Is tontine illegal in Vietnam?

Is tontine illegal in Vietnam?

Pursuant to Article 417 of the Civil Code in 2015 stipulating tontine in Vietnam as follows:

1. Tontine means a form of transaction regarding property in accordance with customary practice on the basis of an agreement reached by a group of people who assemble together and jointly determine the number of people, the term, the amount of money or other property, the form of contribution and payment of tontine, and the rights and obligations of the members of the group.

2. Tonetine is aimed at mutual assistance of citizens and shall be implemented in accordance with law.

3. If tontine is organized with interest, it shall comply with this Code.

4. It shall be strictly prohibited to organize tontine in the form of lending at high interest rates.

As regulations above, tontine is legal in Vietnam. However, the law prohibits organizing tontine in the form of lending at high interest rates. In accordance with the Civil Code, the highest interest rate, that is allowed, is 20%.

What are requirements for membership of tontine in Vietnam?

Pursuant to Article 5 of the Decree 19/2019/NĐ-CP stipulating requirements for membership of tontine in Vietnam as follows:

1. Member is a person aged at least 18 years of age and does not lack legal capacity, have limited legal capacity or have limited cognition or behavior control as prescribed in the Civil Code.

A person aged from fifteen to under eighteen having private property may become a tontine member. If the private property is real estate or movable property required for registration to participate in the tontine, he/she must obtain the consent of his legal representative.

2. Other requirements as agreed upon among tontine members.

Above are requirements for memberships of tontine in Vietnam.

What are rights and obligations of members of tontine in Vietnam?

Pursuant to Article 15 of the Decree 19/2019/NĐ-CP stipulating rights of members of tontine in Vietnam as follows:

1. A member of interest-free tontine has the rights to:

a) Contribute single or multiple annuity shares in a tontine opening;

b) Receive annuities;

c) Transfer a part or the entire of annuity shares to other members in accordance with the Civil Code;

d) Request the tontine holder or tontine book keeper to give the tontine book to see, copy and to supply information related to the tontine group.

dd) Request the tontine holder to contribute the annuity share which a member has not contributed on due date, unless otherwise agreed;

e) Request the tontine holder to fulfill his/her obligations in accordance with Article 18 of this Decree;

g) Request other members to fulfill their obligations prescribed in Article 16 of this Decree;

g) Rights of members prescribed in Clause 1 Article 7, Article 9, Article 10 and Article 13 of this Decree;

i) Send notices as prescribed in Article 14 of this Decree in a case where the tontine holder fails to do so;

k) Other rights as per the law and under the tontine agreement.

2. A member of interest-bearing tontine has the rights to:

a) Rights prescribed in Clause 1 of this Article;

b) Offer interest rate at each tontine opening, except for the case specified in Clause 3, Article 20 of this Decree;

c) Receive the annuities before other members if he/she offers the highest interest rate at the tontine opening, unless otherwise agreed;

d) Enjoy interests from the annuity-receiving members.

3. A member of commission tontine has the rights to:

a) Rights prescribed in Clause 1 of this Article in case of interest-free tontine or rights prescribed in Clause 2 of this Article in case of interest-bearing tontine;

b) Agree on the commission for the tontine holder.

Pursuant to Article 16 of the Decree 19/2019/NĐ-CP stipulating obligations of members of tontine in Vietnam as follows:

1. A member of interest-free tontine has the obligations to:

a) Contribute annuity shares as agreed;

b) Notify new place of residence that any tontine participant changes;

c) Members who receive the annuities are obliged to contribute their respective annuity shares so that other members can receive them until the last member receives the annuities;

d) Obligations of members under Article 10 and Clause 2 of Article 11 of this Decree;

dd) In case of absence of a tontine holder, the member authorized to open and keep the tontine book has the obligations specified in Clause 1 Article 12, Clause 5 and Clause 6 Article 18 of this Decree.

2. A member of interest-bearing tontine has the obligations to:

a) Obligations prescribed in Clause 1 of this Article;

b) Pay interests to other members upon receipt of annuities.

3. A member of commission tontine has the obligations to:

a) Obligations prescribed in Clause 1 of this Article in case of interest-free tontine or obligations prescribed in Clause 2 of this Article in case of interest-bearing tontine;

b) Pay commission to the tontine holder upon receipt of annuities as agreed.

Best regards!