Notice on mortgage over receivables in Vietnam

Mortgage over receivables (thế chấp khoản phải thu) is a very common type of mortgage in Vietnam. Article 33 of Decree 21/2021 provides that a mortgage over receivables does not require a consent by the obligor but such person must be notified by the secured party to know before implementing the obligations in accordance with agreement or law. Under the Civil Code 2015, only a transfer of rights (not mortgage of rights) need to be notified to the obligor. It is not clear if the notice requirement is a perfection requirement and what the consequence is if the notice about the mortgage over receivable is not made to the relevant obligor.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Could contractual options be considered as derivative securities under new Securities Law 2020?

Contractual option agreed privately between two parties is unlikely to be considered as a type of derivative securities under the new Securities Law 2020 and Decree 158/2020. This is because Decree 158/2020 has substantially reduced the scope of underlying assets (tài sản cơ sở) of derivative securities subject to securities regulations. Under the old Securities Law 2006 and Decree 42/2015, a private contractual option could still be considered as a derivative securities under the securities regulations.

Read MoreInfo
Comment
Written by Lawyers VNLaw On In ,

Structure for foreign lenders to take mortgage over the Land Use Right held by Vietnamese borrower

Under Land Law 2013, a foreign lender (Foreign Lender) is not permitted to take mortgage over land use right (LUR) from a Vietnamese borrower. However, a foreign lender with the support of a Vietnamese bank may consider the following the structure to allow a Vietnamese company (Borrower) to use its LUR as security for a foreign lender. The structure could be summarized as follows:

  • A Vietnamese bank (Vietnam Bank) will lend a loan (Domestic Loan) to the Borrower. The Borrower will mortgage to the Vietnam Bank its LUR as security for the Domestic Loan (such mortgage, the LUR Mortgage). Under the Land Law 2013, a company in Vietnam can mortgage its LUR to a bank licensed to operate in Vietnam.

  • Under Vietnamese law, upon enforcement of LUR Mortgage by the Vietnam Bank, the Borrower has the right to receive the remaining proceeds after payment of the Domestic Loan (Right to LUR Mortgage). If the value of the Domestic Loan is less than the value of the LUR then the Right to LUR Mortgage could have substantial value. The Right to LUR Mortgage is usually recorded in the mortgage agreement between the Borrower and the Vietnam Bank. Accordingly, Right to LUR Mortgage is a type of contractual property right, which can be used to secure performance of obligation under Article 14 of Decree 21/2021.

  • Accordingly, the Borrower could mortgage the Right to LUR Mortgage to a foreign lender (Foreign Lender) as a mortgage of contractual rights (Rights Mortgage) in order to secure a loan extended by the Foreign Lender (Foreign Loan) to the Borrower.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,

Guarantee for obligations of a non-resident by a Vietnamese individual

It is not entirely clear under the foreign exchange (FX) regulations of Vietnam if a Vietnamese individual can provide guarantee for a non-resident (i.e. guarantee for the performance of obligation of such non-resident) (Non-Resident Guarantee). While the FX Ordinance 2005 provides that “economic institutions [established in Vietnam] are permitted to provide offshore loans, except for the export of goods and services on deferred payment, and to provide guarantees for non-residents when the Prime Minister so permits”, there is no similar clause applicable to Vietnamese individuals. Due to this ambiguity, one can take different views on this issue.

Read MoreInfo
Comment
Written by Nguyen Quang Vu On In ,