What is the Registration of Secured Transactions?

At Clause 1 Article 2 of Decree No. 83/2010/ND-CP stipulates that Registration of secured transactions is the act of the secured transaction registration authority recording in the Register of Secured Transactions or entering into the Database on Secured Transactions that the securing party uses assets to secure the performance of civil obligations to the secured party.

Through the registration of secured transactions, the state acknowledges a secured status for one or more certain civil obligations, from which the priority order of payment can be determined when handling the secured assets for creditors secured by an asset.

Article 325 of the Civil Code 2005 stipulates:

1. In the case where the secured transaction is registered, the priority order of payment when handling the secured assets is determined according to the registration order;
2. In the case where an asset is used to secure the performance of multiple civil obligations, with some secured transactions registered and some not registered, the registered secured transactions are given payment priority;
3. In the case where an asset is used to secure the performance of multiple civil obligations and none of the secured transactions are registered, the priority order of payment is determined based on the establishment order of the secured transactions.

According to Decree No. 83, the following secured transactions must be registered:

- Mortgage of land use rights;- Mortgage of production forests which are plantation forests;- Pledge of aircraft, mortgage of aircraft;- Mortgage of ships;- Other cases as prescribed by law.

For secured transactions involving assets not required to be registered as mentioned above, registration will be carried out upon request by individuals or organizations.

Registration of secured transactions including mortgage of assets encompasses both the mortgage of future-formed assets, pledge of assets, deposit, escrow, and security deposit.

The entity requesting the registration of a secured transaction can be the securing party, the secured party, or the head of the asset management and liquidation team of the secured party, which is a bankrupt enterprise or cooperative, or a person authorized by these entities. If there is a change in the securing party or the secured party, the new securing party or the new secured party can also request the registration of such change.

When registering a secured transaction, the requesting party is obliged and responsible to accurately and truthfully declare, in accordance with the content of the executed secured transaction and to fully declare all items that need to be declared in the registration application form; to fully prepare the registration dossier and not to forge documents.

If it is found that the registration application contains false information inconsistent with the content of the executed secured transaction, or the registration dossier contains forged documents that cause damage, the requesting party must compensate the aggrieved party; depending on the degree of violation, they may be administratively sanctioned or criminally prosecuted as prescribed by law.

The registration of secured transactions brings about certain meanings as follows:

- For cases where the law stipulates that secured transactions must be registered, this is a condition for the mortgage contract to be legally effective;- It serves as a basis to determine the priority order of payment in case an asset is utilized to secure the performance of multiple obligations, contributing to protecting the legal rights and interests of the parties involved in the transaction;- It serves as a basis to resolve disputes arising from secured transactions;- In cases where registration is mandatory but not carried out, the secured transaction can become invalid and unenforceable against third parties, meaning that if a third party purchases an asset being used as a bank mortgage (guarantee), their ownership rights will still be legally protected because they bought it in good faith and were unaware that the asset was pledged.

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