Guidelines for performance of security obligations in the form of collateralized security in Vietnam

Guidelines for performance of security obligations in the form of collateralized security in Vietnam (Internet image)

1. Regulations on bank providing secured transactions in Vietnam (Latest)

Article 37 of Circular 12/2022/TT-NHNN stipulates the regulations on bank providing secured transactions in Vietnam as follows:

- The transfer of funds for performing secured obligations (including the transfer of funds to fulfill guarantee obligations and the transfer of funds to perform asset-based secured obligations) must be carried out through one bank managing secured transactions, except as specified in Clause 3, Article 36 of Circular 12/2022/TT-NHNN.

- In cases where the bank managing the secured transaction is also the bank providing the account services for the foreign loan, this bank is responsible for checking and retaining the related documents as prescribed by law when transferring funds for performing secured obligations according to the regulations of Circular 12/2022/TT-NHNN.

- When the bank managing the secured transaction is not the bank providing the account services for the foreign loan, it has the following responsibilities when transferring funds to perform secured obligations:

+ Check, retain documents, and transfer funds based on the documents specified in Clause 4, Article 37 of Circular 12/2022/TT-NHNN;

+ Within 07 working days from the date of transferring funds for performing the secured obligations, notify and send to the bank providing the account services the documents proving the debt amounts (principal, interest, fees) that have been paid to the lender through performing the secured obligation. This will enable the account provider bank to monitor and determine the remaining principal, interest, fees of the loan and serve as the basis for executing the repayment transfer between the borrower and the guarantor as prescribed by Circular 12/2022/TT-NHNN.

- Documents required by the bank managing secured transactions to allow the transfer of funds for performing secured obligations for foreign loans include:

+ Foreign loan agreement;

+ Agreements related to guarantees and asset-based securities for the foreign loan;

+ Written request to perform the secured obligation from the lender (or the entity representing the lender or the entity representing the lender in handling the secured asset) according to the parties' agreement on guarantees and asset handling, specifying the payment obligations not fulfilled by the borrower under the loan agreement;

+ Confirmation document from the account service provider bank of the borrower regarding the withdrawal of funds and loan repayment status to the point of requesting fund transfer for the secured obligation;

+ Document confirming the registration or registration change for the foreign loan with the State Bank containing information about the security measures for the foreign loan (applies to cases where the foreign loan is subject to registration with the State Bank);

+ Other documents and materials (if any) as prescribed by the bank managing the secured transaction.

- The borrower is responsible for notifying the guarantor of the account service provider bank, the bank managing the secured transaction, and fully disclosing information about these banks when registering or registering changes to the foreign loan (in cases where the loan is subject to foreign loan registration as specified in Circular 12/2022/TT-NHNN).

2. Guidelines for performance of security obligations in the form of collateralized security in Vietnam

Article 36 of Circular 12/2022/TT-NHNN provides guidelines for performance of security obligations in the form of collateralized security in Vietnam as follows:

- When asset-based collateral obligations arise for a foreign loan, the guarantor must fulfill the secured obligation according to the commitments in the loan agreement and relevant guarantee agreements, provided these do not contradict Vietnamese law on secured transactions and other related laws.

- The transfer of funds obtained from handling secured assets within the territory of Vietnam to the lender or the lender's representative for performing asset-based secured obligations (hereinafter referred to as "transferring funds to perform asset-based secured obligations") must be done through one bank managing secured transactions as prescribed in Circular 12/2022/TT-NHNN.

- In cases where the secured asset is handled by having the secured party take possession of the asset to substitute for the fulfillment of obligations, the borrower is responsible for notifying the account service provider bank about the debt obligations that have been settled by having the secured party take possession of the secured asset to substitute for the fulfillment of obligations.

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