon, in cases they keep the mortgaged properties, except where the revenue or yields also belong to the mortgaged properties;
d) To request the borrowing customers or the third party that keep the mortgaged properties to stop using them and supplement the mortgaged properties or replace them with other security measures if the mortgaged properties are lost or damaged; if the borrowing customers or the third party fail to do so, the credit institutions may recover debts before schedule;
e) To handle the mortgaged properties in order to recover debts as prescribed by law.
2.4. Obligations of the credit institutions:
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b) Not to sell, exchange, give, donate, lease, lend, contribute as joint-venture capital or use the mortgaged property as security for the performance of other obligations, in case they are kept by the credit institutions;
c) Not to continue exploiting the utility of the mortgaged property if the continued exploitation threatens to lead to the loss or reduction of the property value, in case they are kept by the credit institutions;
d) To pay compensation for damage caused to borrowing customers if the mortgaged property or the papers thereon are lost or damaged, in case they are kept by the credit institutions;
e) To return the mortgaged property and the papers thereon to the borrowing customers when the latter fulfill their secured obligations, in case they are kept by the credit institutions.
2.5. Rights of the third party that keeps the mortgaged property:
a) To receive remuneration and repayment of the expenses for the keeping and preservation of the property as agreed upon by the parties;
b) To exploit the utility of and enjoy the yields and revenue from, the mortgaged property, if so agreed upon by the parties, except where the yields and revenue also belong to the mortgaged property.
2.6. Obligations of the third party that keeps the mortgaged property:
The third party that keeps the mortgaged property shall have the obligations like those of the credit institutions in cases where they keep the mortgaged property as prescribed at Point 2.4 of this Section.
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3.1. Rights of the guarantors:
Where the guarantors pledge or mortgage property to secure the performance of the guarantee obligations, they shall have the same rights as those of the borrowing customers when the latter pledge or mortgage property as prescribed at Points 1.1 and 2.1 of this Section.
3.2. Obligations of the guarantors:
a) To repay debts for the borrowing customers as committed, if when due the borrowing customers fail to perform or improperly perform the debt repayment obligations;
b) Where the guarantors pledge or mortgage property to secure the performance of the guarantee obligations, they shall have the other obligations like those of the borrowing customers that pledge or mortgage property as prescribed at Points 1.2 and 2.2 of this Section.
3.3. Rights of the guarantee credit institutions:
a) To request the guarantors to repay debts for the borrowing customers as committed if the borrowing customers fail to perform or improperly perform the debt repayment obligations when due;
b) Where the guarantors pledge or mortgage property to secure the performance of the guarantee obligations, they shall have other rights like those of the credit institutions when taking the property pledge or mortgage as prescribed at Points 1.3 and 2.3 of this Section.
3.4. Obligations of the credit institutions:
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Section 4. DETERMINATION OF THE VALUE OF THE LOAN SECURITY PROPERTY
1. The loan security property must be valued at the time of signing the security contracts; the determination of the property value at this time only serves as basis for determining the level of loans of the credit institutions and shall not apply when handling the property to recover debts. The valuation of the loan security property must be made in a separate document attached to the security contract.
2. With regard to loan security property other than the land use right, the determination of their values shall be agreed upon by the parties, or made by the hired consultancy organizations or professional organizations on the basis of the market prices at the time of determination, with reference to different kinds of price such as the prices set by the State (if any), the purchase prices, the remaining prices left on accounting books and other price elements.
3. The value of the mortgaged land use right shall be determined as follows:
3.1. For land assigned by the State to family households or individuals for agricultural or forestrial production, aquaculture, salt-making; residential land; special-use land; land over which the economic organizations receive the use right lawfully transferred from individuals or which are assigned by the State with the collection of land use levy while the land use levy as well as the money for land use right transfer are not supplied by the State budget; land over which the family households or individuals receive the use right lawfully transferred from other persons or which are assigned by the State with the collection of land use levy, the value of the mortgaged land use right shall be determined according to the land prices issued by the People’s Committees of provinces and centrally-run cities and applicable at the time of mortgage;
3.2. For the land leased by the State to family households or individuals with the land rents already paid for the whole leasing term; land leased by the State to economic organizations with the land rent already paid for the whole leasing term and such land rent is not provided by the State budget; land leased by the State to family households or individuals with the land rent being paid for many years while the paid leasing duration remains for at least 5 years; land leased by the State to economic organizations with the land rent already paid for many years while the paid leasing duration remains for at least 5 years and such land rent are not provided by the State budget, the value of the mortgaged land use right shall include the damage compensation money when the land is leased by the State (if any) and the land rent already paid to the State after deducting the land rent already paid for the use duration.
3.3. For land leased by the State to foreign economic organizations and individuals, overseas Vietnamese that invest in Vietnam under the Law on Foreign Investment in Vietnam, when the right to use land with their own property which they have invested in the construction thereof on such land, the value of the mortgaged land use right shall be determined according to the land rent already paid to the State after deducting the land rent already paid for duration in which the land was used;
3.4. For land assigned by the State to economic organizations without the collection of land use levy for use for the purposes of agricultural or forestrial production, aquaculture, salt-making; land leased by the State to economic organizations, family households or individuals with the land rent already paid annually or for many years while the paid leasing duration remains for less than 5 years, the value of the mortgaged property does not include the value of the land use right;
3.5. In case of mortgage of the land use right value while the land lessees are entitled to land rent exemption or reduction under the provisions of law, the value of the mortgaged land use right shall be calculated according to the land leasing price before the enjoyment of exemption or reduction.
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5. The value of the pledged, mortgaged property is determined as having included the yields, incomes and rights arising from such property, if so agreed upon by the parties of prescribed by law.
Where the mortgaged property is the entire real estate with accessories, the value of such accessories shall also belong to the value of the mortgaged property; if only part of the real estate with accessories is mortgaged, the value of such accessories shall belong to the value of the mortgaged property only when so agreed upon by the parties.
1. The scope of security for obligation performance
1.1. The scope of obligation performance security is the borrowing customer’s debt repayment obligation toward the credit institution. The borrowing customer’s debt repayment obligation towards the credit institution shall include the loan money (principal), loan interest, overdue interest, charges (if any) inscribed in the credit contract which the borrowing customer shall have to pay under the provisions of law within the scope of obligation performance security, except where the parties agree that the loan interest, overdue interest and charges (if any) do not fall under the scope of obligation performance security.
1.2. The value of the loan security property must be higher than the value of the secured obligation, except where the credit institution and the borrowing customer agree on the security with property as an additional measure for the loan which the borrowing customer fully meets the conditions for borrowing without property security,
1.3. The debt repayment obligation inscribed in the credit contract may be secured by one or many properties, by one or many measures of security with property, provided that such must comply with the provisions at Point 1.2 of this Section.
1.4. The reduction or addition, replacement of security property: During the security time limit, the parties may reach agreement on the reduction, addition or replacement of security property provided that such must comply with the provisions at Point 1.2 of this Section. Where the borrowing customer has already performed part of the debt repayment obligation secured with property, the credit institution may permit the reduction of security property corresponding to the already performed obligation part, if so requested, provided that the reduction of security property shall not affect the debt repayment obligation secured with the remaining property as well as the subsequent handling of security property.
2. The loan levels against the value of the security property
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3. The scope of loan security of the property
A property shall be used as security for a debt repayment obligation at a credit institution; where the property registers the ownership right as prescribed by law, such a property may be used to secure more than one debt repayment obligation at a credit institution on the condition that such must comply with the provisions at Point 1.2 of this Section.
Section 6. THE KEEPING OF LOAN SECURITY PROPERTIES AND THE PAPERS THEREON
1. When pledging properties, the borrowing customers or the guarantors are obliged to hand over the pledged properties to the credit institutions for keeping; if the pledged properties have their ownership rights registered, the parties may come to term that the pledged properties shall be kept and used by the borrowing customers or the guarantors or assigned to the custody of the third persons, but the credit institutions must keep the originals of the property ownership certificates.
2. When the properties are mortgaged, the mortgaged properties shall be kept by the borrowing customers or the guarantors, except where the parties agree to assign them to the credit institutions or the third parties for custody. If the mortgaged properties are those with the registration of the ownership right and/or the land use right, the credit institutions shall have to keep the originals of the property ownership certificates and/or the land use right certificates.
3. For the pledged, mortgaged properties being transport means, fishing means with registration certificates as prescribed by law (called the registration certificates for short), the credit institutions shall have to keep the originals of the registration certificates, while the borrowing customers or the guarantors may use their copies certified by the Public Notary and the credit institutions (being the pledgee or the mortgagee) for circulation of the means during the pledging or mortgaging time limits. The credit institutions shall make the certification in a copy of the registration certificate only after it is certified by the Public Notary. The contents of certification by the credit institutions on the copy of the registration certificate shall read: "The original is being kept at... from day... month... year... to day... month...year..." and the signature of the General Director (Director) or the deputy General Director (deputy Director) and the seal of the credit institution; or the signature of the Director (deputy Director) and seal of the credit institution’s member organization authorized to decide the loan provision.
Where a loan is extended, the credit organization shall certify the extension of the time limit for circulation of the copy of the registration certificate in compatibility to the debt extention duration.
The copies of registration certificates, certified by the Public Notary and the credit institutions shall be valid only for the circulation of means during the pledging or mortgaging duration including the debt extension period (if any). Upon the expiry of the copies of registration certificates, the borrowing customers or the guarantors shall have to re-submit them to the credit institutions.
4. Where property is pledged or mortgaged for a syndicated capital loan, the participating credit institutions shall appoint representatives to manage the loan security property and papers thereon.
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5. If the party keeping the loan security property and the papers thereon lose or damage them, they shall be handled according to the provisions on rights and obligations of the parties when property is pledged, mortgaged or used as security as prescribed in Section 3 of this Chapter.
1. If borrowing customers and the guarantors are enterprises which are divided, separated, consolidated, merged, transformed or equitized according to the provisions of law or by decisions of the competent State bodies and unable to repay their debts before the division, separation, consolidation, merger, transformation or equitization, the enterprises formulated after the division, separation, consolidation, merger, transformation or equitization shall have to acknowledge debts and perform the obligation of debt repayment to the lending credit institutions.
2. The property securing the debt repayment obligation of the borrowing customers or the guarantors being divided, separated, consolidated, merged, transformed or equitized enterprises shall be handled as follows:
2.1. With regard to divided, separated enterprises: if the loan security property is divisible, it shall be divided in percentages corresponding to the debt repayment obligations of the divided, separated enterprises; if the property cannot be divided in percentages corresponding to the debt repayment obligations and the divided, separated enterprises do not otherwise agree on security measures, the credit institutions may recover debts before the division or separation;
2.2. For consolidated, merged, transformed or equitized enterprises: The property used as security for the debts of enterprises before they are consolidated, merged, transformed or equitized shall continue to be used as property to secure such debts of the new enterprises after the consolidation, merger, transformation or equitization.
3. Where the enterprises cannot apply measures as prescribed at Point 2 of this Section, the credit institutions may handle the loan security properties in order to recover debts before the division, separation, consolidation, merger, transformation or equitization.
4. In all cases of transferring the obligation of security with property as prescribed at Point 2 of this Section, the credit institutions, borrowing customers or the guarantors which are enterprises shall, after the division, separation, consolidation, merger, transformation or equitization, have to re-sign the security contracts; if the security contracts are not re-signed, the credit institutions may handle the loan security properties to recover debts.
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1.1. The borrowing customers fulfill their debt repayment obligations or the guarantors fulfill their guarantee obligations towards credit institutions;
1.2. The loan security properties have been handled to recover debts under the provisions of law;
1.3. The parties agree to replace them with other security measures;
1.4. Other circumstances prescribed by law or under the decisions of competent State bodies.
2. Upon the termination of measures to secure loans with the pledged, mortgaged properties of the borrowing customers or the property of the guarantors, the security contracts shall be liquidated and the security transaction registration shall be wiped out according to the provisions of law.
LOAN SECURITY WITH PROPERTIES FORMULATED FROM LOAN CAPITAL
The loan security with properties formulated from loan capital shall apply to the following cases:
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2. The Government or the Prime Minister shall decide to assign the credit institutions to provide loans to borrowing customers and borrowing subjects in a number of specific cases.
The credit institutions shall opt for the application of loan security with properties formed from loan capital when the borrowing customers and the properties formed from loan capital satisfy the following conditions:
1. With regard to borrowing customers:
1.1. Having prestige with the credit institutions;
1.2. Having financial capability and lawful income sources collectible during the capital- borrowing period for the performance of obligation to repay debts to the credit institutions;
1.3. Having feasible projects on production, business and/or service development, being capable of repaying debts; or having feasible projects on daily life services in conformity with law provisions. Where the borrowing customers borrow capital in service of essential requirements of life, they must have feasible plans on debt repayment;
1.4. Having self-procured capital amount (the owners’ capital) for participating in investment projects and the value of loan security properties through measures of pledge, mortgage, guarantee with the third party’s property, which meet one of the following three requirements:
a) The self-procured capital amount participating in the investment project represents at least 50% of the total investment capital of the project;
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c) The value of loan security property through one or many measures of pledge, mortgage, guarantee with the third party’s property represents at least 50% of the total investment capital of the project.
2. With regard to properties formed from loan capital:
2.1. Properties formed from loan capital and used as loan security must be determined in term of:
a) The borrowing customers’ right to ownership. For property being the land use right, the borrowing customers’ use right must be determined and mortgaged according to the provisions of land legislation.. For properties of the State enterprises, such enterprises’ right to manage and use them must be determined and used as loan security according to the provisions of law. If the property is immoveables affixed to land, the borrowing customers must have the land use right certificates for the land plot where the properties shall be formed and shall have to complete the procedures for investment and construction according to the provisions of law;
b) Their list, quantity, value and characters. The determination of such factors shall be based on the investment projects or plans in service of livelihood;
c) Properties permitted for transaction and without dispute.
2.2. For the properties which require the purchase of insurance under the provisions of law, the borrowing customers shall have to commit to buy insurance for the whole loan term when the properties have already been formed and put into use.
1. The contracts on pledge or mortgage of properties formed from loan capital must be made in writing; may be inscribed in the credit contracts or made in separate documents according to the agreement reached between the parties.
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When the formed properties are put to use, the parties shall have to make appendices to the contracts on pledge, mortgage of properties formed from loan capital, clearly describing the characters and determining the value of the formed properties.
2. Procedures for pledge, mortgage of properties formed from loan capital
2.1. The contracts on pledge or mortgage of properties formed from loan capital shall be certified by the Public Notary or substantiated by the competent People’s Committees, if so agreed upon by the parties; in cases where the law require the certification or substantiation, the parties shall have to comply therewith.
2.2. The registration of security transaction with properties formed from loan capital shall comply with the provisions at Point 7.5., Section 2, Chapter II of this Circular.
1. Rights and obligations of borrowing customers when borrowing capital secured with properties formed from loan capital
1.1. Rights of the borrowing customers:
a) To exploit the utility of and enjoy yields and/or revenue from the properties, except where the yields and/or revenue also belong to the loan security properties;
b) To lease or lend properties if so agreed upon with the lending credit institutions.
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a) To hand to the credit institutions the land use right certificates for the land plot where the property being immoveables shall be formed when signing the contracts for security with properties formed from the loan capital;
b) To inform the credit institutions of the process of formation and the status of the security properties, create conditions for the credit institutions to check the loan security properties;
c) For loan security property which the law requires the ownership registration, before being put into use, such properties must have their ownership registered and the original of the certificates of ownership over such properties shall be handed to the credit institutions;
d) Not to sell, assign, give, donate, contribute as joint-venture capital or use the properties formed from loan capital as security for the performance of other obligations when debts are not paid up to the credit institutions, except where the credit institutions baptize the sale for repayment of debts for the secured loans themselves.
2. Rights and obligations of credit institutions undertaking the security with properties formed from loan capital
2.1. Rights of the credit institutions:
a) To request the borrowing customers to notify on the tempo of formation of and change in the loan security properties;
b) To conduct inspections and request the borrowing customers to supply information for the inspection and supervision of the properties formed from loan capital;
c) To recover loan debts ahead of time if detecting that the borrowing customers have not used the loan capital to formulate properties as committed;
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2.2. Obligations of the credit institutions:
a) To conduct evaluation and examination in order to ensure that the borrowing customers and the properties formed from loan capital and used as loan security satisfy the conditions defined in Section 2 of this Chapter;
b) To return the papers on the properties upon the termination of measures of loan security with properties formed from loan capital, if they are kept by the credit institutions.
Section 5. TERMINATION OF MEASURES OF SECURITY WITH PROPERTIES FORMED FROM LOAN CAPITAL
1. The measure of security with properties formed from loan capital shall be terminated in the following circumstances:
1.1. The borrowing customers fulfill their debt repayment obligations toward the credit institutions;
1.2. The security properties formed from loan capital have been handled to recover debts according to the provisions of law;
1.3. The parties agree to replace it with other security measure;
1.4. Other cases prescribed by laws or by decisions of competent State bodies.
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PROVISION OF LOANS WITHOUT PROPERTY SECURITY
Section 1. CREDIT INSTITUTIONS SELECT THE PROVISION OF LOANS WITHOUT PROPERTY SECURITY
1. Cases of application
Credit institutions may select borrowing customers to provide loans without property security when providing short-, medium- and long-term loans for implementation of development investment projects or plans on production, business, service and livelihood development to borrowing customers according to the provisions at Point 2 and Point 3 of this Section.
2. Conditions on customers borrowing capital without property security
2.1. The borrowing customers must fully meet the following conditions:
a) Having prestige with the lending credit institutions in using the loan capital and paying debts, both principals and interests, fully and on time;
b) Having feasible investment projects or feasible production, business or service plans, being capable of repaying debts; having feasible projects and/or plans in service of livelihood in conformity with the provisions of law. In case of borrowing to service the essential demands of life, the borrowing customers must have feasible plans on debt repayment;
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d) Committing to apply property security measures at the request of the credit institutions if using loan capital contrarily to the commitment in the credit contracts; committing to repay debts ahead of schedule if failing to apply property security measures stipulated at this point.
2.2. For borrowing customers being enterprises, apart from meeting the conditions prescribed at Point 2.1 of this Section, they must gain production and business profits for two consecutive years just preceding the time of considering the loans.
3. Where borrowing customers fully meet conditions for borrowing without property security, the credit institutions and the borrowing customers may reach agreement on measures of security with the borrowing customers’ pledged or mortgaged properties, the third party’s property or with properties formed from loan capital for part of such loan.
4. Restriction of the provision of loans without property security
4.1. Credit institutions must not provide loans without property security to the following subjects defined in Clause 1, Article 78 of the Law on Credit Institutions:
a) Auditing organizations, auditors that are conducting audits at credit institutions; chief accountants, inspectors;
b) Big share-holders of credit institutions. Big share holders of credit institutions are individuals or organizations holding over 10% of the charter capital or over 10% of the share-holding capital of a credit institution, that have power to vote.
c) Borrowing customers being enterprises which have one of the subjects defined in Clause 1, Article 77 of the Law on Credit Institutions owning over 10% of the charter capital of such enterprises.
4.2. The level of non-property security loan of a credit institution shall be stipulated by the State Bank Governor in each period.
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Section 2. STATE CREDIT INSTITUTIONS PROVIDE NON-SECURITY LOANS AT THE GOVERNMENT’S DESIGNATION
1. Providing non-security loans at the Government’s designation
The State credit institutions provide non-security loans to borrowing customers for implementation of investment projects under the State’s special economic programs, key economic programs, socio-economic programs and to a number of customers entitled to preferential credit policies regarding the capital-borrowing conditions as stipulated in various legal documents of the Government or the Prime Minister.
2. Responsibilities of State credit institutions which provide non-security loans at the Government’s designation:
2.1. To strictly comply with the regulations of the Government and the Prime Minister on the designated loans and abide by law provisions in the course of loan consideration and approval, inspection of the use of loan capital and the recovery of debts (including both principals and interests).
2.2. To organize separate monitoring of designated loans and report on the loan capital using situation, the debt-recovering possibility, to propose handling of losses in case of inability to recover debts according to the provisions at Point 4.1 of this Section.
3. Responsibilities of customers borrowing non-security loans at the Government’s designation
3.1. To strictly fulfill the commitments stated in the credit contracts.
3.2. To strictly comply with the regulations of the Government or the Prime Minister on using loan capital with regard to designated loans.
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4. Handling of losses caused to non-security loans at the Government’s designation
4.1. The Government handles losses incurred by State credit institutions in case the designated borrowing customers are unable to pay debts (principals and interests) due to the following causes:
a) Natural calamities, fires and other objective risks;
b) The borrowing customers being economic organizations dissolved under decisions of competent State bodies or declared bankrupt, which, after being handled according to provisions of law, remain unable to fully pay the debts to the credit institutions;
c) Changes in the State’s policies, thus causing difficulties to customers’ production and business activities and making them unable to repay debts;
d) Other causes decided by the Prime Minister.
4.2. Quarterly, on the 15th of the first month of the following quarter, the State credit institutions designated by the Prime Minister to provide non-security loans shall sum up the loss amounts arising in the preceding quarter due to causes specified in Clause 4.1 of this Section, report them to the Vietnam State Bank Governor and the Finance Minister for further reporting them to the Prime Minister for deciding measures of handling the losses incurred by the credit institutions.
1. Guarantee with the trust of socio-political organizations
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The local socio-political organizations of the Vietnam Peasants’ Association, the Vietnam Women’s Union, the Vietnam Labor Confederation, the Ho Chi Minh Communist Youth Union, the Vietnam War Veterans’ Association are determined in the Statutes of such socio-political organizations.
1.2. The guaranteed are poor individuals or family households, that are members of one of the socio-political organizations specified at Point 1.1 of this Section when borrowing a small sum at a credit institution for production, business and/or service activities.
1.3. The maximum loan level guaranteed with trust by socio-political organizations for each poor individual or family household shall be determined by the chairman of the Management Board of the lending credit institution in each period.
2. Forms of trust guarantee by socio-political organizations
2.1. The trust guarantee by socio-political organizations must be made in writing with the following principal contents:
a) Full name and address of the poor individual or family household given trust guarantee;
b) Names and addresses of the socio-political organization which provides trust guarantee and the lending credit institution;
c) The loan amount;
d) The borrowing purpose;
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f) The obligations of the borrowing poor individual or family household given trust guarantee by the socio-political organization;
g) The rights and obligations of the lending credit institution and the trust-guaranteeing socio-political organization.
2.2. Basing themselves on the guarantee documents and the lists of guaranteed members, the credit institutions shall consider and provide loan capital to poor individuals or family households.
3. Rights and obligations of the parties when trust guarantee is provided by socio-political organizations to borrowing poor individuals and family households
3.1. Rights and obligations of the credit institutions which provide loans with trust guarantee by socio-political organizations:
a) To request the guaranteeing organizations to coordinate with the credit institutions in inspecting the use of loan capital and urging the debt repayment;
b) To coordinate with the guaranteeing organizations in the provision of loans and the recovery of debts.
3.2. Rights and obligations of the socio-political organizations which provide guarantee with their trust:
a) To assist, guide and create conditions for poor individuals and family households to borrow capital and use it for the right purpose and efficiently; to urge the repayment of debts in full and on time to the credit institutions;
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3.3. Rights and obligations of poor individuals and family households provided with guarantee for capital borrowing:
a) To use the loan capital for the right purpose as committed;
b) To create favorable conditions for credit institutions and socio-political organizations to examine the use of loan capital;
c) To repay debts (principals and interests) in full and on time to the credit institutions.
ACCOUNTANCY ACCOUNTING, REPORTING, INSPECTION, EXAMINATION AND HANDLING OF VIOLATIONS
Section 1. ACCOUNTANCY ACCOUNTING, REPORTING, INSPECTION AND EXAMINATION
1. The credit institutions shall have to organize the accountancy accounting, observe the regime of information, reporting and statistics according to the regulations of the State Bank in order to monitor and manage the provision of loans with property security, the provision of loans without property security and the handling of security property.
2. The Accountancy- Finance Department shall have to submit to the State Bank Governor the regulation on the regime of book-keeping accounting of loans with property security, loans without property security selected by credit institutions, loans at the Government’s designation.
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4. The State Bank Inspectorate shall have to conduct the inspection of the implementation of Decree No.178 and this Circular.
Section 2. HANDLING OF VIOLATIONS
1. Organizations and individuals that violate the provisions of Decree No.178 and this Circular shall be handled according to law, depending on the nature and seriousness of their violations.
2. Organizations and individuals that breach the contracts on loan security, if causing damage, shall have to compensate the victims according to the provisions of law; all disputes over the loan security contracts shall be settled according to the provisions of law.
1. This Circular takes effect 15 days after its signing.
2. The regulations on mortgage, pledge and guarantee for borrowing capital from banks, which cease to be effective under the provisions in Clause 2 of Article 38 of Decree No.178, include:
2.1. The regulation at Point 1, Section II of Resolution No.49/CP-m of May 6, 1997 of the Government on the borrowing of capital from State-run commercial banks by State enterprises without mortgage;
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2.3. The Regulation on mortgage, pledge and guarantee for borrowing bank capital, promulgated together with Decision No.217/QD-NH1 of August 17, 1996 of the State Bank Governor;
2.4. Inter-ministerial Circular No.01/TTLB of July 3, 1996 of the State Bank, the Finance Ministry and the Ministry of Justice, guiding the procedures for property mortgage or pledge by State enterprises and the procedures for notarization of contracts on mortgage, pledge and guarantee for borrowing bank capital.
3. Credit contracts applying the measures of mortgage, pledge, guarantee and provision of loans without property security and established before the effective date of this Circular shall continue to be performed according to terms agreed upon by the parties in accordance with the provisions of law at the time of signing the contracts till the borrowers pay up the debts to the lending credit institutions.
4. The chairmen of the Management Boards, the General Directors (Directors) of credit institutions and the customers borrowing capital from credit institutions shall have to implement this Circular.
The heads of units attached to the State Bank, the directors of the State Bank’s branches in the provinces and centrally-run cities shall have to inspect the implementation of this Circular.
STATE BANK GOVERNOR
Le Duc Thuy
- 1 Circular No. 07/2003/TT-NHNN of May 19, 2003, guiding the implementation of a number of regulations on credit institutions loan security
- 2 Decree No. 08/2000/ND-CP of March 10, 2000, on registration of security transactions
- 3 Decree No. 178/1999/ND-CP of December 29, 1999, on credit institution’s loan security
- 1 Circular No. 07/2003/TT-NHNN of May 19, 2003, guiding the implementation of a number of regulations on credit institutions loan security
- 2 Decree No. 85/2002/ND-CP of October 25, 2002, amending and supplementing Decree No. 178/1999/ND-CP of December 29, 1999 on credit institutions loan security
- 3 Circular No.62/2002/TT-BTC of July 18, 2002 guiding the application of value added tax (VAT) on credit institutions’ activities of handling loan security assets to recover debts
- 4 Decision No. 993/2001/QD-NHNN of August 6, 2001, on the level of lending without asset security for state-owned commercial banks, branches of foreign banks in Vietnam, finance companies of state-owned general corporations and the bank for the poor.