When a security deposit in Vietnam can be forfeited?

Deposit (đặt cọc) is a form of security interest. Deposit means a sum of money, precious metals, gemstones or other valuable objects delivered by one party to another party for a period of time as security for the entering into or performance of a contract. Article 328.2 of the Civil Code 2015 provides that the deposit receiver (i.e., the secured party) can own the deposit when the depositor (i.e., the securing party) “rejects” (từ chối) the performance of the contract. The word “rejection” indicates that the relevant party may need to clearly refuse to perform the contract. And the Civil Code 2015 is not clear whether a failure to perform could constitute a rejection of the performance contract. To clarify this point, a deposit agreement should specify that a failure to perform the contract is deemed to constitute a rejection of the performance of the contract.

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More Measures For Enforcement Of A Share Mortgage For A Project Company In Vietnam

For a project financing or limited recourse financing in Vietnam, a mortgage over shares (or equity capital) of the project company usually forms part of the security package due to the ease of creating and perfecting a mortgage over shares. That said, when an enforcement event occurs and if the borrower or the project company does not cooperate, the lenders (usually foreign lenders), who wish to immediately taking over the mortgaged shares, may find it difficult to actually enforce the mortgage due to the need to complete various licensing procedures for the sale or transfer of the mortgaged shares.

Thanks to the flexibility offered by the Enterprises Law 2014 and the Investment Law 2014, lenders may now consider taking some extra measures to increase their ability to enforce the mortgaged over shares of a project company in Vietnam. In particular,

Amendments to restrictions on the use of foreign currency in Vietnam

On 29 March 2019, the State Bank of Vietnam (SBV) issued Circular 3/2019 to amend and supplement some articles of Circular 32 of the SBV dated 26 December 2034 on restrictions in using foreign exchange within the territory of Vietnam (Circular 32/2013). Circular 3/2019 will take effect from 13 May 2019.

First, a bit of background, under the Foreign Exchange Ordinance, “in the territory of Vietnam” all transactions, payment, price denomination must not be made in foreign currencies except as permitted by the SBV. The SBV usually takes quite a restrictive (and, in our opinion, not reasonable) on what transactions are considered to occur “in the territory of Vietnam”.

Regulations regarding cross-border lending in Vietnam

Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:

Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;

Vietnam Business Law