Deposit, security collateral, and escrow deposit in Vietnam: What's the difference? What are the obligations of related parties?
Deposit, security collateral, and escrow deposit in Vietnam: What's the difference?
Below are the criteria to distinguish deposit, security collateral, and escrow deposit:
Criteria | Deposit | Security collateral | Escrow deposit |
Deposit is an act whereby one party (hereinafter referred to as the depositor) transfers to another party (hereinafter referred to as the depositary) a sum of money or precious metals, gemstones or other valuable things (hereinafter referred to as the deposited property) for a period of time as security for the entering into or performance of a contract. (Article 328 Civil Code 2015) | Security collateral is an act whereby a lessee of a movable property transfers a sum of money or precious metals, gems or other valuable things (hereinafter referred to as security collateral property) to the lessor for a specified time limit to secure the return of the leased property. (Article 329 Civil Code 2015) | Escrow deposit is an act whereby an obligor deposits a sum of money, precious metals, gems or valuable papers into an escrow account at a credit institution to secure the performance of an obligation (Article 330 of the Civil Code 2015) | |
Purpose | Security for the entering into or performance of a contract | Security for the return of the leased property | Security for the performance of an obligation |
Secured assets | A sum of money or precious metals, gemstones or other valuable things | A sum of money or precious metals, gemstones or other valuable things | A sum of money or precious metals, gemstones or other valuable things |
Subject | - Depositor - Depositary | - Lessee - Lessor | - Obligor - Credit institution - Obligation |
Legal consequences | - Upon a contract being entered into or performed, any deposited property shall be returned to the depositor, or deducted from the amount of an obligation to pay money. - If the depositor refuses to enter into or perform the contract, the deposited property shall belong to the depositary. - If the depositary refuses to enter into or perform the contract, it must return the deposited property and pay an amount equivalent to the value of the deposited property to the depositor, unless otherwise agreed. | - In cases where the leased property is returned, the lessee shall be entitled to reclaim the security collateral property after pay the rental; - If the lessee does not return the leased property, the lessor shall be entitled to reclaim the leased property; - If the leased property is no longer available for the return, the security collateral property shall belong to the lessor | In cases where the obligor has failed to perform or has improperly performed an obligation, the obligee shall be entitled to receive payment and compensation for damage caused by the obligor from the bank where the escrow deposit is affected, after deducting the bank service charges. |
Deposit, security collateral, and escrow deposit in Vietnam: What's the difference? What are the obligations of related parties? (Picture from internet)
What are the rights and obligations of parties in deposit, security collateral in Vietnam?
Pursuant to the provisions of Article 38 of Decree 21/2021/ND-CP, it is stipulated that the parties in deposit, security collateral have the following rights and obligations:
- Depositors and parties putting up collateral have the rights and obligations to:
+ request depositees and parties receiving collateral to cease extracting, using or establishing civil transactions for deposited properties and security collateral properties; preserve and keep deposited properties and security collateral properties from losing value;
+ exchange and replace deposited properties, security collateral properties or include deposited properties, security collateral properties in other civil transactions when depositees and parties receiving security collateral agree;
+ pay for depositees, parties receiving security collateral appropriate costs for managing, preserving deposited properties and security collateral properties.
Appropriate costs specified under this Point are necessary, legitimate expenditure which, in normal conditions, depositees and parties receiving security collateral must pay for to prevent deposited properties and security collateral properties from going missing, being damaged or destroyed;
+ register property ownership or fulfill other obligations as per the law to enable depositees and parties receiving security collateral to possess deposited properties and security collateral properties specified under Point b Clause 2 of this Article;
+ other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
- Depositees and parties receiving collateral have the rights and obligations to:
+ request depositors and parties putting up security collateral to cease exchanging, replacing or establishing other civil transactions with deposited properties and security collateral properties without consent of depositees and parties receiving security collateral;
+ possess deposited properties in case depositors violate commitment regarding contract conclusion and execution; possess security collateral properties in case hired properties are no longer available to be returned to depositees;
+ preserve deposited properties and security collateral properties;
+ refrain from establishing civil transactions, extracting, using deposited properties or security collateral without consent of properties of depositors, parties putting up security collateral;
+ other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
What are the rights and obligations of parties in escrow deposit in Vietnam?
Pursuant to the provisions of Article 40 of Decree 21/2021/ND-CP, the parties in the escrow have the following rights and obligations:
- Credit institutions where escrow deposits are made have the rights and obligations to:
+ benefit from service fee;
+ request parties holding rights to comply with agreements on escrow deposits to receive payment for obligations from escrow deposits;
+ pay for obligations at request of parties holding rights within the scope of escrow deposits;
+ return remaining escrow deposits to parties making deposit after paying for obligations at request of parties holding rights and when terminating escrow deposit;
+ other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
- Parties making escrow deposit have rights and obligations:
+ agree with credit institutions where escrow deposits are made regarding payment conditions as per commitment with parties holding rights;
+ request credit institutions where escrow deposits are made to return deposits according to Point d Clause 1 of this Article; may return interest in case agreed upon with credit institutions where escrow deposits are made;
+ withdraw, add deposits or include deposits in other civil transactions under consent of parties holding rights;
+ submit deposits in credit institutions where deposits are made;
+ other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
- Parties holding rights in escrow deposits have rights and obligations to:
+ request credit institutions where deposits are made to pay for obligations in an adequate and timely manner;
+ comply with procedures at request of credit institutions where escrow deposits are made when executing right under Point of this Clause;
+ other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
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