Decree No. 178/1999/ND-CP on Guarantees for Loans of Credit Institutions

DECREE

On the guarantee of loans for credit institutions

_________________

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

Based on the Law on Credit Organizations No. 02/1997/QH10 dated December 12, 1997;

At the proposal of the Governor of the State Bank of Vietnam,

DECREE:

Chapter I

GENERAL PROVISIONS

Article 1. Object regulated and scope of application

1. This Decree stipulates the guarantee of loans in the provision of credit in the form of lending by credit institutions to borrowers as prescribed by the Law on Credit Institutions.

2. The provision of credit in other forms by credit institutions as prescribed by the Law on Credit Institutions, if the parties agree on measures to ensure, shall also apply the provisions of this Decree, except where otherwise provided by law.

Article 2. Definitions

The terms used in this Decree shall be understood as follows:

1. Guarantee of loan means the application by credit institutions of measures to prevent risks, creating economic and legal grounds to recover debts already lent to borrowers.

2. Secured lending with collateral is lending of funds by credit institutions whereby the borrower's obligation to repay debt is committed to be guaranteed by collateral, mortgage, assets formed from borrowed capital of the borrower, or third-party asset guarantee.

3. Collateral for loan guarantee is the property of the borrower, assets formed from borrowed capital, and the property of the guarantor used to guarantee the fulfillment of the obligation to repay debt to the credit institution.

4. Assets formed from borrowed capital are assets of the borrower whose value is created by part or all of the loan from the credit institution.

5. Guarantee of loan with assets formed from borrowed capital is the borrower using assets formed from borrowed capital to guarantee the fulfillment of the obligation to repay the same loan to the credit institution.

6. Third-party asset guarantee is the commitment by a third party (referred to as the guarantor) to the lending credit institution to use assets under its ownership to fulfill the obligation to repay on behalf of the borrower, if the borrower fails to fulfill or fulfills incorrectly the repayment obligation at maturity.

7. Borrower's financial capacity is the ability regarding capital and assets of the borrower to ensure regular operations and perform payment obligations.

8. Credit institutions are credit institutions established and operating under the Law on Credit Institutions.

9. Borrowers include legal entities, households, cooperatives, private enterprises, and individuals who meet the conditions to borrow funds from credit institutions as prescribed by law.

10. Political-social organization surety is a method of loan guarantee in cases of unsecured lending, whereby political-social organizations at the grassroots level guarantee by reputation for poor individuals and households to borrow a small amount of money from credit institutions for production, business, and services.

11. The borrower's obligation to repay debt to the credit institution includes the principal loan (principal debt), interest on the loan, overdue interest penalties, and fees (if any) recorded in the credit contract that the borrower must pay according to the law.

Article 3. Measures to ensure loan guarantees

1. Measures to ensure loan guarantees with collateral:

a) Pledge, mortgage with the borrower's property;

b) Third-party asset guarantee;

c) Guarantee with assets formed from borrowed capital.

2. Measures to ensure loan guarantees in cases of unsecured lending:

a) Credit institutions proactively select borrowers to lend without collateral;

b) State-owned credit institutions may lend without collateral upon designation by the Government;

c) Credit institutions lend to poor individuals and households with political-social organization surety.

Article 4. Principles of loan guarantee

1. Credit institutions have the right to choose and decide on secured lending or unsecured lending as prescribed by this Decree and bear responsibility for their decisions. In cases where state-owned credit institutions lend without collateral upon designation by the Government, losses due to objective reasons of these loans shall be handled by the Government.

2. Borrowers selected by credit institutions for unsecured lending, if during the use of borrowed funds, the credit institution discovers that the borrower violates commitments in the credit contract, the credit institution has the right to apply collateral measures or recover the debt ahead of schedule.

3. Credit institutions have the right to process collateral for loan guarantees according to this Decree and relevant laws to recover debts when the borrower or guarantor does not fulfill or fulfills incorrectly the repayment obligation committed.

4. After processing collateral for loan guarantees, if the borrower or guarantor still fails to fulfill the repayment obligation correctly, the borrower or guarantor shall continue to fulfill the repayment obligation committed.

Article 5. Protection of rights and legitimate interests of the parties

The State protects the rights and legitimate interests of the parties in loan guarantee matters. No organization or individual may intervene illegally in loan guarantee matters and the processing of collateral for loan guarantees of the parties.

Chapter II

GUARANTEE OF LOANS WITH BORROWER'S COLLATERAL AND THIRD-PARTY ASSET GUARANTEE

Article 6. Principles of guarantee of loans with borrower's collateral and third-party asset guarantee

1. Borrowers must pledge or mortgage assets or must be guaranteed by a third party with assets to ensure the fulfillment of the obligation to repay debt to the credit institution, except where the borrower is granted a loan with assets formed from borrowed capital or unsecured loan as prescribed by this Decree.

2. Credit institutions and borrowers agree to select the application of measures to ensure loan guarantees with borrower's collateral or third-party asset guarantee.

3. Credit institutions have the right to choose assets meeting the conditions to serve as loan guarantees; select third parties to guarantee assets for borrowers.

4. Guarantors can only guarantee with assets under their ownership. Credit institutions and guarantors may agree on measures to pledge or mortgage guarantor's assets to ensure the fulfillment of the guarantee obligation.

Where the guarantor is a credit institution, it shall perform the guarantee in accordance with the provisions of the Law on Credit Institutions and the regulations of the State Bank of Vietnam.

5. When mortgaging assets attached to land, the borrower must mortgage both the value of the land use right and the asset, except where otherwise provided by law.

Article 7. Conditions and procedures for implementing loan guarantees by collateral and pledge of assets from borrowers and third-party asset surety

1. The assets, conditions for receiving collateral, mortgage, and guarantee, procedures for signing and implementing collateral contracts, mortgage contracts, and guarantee contracts (hereinafter referred to as security contracts) and registering security transactions shall be carried out in accordance with the provisions of the law on security transactions. Security contracts must be certified by the Notary Public or authenticated by the People's Committee at the competent level if the parties agree, except where otherwise provided by law.

2. The mortgage of land use rights shall be carried out in accordance with the provisions of the law on land.

3. The verification of the legality and conditions of the collateral for loans shall be conducted by credit institutions.

Article 8Determination of the value of collateral for loans

1. The collateral for loans must be valued at the time of signing the security contract; the valuation of the collateral at this time is only used as a basis for determining the loan amount granted by the credit institution, and is not applied when disposing of the collateral to recover debts. The determination of the value of collateral for loans must be documented in a separate document accompanying the security contract.

2. For collateral for loans that are not land use rights, the valuation of the collateral for loans shall be agreed upon by the parties, or hired from consulting organizations or specialized organizations based on market prices at the time of valuation, taking into account various types of prices such as state-prescribed prices (if applicable), purchase prices, remaining book values, and other pricing factors.

3. The value of mortgaged land use rights shall be determined as follows:

a) Land allocated by the State to households and individuals for agricultural, forestry, aquaculture, salt production purposes; residential land; special-purpose land; land transferred legally by economic organizations from others or allocated by the State with payment of land use fees, where the land use fee or transfer price was not funded by the State budget; land transferred legally by households and individuals from others or allocated by the State with payment of land use fees, the value of the mortgaged land use rights shall be determined according to the land price issued by the provincial or centrally-administered municipal People's Committees at the time of mortgage.

b) Land leased by the State to households and individuals who have paid rent for the entire lease period; land leased by the State to economic organizations which have paid rent for the entire lease period, where the rent was not funded by the State budget; land leased by the State to households and individuals who have paid rent for multiple years, with at least five years remaining in the lease period; land leased by the State to economic organizations which have paid rent for multiple years, with at least five years remaining in the lease period, and where the rent was not funded by the State budget, the value of the mortgaged land use rights includes compensation for losses when leasing the land (if applicable) and the rent paid to the State after deducting the rent already paid for the usage period.

c) Land leased by the State to economic organizations, foreign individuals, or overseas Vietnamese investing in Vietnam under the Law on Foreign Investment, when mortgaging the land use rights attached to assets they have invested in constructing on the land, the value of the mortgaged land use rights shall be determined according to the rent paid to the State after deducting the rent already paid for the usage period.

d) Land allocated by the State to economic organizations without payment of land use fees for agricultural, forestry, aquaculture, and salt production purposes; land leased by the State to economic organizations, households, and individuals annually or for multiple years, with less than five years remaining in the lease period, the value of the collateral does not include the value of the land use rights.

đ) In cases where the land use rights are mortgaged and the lessee is exempted or reduced from paying rent according to the law, the value of the mortgaged land use rights shall be calculated based on the rental value before the exemption or reduction.

4. When mortgaging the value of land use rights where there are assets attached to the land, the value of the collateral for loans includes the value of the land use rights and the value of the assets attached to the land.

5. The value of the collateral for loans includes accrued income, interest, and other rights derived from the asset if the parties agree or if the law provides.

In cases where the collateral for loans is the entire immovable property with fixtures, the value of the fixtures also belongs to the value of the collateral; if only part of the immovable property with fixtures is mortgaged, the value of the fixtures only belongs to the value of the collateral if the parties agree.

Article 9. Scope of Guarantee

1. The scope of guarantee for fulfilling obligations is the obligation of the borrower to repay the debt to the credit institution. The obligation to pay interest on the loan, overdue interest, and fees (if any) do not fall within the scope of guarantee for fulfilling obligations unless the parties agree.

2. The value of the collateral for loans must be greater than the value of the obligations guaranteed.

3. The repayment obligation recorded in the credit contract may be secured by one or more assets; by one or more security measures using assets, provided that the total value of the assets securing the obligation must be greater than the value of the obligation being secured.

Article 10Loan Amount Relative to the Value of Collateral for Loans

The credit institution determines the loan amount within the limit of the value of the collateral for loans and the scope of guarantee for fulfilling obligations that has been established.

Article 11. Scope of Loan Security

A property is used to secure a debt obligation at a credit institution; if the property has ownership rights registered in accordance with the law, then the property may be used to secure multiple debt obligations at a credit institution provided that the value of the secured property must exceed the total value of the secured obligations.

Article 12. Holding the collateral property and its documents

1. When pledging a property, the borrower has the obligation to hand over the property to the credit institution for safekeeping; if the property has ownership registration, the parties may agree that the borrower retains possession of the property or entrusts it to a third party, but the credit institution must keep the original certificate of ownership of the property.

2. For pledged properties that are means of transportation or fishing vessels with registration certificates, the credit institution holds the original registration certificate, while the owner may use a certified copy with the notarized confirmation of the State Notary and the credit institution's confirmation (the place where the pledge was made) to operate the vehicle during the pledge period. The credit institution only confirms on a copy of the registration certificate after obtaining the certification from the State Notary.

3. When mortgaging a property, the mortgaged property is kept by the borrower, except when the parties agree to entrust it to the credit institution or a third party. If the mortgaged property is a registered asset or land use right, the credit institution must hold the original certificate of ownership of the property and the land use right certificate.

4. In cases where properties are pledged or mortgaged for joint loans, participating credit institutions appoint representatives to manage the collateral assets and their documents.

In cases where foreign credit institutions, joint venture credit institutions, and Vietnamese credit institutions jointly provide joint loans for a project in Vietnam, if the collateral for the loan is the value of land use rights and attached assets, then the Vietnamese credit institution must be the representative managing the collateral assets and their documents.

5. The party holding the collateral assets and their documents, if they lose or damage them, shall be handled according to the provisions of the law on secured transactions.

Article 13. Implementation of the guarantee obligation by property in cases where the borrower or guarantor is a business entity undergoing division, separation, merger, consolidation, conversion, or shareholding reform

1. If a business entity undergoes division, separation, merger, consolidation, conversion, or shareholding reform in accordance with the law or a decision by a competent state agency, and the entity cannot repay the debt before such restructuring, the newly formed entities after the restructuring must assume responsibility for accepting the debt and fulfilling the repayment obligation to the lending credit institution.

2. The collateral securing the debt obligation of a business entity undergoing division, separation, merger, consolidation, conversion, or shareholding reform shall be handled as follows:

a) For businesses undergoing division or separation: if the loan collateral can be divided proportionally according to the debt obligations of the business after division or separation, it shall be divided accordingly; if the loan collateral cannot be divided proportionally and the divided or separated businesses have no other agreement on security measures, the credit institution has the right to recover the debt before division or separation.

b) For businesses undergoing merger, consolidation, conversion, or shareholding reform: the collateral securing the debts of the business prior to the merger, consolidation, conversion, or shareholding reform shall continue to be used as collateral for those debts of the new businesses after the merger, consolidation, conversion, or shareholding reform.

3. In cases where a business cannot implement the measures as stipulated in Clause 2 of this Article, the credit institution has the right to dispose of the loan collateral to recover the debt before the restructuring takes place.

4. In all cases of transferring the guarantee obligation by property as stipulated in Clause 2 of this Article, the credit institution, borrower, or guarantor business after restructuring must re-agree and sign a new guarantee contract.

Chapter III

SECURING LOANS WITH ASSETS FORMED FROM LOAN FUNDS

Article 14. Application Cases

Securing loans with assets formed from loan funds shall apply in the following cases:

1. Credit institutions providing medium-term and long-term loans for investment projects to develop production, business, services, and living standards, if the borrower and the assets formed from the loan funds meet the conditions specified in Article 15 of this Decree.

2. The Government or the Prime Minister decides to grant loans to borrowers and specific borrowing targets in certain specific cases.

Article 15. Conditions for borrowers and assets formed from borrowed capital

When a credit institution provides a loan to a borrower in accordance with Clause 1 of Article 14 of this Decree, the borrower and the assets formed from the loan funds must satisfy the following conditions:

1. For the borrower

a) Having trustworthiness with the credit institution;

b) Having financial capacity to fulfill the repayment obligation;

c) Having a feasible investment project to develop production, business, and services with the ability to repay the debt; or having a feasible project or plan serving living standards in compliance with the law;

d) Having a minimum equity participation in the project and the value of the collateral secured by pledge or mortgage methods equal to at least 50% of the project's investment capital.

2. For the assets

a) Assets formed from loan funds used as loan collateral must be identifiable in terms of ownership or usage rights; their value, quantity, and transactionability must be ascertainable. If the assets are immovable property attached to land, they must have a land use right certificate for the land on which the assets will be formed and must complete the necessary procedures for investment construction in accordance with the law;

b) For assets that the law requires to be insured, the borrower must commit to purchasing insurance throughout the loan period once the assets are formed and put into use.

Article 16. Forms, contents, procedures for concluding and performing pledge and mortgage contracts for assets formed from borrowed capital

1. Pledge and mortgage contracts for assets formed from borrowed capital must be established in writing; they may be recorded in credit contracts or established in separate documents as agreed by the parties. When the assets have been formed and put into use, the parties must establish an annex to the pledge and mortgage contract for assets formed from borrowed capital, describing the characteristics and determining the value of the formed assets.

2. The contents, procedures for concluding and performing pledge and mortgage contracts for assets formed from borrowed capital, and registration of secured transactions for securing by assets formed from borrowed capital shall be carried out in accordance with the provisions of the law on secured transactions. Pledge and mortgage contracts for assets formed from borrowed capital shall be certified by Notary Public or authenticated by the competent People's Committee if the parties agree, except where otherwise provided by law.

Article 17. Rights and obligations of borrowers when borrowing with security by assets formed from borrowed capital

1. Borrowers have the following rights:

a) To exploit the utility, enjoy profits, income from the asset, except where the profits, income also belong to the collateral for the loan;

b) To lease, lend the asset if agreed with the lending credit institution.

2. Borrowers have the following obligations:

a) Must hand over to the credit institution the certificate of land use right for the land area where the immovable property will be formed when concluding the pledge contract for assets formed from borrowed capital;

b) Notify the credit institution about the process of forming and the status of the collateral asset, creating conditions for the credit institution to inspect the collateral asset for the loan;

c) For collateral assets for loans that the law requires registration of ownership, before putting into use, must register ownership of the asset and hand over the original certificate of ownership of the asset to the credit institution;

d) Shall not sell, transfer, gift, contribute capital to joint ventures, or use assets formed from borrowed capital to secure other obligations until the debt to the credit institution has been fully repaid, except where the credit institution agrees to sell to repay the debt for the guaranteed loan.

Article 18. Rights and obligations of credit institutions receiving security by assets formed from borrowed capital

1. Credit institutions have the following rights:

a) Require borrowers to report the progress of forming the collateral asset and changes in the collateral asset for the loan;

b) Conduct inspections and require borrowers to provide information for inspection and supervision of assets formed from borrowed capital;

c) Recover the loan ahead of schedule if it is found that the loan proceeds were not used to form the asset as committed;

d) Dispose of assets formed from borrowed capital to recover debts when borrowers fail to perform or perform their debt repayment obligations incorrectly.

2. Credit institutions have the following obligations:

a) Appraise and inspect to ensure that borrowers and assets formed from borrowed capital used as collateral for the loan meet the conditions stipulated in Article 15 of this Decree;

b) Return to borrowers certificates of land use rights, certificates of ownership of assets (if any) after borrowers fulfill their debt repayment obligations.

Chapter IV

UNSECURED LOANS

PART 1

CREDIT INSTITUTIONS SELECTING UNSECURED LOANS

Article 19. Application Cases

Credit institutions may select borrowers to provide unsecured loans when providing short-term, medium-term, or long-term loans to implement investment development projects or production, business, service, and living plans for borrowers as stipulated in Articles 20 and 21 of this Decree.

Article 20. Conditions for customers borrowing without collateral

1. Borrowers must meet the following conditions:

a) To have creditworthiness with the lending financial institution in using borrowed funds and repaying principal and interest on time;

b) To have feasible investment projects or production, business, service plans capable of repaying debts; or have feasible projects or plans serving livelihoods in accordance with legal provisions;

c) To have financial capacity to fulfill debt repayment obligations;

d) To commit to implementing security measures with assets according to the requirements of the lending financial institution if the borrowed funds are not used as committed in the credit contract; to commit to repaying the loan ahead of schedule if unable to implement the asset security measures stipulated herein.

2. For corporate borrowers, in addition to the conditions prescribed in Clause 1 of this Article, they must also have achieved profitable production and business results for two consecutive years prior to the time of considering the loan.

Article 21. Restrictions on lending without collateral

1. Financial institutions shall not lend without collateral to the objects prescribed in Clause 1 of Article 78 of the Law on Credit Institutions.

2. The State Bank of Vietnam shall specify the amount of unsecured loans that a financial institution can provide during each period.

3. Financial institutions shall specify the maximum outstanding balance that a borrower can borrow without collateral.

PART 2

STATE FINANCIAL INSTITUTIONS LENDING WITHOUT COLLATERAL PURSUANT TO THE GOVERNMENT'S DIRECTIVES

Article 22. Unsecured lending pursuant to government directives

State financial institutions shall lend without collateral to borrowers to implement investment projects under special economic programs, key economic programs of the State, socio-economic programs, and certain borrowers eligible for preferential credit policies regarding loan conditions as prescribed in government or Prime Minister's regulatory documents.

Article 23Responsibilities of state financial institutions lending without collateral pursuant to government directives

1. To comply with government and Prime Minister's regulations concerning designated loans and to abide by legal provisions during the loan consideration process, capital usage monitoring, and debt recovery including both principal and interest.

2. To separately track designated loans, report on the use of borrowed funds, debt recovery potential, and recommend measures to address losses in cases where debts cannot be recovered as prescribed in Clause 1 of Article 25 of this Decree.

Article 24. Responsibilities of borrowers receiving unsecured loans pursuant to government directives

1. To comply with commitments in the credit contract.

2. To comply with government or Prime Minister's regulations when using borrowed funds for designated loans.

3. To bear legal responsibility for losses caused by their own subjective reasons in the use of borrowed funds.

Article 25. Handling losses from unsecured loans pursuant to government directives

1. The Government shall handle losses for state financial institutions in cases where borrowers designated for loans fail to repay debts (principal and interest) due to the following reasons:

a) Due to natural disasters, fires, and other objective risks;

b) Borrowers are economic organizations dissolved by competent state authorities or declared bankrupt and still unable to fully repay debts to financial institutions after legal processing;

c) The State changes policies leading to difficulties in production and business activities of borrowers and inability to repay debts;

d) Other reasons as decided by the Prime Minister.

2. Quarterly, state financial institutions designated by the Government or Prime Minister to provide unsecured loans shall aggregate losses due to the reasons specified in Clause 1 of this Article, report to the Governor of the State Bank of Vietnam and the Minister of Finance to submit to the Prime Minister for decision on loss handling measures for financial institutions.

PART 3

GUARANTEE BY POLITICAL AND SOCIAL ORGANIZATIONS FOR POOR INDIVIDUALS AND HOUSEHOLDS TO BORROW FUNDS POOR INDIVIDUALS AND HOUSEHOLDS BORROWING CAPITAL

Article 26. Guarantee by political and social organizations

1. Political and social organizations at the grassroots level of the Vietnam Farmers' Union, the Vietnam Women's Union, the General Confederation of Labor of Vietnam, the Ho Chi Minh Communist Youth Union, and the Vietnam Veterans Association may provide guarantee by creditworthiness for poor individuals and households to borrow funds from financial institutions.

2. The guaranteed individual or household is a member of one of the political and social organizations prescribed in Clause 1 of this Article when borrowing a small amount of money from a financial institution for production, business, or services.

3. The maximum borrowing amount for each poor individual or household guaranteed by political and social organizations through creditworthiness is regulated by the State Bank of Vietnam during each period.

Article 27. Form of guarantee by political and social organizations

The guarantee by creditworthiness of political and social organizations at the grassroots level must be documented in writing, clearly stating the loan amount, purpose, borrower's obligations, lending financial institution, and guarantor organization.

Article 28. Rights and obligations of financial institutions providing loans with guarantees by political and social organizations

1. To request the guarantor organization to cooperate with the financial institution in inspecting the use of borrowed funds and urging repayment.

2. To cooperate with the guarantor organization in providing loans and recovering debts.

Article 29. Rights and obligations of political and social organizations providing guarantees by creditworthiness

1. To assist, guide, create conditions for poor individuals and households to borrow funds and use them effectively for their intended purposes; urge full and timely repayment to the financial institution.

2. To refuse to provide guarantees if it is deemed that poor individuals or households lack the ability to use borrowed funds for production, business, or services and to repay the financial institution.

Article 30. Obligations of poor individuals and households receiving guaranteed loans

1. To use borrowed funds for the agreed purpose.

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

3. Repay the full amount (principal and interest) on time to credit institutions.

Chapter V

PROCEDURES FOR THE DISPOSAL OF COLLATERAL TO RECOVER LOAN DEBTS FOR LOANS SECURED BY ASSETS

Article 31. Principles for the disposal of collateral to recover loan debts

The disposal of collateral to recover loan debts for loans secured by assets shall be carried out in accordance with the following principles:

1. When the due date arrives and the borrower or guarantor does not perform or performs incorrectly their obligations towards the credit institution, the collateral securing the loan shall be disposed of to recover the debt.

2. Collateral securing the loan must be disposed of according to the methods agreed upon in the contract; if the parties cannot dispose of it according to the agreed methods, the credit institution has the right:

a) To sell or transfer pledged or mortgaged property to recover the debt;

b) To request the guarantor to fulfill their guarantee obligation; if the guarantor does not perform or performs incorrectly their obligation, then the collateral of the guarantor will be disposed of to fulfill the guarantee obligation.

3. The credit institution has the right to transfer the right to recover the debt and authorize a third party to dispose of the collateral securing the loan; in this case, the third party also has the right to dispose of the collateral securing the loan to recover the debt like the credit institution.

4. In cases where one asset secures multiple debt repayment obligations, if the collateral securing the loan needs to be disposed of to fulfill one overdue debt repayment obligation, then other debt repayment obligations that have not yet reached their due date will also be considered overdue and the collateral securing the loan will be disposed of to recover the debt.

5. If the parties dispose of the asset according to the agreement, it must be done quickly, openly, and ensure the interests of all parties; if the asset cannot be disposed of due to disagreement on the selling price, the credit institution has the right to determine the selling price of the asset to recover the debt.

6. Any costs incurred in disposing of the collateral securing the loan shall be borne by the borrower and the guarantor. The proceeds from the disposal of the collateral securing the loan, after deducting the disposal costs, shall be used by the credit institution to recover the debt in the following order: principal, interest on the loan, overdue interest, and other fees (if any). If the collateral securing the loan, after being disposed of, is insufficient to fulfill the debt repayment obligation, the borrower and the guarantor must continue to fulfill the debt repayment obligation they have committed to.

7. State agencies with authority have the responsibility to create favorable conditions and support the parties in disposing of the collateral securing the loan to recover the debt for the credit institution.

8. The disposal of collateral securing the loan is a measure to recover the debt, not a business activity of the credit institution.

Article 32. Situations where the credit institution has the right to dispose of collateral securing the loan to recover the debt

1. After sixty days from the due date for repayment, if the collateral securing the loan has not been disposed of according to the agreement.

2. The borrower must repay the debt ahead of schedule as prescribed by law, but fails to perform or performs incorrectly the debt repayment obligation.

3. If the borrower, who is an economic organization, is dissolved before the due date for repayment, the debt repayment obligation, although not yet due, will be considered due; if the borrower does not repay the debt and does not dispose of the collateral securing the loan to repay the debt, the credit institution has the right to dispose of the collateral to recover the debt.

4. Disposal of collateral securing the loan as provided for in Clause 3, Article 13 of this Decree.

Article 33. Methods for disposing of collateral securing the loan

1. Selling the collateral securing the loan.

2. The credit institution accepts the collateral securing the loan directly to replace the fulfillment of the guaranteed obligation.

3. The credit institution may directly receive money or assets from a third party when the third party has the obligation to pay money or assets to the borrower or guarantor.

Article 34. Implementation of the disposal of collateral securing the loan

1. The parties agree on the implementation of the methods for disposing of collateral securing the loan as stipulated in Article 33 of this Decree.

In cases where the parties agree to implement the method of selling the collateral securing the loan, the seller may be the borrower or guarantor selling, the credit institution selling, both parties jointly selling, or authorizing a third party to sell. The seller may directly sell to the buyer, authorize the Asset Auction Center or an auction company to sell the collateral securing the loan.

2. In cases where the credit institution has the right to dispose of the collateral securing the loan as stipulated in Article 32 of this Decree, the borrower and guarantor must hand over the collateral to the credit institution for disposal.

The credit institution has the right to implement the disposal of collateral securing the loan as follows:

a) Directly sell to the buyer;

b) Authorize the sale of the asset through the Asset Auction Center or an auction company in accordance with the law on asset auctions;

c) Authorize or transfer to an organization with the function of buying and selling assets to sell;

d) When the credit institution accepts the collateral securing the loan directly to replace the debt repayment obligation, the asset will be transferred to the ownership of the credit institution;

đ) In cases where a third party has the obligation to pay money or assets to the borrower or guarantor, the credit institution may directly receive money or assets from the third party.

3. During the period when the collateral securing the loan has not been disposed of, the credit institution has the right to exploit and use the collateral. The proceeds from the exploitation and use of the collateral, after deducting necessary and reasonable expenses for its exploitation and use, will be used to recover the debt.

4. In cases of disputes and lawsuits between the parties, the collateral securing the loan will be disposed of according to the judgment with legal effect of the Court or the decision of the competent state agency.

5. In cases where the borrower or guarantor is a business that has gone bankrupt, the collateral securing the loan will be disposed of according to the law on business bankruptcy.

Article 35. Responsibilities of state agencies with authority in the disposal of collateral securing the loan to recover the debt for the credit institution

1. In cases where the disposal of collateral for loans encounters difficulties, both due to subjective and objective reasons, competent state agencies shall be responsible for creating conditions and providing support upon request from credit institutions.

2. The Ministry of Public Security shall guide public security agencies at all levels to implement measures to support credit institutions in disposing of assets when borrowers or guarantors fail to dispose of the collateral as agreed.

3. Provincial People's Committees and municipal people's committees directly under the central government shall direct relevant sectors and levels under their management to implement this Decree and take measures to support the disposal of collateral for loans to recover debts for credit institutions.

4. After the collateral for loans has been disposed of, competent state agencies shall be responsible for registering ownership rights to the asset and transferring land use rights to the buyer of the asset or the transferee of land use rights according to the provisions of the law.

Chapter VI

ACCOUNTING RECORDS, REPORTING, INSPECTION, AUDIT AND VIOLATION HANDLING

Article 36. Accounting records, reporting, inspection, audit

1. Credit institutions must organize accounting records, implement information and statistical reporting systems on secured lending, unsecured lending, and the disposal of collateral for loans in accordance with the regulations of the State Bank of Vietnam.

2. The State Bank of Vietnam shall be responsible for inspecting and auditing the implementation of this Decree.

Article 37. Handling Violations

1. Organizations and individuals violating the provisions of this Decree shall be subject to penalties according to the law, depending on the nature and severity of the violation.

2. Organizations and individuals violating guarantee contracts, if causing damage, must compensate the aggrieved party according to the law; all disputes arising from such contracts shall be resolved according to the law.

Chapter VII

IMPLEMENTING PROVISIONS

Article 38. Effectiveness

1. This Decree shall take effect fifteen days from the date of signature.

2. The provisions at point 1, section II of Resolution No. 49/CP dated May 6, 1997 of the Government regarding state-owned enterprises borrowing from state-owned commercial banks without collateral, and previous provisions on mortgage, pledge, and loan guarantees shall cease to be effective.

3. Credit contracts that apply pledge, mortgage, guarantee, and unsecured lending established before the effective date of this Decree shall continue to be implemented according to the terms agreed by the parties, consistent with the legal provisions at the time of contract signing until the borrower repays all debts to the lending credit institution; specifically, the disposal of collateral for loans in these contracts shall be carried out in accordance with the provisions of this Decree.

Article 39. Responsibility for guidance and enforcement

1. The State Bank of Vietnam shall be responsible for guiding the implementation of this Decree.

2. 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 shall cooperate with relevant ministries and sectors to issue Circulars guiding the disposal of collateral for loans to recover debts for credit institutions.

3. The Ministry of Justice shall guide notarization procedures, while the Ministry of Public Security, the Ministry of Transport, and the Ministry of Fisheries shall guide the use of copies of registration certificates for transportation vehicles and fishing vessels for circulation purposes when pledging or mortgaging them for loans from credit institutions.

4. Ministers, heads of ministerial-level agencies, heads of agencies under the Government, and Chairmen of provincial and municipal people's committees directly under the central government shall be responsible for enforcing this Decree.