09 Types of security for performance of obligations in Vietnam

09 Types of security for performance of obligations in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. 09 Types of security for performance of obligations in Vietnam

According to Article 292 of the Civil Code 2015, types of security for the performance of obligations comprise the following:

- Pledge of property;

- Mortgage of property;

- Deposit;

- Security collateral;

- Escrow deposit;

- Title retention;

- Guarantee;

- Fidelity guarantees;

- Lien on property.

2. Can single item of property be used as security for performance of several obligations in Vietnam?

- A single item of property may be used as security for performance of several obligations if, at the time of establishment of the security transaction, the value of such property is greater than the total aggregate value of the secured obligations, unless otherwise agreed or otherwise provided by law.

- Where a single item of property is used as security for performance of several obligations, the securing party must notify the later secured party that the security property is being used as security for performance of other obligations. The provision of security on each occasion must be made in writing.

- Where the security property must be realized in order to satisfy one obligation which has fallen due, the other obligations which have not yet fallen due shall also be deemed due and all secured parties shall be entitled to take part in the realization. The secured party which provided notice of realization of the property shall be responsible for realizing the property, unless otherwise agreed by the secured parties.

If the parties wish to continue to fulfill the obligations which have not yet fallen due, they may agree that the securing party will use other property as security for performance of the obligation which has fallen due.

Thus, single item of property can be used as security for performance of several obligations in Vietnam, but must meet the above requirements.

(Article 296 of the Civil Code 2015)

3. What are the regulations on collateral in Vietnam?

- Collateral must be under the ownership rights of the securing party, except for the cases of lien on property or title retention.

- Collateral may be described generally but must be identified.

- Collateral may be existing property or off-plan property.

- The value of collateral may be greater, equal or smaller than the value of the secured obligation.

(Article 295 of the Civil Code 2015)

4. Scope of security for performance of obligations in Vietnam

According to Article 293 of the Civil Code 2015, the scope of security for performance of obligations is specified as follows:

- An obligation may be fully or partly secured, as agreed or as provided by law. If there is no agreement on or if the law does not provide, the scope of the security, the obligation, including the obligation to pay interest and to compensate for any damage, shall be deemed to be fully secured.

- Secured obligations may comprise current obligations, future obligations and conditional obligations.

- With respect to a future obligation which is going to arise within a guaranteed time limit, it shall be the secured obligation, unless otherwise agreed.

5. Security for performance of future obligations in Vietnam

Pursuant to Article 294 of the Civil Code 2015, security for performance of future obligations is as follows:

- With respect to a future obligation, the parties may agree on the scope of the secured obligation and the deadline by which the secured obligation must be performed, unless otherwise prescribed by law.

- When the future obligation arises, the parties are not required to re-establish the security for such obligation.

Nguyen Ngoc Que Anh

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