Joint Circular No. 03/2001/TTLT-NHNN-BTP-BCA-BTC-TCĐC guiding the handling of collateral assets to recover debts for credit institutions

CIRCULAR JOINT CIRCULAR

Guidelines for the Disposal of Collateral to Recover Debts for Credit Institutions

for credit institutions

____________

Pursuant to Clause 2, Article 39 of Decree No. 178/1999/ND-CP dated December 29, 1999 of the Government on collateral for loans of credit institutions and other relevant laws;

To implement the disposal of collateral to recover debts for credit institutions, the State Bank of Vietnam, the Ministry of Justice, the Ministry of Public Security, the Ministry of Finance, and the General Department of Land Administration have jointly issued guidelines for the disposal of collateral to recover debts for credit institutions as follows:

A. GENERAL PROVISIONS

I. All borrowers who obtain loans from credit institutions shall be obligated to repay the debt when due or before maturity as prescribed by law. The guarantor for a borrower's loan at a credit institution shall be obligated to repay the debt on behalf of the borrower if the borrower fails to fulfill or fulfills the repayment obligation incorrectly.

In the event that the borrower or guarantor fails to fulfill or fulfills the repayment obligation incorrectly, the collateral used to secure the repayment obligation at the credit institution (hereinafter referred to as the collateral) shall be disposed of to recover the debt.

II. The collateral shall be disposed of according to the method agreed upon in the credit agreement or pledge agreement, mortgage agreement, or guarantee agreement (hereinafter collectively referred to as the security agreement) between the credit institution and the borrower, guarantor (hereinafter collectively referred to as the guarantor). In cases where the parties cannot dispose of the collateral according to the agreed method, the credit institution has the right to proactively apply methods to dispose of the collateral. The collateral shall be disposed of through the following methods:

1. Selling the collateral: Selling the collateral involves the credit institution or the guarantor, or both parties working together to sell the asset directly to a buyer or authorizing a third party to sell the asset to a buyer.

The third party authorized to sell the asset may be a property auction center, a business entity conducting auctions, or an organization with the function of purchasing assets for resale.

2. Accepting the collateral in lieu of performing the secured obligation: Accepting the collateral in lieu of performing the secured obligation involves the credit institution directly accepting the collateral, using the valuation of the collateral at the time of disposal as the basis for settling the principal, interest on the loan, and overdue interest owed by the guarantor after deducting other expenses (if any), and accepting the asset according to the provisions of this Circular and other relevant laws.

3. Receiving payments or assets that a third party must pay or deliver to the guarantor: Receiving payments or assets that a third party must pay or deliver to the guarantor involves the credit institution directly receiving payments or assets that a third party must pay or deliver to the guarantor according to the procedures stipulated in this Circular and other relevant laws.

III. Credit institutions have the right to transfer the right to recover debts or authorize a third party to dispose of the collateral. The third party must be an organization with legal personality and can exercise the right to recover debts or dispose of collateral in accordance with the law.

In the case where the third party is granted the right to recover debts by the credit institution, the third party has the right to take measures to recover debts or dispose of collateral as the credit institution would. If the third party is authorized by the credit institution to dispose of the collateral, then the third party may dispose of the collateral within the scope of the authorization.

The disposal of collateral must comply with the principles of transparency, simple procedures, convenience, speed, ensuring the rights and interests of all parties, and cost-effectiveness.

V. In the case where the owner of the collateral is indicted for a criminal act unrelated to the credit institution's loan or unrelated to the source of formation of the collateral, such collateral shall not be seized and shall be disposed of in accordance with the provisions of this Circular, except where otherwise provided by law.

VI. Competent state agencies have the responsibility to create favorable conditions and implement necessary measures to support credit institutions in disposing of collateral in accordance with the provisions of this Circular and other relevant laws.

B. SPECIFIC PROVISIONS ON PROCEDURES

DISPOSAL OF COLLATERAL

I. DISPOSAL OF COLLATERAL ACCORDING TO AGREEMENT

1. The collateral shall be disposed of according to the agreement between the credit institution and the guarantor in the credit agreement or security agreement. The parties may agree to amend, supplement, or enter into a new agreement regarding the disposal of the collateral. Such agreements must be documented in writing.

2. Prior to disposing of the collateral, the credit institution shall carry out the following procedures:

2.1. The credit institution must notify the guarantor in writing about the disposal of the collateral and register the notification requesting the disposal of the collateral in accordance with the law on registration of security transactions (if the security transaction has been registered).

a. The notice of collateral disposal shall contain the following main contents:

- Reason for disposing of the collateral;

- Value of the secured obligation;

- Type of collateral being disposed of: characteristics, quality, quantity;

- Method of disposing of the collateral;

- Time of disposing of the collateral;

- Deadline and location for transferring the collateral (if applicable);

b. The credit institution shall set the time for disposing of the collateral in the notice of collateral disposal, but it must not be earlier than 7 days for pledged assets, 15 days for mortgaged assets, from the date of registering the request to dispose of the collateral at the security transaction registration agency. For security transactions that do not require registration or have not yet been registered due to the national security transaction registration agency not being operational, the 7-day and 15-day periods mentioned above shall be calculated from the date the credit institution sends the notice of collateral disposal to the guarantor. In cases where the collateral is at risk of damage, the credit institution may dispose of the collateral immediately after issuing the notice of collateral disposal.

2.2. The guarantor shall cooperate with the credit institution to implement measures to prepare for the disposal of the collateral, such as transferring the collateral to the credit institution, delivering documents related to the collateral at the request of the credit institution (in cases where the guarantor or a third party holds the collateral documents or the collateral), facilitating potential buyers to view the collateral, and implementing other necessary measures to dispose of the collateral.

In cases where the guarantor or a third party holds the collateral documents or the collateral (hereinafter referred to as the holder of the collateral), the credit institution shall set a date for the transfer of the collateral documents or the collateral for disposal in the notice of collateral disposal; if the holder of the collateral fails to comply, the credit institution has the right to request competent authorities to apply measures to compel the holder of the collateral to transfer the collateral documents or the collateral according to the provisions of Section XI Part B.

3. The credit institution shall establish a record of collateral disposal. The record of collateral disposal must clearly state the transfer and receipt of the collateral, the method of disposing of the collateral, the rights and obligations of the parties, and any other agreements (if any).

In cases where the credit institution applies measures to compel the holder of the collateral to transfer the collateral to the credit institution for disposal, the credit institution shall establish a record of seizure of the collateral according to the provisions of Point 3.3 Clause 3 Section XI Part B.

4. After implementing the notice of collateral disposal, the rights of the credit institution, the obligations of the guarantor, and the third party holding the collateral are regulated as follows:

4.1. Rights of the credit institution

a. Requesting the guarantor to cooperate with the credit institution to implement necessary measures to prepare for the disposal of the collateral according to the provisions of Point 2.2 Clause 2 Section I Part B;

b. Exploiting and using the collateral or allowing the guarantor or authorizing a third party to exploit and use the collateral according to the provisions of Section VI Part B;

c. Requiring the guarantor or a third party not to exploit or use the collateral if such actions pose a risk of devaluing or reducing the value of the collateral;

For coal-fired thermal power plants where the enterprise holds 100% of the registered capital and uses 100% of its own capital to invest in the project approved by the competent authority, E is determined as 100%;. Paying off debts from profits or income derived from exploiting or using the collateral after deducting necessary expenses for exploitation and use of the collateral;

d. Requiring the holder of the collateral to transfer the collateral if any of the following acts occur:

- Not transferring the collateral as requested by the credit institution;

- Not implementing or fully implementing measures to preserve the collateral;

- Unilaterally conducting acts of selling, exchanging, giving away, leasing, lending, joint venture capital contribution, dissipating, damaging, or losing the collateral;

- Engaging in other acts that pose a risk of damaging or losing the collateral.

In cases where the holder of the collateral does not transfer the collateral as requested by the credit institution, the credit institution has the right to request state authorities to compel the holder of the collateral to transfer the collateral according to the provisions of Section XI Part B.

e. Other rights as prescribed by law.

4.2. Obligations of the guarantor:

a. Cooperating with the credit institution to implement necessary measures to prepare for the disposal of the collateral when requested by the credit institution according to the provisions of Point 2.2 Clause 2 Section I Part B;

b. Not selling, exploiting, using, or leasing the collateral without the approval of the credit institution;

c. Not destroying, dissipating, exchanging, giving away, using the collateral for joint venture capital contribution, damaging, or losing the collateral or engaging in other acts causing damage to the collateral;

d. Preserving and maintaining the collateral, and transferring the collateral and related documents upon receiving a request from the credit institution;

e. Other obligations as prescribed by law.

4.3. Obligations of the third party holding the collateral:

The third party holding the collateral shall fulfill the obligation to preserve and transfer the collateral to the credit institution as prescribed for the guarantor under Subparagraphs b, c, d, and e of Point 4.2 Clause 4 Section I Part B.

5. Methods of disposing of the collateral according to agreement.

5.1. Selling the collateral.

a. The sale of the collateral shall be carried out according to the provisions of Clause 1 Article 34 Decree No. 178/1999/ND-CP dated December 29, 1999 of the Government on collateral for loans of credit institutions (hereinafter referred to as Decree No. 178). The parties agree on the valuation of the collateral for sale according to the provisions of Section VII Part B.

b. A purchase and sale contract for the collateral shall be established in writing between the seller of the collateral and the buyer of the collateral. In cases where the guarantor and the credit institution have no agreement or cannot reach an agreement on the seller of the collateral, the credit institution shall decide on the seller according to one of the cases provided for in Clause 1 Article 34 of Decree No. 178.

5.2. The credit institution accepts the collateral to substitute for the performance of the secured obligation.

a. The credit institution and the guarantor shall establish a record of acceptance of the collateral to substitute for the performance of the secured obligation. The record must clearly state the transfer and receipt, valuation, and disposal of the collateral, and payment of debt from the proceeds of the disposal of the collateral according to this Circular.

b. After accepting the collateral to substitute for the performance of the secured obligation, the credit institution may proceed with the procedures to accept the transfer of ownership or use rights of the collateral or sell or transfer the collateral to the buyer or transferee according to the provisions of the law.

5.3. The credit institution receives money or assets that a third party must pay or deliver to the guarantor.

a. The credit institution or the guarantor must notify the third party of the credit institution's right to receive the aforementioned money or assets, and simultaneously request the third party to deliver the money or assets to the credit institution. The delivery of the money or assets to the credit institution must be carried out strictly according to the deadline and location specified in the notice of collateral disposal, except in cases provided for in Article 320 of the Civil Code.

For collateral as stipulated in Points b, c, d, e, and f Clause 1.1 Section II Chapter II Circular 06/2000/TT-NHNN dated April 4, 2000, guiding the implementation of Decree No. 178, credit organizations may accept collateral assets and rights arising from such assets. The third party shall transfer funds, assets, and rights arising from the collateral to the credit organization.

b. Credit organizations shall prepare a record of receipt of funds and assets between the credit organization, the guarantor, and the third party. The record of receipt of funds and assets must clearly state the handover and acceptance of funds and assets, the valuation of the asset, and the repayment of debt from the disposal of the asset.

6. After the collateral asset has been disposed of to recover the debt, the credit organization or the guarantor shall proceed to cancel the registration of asset disposal and the collateral transaction registration in accordance with the provisions of the law on collateral transaction registration.

II. DISPOSAL OF COLLATERAL ASSETS IN ACCORDANCE WITH THE PROVISIONS

AT  CLAUSE 2 ARTICLE 34 DECREE NO. 178

1. When disposing of collateral assets according to the cases stipulated in Clause 2 Article 34 of Decree No. 178, credit organizations and guarantors must implement the procedures prescribed in Clause 2, Clause 3 Section I Part B; the rights and obligations of the parties according to the provisions in Clause 4 Section I Part B.

2. Credit organizations have the right to proactively implement one of the following methods for disposing of collateral assets:

2.1. Credit organizations directly sell collateral assets (except for collateral assets being land use rights and other assets that must be sold at specialized auction organizations as prescribed by law).

a. Credit organizations must publicly announce the sale of collateral assets and can proceed to sell the collateral assets after the time limit specified in item b point 2.1 Clause 2 Section I Part B.

b. The purchase and sale contract of collateral assets between the credit organization and the buyer of the asset must be documented in writing. The credit organization determines the selling price of the collateral asset according to the provisions in Section VII Part B.

2.2. Credit organizations entrust the sale of collateral assets to the Asset Auction Center or enterprises specializing in asset auctions (hereinafter referred to collectively as the asset auction organization).

a. Cases of entrusting auction sales:

- The credit organization chooses to sell collateral assets through the method of entrusting the asset auction organization;

- Collateral assets are land use rights as prescribed in Section III Part B and other assets that must be sold at specialized auction organizations as prescribed by law.

b. The contract for entrusting auction sales of assets is signed between the credit organization and the asset auction organization. The credit organization and the guarantor may agree for the guarantor to request the auction of the collateral asset.

c. The procedure for auctioning assets is carried out in accordance with the provisions of the law on asset auctions.

2.3. Credit organizations entrust or transfer the handling of collateral assets to organizations with the function of purchasing assets for resale.

a. Organizations with the function of purchasing assets for resale include:

- Companies managing non-performing loans and exploiting collateral assets of commercial banks established pursuant to Decision No. 305/2000/QĐ-NHNN dated September 15, 2000, of the Governor of the State Bank of Vietnam;

- Enterprises established to manage and resolve non-performing loans of credit organizations as prescribed by law.

b. Organizations entrusted or transferred the handling of collateral assets by credit organizations have the right to handle collateral assets in accordance with the provisions in Section III Part A and other relevant laws.

For land use rights and assets attached to land, organizations entrusted or transferred the handling of collateral assets by credit organizations when implementing the method of selling collateral assets must put them up for auction. The procedures for auctioning are carried out in accordance with the provisions in Section III Part B.

2.4. Credit organizations accept the actual collateral asset to substitute for the performance of the guaranteed obligation (excluding collateral assets being land use rights and assets attached to land):

In this case, the credit organization does not need to renegotiate with the guarantor. The procedure for accepting the actual collateral asset to substitute for the performance of the guaranteed obligation is carried out in accordance with Point 5.2 Clause 5 Section I Part B.

2.5. Credit organizations accept funds and assets that a third party must pay or deliver to the guarantor.

a. Acceptance of funds and assets that a third party must pay or deliver to the guarantor according to the law or the agreement of the parties in the guarantee contract. The procedures for accepting funds and assets are carried out in accordance with Point 5.3 Clause 5 Section I Part B.

b. If the third party does not transfer the aforementioned funds and assets as requested by the credit organization, the credit organization has the right to request the competent state authority to enforce the third party to deliver the asset according to the provisions in Section XI Part B or initiate legal proceedings.

3. After disposing of the collateral asset, the credit organization or the guarantor shall carry out the cancellation of the registration of asset disposal and the collateral transaction registration in accordance with the provisions of the law on collateral transaction registration.

4. During the process of disposing of collateral assets according to the methods prescribed in Clause 2 Article 34 of Decree No. 178, credit organizations and guarantors have the right to negotiate, renegotiate, and enter into new agreements regarding the method of asset disposal, the rights and obligations of the parties, and other agreements consistent with the provisions of this Circular and other relevant laws.

III. DISPOSAL OF COLLATERAL ASSETS BEING LAND USE RIGHTS AND ASSETS ATTACHED TO LAND

1. The disposal of collateral assets being land use rights and assets attached to land shall be carried out in accordance with the agreement of the parties in the loan contract and the guarantee contract and must comply with the relevant provisions in Section I Part B of this Circular and the provisions of the law on land.

2. In the case where collateral assets being land use rights and assets attached to land cannot be disposed of according to the agreement of the parties in the contract, the credit organization will put the asset up for auction to recover the debt or initiate legal proceedings.

3. The auction of land use rights is carried out in the following sequence:

3.1. The credit organization submits the application file to the competent state authority to allow the auction of land use rights:

a. The People's Committee at the district level permits the auction of land use rights that have been mortgaged by households and individuals;

b. The People's Committee at the provincial level permits the auction of land use rights that have been mortgaged by organizations.

3.2. The application dossier for permission to auction land use rights includes:

a. A request for permission to auction land use rights;

b. A copy of the credit contract and guarantee contract (certified by the credit organization);

c. A copy of the certificate of land use rights or the certificate of ownership of housing and land use rights or other documents as stipulated in Point 7.3 Clause 7 Section of this (certified by the credit organization).

3.3. Within fifteen days from the date of receipt of the above dossier, the competent People's Committee shall be responsible for:

a. Issuing a document permitting the auction of land use rights in cases where the transfer of land use rights is allowed;

b. Guiding the credit organization to complete necessary procedures in cases where the dossier is incomplete, then issuing a document permitting the auction of land use rights;

c. Responding in writing to the credit organization regarding the prohibition on auctioning land use rights for types of land that are not permitted to be transferred according to Article 30 of the Land Law.

3.4. Specifically, for annual crop agricultural land allocated by the State to households and individuals, participants in the auction of land use rights must meet the conditions prescribed in Article 9 of Decree No. 17/1999/NĐ-CP dated March 27, 1999 of the Government on procedures for conversion, transfer, lease, sublease, inheritance of land use rights, mortgage, and capital contribution with the value of land use rights (hereinafter referred to as Decree No. 17).

3.5. After being granted permission to auction land use rights by the competent People's Committee, the credit organization proceeds with the procedures prescribed in Clause 2, Clause 3 Section I Part B and authorizes the Asset Auction Center to carry out the auction of land use rights.

4. After completing the disposal of collateral assets including land use rights and attached assets, the credit organization is responsible for processing the procedures to cancel the registration of notification of asset disposal, cancel the mortgage, and cancel the mortgage registration. The credit organization will proceed with the procedures to transfer land use rights and transfer ownership of assets to the transferee or buyer, except in cases handled by the Asset Auction Center under the law on asset auctions.

5. The issuance of certificates of land use rights and certificates of ownership of housing and land use rights shall be carried out as follows:

5.1. The party responsible for transferring land use rights and transferring ownership of assets to the transferee or buyer, as stipulated in Clause 4 above, submits the dossier to the competent state agency to apply for certificates of land use rights and certificates of ownership of housing and land use rights for the transferee or buyer.

The dossier for applying for certificates of land use rights and certificates of ownership of housing and land use rights is regulated in Clause 2 Section X Part B.

5.2. Within fifteen days (for certificates of land use rights) or sixty days (for certificates of ownership of housing and land use rights) from the date of receiving a complete and valid dossier, the competent state agency shall be responsible for issuing the aforementioned certificates to the transferee or buyer.

6. The obligation to pay taxes for the transfer of land use rights and attached assets is regulated in Section IX Part B.

7. The provisions of this circular are applied to handle collateral assets including land use rights and attached assets that were mortgaged before the effective date of Decree No. 178 in the following cases:

7.1. Land use rights and attached assets that had complete documents and dossiers consistent with legal regulations at the time of mortgage or consistent with legal regulations at the time Decree No. 178 became effective;

7.2. Land use rights and attached assets that met the conditions stipulated in Point 7.1 above but could not be processed due to the mortgage contract lacking a certification from a Notary Public or lacking certification from the competent People's Committee;

7.3. Land use rights and attached assets where, at the time of mortgage, the mortgagor had a certificate of land use rights or a certificate of ownership of housing and land use rights or one of the documents specified in Clause 2 Article 3 of Decree No. 17 and had the right to mortgage land use rights;

7.4. Attached assets where, at the time of mortgage, the mortgagor had legitimate ownership of the asset and had documents on land use rights as stipulated in Point 7.3 above but did not have the right to mortgage land use rights according to the law on land.

In this case, the credit organization puts the attached assets up for auction at the Asset Auction Center. After completing the auction, the Asset Auction Center submits the dossier to the competent state agency to request issuance of a certificate of land use rights for the successful bidder in accordance with the form of land allocation, leasing, or transfer of land use rights as prescribed by the law on land.

7.5. When handling collateral assets including land use rights and attached assets according to the cases stipulated in Points 7.1, 7.2, and 7.3 above, the credit organization sends the existing dossier to the competent state agency as prescribed in Clause 3 Section III Part B to apply for permission to auction land use rights. After obtaining permission from the competent state agency, the credit organization proceeds with the procedures to handle collateral assets according to this Circular.

IV. HANDLING ASSETS FOR ENTERPRISES WHEN DIVIDING, SEPARATING, MERGING, CONSOLIDATING, CONVERTING, AND PRIVATIZING

1. Credit organizations have the right to dispose of assets to recover debts before enterprises divide, separate, merge, consolidate, convert, or privatize according to the cases stipulated in Clause 3 Article 13 of Decree No. 178.

In the event that the collateral for the loan has not been processed to recover the debt, and the enterprise has divided, separated, merged, consolidated, converted, or privatized, the enterprises formed after such division, separation, merger, consolidation, conversion, or privatization must assume the debt and fulfill the obligation to repay the credit institution. If the enterprises formed after division, separation, merger, consolidation, conversion, or privatization fail to fulfill their repayment obligations, the credit institution has the right to process the collateral according to the provisions of Section II Part B.

2. In the case where the credit institution processes the collateral for the loan according to the provisions of Clause 4 Article 13 Decree No. 178, the processing of the asset and fulfillment of the loan repayment obligation shall be based on the guarantee contract re-signed after the enterprise's division, separation, merger, consolidation, conversion, or privatization. The credit institution shall carry out the processing of the asset according to the provisions of this Circular.

V. PROCESSING OF COLLATERAL IN THE CASE WHERE THE GUARANTOR DIES OR IS ABSENT FROM THEIR PLACE OF RESIDENCE AT THE TIME OF PROCESSING THE COLLATERAL

The credit institution may proceed with the processing of the collateral when the debt repayment period expires or the debt must be repaid prematurely, and the guarantor dies or intentionally absents themselves from their place of residence at the time of the collateral processing as notified by the credit institution. The custodian of the collateral (if any) or the heir of the guarantor's property (in the case of the guarantor's death) is obligated to hand over the collateral to the credit institution for processing according to the notification of the credit institution. In the event that the custodian of the collateral or the heir of the guarantor's property refuses to hand over the collateral to the credit institution for processing, the credit institution has the right to request the competent state authority to apply measures compelling the custodian of the collateral to hand it over to the credit institution for processing according to the provisions of Section XI Part B.

VI. EXPLOITATION AND USE OF COLLATERAL DURING THE PERIOD BEFORE PROCESSING

1. During the period before the collateral is processed to recover the debt, the credit institution has the right to exploit and use the collateral or permit the guarantor or authorize a third party to exploit and use the collateral in accordance with the nature and utility of the collateral. The permission or authorization for exploitation, the method of exploitation, and the handling of profits and benefits derived from the exploitation and use of the collateral must be documented in writing.

2. Profits and benefits obtained must be accounted for separately (except in cases where the parties have agreed otherwise); after deducting necessary expenses for the exploitation and use of the collateral (including management costs, maintenance, repair costs of the collateral, taxes, fees for exploiting the collateral, and other necessary and reasonable expenses), the remaining amount shall be used to repay the debt to the credit institution according to the provisions of Section VIII Part B.

VII. VALUATION OF COLLATERAL WHEN PROCESSING

1. The credit institution and the guarantor agree on the price for processing the collateral at the time of processing and record the agreement on the valuation of the collateral in a memorandum.

2. In the case where the parties cannot agree on the price for processing the collateral, the valuation shall be conducted as follows:

2.1. Before the credit institution decides on the price for processing the collateral, the credit institution hires a consulting organization or a specialized organization to determine the price or refers to the price determined by a consulting organization or a specialized organization, the actual price in the locality at the time of processing, the price prescribed by the state (if any), and other factors related to the price.

2.2. In the case where there is a significant difference in price between those who have registered to purchase the collateral or when multiple people have registered to purchase the collateral, the credit institution will decide on the price for processing the collateral based on the highest bid or put it up for public auction to recover the debt.

3. In the case where the credit institution authorizes an organization to conduct a public auction of the collateral, the determination of the price for processing the collateral shall be carried out in accordance with the laws on public auction of assets.

4. In the case where the credit institution authorizes or transfers the processing of the collateral to a third party, the credit institution may determine the price for processing the collateral or agree with the third party to determine the price for processing the collateral according to the principle stipulated in Point 2.1 Clause 2 above.

VIII. SETTLEMENT OF DEBT RECOVERY FROM THE PROCESSING OF COLLATERAL

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

1.1. Necessary expenses for processing the collateral: preservation, management, valuation, advertising, selling, commission, auction fees, and other necessary and reasonable expenses related to the processing of the collateral.

1.2. Taxes and fees paid to the state budget (if any).

1.3. Principal, interest on the loan, and overdue interest calculated up to the date the guarantor or the custodian of the collateral hands over the collateral to the credit institution for processing.

2. In the case where the credit institution advances funds to settle the processing expenses or tax and fee payments to the state budget, the credit institution shall recover the advanced funds before settling the principal, interest on the loan, and overdue interest, except in the case where the guarantor has already repaid the advanced funds to the credit institution.

3. In the case where the proceeds from selling the collateral and income from the exploitation and use of the collateral during the period before processing (after deducting necessary expenses for the exploitation and use of the collateral) exceed the amount of debt owed, the excess amount shall be refunded to the guarantor. The guarantor is obligated to continue repaying the debt if the proceeds are insufficient to cover the debt owed and the expenses related to the processing of the collateral.

In the case where the credit institution receives the collateral directly to replace the fulfillment of the obligation or receives the amounts and assets that a third party must transfer to the guarantor, the excess amount between the price for processing the collateral and the income from the exploitation and use of the collateral during the period before processing (after deducting necessary expenses for the exploitation and use of the collateral) compared to the amount of debt owed shall be refunded to the guarantor. The guarantor is obligated to continue repaying the debt if the income is less than the principal, interest, overdue interest, and expenses related to the processing of the collateral.

4. In the case where the buyer cannot immediately pay off the debt with the collateral assets, the credit organization may apply a partial debt collection method according to the buyer's payment capacity. The credit organization shall determine the principal debt, interest, overdue interest, and other charges due up to the date when the credit organization takes possession of the collateral.

5. In the event that a single asset is used to secure multiple obligations at one credit organization, if it becomes necessary to process the asset to fulfill a maturing obligation, then all other obligations, even those not yet due, will be considered due, and the credit organization may process the collateral asset to collect the debt. The order of repayment among debts secured by a specific asset shall follow the registration order at the collateral transaction registration authority.

6. For a collateral asset securing multiple obligations in a syndicated loan, if it becomes necessary to process the asset to fulfill a maturing obligation, then the lending parties shall be repaid according to their proportionate capital contributions.

7. If the guarantor increases the value of the collateral asset (such as through repairs or upgrades) during direct management and use of the collateral asset, the additional value of the collateral asset shall be considered part of the collateral asset's value to ensure the fulfillment of the initial obligation. When processing the collateral asset, the credit organization can repay the debt from both the original and the increased value of the collateral asset.

8. In cases where the collateral asset has been insured, the insurance money paid by the insurance agency shall be directly paid to the credit organization for debt collection. This amount will be used to settle the guarantor's debt.

IX. TAXATION ON TRANSFER OF OWNERSHIP AND USE RIGHTS OF COLLATERAL ASSETS

1. Taxation on the transfer of ownership and use rights of collateral assets shall be carried out when procedures for transferring ownership and use rights are conducted, or when the credit organization receives the collateral asset directly to replace the obligation and transfers ownership and use rights to the credit organization.

2. For taxes on the transfer of land use rights, they shall be implemented in accordance with Decree No. 19/2000/NĐ-CP dated June 8, 2000, of the Government detailing the implementation of the Law on Land Transfer Tax and the Law Amending and Supplementing Certain Provisions of the Law on Land Transfer Tax.

3. In cases where the credit organization receives the collateral asset directly to replace the secured obligation and the asset has not yet completed the procedures for transferring ownership and use rights, no tax on the transfer of ownership and use rights shall be paid.

X. COOPERATIVE RESPONSIBILITIES OF RELEVANT AUTHORITIES

1. When the credit organization proceeds to handle collateral assets according to the methods stipulated in this Circular, the Notary Public Authority and the People's Committee at the appropriate level within their respective duties and powers shall certify purchase and sale contracts, transfer contracts, asset receipt certificates, and other documents related to the transfer of ownership and use rights to the buyer or transferee.

2. Relevant state authorities (People's Committee at the appropriate level, Department of Land Administration or Department of Land Administration - Real Estate, Provincial or City Traffic Police Department of Public Security, Transport Vehicle Inspection Authority, Regional Ship Registration and Seafarer Authority, Civil Aviation Administration of Vietnam) shall carry out procedures to transfer ownership and use rights of the asset to the buyer or transferee upon receiving requests from the credit organization (or auction organization) and relevant documents including:

2.1. A copy of the credit agreement; guarantee contract (signed by the credit organization);

2.2. Certificate of ownership of the asset, or certificate of use right of the asset, or asset registration document of the owner, or other documents as specified in Point 7.3 Clause 7 Section III Part B (depending on the specific situation);

2.3. Record of asset handling or record of asset seizure;

2.4. Purchase and sale contract, or transfer contract, or receipt record, or auction sale document (depending on the specific handling situation);

2.5. Documents confirming the payment of asset transfer tax as prescribed by law.

3. Procedures for transferring ownership and use rights of collateral assets in the case of enforcement of collateral assets:

Relevant state authorities shall carry out procedures to transfer ownership and use rights of the collateral asset to the buyer or transferee based on the following documents:

3.1. Extract of judgment or copy of judgment or copy of court decision;

3.2. Enforcement decision of the enforcement agency;

3.3. Credit agreement, guarantee contract (signed by the credit organization);

3.4. Purchase and sale contract, or transfer contract, or receipt contract, or auction sale document (depending on the specific handling situation).

4. In the file for transferring ownership and use rights of the collateral asset, there is no need for a consent document from the owner of the collateral asset regarding the handling of the collateral asset (as such consent is already reflected in the credit agreement and guarantee contract); there is no need for a purchase and sale contract between the owner of the asset or the person subject to enforcement and the buyer, except in cases where the handler of the asset is the owner of the asset or the person subject to enforcement.

5. The deadline for completing the procedures for transferring ownership and use rights of the asset to the buyer or transferee is 15 days (except for the transfer of ownership of housing and use rights of residential land which is 60 days) from the date of receipt of the request from the credit organization (or auction organization) and the above documents, unless otherwise provided by law.

XI. PROCEDURES TO OBLIGATE THE HOLDER OF THE COLLATERAL ASSET TO DELIVER THE COLLATERAL ASSET TO THE CREDIT ORGANIZATION

ASSETS SECURING FOR CREDIT ORGANIZATIONS

According to Article 35 of Decree No. 178, the procedures to compel the holder of the collateral asset to deliver the collateral asset to the credit organization are as follows:

1. The party holding the collateral asset shall deliver the collateral asset to the credit institution for disposal upon notification from the credit institution. If the party holding the collateral asset fails to deliver the collateral asset within the time limit specified in the notification, the credit institution shall issue a notice applying measures to compel the party holding the collateral asset to deliver the collateral asset to the credit institution.. The notice must clearly state the reasons for application, the deadline for delivering the collateral asset, the implementation measures, and the rights and obligations of the parties.

2. The credit institution may apply the following measures:

2.1. The credit institution requests the party holding the collateral asset to deliver the collateral asset under its management to the credit institution.

2.2. After applying the above measure, if the party holding the collateral asset still fails to deliver the collateral asset, the credit institution sends a notice to the People's Committee and the police agency where the guarantor resides or where the collateral asset is located, requesting cooperation and support in recovering the collateral asset.

In cases where a third party holds the collateral asset, the credit institution notifies the guarantor to cooperate with the credit institution to compel the party holding the collateral asset to deliver the collateral asset to the credit institution.

2.3. After the expiration of the time limit specified in the notice applying the measure to compel delivery of the collateral asset, if the party holding the collateral asset fails to deliver the collateral asset to the credit institution for disposal, the credit institution will proceed to seize the collateral asset with the assistance of the People's Committee and the police agency.

3. The responsibility for cooperation of the People's Committee and the police agency in supporting the credit institution in recovering the collateral asset is as follows:

3.1. Upon receiving the request of the credit institution as stipulated in point 2.2 clause 2 above, the People's Committee applies educational measures to persuade the party holding the collateral asset to deliver the collateral asset under its management to the credit institution. The People's Committee sets a deadline for the party holding the collateral asset to deliver the collateral asset to the credit institution for disposal, but not exceeding 10 days from the date the People's Committee applies the educational measures.

3.2. If the deadline has expired and the party holding the collateral asset still fails to deliver the collateral asset according to the credit institution's request, the People's Committee directs relevant functional departments to participate in cooperation with the credit institution and carry out necessary procedures to compel the party holding the collateral asset to deliver the collateral asset to the credit institution.

a. For collateral assets that are means of transportation, based on the notice issued by the credit institution (clearly stating the contact address, fax number, and telephone number):

- The traffic police authority, through registration work, if they discover cases as requested by the credit institution, shall not allow the transfer of ownership and require the vehicle owner or the person authorized by the owner to seek approval from the credit institution before proceeding with the transfer of ownership procedures.

- In cases discovered through patrol and inspection work, if the traffic police authority finds the driver using a copy of the vehicle registration certificate that has exceeded its validity period as stipulated in Clause 2 Article 12 of Decree No. 178, the traffic police authority shall issue a temporary detention notice and notify the credit institution directly, via fax, or through other communication methods. Within 15 days from receipt of the notice, the credit institution must send someone to collect the detained vehicle. The handover between the traffic police authority and the credit institution must be documented in a handover record. The credit institution must inform the vehicle owner or driver about this handover. If the credit institution does not collect the vehicle within this period, the traffic police authority will return the vehicle to the driver who was temporarily detained.

The credit institution must pay the notification fees, temporary detention fees, and other reasonable costs (if any) when collecting the detained vehicle. These costs are included in the asset disposal expenses as stipulated in Section VIII Part B. If the credit institution does not collect the vehicle as notified by the traffic police authority, the credit institution must bear the responsibility for paying these costs from its own funds.

b. For collateral assets such as warehouses, houses, and other construction projects, the credit institution allows the transfer of non-collateral items to a storage agency and accepts the collateral asset for disposal. The storage fee is paid by the party owning the collateral asset.

c. For collateral assets such as machinery, equipment, raw materials, fuel, consumer goods, precious metals, gems, and other collateral assets, the credit institution proceeds to seize them.

3.3. The seizure of collateral assets must be documented in a seizure record, witnessed by representatives of the local People's Committee where the party holding the collateral asset resides or where the collateral asset is located, and related agencies.

3.4. During the process of the credit institution seizing the collateral asset for disposal, if the party holding the collateral asset engages in acts of resistance, obstruction against officials performing their duties, or other acts aimed at reclaiming the asset, or infringing upon the life and health of officials performing their duties, causing disorder, the police agency shall take measures as prescribed by law to prevent and promptly handle such acts; the People's Committee shall create conditions to support the credit institution, dispatch personnel to participate, and resolve any issues arising during the credit institution's process of seizing the collateral asset for disposal within its jurisdiction.

C. IMPLEMENTATION AND EFFECTIVE ENFORCEMENT

I. This Circular is applied to dispose of collateral assets and recover debts for credit institutions as defined in Article 12 of the Law on Credit Institutions. The disposal of collateral assets to recover debts for domestic individuals and legal entities; foreign individuals and legal entities that are not credit institutions shall be carried out in accordance with the provisions of Government Decree No. 165/1999/NĐ-CP dated November 19, 1999 on secured transactions.

II. Credit contracts that have exceeded the debt repayment deadline before this Circular takes effect but where the collateral has not yet been disposed of shall be subject to the provisions of this Circular for disposal.

III. In cases where credit institutions provide credit in other forms, if the parties have agreed on security measures, they may apply the provisions of this Circular for disposal.

IV. For collateral assets that are evidence in criminal cases, the provisions of Joint Circular No. 06/1998/TTLT-TANDTC-VKSNDTC-BCA-BTC-BTP dated October 4, 1998, issued by the Supreme People's Court, the Supreme People's Procuracy, the Ministry of Public Security, the Ministry of Justice, and the Ministry of Finance guiding certain issues regarding the preservation and disposal of assets as evidence and assets seized during the investigation, prosecution, and trial of criminal cases shall be applied.

V. This Circular shall take effect fifteen days from the date of signature. During implementation, any difficulties shall be reported by relevant sectors for inter-sectoral explanation, supplementation, and timely amendment. Any amendments and supplements to this Circular shall be decided by the Governor of the State Bank, the Minister of Justice, the Minister of Public Security, the Minister of Finance, and the Director General of the Land Administration Department.