Decree No. 163/2006/NĐ-CP on Secured Transactions

DECREE

On secured transactions

_________

 

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Based on the Civil Code dated June 14, 2005;

Pursuant to Resolution No. 45/2005/QH11 dated June 14, 2005 of the National Assembly on the implementation of the Civil Code;

Considering the proposal of the Minister of Justice.

 

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree provides detailed regulations for certain provisions of the Civil Code regarding the establishment, performance of secured transactions to ensure the fulfillment of civil obligations and the handling of secured assets.

Article 2. Application of Law

The establishment, performance of secured transactions, and the handling of secured assets shall be carried out in accordance with the provisions of the Civil Code, this Decree, and related legal normative documents.

Article 3. Explanation of Terms

In this Decree, the following terms are understood as follows:

1. The guarantor is the obligor or a third party who commits to guaranteeing the fulfillment of civil obligations, including the pledgor, mortgagor, depositor, surety, guarantor, and political-social organization at the grassroots level in cases of creditworthiness.

2. The secured creditor is the right holder in civil relations where the exercise of such rights is guaranteed by one or more secured transactions, including the pledgee, mortgagee, depositor, surety, guarantor, financial institution in cases of creditworthiness, and the right holder entitled to bank payment or compensation for damages in cases of guarantee.

3. The bona fide secured creditor is the secured creditor in a situation where they are unaware and could not have been aware that the guarantor does not have the right to use the asset to secure the fulfillment of civil obligations.

4. The obligor is the party required to fulfill the obligation guaranteed to the right holder.

5. The guaranteed obligation is part or all of a civil obligation, which may be a current obligation, a future obligation, or a conditional obligation, the fulfillment of which is guaranteed by one or more secured transactions.

6. A future obligation is a civil obligation where the civil transaction establishing such obligation is concluded after the secured transaction has been entered into.

7. Secured asset is the asset used by the guarantor to secure the fulfillment of civil obligations to the secured creditor.

8. Goods circulating in the production and business process are movable property used for exchange, sale, or lease within the scope of the guarantor's production and business activities.

9. Valuable securities include stocks, bonds, bills of exchange, promissory notes, deposit certificates, checks, and other valuable securities as prescribed by law, whose value can be converted into money and are permitted to be traded.

10. Tradable assets are assets not prohibited from being traded according to the law at the time of establishing the secured transaction.

Article 4. Secured Assets

1. Secured assets are agreed upon by the parties and belong to the obligor or to a third party who commits to using such assets to secure the obligor’s obligations towards the right holder. Secured assets may be existing assets, future assets, and tradable assets.

2. Future assets are assets belonging to the guarantor after the time when the obligation is established or the secured transaction is concluded. Future assets include assets already formed at the time of concluding the secured transaction but only become the guarantor's property after the conclusion of the secured transaction.

3. State-owned enterprises may use assets under their management and use to secure the fulfillment of civil obligations, except where otherwise provided by law.

4. In cases where the secured transaction is legally concluded and has legal effect for third parties, courts and other competent state agencies shall not attach the secured asset to enforce other obligations of the guarantor, except where otherwise provided by law.

Article 5. Value of Assets Used to Guarantee Multiple Civil Obligations

In cases where the guarantor uses one asset to guarantee multiple civil obligations as stipulated in Clause 1 of Article 324 of the Civil Code, the parties may agree to use an asset with a value less than, equal to, or greater than the total value of the guaranteed obligations, except where otherwise provided by law.

Article 6. Order of Priority for Payment

1. The order of priority for payment when disposing of collateral assets shall be determined according to the provisions of Article 325 of the Civil Code.

2. Parties receiving guarantees on the same asset have the right to agree on changing the order of priority for payment among themselves. A party that has transferred its priority for payment can only be prioritized for payment within the scope of the guarantee provided by the party to which it transferred the priority.

3. In cases where the amount obtained from disposing of collateral assets is insufficient to pay all parties receiving guarantees with the same order of priority, such amount shall be distributed among the parties in proportion to the value of their respective guaranteed obligations.

Article 7. Selection of Security Transactions to Fulfill Civil Obligations

In cases where a civil obligation is secured by multiple security transactions, and the obligor fails to perform or performs incorrectly upon maturity, the creditor has the right to choose which security transaction to enforce or to enforce all security transactions if the parties have not agreed otherwise.

Chapter II

CONCLUSION OF SECURITY TRANSACTIONS

Article 8. Guaranteeing Performance of Obligations with Future Formed Assets

In cases where obligations are guaranteed with future formed assets, once the guarantor has ownership rights over part or all of the collateral asset, the creditor has corresponding rights over that part or all of the asset. For assets that must be registered under the law but have not been registered by the guarantor, the creditor still has the right to dispose of the asset upon maturity.

Article 9. Notarization and Authentication of Security Transactions

1. Notarization or authentication of security transactions is subject to agreement between the parties.

2. Where the law requires, security transactions must be notarized or authenticated.

Article 10. Effectiveness of Security Transactions

1. Legally concluded security transactions become effective from the time of conclusion, except in the following cases:

a) Where the parties have agreed otherwise;

b) Pledge of assets becomes effective from the time of transferring the asset to the pledgee;

c) Mortgage of land use rights, forest use rights, ownership rights of production forests, aircrafts, and ships becomes effective from the time of mortgage registration;

d) Security transactions become effective from the time of notarization or authentication as required by law.

2. General description of collateral assets does not affect the effectiveness of security transactions.

Article 11. Time When Security Transactions Have Legal Effect Against Third Parties

1. Security transactions have legal effect against third parties from the time of registration. The time of registration is determined according to the law on registration of security transactions.

2. Changing one or more parties involved in security transactions does not alter the time when security transactions have legal effect against third parties.

Article 12. Registration of Security Transactions

1. The cases that require registration include:

a) Mortgage of land use rights;

b) Mortgage of forest use rights, ownership of production forests which are planted forests;

c) Mortgage of aircrafts, ships;

d) Mortgage of a property to secure the performance of multiple obligations;

đ) Other cases if prescribed by law.

2. Security transactions not falling under the cases specified in Clause 1 of this Article may be registered upon request of individuals or organizations.

3. The procedures, formalities, and authority for registering security transactions shall be carried out in accordance with the provisions of the law on registration of security transactions.

Article 13. Cases where the secured asset does not belong to the guarantor

1. In case the guarantor uses an asset that does not belong to them to secure the performance of civil obligations, the owner has the right to reclaim the asset according to Articles 256, 257, and 258 of the Civil Code and Clause 2 of this Article.

2. In case the secured asset is purchased on credit or installment basis, or leased for a term of one year or more by a business or individual with business registration including machinery, equipment, or other chattels that are not required to be registered for ownership, and the purchase on credit or installment contract, or lease contract is registered at the competent security transaction registration agency within fifteen days from the date of concluding the purchase on credit or installment contract, or lease contract, then the seller retains ownership, and the lessor has the highest priority in payment when disposing of the secured asset; if not registered or registered after the above period and after the security transaction has been registered, the secured party is considered a bona fide secured party and has the highest priority in payment when disposing of the secured asset.

3. An organization or individual receiving security by assets purchased on credit or installment basis, or leased after the registration of the purchase on credit or installment contract, or lease contract, shall not be considered a bona fide secured party.

Article 14. Cases where the guarantor is a legal entity undergoing restructuring

1. A guarantor who is a legal entity undergoing restructuring must notify the secured party about the restructuring of the legal entity before splitting, dividing, merging, consolidating, or converting.

2. The parties agree on the succession, fulfillment of guaranteed obligations, and security transactions during the restructuring process of the legal entity; if they cannot reach an agreement, the secured party may request the obligor to fulfill the obligation ahead of schedule; if the secured party does not request early fulfillment of the obligation, it will be resolved as follows:

a) In the case of splitting a legal entity, the new legal entities must jointly perform the security transaction;

b) In the case of dividing a legal entity, the divided legal entity and the newly formed legal entity must jointly perform the security transaction;

c) In the case of merging or consolidating, the merged or consolidated legal entity must perform the security transaction;

d) In the case of converting a business or state-owned company, the converted business must perform the security transaction.

3. For security transactions established before the restructuring of the legal entity and still within their validity period, the parties do not need to conclude such transactions again. The parties may establish a document recording the change of the guarantor.

For registered security transactions, the registration of the change of the guarantor must be carried out within the time limit prescribed by law.

  Article 15. Relationship between secured transactions and contracts with secured obligations  

1. If a contract with secured obligations becomes void and the parties have not yet performed the contract, the secured transaction shall terminate; if the contract has been partially or fully performed, the secured transaction shall not terminate, except where otherwise agreed.

2. The invalidity of a secured transaction does not terminate the contract with secured obligations, except where otherwise agreed.

3. If a contract with secured obligations is rescinded or unilaterally terminated and the parties have not yet performed the contract, the secured transaction shall terminate; if the contract has been partially or fully performed, the secured transaction shall not terminate, except where otherwise agreed.

4. The rescission or unilateral termination of a secured transaction does not terminate the contract with secured obligations, except where otherwise agreed.

5. In cases where the secured transaction does not terminate pursuant to Clause 1 and Clause 3 of this Article, the secured party may dispose of the collateral assets to settle the repayment obligation of the obligor towards itself.

Chapter III

SECURED TRANSACTIONS

Section 1

PLEDGE OF ASSETS

Article  Article 16. Holding pledged assets  

After receiving the transferred pledged assets, the pledgee directly holds the assets or delegates a third party to hold them; in case of delegation to a third party to hold the assets, the pledgee still bears responsibility towards the pledgor for performing the obligations as stipulated in Article 332 of the Civil Code and other obligations as agreed with the pledgor.

Article 1  7.    Liability of the pledgee in case the pledged assets are lost, damaged, devalued, or depreciated  

1. In case the pledged assets are at risk of devaluation or depreciation, the pledgee holding such assets must notify the pledgor and request the pledgor to provide a solution within a specified period; if the pledgor does not respond by the end of that period, the pledgee must take necessary measures to prevent it. The pledgee has the right to demand the pledgor to pay reasonable expenses, if the pledgee is not at fault for the occurrence of such risk.

In case the pledged assets are lost, damaged, devalued, or depreciated due to the fault of the pledgee, the pledgee must compensate the pledgor for the loss.

2. In case the pledged assets are held by a third party and are at risk of being lost, damaged, devalued, or depreciated, the rights and obligations between the third party and the pledgee shall be implemented according to the asset custody contract.

3. The provisions of Clause 1 and Clause 2 of this Article do not apply in cases where the pledged assets naturally wear out.

Article 18 Liability of the pledgee in case of selling, exchanging, giving away, leasing, lending pledged assets, or using pledged assets to secure another obligation 

1. In case the pledgee sells, exchanges, gives away, leases, lends pledged assets, or uses pledged assets to secure another obligation contrary to the provisions of Clause 2 of Article 332 of the Civil Code, the pledgor has the right to reclaim those assets and demand the pledgee to compensate for any resulting damage; however, the pledgor does not have the right to reclaim the assets in the following cases:

a) The buyer, the recipient of the exchange, or the recipient of the gift has established ownership according to the statute of limitations provided for in Clause 1 of Article 247 of the Civil Code;

b) The buyer or the recipient of the exchange of movable pledged assets not required to be registered under Article 257 of the Civil Code and is in good faith.

2. In case the pledgor cannot reclaim the assets from the buyer, the recipient of the exchange, or the recipient of the gift as provided for in Clause 1 of this Article, the pledgee must compensate the pledgor for the loss.

Article 19 Rights of the pledgee in case of receiving a bill of lading, savings card, or negotiable instrument as collateral 

1. In case of receiving a bill of lading issued on order or bearer (complete set of bills of lading) as provided for in Article 89 of the Maritime Law, the pledgee has rights over the goods recorded on the bill of lading.

2. In case of receiving a savings card as collateral, the pledgee has the right to request the savings deposit organization to freeze the savings account of the pledgor.

3. In case of receiving a negotiable instrument as collateral, the pledgee has the right to request the issuer of the negotiable instrument or the Securities Depository Center to ensure the pledgee's supervisory rights over the value of the asset recorded on the negotiable instrument.

In case the issuer of the negotiable instrument or the Securities Depository Center breaches the commitment to ensure the pledgee's supervisory rights, they must bear responsibility for compensating the pledgee for losses corresponding to the reduction in the value of the asset recorded on the negotiable instrument, except where otherwise agreed.

Section 2

MORTGAGE OF ASSETS

Article  Article 20. Rights of the mortgagee in case the mortgagor sells, exchanges, or gifts the mortgaged property 

1. In case the mortgagor sells, exchanges, or gifts the mortgaged property which is not a circulating commodity in production or business without the consent of the mortgagee, the mortgagee has the right to recover the mortgaged property, except in the following cases:

a) The purchase or exchange of the property was carried out before the registration of the mortgage and the buyer or the recipient of the exchange is in good faith;

b) The buyer or the recipient of the exchange of motor vehicles registered for mortgage, but the mortgage registration does not accurately describe the frame number and engine number of the motor vehicle and the buyer or the recipient of the exchange is in good faith.

2. In case the mortgagee does not exercise the right to recover the mortgaged property, the proceeds, claims for payment, or other assets obtained from the sale or exchange of the mortgaged property become substitute collateral for the sold or exchanged property.

For registered secured transactions, the mortgagee may proactively request registration changes regarding the collateral. Registration changes in this case do not alter the registration date.

3. In the case where the mortgagor sells or exchanges collateral that is circulating goods within the scope of the mortgagor's production and business activities; or sells or exchanges other collateral with the consent of the mortgagee and in the cases stipulated in points a and b of Clause 1 of this Article, then the buyer or the party receiving the exchange shall have ownership rights over such property.

Article  21. Rights of the custodian in the case of custody of collateral 

In the case where the party entitled to custody of the asset according to Article 416 of the Civil Code is currently using the asset as collateral, the rights of the custodian shall be prioritized over the rights of the mortgagee.

Article 2 2. Mortgage of debt claim 

1. The party entitled to a debt claim may mortgage part or all of the debt claim, including future-formed debt claims, without the need for the debtor's consent.

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

a) To request the debtor to pay the amount due when the debtor fails to perform or performs inadequately upon maturity.

b) To provide information on the mortgage of the debt claim if requested by the debtor.

3. The debtor has the following rights and obligations:

a) To pay the mortgagee as provided in point a of Clause 2 of this Article.

b) To request the mortgagee to provide information on the mortgage of the debt claim; if the information is not provided, the debtor has the right to refuse payment to the mortgagee.

4. In the event that the debt claim is transferred according to Article 309 of the Civil Code, the priority order between the transferee of the debt claim and the mortgagee of the debt claim shall be determined based on the registration time of these transactions at the competent registration authority.

Article  23. Leasing or lending of collateral 

1. In the case where the mortgagor leases or lends collateral without informing the lessee or borrower about the collateral being used as security as stipulated in Clause 5 of Article 349 of the Civil Code and causing damage, the mortgagor must compensate the lessee or borrower.

2. The lease or loan contract of collateral terminates when the collateral is processed to fulfill the obligation. The lessee or borrower must hand over the collateral to the mortgagee for processing, except in cases where there is a different agreement between the parties.

Article 2 4. Mortgage of leased assets 

In the case of mortgaging a leased asset, the mortgagor must inform the mortgagee about the leasing of the asset; if the asset is processed to fulfill the obligation, the lessee may continue leasing until the end of the lease term under the contract, unless there is a different agreement among the parties.

Article  25. Liability of the mortgagor or third party holding the collateral 

1. In the case where the collateral is lost, damaged, devalued, or depreciated, the mortgagor must immediately notify the mortgagee and repair, supplement, or replace it with another asset of equivalent value or supplement or replace another form of security, unless otherwise agreed.

2. In the case where a third party holding the collateral must compensate for losses caused by losing the collateral, devaluing, or depreciating the collateral according to Clause 1 of Article 352 of the Civil Code, the compensation amount becomes collateral.

3. A third party holding the collateral is not liable for damages in the case where the collateral naturally wears out.

Article 26 Supervision and inspection of future-formed collateral 

The mortgagor has the obligation to facilitate the mortgagee's exercise of the right to supervise and inspect the formation process of the asset. The mortgagee's supervision and inspection shall not obstruct or make difficulties for the formation of the asset.

Article 1 u 27. Investment in collateral 

1. The mortgagee shall not restrict the mortgagor or a third party from investing in the collateral to increase its value.

2. In the case where the mortgagor invests in the collateral and uses the additional asset created by the investment to secure the performance of another obligation, or a third party invests in the collateral and mortgages the additional asset created by the investment, the matter shall be resolved as follows:

a) If the additional asset can be separated from the collateral without reducing the value or depreciating the collateral compared to its value before the investment, each secured party has the right to separate the portion of the asset they secured for processing.

b) If the additional asset created by the investment cannot be separated from the collateral, the entire collateral shall be processed to fulfill the obligation. The priority order of payment among the secured parties shall be determined based on the registration time.

Article 2 8. Returning land use right certificates or property ownership certificates to the person requesting mortgage registration 

1. In the case where the parties agree or the law permits the use of land use rights or registered property ownership rights to secure multiple civil obligations, the mortgagee or the third party currently holding the Land Use Right Certificate or Property Ownership Certificate must return the certificate to the person requesting registration for the purpose of registering the mortgage, except in cases where the secured parties have a different agreement regarding the registration of the secured transaction.

2. Within five days from the completion of the registration of the secured transaction, the person requesting registration shall be responsible for returning the land use right certificate or property ownership certificate to the mortgagee or the third party authorized to hold the certificate, except in cases where the parties have a different agreement.

Section 3

DEPOSIT, BETTING MONEY

Article  29. Case where it is unclear whether it is a deposit or advance payment For 

In the case where one party in the contract provides the other party with a sum of money but does not clearly specify whether it is a deposit or an advance payment, such sum shall be considered an advance payment.

Article 30. Obligations of the Pledgor and Guarantor

1. Pay to the Pledgee and Guarantor reasonable expenses for preserving and maintaining the pledged property and guaranteed property, except where otherwise agreed.

2. Register ownership rights of the pledged property and guaranteed property for the Pledgee and Guarantor in accordance with the provisions of the law when such property is transferred to the Pledgee and Guarantor, as stipulated by law or by agreement.

Article 31. Rights of the Pledgor and Guarantor

The Pledgor and Guarantor have the right to request the Pledgee and Guarantor to cease using the pledged property and guaranteed property if such use poses a risk of depreciation or devaluation of the property.

Article 32. Obligations of the Pledgee and Guarantor

1. Preserve and maintain the pledged property and guaranteed property; shall not exploit or use such property, except where otherwise agreed.

2. Shall not establish transactions concerning the pledged property and guaranteed property, except with the consent of the Pledgor and Guarantor.

Article 33. Rights of the Pledgee and Guarantor

The Pledgee has the right to own the pledged property if the Pledgor refuses to enter into or perform the contract, except where otherwise agreed.

The Guarantor has the right to own the guaranteed property if the leased property is no longer available to return to the Guarantor, except where otherwise agreed.

Section 4

DEPOSIT

Article 34. Collateral

1. Collateral as prescribed in Clause 1, Article 360 of the Civil Code shall be deposited into a frozen account at a commercial bank to ensure the performance of civil obligations.

2. Collateral and the establishment of collateral once or multiple times at the bank where the collateral is established shall be agreed upon by the parties or prescribed by law.

Article 35. Obligations of the Bank Where Collateral is Established

1. Pay according to the request of the party entitled to payment and compensation by the bank within the value of the collateral, after deducting banking service fees.

2. Return remaining collateral to the party establishing the collateral after deducting banking service fees and the amount paid according to the request of the entitled party upon termination of the collateral.

Article管理条例 36. Rights of the Bank Where Collateral is Established

1. Request the party entitled to payment and compensation by the bank to comply with the procedures for payment and compensation.

2. Enjoy banking service fees.

Article 37. Obligations of the Party Establishing Collateral

1. Establish collateral at the bank designated or accepted by the party entitled to payment and compensation by the bank.

2. Provide sufficient collateral according to the agreement with the party entitled to payment and compensation by the bank.

3. Agree with the bank where collateral is established on the conditions of payment in accordance with the commitment to the party entitled to payment and compensation by the bank.

Article 38. Rights of the Party Establishing Collateral

The party establishing collateral has the right to request the bank where collateral is established to return remaining collateral after deducting banking service fees and the amount paid according to the request of the party entitled to payment and compensation by the bank upon termination of the collateral.

Article 39. Obligations of the Party Entitled to Payment and Compensation by the Bank

The party entitled to payment and compensation by the bank has the obligation to follow the correct procedures when requesting the bank where collateral is established to make payment.

Article 40. Rights of the party entitled to bank payment and compensation for damages

The party entitled to bank payment and compensation for damages has the right to request the depositing bank to make full and timely payment.

Section 5

GUARANTEE

Article 41. Basis for performing guarantee obligations

The basis for performing guarantee obligations shall be agreed upon by the parties or prescribed by law, including the following cases:

1. When the due date for performing the obligation arrives and the guaranteed party does not perform or performs the obligation incorrectly towards the beneficiary;

2. The guaranteed party must perform the obligation towards the beneficiary before the deadline due to violation of the obligation, but does not perform or performs it incorrectly;

3. The guaranteed party lacks the ability to perform its obligation when the parties have agreed that the guarantor only needs to perform the guarantee obligation when the guaranteed party cannot perform its obligation;

4. Other bases if prescribed by law.

Article 42. Notification of performance of guarantee obligations

The beneficiary notifies the guarantor about the performance of the guarantee obligation when the basis for performing the guarantee obligation arises as stipulated in Article 41 of this Decree; if the guaranteed party must perform the obligation before the deadline due to violation of the obligation, but does not perform or performs it incorrectly, then the beneficiary must clearly state the reason in the notification regarding the guaranteed party's obligation to perform the obligation before the deadline.

Article 43. Time limit for performing guarantee obligations

The guarantor must perform the guarantee obligation within the time limit agreed upon by the parties; if there is no agreement, the guarantor must perform the guarantee obligation within a reasonable period of time from the date of notification of the performance of the guarantee obligation.

Article 44. Security for the performance of guarantee obligations, obligations of the guaranteed party towards the guarantor

The parties may agree on establishing a security transaction to secure the performance of guarantee obligations and the obligations of the guaranteed party towards the guarantor according to the Civil Code, this Decree, and related regulatory legal documents.

Article 45. Right to demand repayment of the guarantor

The guarantor notifies the guaranteed party about having performed the guarantee obligation; if the guarantor does not notify and the guaranteed party continues to perform the obligation with the beneficiary, the guarantor has no right to require the guaranteed party to perform the obligation towards itself. The guarantor has the right to demand the beneficiary to repay what has been received from the guarantor.

Article 46. Rights of the beneficiary

From the date of notification to the guarantor as stipulated in Article 42 of this Decree, the beneficiary has the following rights:

1. Request the court to apply urgent provisional measures against the guarantor's assets according to civil procedural law;

2. Require persons who illegally obstruct the beneficiary's rights to stop such actions.

Article 47. Disposal of the guarantor's assets

In case of disposing of the guarantor's assets as provided for in Article 369 of the Civil Code, the parties agree on the asset, time, place, and method of disposal; if they cannot reach an agreement, the beneficiary has the right to initiate a lawsuit at the court.

Article 48. Fulfillment of Guarantee Obligations in Cases Where the Guarantor is a Business Entity Declared Bankrupt, or a Natural Person Dies or Is Deemed Dead by the Court

1. In the case where the guarantor is a business entity declared bankrupt, the guarantee shall be handled as follows:

a) If the guarantee obligation arises, the guarantor must fulfill the guarantee obligation. In the event that the guarantor does not fully settle within the scope of the guarantee, the beneficiary of the guarantee has the right to request the guaranteed party to pay the remaining amount;

b) If the guarantee obligation has not arisen, the guaranteed party must replace the guarantee with another form of security, except in cases where there is a different agreement.

2. In the case where the guarantor is a natural person who dies or is declared dead by the court, the guarantee shall be handled as follows:

a) If the performance of the guarantee obligation must be carried out by the guarantor itself according to the agreement or the provisions of the law, the guarantee shall terminate;

b) If the performance of the guarantee obligation does not need to be carried out by the guarantor itself, the guarantee shall not terminate. The heir of the guarantor must perform the guarantee obligation on behalf of the guarantor in accordance with Article 637 of the Civil Code, except in cases where they refuse to accept the inheritance according to Article 642 of the Civil Code. After performing the obligation on behalf of the guarantor, the heir shall have the rights of the guarantor against the guaranteed party.

Chapter 6

CREDIT GUARANTEE

Article 49. Credit Guarantee

1. Credit guarantee is the act of political-social organizations at the grassroots level using their reputation to ensure that poor individuals and households can borrow a certain amount of money from credit institutions for production, business, and service provision.

2. Poor individuals and households guaranteed by credit guarantee must be members of one of the political-social organizations specified in Article 50 of this Decree.

3. The poverty standard applied during each period shall be determined in accordance with the provisions of the law.

Article 50. Political-Social Organizations Ensuring Credit Guarantee

The grassroots units of the following political-social organizations are the guarantors by credit guarantee:

1. Vietnam Farmers' Union;

2. Vietnam Women's Union;

3. Vietnam General Confederation of Labor;

4. Ho Chi Minh Communist Youth Union;

5. Vietnam Veterans Association;

6. Vietnam Fatherland Front.

Article 51. Obligations of Political-Social Organizations

1. Confirming, upon request of the credit institution, the conditions and circumstances of poor individuals and households when borrowing from that credit institution.

2. Actively or closely coordinating with the credit institution to assist, guide, and create favorable conditions for poor individuals and households to borrow funds; supervise the use of borrowed funds for intended purposes and effectively; urge repayment of loans fully and on time to the credit institution.

Article 52. Rights of Political-Social Organizations

Political-social organizations have the right to refuse to provide credit guarantees if they determine that poor individuals and households lack the ability to use borrowed funds for production, business, and services and to repay debts to the credit institution.

Article 53. Obligations of Credit Institutions

Credit institutions have the obligation to coordinate with political-social organizations providing credit guarantees in lending and debt recovery.

Article 54. Rights of Credit Institutions

Credit institutions have the right to request political-social organizations providing credit guarantees to cooperate in inspecting the use of borrowed funds and urging repayment.

Article 55. Obligations of the Borrower

1. Use the loaned capital for the purpose agreed upon.

2. Create favorable conditions for credit institutions and political-social organizations to inspect the use of the loaned capital.

3. Fully repay the principal and interest of the loan to the credit institution on time.

Chapter IV

DISPOSITION OF COLLATERAL IN PLEDGE AND MORTGAGE

Article 56. Cases for Disposing of Collateral

1. When the due date for performing the secured obligation arrives but the obligor does not perform or performs incorrectly.

2. The obligor must perform the secured obligation before the agreed deadline or as prescribed by law due to violation of obligations.

3. The law stipulates that collateral must be disposed of so that the guarantor can fulfill another obligation.

4. Other cases agreed upon by the parties or prescribed by law.

Article 57. Disposition of Collateral in Case of Guarantor's Bankruptcy

1. In case the guarantor is the obligor who has gone bankrupt, the collateral shall be disposed of according to the provisions of the bankruptcy law and this Decree to fulfill the obligation; if the bankruptcy law provides differently from this Decree regarding the disposition of collateral, the provisions of the bankruptcy law shall apply.

2. In case the guarantor is a third party pledgor or mortgagor whose assets have been declared bankrupt, the collateral shall be disposed of as follows:

a) If the secured obligation has reached its due date but the obligor does not perform or performs incorrectly, the collateral shall be disposed of according to the provisions of Clause 1 of this Article to fulfill the obligation;

b) If the secured obligation has not yet reached its due date, the collateral shall be disposed of according to the agreement of the parties; in case there is no agreement, the collateral shall be disposed of according to the provisions of the bankruptcy law to fulfill other obligations of the guarantor.

Article 58. Principles for Disposing of Collateral

1. In case the asset is used to secure the performance of one obligation, the disposal of such asset shall be carried out according to the agreement of the parties; if there is no agreement, the asset shall be sold at auction according to the provisions of the law.

2. In case the asset is used to secure the performance of multiple obligations, the disposal of such asset shall be carried out according to the agreement of the guarantor and the parties receiving the guarantee; if there is no agreement or the agreement cannot be reached, the asset shall be sold at auction according to the provisions of the law.

3. The disposal of collateral must be conducted objectively, publicly, transparently, ensuring the rights and legitimate interests of the parties involved in the secured transaction, individuals, organizations related to it, and in accordance with the provisions of this Decree.

4. The person disposing of the collateral (hereinafter referred to as the collateral disposer) is the party receiving the guarantee or a person authorized by the party receiving the guarantee, except where the parties involved in the secured transaction have agreed otherwise.

5. The disposal of collateral to recover debt is not a business activity of the party receiving the guarantee.

Article 59. Methods of Disposing of Collateral According to Agreement

1. Selling the collateral.

2. The party receiving the guarantee accepts the collateral itself to replace the fulfillment of the guarantor's obligation.

3. The party receiving the guarantee receives money or other assets from a third party in the case of mortgage of a claim.

4. Another method agreed upon by the parties.

Article 60. Obligations of the person handling the asset when one asset is used to secure multiple obligations

1. Notify other parties receiving the guarantee about the asset disposal as stipulated in Article 61 of this Decree.

2. Carry out the disposal of the secured asset.

3. Pay the proceeds from the disposal of the secured asset according to the priority order of payment.

Article 61. Notification on the disposal of the secured asset when securing multiple obligations

1. Before disposing of the secured asset, the person handling the asset must notify in writing about the disposal of the secured asset to other parties receiving the guarantee at the address retained with the registration authority for secured transactions or register the notification document regarding the disposal of the secured asset in accordance with the law on registration of secured transactions.

2. For secured assets that are at risk of losing value or depreciating, such as claims, negotiable instruments, savings certificates, bills of lading, the person handling the asset may dispose of them immediately while also notifying other parties receiving the guarantee about the disposal of these assets.

3. The notification document on the disposal of the secured asset shall contain the following main contents:

a) Reason for disposing of the asset;

b) Obligation being secured;

c) Description of the asset;

d) Method, time, and location of disposing of the secured asset.

4. In case the person handling the asset does not notify about the disposal of the secured asset as prescribed in Clause 1 of this Article and causes damage to other parties receiving the guarantee in registered secured transactions, they must compensate for the damage.

Article 62. Time limit for disposing of the secured asset

The secured asset shall be disposed of within the time limit agreed upon by the parties; if there is no agreement, the person handling the asset has the right to decide on the time limit for disposal, but it cannot be less than seven days for movable property or fifteen days for immovable property, counted from the date of notification about the disposal of the secured asset, except in cases provided for in Clause 2 of Article 61 of this Decree.

Article 63. Seizure of the secured asset for disposal

1. The party holding the secured asset must hand over the asset to the person handling the asset as notified by that person; if the deadline specified in the notification expires and the party holding the secured asset does not hand over the asset, the person handling the asset has the right to seize the secured asset as prescribed in Clause 2 of this Article for disposal or request the court to resolve the matter.

2. When carrying out the seizure of the secured asset, the person handling the asset has the responsibility:

a) To notify the holder of the asset in advance about the application of the measure to seize the secured asset within a reasonable period. The notification document must clearly state the reason, time of implementing the seizure of the secured asset, and the rights and obligations of the parties.

b) Not to apply measures that violate prohibitions under the law or contravene social morals during the process of seizing the secured asset.

3. In case the holder of the secured asset is a third party, the guarantor has the responsibility to cooperate with the person handling the asset to carry out the seizure of the secured asset.

4. The guarantor or the third party holding the secured asset must bear reasonable and necessary costs for the seizure of the secured asset; in case they fail to hand over the asset for disposal or engage in acts obstructing the lawful seizure of the secured asset causing damage to the party receiving the guarantee, they must compensate for the damage.

5. During the process of seizing the secured asset, if the holder of the secured asset shows signs of resistance, obstruction, disruption of public security and order, or engages in other violations of the law, the person handling the secured asset has the right to request the People's Committee of the commune, ward, town, and the police agency where the seizure of the secured asset is taking place, within their functions, duties, and powers, to apply measures as prescribed by law to maintain public security and order and ensure that the person handling the asset can exercise the right to seize the secured asset.

Article 64. Rights and Obligations of the Guarantor during the Period Awaiting Disposal of the Guaranteed Property

1. During the period awaiting disposal of the guaranteed property, the guarantor may exploit and use the guaranteed property or permit the guarantor or authorize a third party to exploit and use the guaranteed property in accordance with its intended function and utility. The permission or authorization for exploitation, the method of exploitation, and the handling of profits and revenues obtained must be documented in writing.

2. Profits and revenues obtained must be accounted for separately unless otherwise agreed. After deducting necessary expenses for the exploitation and use of the property, the remaining amount shall be used to settle debts owed to the guarantor.

Article 65. Disposal of Movable Guaranteed Property in the Absence of an Agreement on the Method of Disposal

In the absence of an agreement on the method of disposing of the guaranteed property, such property shall be sold at public auction in accordance with the provisions of the law. However, for movable guaranteed property whose specific market value can be clearly determined, the person disposing of the property may sell it at market price without going through the public auction process, while simultaneously notifying the guarantor and other co-guarantors (if any).

Article 66. Disposal of Guaranteed Property in the Form of a Debt Claim

1. The guarantor has the right to request a third party who is obligated to repay the debt to transfer funds or other assets to themselves or to the authorized person. If the debtor requests proof of the right to claim the debt, the guarantor must provide such proof.

2. In cases where the guarantor is also the debtor, the guarantor may offset the amount.

Article 67. Disposal of Guaranteed Property in the Form of Valuable Instruments, Transport Documents, and Savings Cards

1. The disposal of guaranteed property in the form of bonds, shares, promissory notes, other valuable instruments, and savings cards shall be carried out in accordance with the laws governing bonds, shares, promissory notes, other valuable instruments, and savings cards.

2. The holder of a consignment transport document has the right to present the document according to the procedures prescribed by law to exercise possession over the goods listed on the document. The disposal of goods listed on the transport document shall be carried out in accordance with Article 65 of this Decree.

In cases where the custodian of the goods does not deliver the goods listed on the transport document to the guarantor, causing damage, they must compensate the guarantor.

3. In cases where the guarantor is also the party obligated to pay, the guarantor may offset the amount.

Article 68. Disposal of Guaranteed Property in the Form of Land Use Rights and Assets Attached to Land in the Absence of an Agreement on the Method of Disposal

1. In the absence of an agreement on the method of disposing of guaranteed property in the form of land use rights and assets attached to land, these properties shall be sold at public auction.

2. In cases where only the assets attached to land are mortgaged without mortgaging the land use rights, when disposing of the assets attached to land, the buyer or the person receiving the main asset attached to land may continue to use the land. The rights and obligations of the mortgagor under the land use rights contract between the mortgagor and the land user shall be transferred to the buyer or the person receiving the main asset attached to land, except where otherwise agreed.

Article 69. Determining the Order of Priority for Payment in the Case of Guaranteeing Future Obligations

In the case where a secured transaction is concluded to guarantee the performance of future obligations, such future obligations shall have priority in payment according to the order of registration of the secured transaction, regardless of the time when the civil transaction that generates the future obligation is established.

Article 70. Transfer of Ownership and Right to Use of Secured Property

1. The buyer of the secured property, or the person receiving the secured property in lieu of the guarantor's performance of its obligation towards itself, has the right to own such property. The time of transfer of ownership shall be determined in accordance with Article 439 of the Civil Code.

2. In cases where the secured property is registered for ownership and right to use, the person receiving the transfer of ownership and right to use of the property shall be issued a certificate of ownership and right to use the property by the competent state authority.

The procedures for transferring ownership and right to use of the secured property shall be carried out in accordance with the provisions of the law on registration of ownership and right to use of property. In cases where the law stipulates that the transfer of ownership and right to use of the property must be agreed upon in writing by the owner, and the sales contract between the owner of the property or the person subject to enforcement and the buyer of the property regarding the handling of the secured property, then the pledge contract or mortgage contract shall be used to replace these types of documents.

Article 71. Right to Reclaim Secured Property

Prior to the date of disposal of the secured property, if the guarantor fulfills its obligations towards the beneficiary and pays all costs arising from the delay in performing the obligation, it shall have the right to reclaim such property, except in cases where the law provides otherwise regarding the time for reclaiming the secured property before disposal.

Chapter V

IMPLEMENTING PROVISIONS

Article 72. Effective Date

1. This Decree shall take effect fifteen days from the date of publication in the Official Gazette.

2. This Decree replaces Government Decree No. 165/1999/NĐ-CP dated November 19, 1999 on secured transactions.

3. This Decree abolishes:

a) Government Decree No. 178/1999/NĐ-CP dated December 29, 1999 on guaranteeing loans of credit institutions;

b) Government Decree No. 85/2002/NĐ-CP dated October 25, 2002 on amending and supplementing Government Decree No. 178/1999/NĐ-CP dated December 29, 1999 on guaranteeing loans of credit institutions;

c) Clause 2, Article 2 of Government Decree No. 08/2000/NĐ-CP dated March 10, 2000 on registration of secured transactions.

4. The guarantee by the right to use land, the right to use forests, and the ownership of production forests being planted as provided for in Government Decree No. 181/2004/NĐ-CP dated October 29, 2004 on implementing the Land Law, and the provisions at Clause 5, Article 32, Clause 4, Article 33, Clause 4, Article 34, Clause 4, Article 35, and Clause 1, Article 36 of Government Decree No. 23/2006/NĐ-CP dated March 3, 2006 on implementing the Forest Protection and Development Law and related guiding documents shall be converted into the mortgage of the third party's right to use land, the right to use forests, and the ownership of production forests being planted.

5. All other provisions contrary to this Decree shall be abolished.

Article 73. Transitional Provisions

Transactions secured entered into in accordance with the Civil Code of 1995, Government Decree No. 165/1999/NĐ-CP dated November 19, 1999 on secured transactions, Government Decree No. 178/1999/NĐ-CP dated December 29, 1999 on securing loans of credit institutions, Government Decree No. 85/2002/NĐ-CP dated October 25, 2002 amending and supplementing Government Decree No. 178/1999/NĐ-CP dated December 29, 1999 on securing loans of credit institutions, or other legal regulations that remain valid for implementation after the effective date of this Decree shall continue to be valid without the need for amendment or re-conclusion of such secured transactions.

Article 74. Responsibility for Implementation

The Ministers, Heads of ministerial-level agencies, Heads of government-attached agencies, Chairpersons of provincial People's Committees under the central city shall be responsible for implementing this Decree./.