Regulations Governing Debt Sale And Purchase Business Activity

1. Currently, the debt sale and purchase activity of entities not being credit institutions is no longer a conditional business activity. Specifically, the Law on Investment of the National Assembly dated 17 June 2020 (Investment Law 2020) has removed the business line of “debt sale and purchase” from the list of industries and trades in which business investment is conditional. Under the explanation of the drafting committee of the Investment Law 2020, the subject of a debt sale and purchase transaction can be any business entity, the debt sale and purchase service is only a supporting service which helps to promote the debt sale and purchase transactions, and the current system of the civil and commercial law relating to the sale and purchase activities have sufficient regulations to govern the debt sale and purchase transactions as well as the transactions supporting the debt sale and purchase

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Written by Lawyers VNLaw On In

New Decree On Security Interest In Vietnam

On 19 March 2021, the Government has issued Decree 21 guiding the Civil Code on obligation performance security (Decree 21/2021). Decree 21/2021 replaces Decree 163 of the Government dated 29 December 2006 on security transactions (Decree 163/2006) from 15 May 2021.

Parties’ autonomy

Decree 21/2021 appears to allow the parties to a security transaction to agree on any issue relating to a security transaction as long as such agreement complies with the fundamental principles of the Civil Code 2015, does not violate the conditions for a transaction to take effect, and does not violate the limitation on the exercise of civil right under the Civil Code 2015 and other relevant law.

It is not clear if the parties can agree not to follow the provisions of Decree 21/2021 as long as such agreements comply with these mentioned conditions. For example, Article 9.1 of Decree 21/2021 regulates that the description of the security assets is agreed by the secured party and the securing party, but it is also followed by the requirement that such description must be in accordance with several other provisions of Decree 21/2021. It is not clear if the parties can apply Article 4 to describe the security assets in a manner different from the provisions of Decree 21/2021, or, even if the parties have the right to agree on the description of the security assets, such description must follow Article 9.1 of Decree 21/2021.

Concept of obligor and obligee

Decree 21/2021 defines that the obligor (“người có nghĩa vụ được bảo đảm” in Vietnamese) is a person whose obligation is secured by security measure. It is also clearly stated that the obligor may or may not concurrently be the securing party (“bên bảo đảm” in Vietnamese).

Interestingly, Decree 21/2021 removes the express description in Decree 163/2006 that the obligee is the secured party in a secured obligation. It is not clear if this change provides for the possibility that the secured party needs not to be the obligee in a secured transaction (see more discussion here).

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Written by Nguyen Quang Vu On In

Can the secured party in a secured transaction be different from the obligee under Vietnamese law?

Under Vietnamese law, it is a common understanding that the obligee (e.g, the lender) must be the secured party (e.g., the mortgagee) in a secured transaction although the securing party (e.g., the mortgagor) could be different from the obligor (e.g., the borrower). In fact, this has been the position under Decree 163/2006 for several years. However, the new Decree 21/2021 replacing Decree 163/2006 from 15 May 2021 removes the express description that the oblige is the secured party in a secured obligation. It is not clear if this change provides for the possibility that the secured party needs not to be the obligee in a secured transaction.

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Written by Nguyen Quang Vu On In

New Draft Decree on Security Interests in Vietnam

In September 2020, the Ministry of Justice (MOJ) published a draft decree (Draft Decree) on security interests such as mortgages, or pledges in Vietnam. Once issued, the Draft Decree will replace Decree 163/2006 on the same topic. Some important changes are discussed below:

· Legal basis for the Decree - Unlike Decree 163/2006 which implements the Civil Code 2005 only, the Draft Decree is stated to implement the Land Law 2013 and the Housing Law 2014 on secured transactions.

· Parties’ autonomy - The Draft Decree appears to allow the parties to a secured transaction to agree on any issue relating to a secured transaction as long as such agreement complies with the fundamental principles of the Civil Code 2015. However, it is not clear if the parties can agree not to follow the provisions of the Draft Decree as long as such agreements comply with the fundamental principles of the Civil Code 2015.

· Flexible formality requirements – The Draft Decree expressly allows a secured transaction to exist in the form of a separate security contract, a part of another contract, power of attorney, or other unilateral undertakings unless otherwise restricted by law.

· Definitions of secured assets - The Draft Decree introduces various definitions of certain types of assets that can be used as secured assets in a secured transaction. In particular, the Draft Decree defines property rights (quyền tài sản) to include the right to claim debt, right to request for payment, interests arising from a contract, project development rights, right to sublease right to lease infrastructure in an industrial zone of which rent is paid a lump sum, or right to claim damages.

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Written by Nguyen Quang Vu On In ,