In Vietnam, what is escrow deposit? When must credit institutions where escrow deposits are made return the remaining escrow deposits to the parties making the deposit?
In Vietnam, what is escrow deposit?
Under Article 330 of the Civil Code 2015 on escrow deposit:
Escrow deposit
1. 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 obligation fulfillment.
2. 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.
3. The procedures for making deposits and making payments shall be as provided by the law.
Thus, an 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 obligation fulfillment.
Referring to Article 39 of Decree 21/2021/ND-CP, the escrow deposit is defined as follows:
Submission and payment for escrow deposit
1. Money for escrow deposit (hereinafter referred to as “escrow deposit”) is deposited in escrow accounts in credit institutions as agreed upon or by parties holding right to appoint to secure obligation fulfillment.
2. Escrow deposit and single or multiple escrow instances shall be agreed upon by parties or prescribed by the law.
3. In case secured obligations are infringed, escrow deposit shall be used for paying for obligations and damages minus service fee (hereinafter referred to as “payment for obligations”).
Thus, escrow deposit is deposited in escrow accounts in credit institutions as agreed upon or by parties holding the right to appoint to secure obligation fulfillment.
Escrow deposit and single or multiple escrow instances shall be agreed upon by parties or prescribed by the law.
When must credit institutions where escrow deposits are made return the remaining escrow deposits to the parties making the deposit in Vietnam?
The rights and obligations of parties in escrow deposit are specified in Article 40 of Decree 21/2021/ND-CP as follows:
Rights and obligations of parties in escrow deposit
1. Credit institutions where escrow deposits are made have the rights and obligations to:
a) benefit from service fee;
b) request parties holding rights to comply with agreements on escrow deposits to receive payment for obligations from escrow deposits;
c) pay for obligations at request of parties holding rights within the scope of escrow deposits;
d) return remaining escrow deposits to parties making deposit after paying for obligations at the request of parties holding rights and when terminating escrow deposit;
dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
2. Parties making escrow deposit have rights and obligations:
a) agree with credit institutions where escrow deposits are made regarding payment conditions as per commitment with parties holding rights;
b) 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;
c) withdraw, add deposits or include deposits in other civil transactions under consent of parties holding rights;
d) submit deposits in credit institutions where deposits are made;
dd) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
3. Parties holding rights in escrow deposits have rights and obligations to:
a) request credit institutions where deposits are made to pay for obligations in an adequate and timely manner;
b) comply with procedures at the request of credit institutions where escrow deposits are made when executing right under Point of this Clause;
c) other rights and obligations agreed upon or prescribed by the Civil Code or the relevant law provisions.
Thus, credit institutions where escrow deposits are made return the remaining escrow deposits to the parties making the deposit in Vietnam after paying for obligations at the request of parties holding rights and when terminating the escrow deposit.
In addition to escrow deposit, what are the other types of security for obligation fulfillment in Vietnam?
Types of security for obligation fulfillment in Vietnam are prescribed in Article 292 of the Civil Code 2015 as follows:
Types of security for obligation fulfillment
Types of security for the obligation fulfillment comprise the following:
1. Pledge of property;
2. Mortgage of property;
3. Deposit;
4. Security collateral;
5. Escrow deposit;
6. Title retention;
7. Guarantee;
8. Fidelity guarantees;
9. Lien on property.
Thus, in addition to escrow deposit, the other types of security for obligation fulfillment in Vietnam include:
- Pledge of property;
- Mortgage of property;
- Deposit;
- Security collateral;
- Title retention;
- Guarantee;
- Fidelity guarantees;
- Lien on property.
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