Socialist Republic of Vietnam

No. 03-2001-TTLT-NHNN-BTP-BCA-BTC-TCDC Hanoi, 23 April 2001


JOINT CIRCULAR PROVIDING GUIDELINES ON REALIZATION OF SECURITY PROPERTY FOR LOANS IN ORDER TO RECOVER DEBTS
OWING TO CREDIT INSTITUTIONS


Pursuant to article 39.2 of Decree 178-1999-ND-CP of the Government dated 29 December 1999 on Security for Loans Obtained from Credit Institutions and other relevant provisions of the law;

In order to conduct realizations of security property for loans and to recover debts owing to credit institutions, the State Bank of Vietnam, the Ministry of Justice, the Ministry of Police, the Ministry of Finance and the General Department of Land Administration have agreed on the following guidelines on realization of security property for loans in order to recover debts owing to credit institutions:


A. GENERAL PROVISIONS

I. All borrowers from credit institutions have the obligation to repay their debts when they fall due or to make early repayment of debts in accordance with the provisions of the law. A guarantor of a borrower from a credit institution has the obligation to repay the debt on behalf of the borrower if the borrower fails to perform, or to perform properly, the obligation to repay the debt.

When the borrower and the guarantor fail to perform, or to perform properly, their obligations to repay the debt, the security property for the obligation to repay the debt to the credit institution (hereinafter referred to as the security property) may be realized in order to recover the debt.


II. Security property shall be realized in accordance with the method agreed in the credit agreement or the contract of pledge, mortgage or guarantee (hereinafter referred to as the security contract) between a credit institution and a borrower or guarantor (hereinafter referred to as the party providing security). If the parties fail to realize the security property by the agreed method, a credit institution shall have the right to initiate methods for realizing it. Security property may be realized by the following methods:

1. Sale of security property:

Sale of security property means a credit institution or a party providing security or all parties co-ordinate(s) to sell the property directly to a purchaser or authorize(s) a third party to sell the property to a purchaser.

A third party authorized to sell the property may be a property auction centre or a property auction enterprise or an organization having the function to purchase property for sale.

2. Receipt of actual security property in lieu of performance of the secured obligation:

Receipt of the actual security property in lieu of performance of the secured obligation means a credit institution directly accepts the security property with its value as fixed at the date of realization as the basis for repaying principal, loan interest plus interest payable on overdue amounts by the guarantor after deducting all other expenses (if any) and accepts that property pursuant to the provisions in this Circular and other provisions of the law.

3. Receipt of money or property which a third party must pay or deliver to the guarantor:

Receipt of money or property which a third party must pay or deliver to a guarantor means a credit institution directly receives money or property which a third party must pay or deliver to a guarantor pursuant to the procedures stipulated in this Circular and in other provisions of the law.

III. Credit institutions shall have the right to transfer the right to recover a debt to a third party or to authorize it to realize security property. The third party must be an organization with legal entity status and shall exercise the right to recover the debt or to realize security property in accordance with the provisions of the law.

Where a credit institution transfers the right to recover a debt, the third party shall have the same rights as the credit institution to take measures to recover the debt or to realize security property. Where a credit institution authorizes a third party to realize security property, the third party shall realize the security property within the scope of its authority.

IV. Any realization of security property must comply with the principles of public disclosure, procedural simplicity, convenience, promptness, ensuring the rights and interests of the parties, and cost economization.

V. In the case where an owner of security property is prosecuted for a breach unrelated to the loan by the credit institution or unrelated to the source from which the security property was formed, the security property of such person may not be attached and shall be realized pursuant to the provisions in this Circular, unless otherwise provided by law.

VI. Authorized State bodies shall be responsible to facilitate the taking of necessary measures to assist credit institutions to realize security property pursuant to the provisions in this Circular and other provisions of the law.


B. A NUMBER OF SPECIFIC PROVISIONS ON
PROCEDURES FOR REALIZATION OF
SECURITY PROPERTY

I. Realization of security property in accordance with an agreement

1. Security property shall be realized in accordance with the agreement between the credit institution and the guarantor in the credit agreement or the security contract. The parties may agree on additions and amendments or may reach a new agreement on realization of the security property. Such agreement must be in writing.

2. A credit institution must conduct the following procedures prior to realization of security property:

2.1 The credit institution must provide written notice of realization of security property to the guarantor and register such notice of realization of security property in accordance with the provisions of the law relating to registration of security transactions (if the security transaction has already been registered).

(a) A notice of realization of security property shall contain the following main items:

- Reason for the realization of security property;

- Value of the guaranteed obligation;

- Type of property to be realized: its special characteristics, quality and volume;

- Method of realization of security property;

- Date of realization of security property;

- Time-limit for and location of delivery of security property (if applicable).

(b) The credit institution shall fix the date of realization of security property in the notice of realization of security property, but it shall not be earlier than seven days in the case of pledged property, and fifteen (15) days in the case of mortgaged property, from the date of registration of the notice of realization of security property at the office for registration of security transactions. For security transactions which are not required to be registered, or which have not been registered because the national office for registration of security transactions is not yet operating, the above periods of seven days and fifteen (15) days shall be calculated from the date when the credit institution provides written notice of realization of security property to the guarantor. In the case where security property is in danger of being destroyed, a credit institution may realize the security property immediately after the credit institution provides notice of realization of security property.

2.2 The guarantor shall co-operate with the credit institution to take preparatory measures for the realization of security property, such as delivery of security property to the credit institution and delivery of documents relating to the security property as requested by the credit institution (in the case where the guarantor or a third party retains such documents), and shall facilitate purchasers viewing the property and take other necessary measures in order to realize the security property.

In the case where a guarantor or a third party retains the documents relating to the security property (hereinafter both referred to as the party retaining the security property), the credit institution shall fix a date for delivery of such documents in order to conduct the realization as set out in the notice of realization of security property. If the party retaining the security property fails to deliver the documents, the credit institution shall have the right to request authorized bodies to take measures to compel the party retaining the security property to deliver the documents pursuant to the provisions in Section XI of Part B.

3. Credit institutions shall prepare minutes of realization of security property, specifying the delivery and acceptance of the security property, the method of realization, the rights and obligations of the parties, and other agreements (if any).

In a case where a credit institution takes measures to compel the party retaining the security property to deliver documents to the credit institution for the purpose of conducting realization, credit institutions shall prepare minutes of seizure of security property pursuant to the provisions in clause 3.3 of Section XI of Part B.

4. After notice of realization of security property has been provided, the rights of the credit institution and the obligations of the guarantor and the third party shall be stipulated as follows:

4.1 Rights of the credit institution:

(a) To require the guarantor to co-operate with the credit institution in taking the necessary preparatory measures for realization of security property in accordance with clause 2.2 of Section I of Part B;

(b) To exploit and use security property, or to permit the guarantor or to authorize a third party to exploit and use the security property, in accordance with the provisions in Section VI of Part B;

(c) To require the guarantor or a third party not to exploit and use the security property if there is a danger that exploitation and use will result in loss or reduction of the value of the property;

(d) To make payment of the debt with income and profit received from the exploitation and use of the security property after deducting necessary expenses for such exploitation and use;

(dd) To require the party retaining the security property to deliver it upon any one of the following acts:

- Failure to deliver the security property at the request of the credit institution;

- Failure to perform, or to perform properly, full measures to preserve the security property;

- Taking action arbitrarily to sell, exchange, make a gift of, lease, lend, contribute as joint venture capital, disperse, spoil or lose the security property;

- Any other action causing danger that the security property will be spoilt or lost;

In the case where the party retaining the security property fails to deliver it at the request of the credit institution, the credit institution shall have the right to request authorized State bodies to compel the party retaining the security property to deliver it pursuant to the provisions in Section XI of Part B;

(e) Other rights in accordance with the provisions of the law.

4.2 Obligations of the guarantor:

(a) To co-operate with the credit institution in taking the necessary preparatory measures for the realization of the security property when required by the credit institution pursuant to the provisions in clause 2.2 of Section I of Part B;

(b) Not to take action arbitrarily to sell, exploit, use, lease or lend the security property if the credit institution does not agree;

(c) Not to spoil, disperse, exchange or make a gift of the security property, not to use it to contribute as joint venture capital, not to destroy or lose it, and not to take any other action causing loss and damage to the security property;

(d) To preserve and retain the security property and to deliver it together with the related documents upon receipt of a request from the credit institution;

(dd) Other obligations in accordance with the provisions of the law.

4.3 Obligations of a third party retaining the security property:

Any third party retaining security property shall have the same obligation to preserve it and to hand it over to the credit institution as stipulated in the case of a guarantor in clause 4.2(b), (c), (d) and (dd) of Section I of Part B.

5. Methods for realizing security property in accordance with an agreement:

5.1 Sale of security property:

(a) Sales of security property shall be conducted in accordance with article 34.1 of Decree 178-1999-ND-CP of the Government dated 29 December 1999 on Security for Loans Obtained from Credit Institutions (hereinafter referred to as Decree 178). The parties shall fix a selling price for the security property in accordance with the provisions in Section VII of Part B.

(b) A contract for sale and purchase of security property shall be prepared in writing between the seller and the purchaser. In the case where a guarantor and a credit institution do not have an agreement or are unable to reach agreement on a seller, the credit institution shall decide on a seller falling within one of the cases prescribed in article 34.1 of Decree 178.

5.2 Receipt of actual security property by a credit institution in lieu of performance of the secured obligation:

(a) A credit institution and a guarantor shall prepare minutes of receipt of security property in lieu of performance of the secured obligation, specifying the delivery, acceptance, the valuation for realization of security property, and payment of the debt from the realization of the security property, in accordance with the provisions in this Circular.

(b) After receipt of security property in lieu of performance of the secured obligation, the credit institution shall carry out the procedures to receive the transfer of rights of ownership or use, or may sell or assign the security property to a purchaser or assignee of the property in accordance with the provisions of the law.

5.3 Receipt of money or property by a credit institution which a third party must pay or deliver to a guarantor:

(a) A credit institution or a guarantor must notify the third party of the receipt by the credit institution of the above money or property and, at the same time, require the third party to deliver such money or property to the credit institution. The delivery of money or property to the credit institution must be implemented within the time-limit and at the location fixed in the notice of realization of security property, except in the cases prescribed in article 320 of the Civil Code.
In the case of security property referred to in clause 1.1(b), (c), (d), (dd) and (e) of Section II of Chapter II of Circular 06-2000-TT-NHNN1 of the Governor of the State Bank of Vietnam dated 4 April 2000 providing guidelines on Decree 178, credit institutions shall accept security property and the rights arising from it. Third parties shall be obliged to deliver money or property and to transfer the rights arising from the security property to the credit institution.

(b) A credit institution shall prepare minutes of receipt of money or property between the credit institution, the guarantor and the third party, specifying the delivery and acceptance of the money or property, the valuation for the property, and the payment of the debt from the realization of the property.

6. After security property has been realized in order to recover a debt, the credit institution or the guarantor shall conduct cancellation of the registration of realization of the property and cancellation of the registration of the security transaction in accordance with the provisions of the law relating to registration of security transactions.

II. Realization of security property in accordance with article 34.2 of Decree 178

1. When security property is realized in accordance with the cases prescribed in article 34.2 of Decree 178, the credit institution and the guarantor must carry out the procedures stipulated in clauses 2 and 3 of Section I of Part B; and shall have the same rights and obligations as the parties stipulated in clause 4 of Section I of Part B.

2. The credit institution shall have the right to initiate any one of the following methods for realizing security property:

2.1 Direct sale of security property by the credit institution (except for security property being land use rights and other property which the law stipulates must be sold at specialist property auction organizations):

(a) The credit institution must make a public announcement of the sale of the security property and conduct it after the period stipulated in clause 2.1(b) of Section I of Part B.

(b) A contract for sale and purchase of the property shall be prepared in writing between the credit institution and the purchaser. The credit institution shall decide the selling price of the security property in accordance with the provisions in Section VII of Part B.
2.2 A credit institution may authorize a property auction centre or a property auction enterprise (hereinafter both referred to as property auction organization) to sell the security property:

(a) Cases for authorizing an auction:

- A credit institution chooses to sell the security property by the method of authorizing a property auction organization;

- The security property is land use rights pursuant to the provisions in Section III of Part B and other property which the law stipulates must be sold by specialist property auction organizations.

(b) A contract authorizing a property auction shall be entered into between the credit institution and the property auction organization. A credit institution and a guarantor may reach agreement in order for the guarantor to authorize an auction of the security property.

(c) Procedures for an auction of security property shall be carried out in accordance with the provisions of the law on property auctions.

2.3 A credit institution may authorize, or assign to an organization having the function to purchase property for sale, the realization of security property:

(a) An organization having the function to purchase property for sale means:

- Company for debt management and operation of mortgaged assets established by a commercial bank pursuant to Decision 305-2000-QD-NHNN5 of the Governor of the State Bank of Vietnam dated 15 September 2000;

- Company for management and resolution of bad debts of a credit institution established by the credit institution in accordance with the provisions of the law.

(b) Any organization which has been authorized or assigned to realize security property shall have the right to realize the security property in accordance with the provisions in Section III of Part A and other relevant provisions of the law.
With respect to land use rights and assets attached to land, any organization which has been authorized or assigned by a credit institution to realize such security property must implement the method of sale by auction. The order and procedures for auctions shall be carried out in accordance with the provisions in Section III of Part B.

2.4 Receipt of the actual security property by a credit institution in lieu of performance of the secured obligation (except where the security property is land use rights and assets attached to land):

In this case, the credit institution shall not be required to reach a re-agreement with the guarantor. The procedures for receipt of the actual security property in lieu of performance of the secured obligation shall be carried out in accordance with the provisions in clause 5.1 of Section I of Part B.

2.5 Receipt by a credit institution of money or property which a third party must pay or deliver to a guarantor:

(a) Receipt of money or property which a third party must pay or deliver to a guarantor pursuant to the law or pursuant to an agreement between the parties to a security contract. The order and procedures for the receipt of money or property shall be carried out in accordance with the provisions in clause 5.3 of Section I of Part B.

(b) In the case where the third party fails to deliver the above money or property on demand from the credit institution, the credit institution shall have the right to require authorized State bodies to take measures to compel the third party to deliver the property in accordance with the provisions in Section XI of Part B or to institute court proceedings.

3. After security property has been realized, the credit institution or the guarantor shall conduct cancellation of the registration of realization of the property and cancellation of the registration of the security transaction in accordance with the provisions of the law relating to registration of security transactions.

4. During the course of realizing security property by the methods prescribed in article 34.2 of Decree 178, the credit institution and the guarantor shall have the right to agree, to re-agree, or to reach a new agreement on the method of realizing security property and the other rights and obligations of the parties provided that any other agreements shall be consistent with the provisions in this Circular and other provisions of the law.

III. Realization of security property being land use rights and assets attached to land

1. Security property being land use rights and assets attached to land shall be realized in accordance with the agreement of the parties in credit agreements or security contracts, which must be consistent with the relevant provisions in Section I of Part B of this Circular and the provisions of the laws on land.

2. In the case where security property being land use rights and assets attached to land are not able to be realized in accordance with the contractual agreement of the parties, a credit institution may auction the property in order to recover the debt or may institute court proceedings.

3. An auction of land use rights shall be conducted in the following order:

3.1 The credit institution shall forward a file requesting one of the following authorized State bodies to permit an auction of the land use rights:

(a) District people's committee, to permit the auction of land use rights mortgaged by a household or individual;

(b) Provincial people's committee, to permit the auction of land use rights mortgaged by an organization.

3.2 A file requesting permission for an auction of land use rights shall comprise:

(a) Application for permission to auction land use rights;

(b) Copy of the credit agreement, guarantee contract (copy signed by the credit institution);

(c) Copy of the certificate of land use rights or certificate of ownership of residential housing and land use rights or other document in accordance with the provisions in clause 7.3 of this Section (copy signed by the credit institution).

3.3 Within the time-limit of fifteen (15) days from the date of receipt of the above file, the people's committee at the authorized level shall be responsible:

(a) In the case where the land use rights may be assigned, to issue a written permit to auction the land use rights;

(b) In the case where the file is incomplete, to guide the credit institution to carry out the necessary procedures and then issue a written permit to auction the land use rights;

(c) In the case of types of land which are not permitted to be assigned pursuant to the provisions of article 30 of the Law on Land, to reply in writing to the credit institution that the land use rights may not be auctioned.

3.4 In particular, with respect to agricultural land on which annual crops are planted and which the State assigns to households and individuals, bidders at an auction of the land use rights must satisfy the conditions stipulated in article 9 of Decree 17-1999-ND-CP of the Government dated 27 March 1999 on Procedures for Conversion, Assignment, Lease, Sub-Lease and Inheritance of Land Use Rights and for Mortgage and Capital Contribution of Value of Land Use Rights (hereinafter referred to as Decree 17).

3.5 After the people's committee at the authorized level has issued a permit for the auction of the land use rights, the credit institution shall carry out the procedures stipulated in clauses 2 and 3 of Section I of Part B and shall authorize a property auction organization to conduct the auction of the land use rights.

4. After completing the realization of security property being land use rights and assets attached to land, the credit institution shall be responsible to conduct procedures for the cancellation of the registration of the notice of realization of security property, cancellation of the mortgage, and cancellation of the registration of the mortgage. The credit institution shall be responsible to conduct procedures for the transfer of the land use rights and the transfer of ownership of the assets to the assignee or the purchaser of the assets, unless conducted by the property auction organization in accordance with the law on property auctions.

5. Certificates of land use rights and certificates of ownership of residential housing and land use rights shall be issued as follows:

5.1 The party responsible for conducting procedures for the transfer of land use rights and the transfer of ownership of the assets to the assignee or the purchaser of the assets, as provided for in clause 4 above, shall forward a file to the authorized State body requesting the issuance of a certificate of land use rights or certificate of ownership of residential housing and land use rights to the assignee or the purchaser of the asset.

The file requesting the issuance of a certificate of land use rights or certificate of ownership of residential housing and land use rights shall be in accordance with the provisions stipulated in clause 2 of Section X of Part B.

5.2 Within the time-limit of fifteen (15) days (for a certificate of land use rights) or sixty (60) days (for a certificate of ownership of residential housing and land use rights) from the date of receipt of a complete and valid file, the authorized State body shall be responsible to issue the above certificates to the assignee or the purchaser of the assets.

6. The obligation to pay tax upon transfer of land use rights and assets attached to land shall be implemented in accordance with the provisions in Section IX of Part B.

7. The provisions in this Circular shall apply in order to realize security property being land use rights and assets attached to land which was mortgaged prior to the date on which Decree 178 became effective in the following cases:

7.1 The land use rights and assets attached to land had full documentation and files which were consistent with the provisions of the law at the time of the mortgage or consistent with the provisions of the law at the time of effectiveness of Decree 178.

7.2 The land use rights and assets attached to land had full documentation in accordance with the provisions in clause 7.1 above but have not been realised because the mortgage contract lacked notarization by the State notary public or lacked confirmation from the people's committee at the authorized level.

7.3 In the case of land use rights and land with assets attached in respect of which, at the time of the mortgage, the mortgagor had a certificate of land use rights or certificate of ownership of residential housing and land use rights or one of the other documents prescribed in article 3.2 of Decree 17 and had the right to mortgage the land use rights.

7.4 In the case of assets attached to land, at the time of the mortgage the mortgagor had legal ownership of such assets and had documentation on land use rights in accordance with the provisions in clause 7.1 above but did not have the right to mortgage the land use rights pursuant to the provisions of the laws on land.

In this case, the credit institution shall arrange for assets attached to land to be auctioned at a property auction centre. After completing the auction, the property auction centre shall forward the file to the authorized State body in order to request the issuance of a certificate of land use rights to the winning bidder in the form in which the State assigns land, leases land or receives a transfer of land use rights in accordance with the provisions of the laws on land.

7.5 When realizing security property being land use rights and assets attached to land in the cases prescribed in clauses 7.1, 7.2 and 7.3 above, the credit institution shall forward its current file to the authorized State body in accordance with the provisions in clause 3 of Section III of Part B in order to request permission for an auction of the land use rights. After the authorized State body has granted permission for an auction, the credit institution shall carry out the procedures for realization of the security property in accordance with the provisions in this Circular.

IV. Realization of property where an enterprise is divided, separated, consolidated, merged, converted or equitized

1. A credit institution shall have the right to realize property to recover a debt prior to an enterprise dividing, separating, consolidating, merging, being converted or equitized in the cases stipulated in article 13.3 of Decree 178.

In the case where the security property for a loan of money is not realized to recover the debt prior to an enterprise being divided, separated, consolidated, merged, converted or equitized, then the enterprise formed as a result of the division, separation, consolidation, merger, conversion or equitization must accept the debt and perform the obligation to repay the debt to the credit institution. If the enterprise formed as a result of the division, separation, consolidation, merger, conversion or equitization fails to perform the obligation to repay the debt, the credit institution shall have the right to realize the security property in accordance with the provisions in Section II of Part B.

2. In the case where a credit institution realizes security property for a loan of money pursuant to the provisions in article 13.4 of Decree 178, the realization of the property and the performance of the obligation to repay the loan debt shall be based on the new security contract entered into after the enterprise has divided, separated, consolidated, merged, converted or equitized. The credit institution shall conduct the realization of the property in accordance with the provisions in this Circular.

V. Realization of security property in cases where a guarantor is deceased or is absent from his or her place of residence at the date of realization of security property

A credit institution shall be entitled to conduct the realization of security property in cases when a debt falls due or early repayment is due but the guarantor is deceased or deliberately absents himself or herself from his or her place of residence at the date of realization of security property as notified in advance by the credit institution. The party retaining the security property (if any) or the person who inherits the property of the guarantor (in the case where a guarantor is deceased) shall be obliged to deliver the property to the credit institution in order to realize it in accordance with the notice of the credit institution. In the case where the party retaining the security property or the person who inherits the property of the guarantor does not agree to delivery of the property to the credit institution to realize it, the credit institution shall have the right to request the authorized State body to take measures to compel the party retaining the security property to deliver it to the credit institution to realize it in accordance with the provisions in Section XI of Part B.

VI. Exploitation and use of security property in the period prior to realization

1. During the period prior to realization of security property to recover a debt, a credit institution shall have the right to exploit and use the security property or to permit the guarantor or to authorize a third party to exploit and use the security property in accordance with its true qualities and utilities. The permission or authorization to exploit and the means of exploitation and dealing with income and profit from the exploitation and use of the security property must be recorded in a written document.

2. Income and profit which is received must be accounted for separately (unless otherwise agreed by the parties); after deducting all necessary expenses for exploitation and use of the property (including management fees, repairs to the property, all types of taxes, expenses for exploiting the property, and other reasonable and necessary expenses), the remaining amount shall be used to discharge the debt to the credit institution in accordance with the provisions in Section VIII of Part B.

VII. Valuation of security property for realization

1. The credit institution and the guarantor shall reach agreement on a valuation for realization of security property at the time of realization and shall prepare minutes of agreement on valuation of the property.

2. In the case where the parties do not agree on a valuation for realization of the security property, the valuation shall be conducted as follows:

2.1 Prior to deciding on a valuation for realization of security property, the credit institution shall engage a consultancy or specialist organization to determine actual values in the locality at the time of realization, prices stipulated by the State (if any), and other pricing factors.

2.2 In the case of sale of security property, where there is a large discrepancy in prices amongst the people registering to purchase the property at the same time or where there are a large number of people registering to purchase the property at the same time, the credit institution shall decide on the price for realizing the security property on the basis of the highest paying price or shall arrange an auction to recover the debt.

3. In the case where a credit institution authorizes a property auction organization to sell the property, setting a price for realizing the security property shall be carried out in accordance with the provisions of the law on property auctions.

4. In the case where a credit institution authorizes or delivers the security property to a third party to realize, the credit institution may decide on the valuation for realization of security property or reach agreement that the third party shall decide on the valuation for realization of he security property in accordance with the principles in clause 2.1 above.

VIII. Making payment of debts from realization of security property

1. Payment of the debt shall be conducted in accordance with the following order:

1.1 Necessary expenses for realization of security property: Expenses for preservation and management of property, valuation, advertising sale, sale, commission and auction fees and charges, and other reasonable and necessary expenses related to the realization of security property;

1.2 Taxes and fees payable to the State Budget (if any);

1.3 Principal, loan interest plus interest payable on overdue amounts calculated to the date of delivery by the guarantor or the party retaining the security property of the security property to the credit institution for realization.

2. In the case where a credit institution advances money to pay for the expenses for realization of security property or for taxes and fees payable to the State Budget, the credit institution shall first recover the amount of such advance payment prior to payment of principal, loan interest plus interest payable on overdue amounts, unless the guarantor has already reimbursed the credit institution the amount of such advance payment.

3. In the case where the amount collected from a sale of property plus revenue from the exploitation and use of security property during the period prior to realization (after deducting all necessary expenses for exploitation and use of security property) exceeds the debt payable, the difference shall be paid to the guarantor. The guarantor shall be obliged to continue to pay the debt if the aggregate of the above items is less than the amount of principal, loan interest plus interest payable on overdue amounts and the expenses for realization of security property.
In the case where a credit institution receives the actual security property in lieu of performance of the secured obligation, or receives money or property which a third party must deliver to a guarantor, if the valuation for realization of security property and the amount collected from the exploitation and use of the security property during the period prior to realization (after deducting all necessary expenses for exploitation and use of security property) exceeds the amount of the debt payable, the excess difference shall be paid to the guarantor. The guarantor shall be obliged to continue to pay the debt if the aggregate of the above items is less than the amount of principal, loan interest plus interest payable on overdue amounts and the expenses for realization of security property.

4. In the case where the purchaser of security property is unable to make immediate payment in order to discharge the debt, the credit institution shall adopt the method of collecting the debt on each occasion that the purchaser is able to make a payment. The credit institution shall fix the amount of principal, loan interest plus interest payable on overdue amounts and expenses which are collectable, calculated up to the date of receipt by the credit institution of the security property.

5. In the case where a single item of property is used as security for several obligations to a single credit institution, and the property must be realized to fulfil one obligation to pay a debt which has fallen due, the other obligations to repay debts not yet due shall be deemed to be due and the credit institution shall realize the security property to collect the debts. The sequence for payment as between debts secured by a single item of property shall be determined in accordance with the order they were registered at the office for registration of security transactions.

6. In the case where a single item of property is used as security for several obligations in the case of a syndicated loan, if the property must be realized to fulfil an obligation to pay a debt which has fallen due, the parties participating in the syndicated loan shall be paid in accordance with the ratio of their capital contribution.

7. In the case where the guarantor increases the value of the security property (such as repairing or upgrading the property, and so forth) during the course of direct management or use of the security property, such portion of increased value shall be deemed to be part of the value of the security property securing the initial obligation. When it realizes the security property, the credit institution shall also use such portion of increased value to repay the debt.

8. In the case where security property has been insured, any insurance proceeds paid by an insurer shall be paid directly to the credit institution in order to repay the debt. This sum of money shall be used to make payment of the debt of the guarantor.

IX. Calculating tax upon transfer of ownership or use rights of security property

1. The calculation of tax upon transfer of ownership or use rights of security property shall be made when conducting the procedures for such transfer or when a credit institution accepts the actual security property in lieu of performance of the obligation to repay the debt and ownership or use rights of that security property are transferred to the credit institution.

2. Land use right transfer tax shall be implemented in accordance with the provisions in Decree 19-2000-ND-CP of the Government dated 8 June 2000 providing detailed guidelines for implementation of the Law on Land Use Right Transfer Tax and the Law on Amendment of and Addition to a Number of Articles of the Law on Land Use Right Transfer Tax.

3. In the case where a credit institution receives the actual security property in lieu of performance of the secured obligation but procedures for the transfer of ownership or use rights for that property have not yet been carried out, ownership transfer or land use right transfer tax shall not be payable.

X. Responsibility to co-ordinate of relevant bodies

1. Where credit institutions conduct realization of security property pursuant to the methods prescribed in this Circular, the State notary public and people's committees at the authorized level shall be responsible, within the scope of their respective duties and powers, to certify contracts of sale and purchase, contracts of assignment of property, minutes of receipt of property, and documents relating to the transfer of ownership or use rights to purchasers and assignees.

2. The authorized State bodies (people's committees at the authorized level, Departments of Land Administration or Departments of Housing and Land Administration, municipal and provincial traffic police offices, offices for registration of waterway transport vehicles, offices for registration of ships and crew, and the Civil Aviation Department of Vietnam) shall be responsible to conduct procedures for the transfer of property ownership or use rights to purchasers and assignees upon receipt of requests from credit institutions (or property auction organizations) and other relevant data comprising:

2.1 Copy of the credit agreement, guarantee contract (copy signed by the credit institution);

2.2 Certificate of property ownership, or certificate of property use right, or certificate of property registration by the owner, or other document in accordance with the provisions in clause 7.3 of Section III of Part B (depending on each specific case);
2.3 Minutes of realization of property or minutes of seizure and retention of property;

2.4 Contract of sale and purchase, or contract of assignment of property, or minutes of receipt of property, or documents relating to property auction (depending on each specific case);

2.5 Documents confirming payment of property transfer tax in accordance with the provisions of the law.

3. Procedures for the transfer of ownership of or rights to use security property where the security property realized was property seized in execution of a court order:

The authorized State body shall conduct procedures for the transfer of ownership of or right to use security property to a purchaser or assignee based on a file comprising the following documents:

3.1 Extract of the judgment or copy of the judgment or copy of the decision of the court;

3.2 Decision on execution of the executing body;

3.3 Copy of the credit agreement, guarantee contract (copy signed by the credit institution);

3.4 Contract of sale and purchase or contract for transfer of property or minutes of receipt of property or documentation relating to property auction (depending on each specific case).

4. The file for the procedures for the transfer of ownership of or right to use security property shall not be required to contain written agreement from the property owner to the realization of security property (where such agreement has already been expressed in the credit agreement or guarantee contract); and shall not be required to contain a contract of sale and purchase between the property owner or person executing the court order and the property purchaser, except in the case where the person realizing the property is the property owner or the person executing the court order.

5. The time-limit for completing procedures for the transfer of ownership of or right to use property to a purchaser or assignee shall be fifteen (15) days (for the transfer of home ownership and residential land use rights, sixty (60) days) from the date of receipt of the request from the credit institution (or property auction organization) and the above documentation, unless otherwise provided by law.

XI. Procedures for compelling delivery by the party retaining security property to the credit institution

Pursuant to article 35 of Decree 178, the procedures for compelling the party retaining security property to deliver it to the credit institution shall be as follows:

1. The party retaining security property shall be responsible to deliver it to the credit institution for realization in accordance with the notice of the credit institution. If upon expiry of the time-limit stipulated in the notice the party retaining security property has failed to deliver it to the credit institution, the credit institution shall issue a notice of measures to be taken to compel the party retaining security property to deliver it to the credit institution. The notice must specify the reasons for taking measures, the time-limit for delivery of security property, the measures to be taken, and the rights and obligations of the parties.

2. A credit institution shall be entitled to take the following measures:

2.1 A credit institution may request the party retaining security property to deliver security property under its control to the credit institution.

2.2 If after taking the above measure the party retaining security property still fails to deliver it, the credit institution may send a letter to the people's committee and the police office where the guarantor resides or where the security property is situated requesting that they co-ordinate to assist the credit institution to recover the security property.

In the case where a third party retains security property, the credit institution may issue a notice to the guarantor to co-ordinate with it to compel the party retaining security property to deliver it to the credit institution.

2.3 If upon expiry of the time-limit stipulated in the notice of measures to be taken to compel delivery, the party retaining security property has failed to deliver it to the credit institution for realization, the credit institution shall carry out seizure and retention of the security property with the assistance of the people's committee and the police office.

3. The responsibilities of a people's committee and a police office to co-ordinate in assisting a credit institution to recover security property shall be as follows:

3.1 After receipt of a request from a credit institution pursuant to clause 2.2 above, a people's committee shall take the measures of educating and persuading the party retaining the property to deliver the security property under its control to the credit institution. The people's committee shall decide on the time-limit within which the party retaining security property must deliver it to the credit institution, which shall not exceed ten (10) days from the date when the people's committee takes educating measures.

3.2 If upon expiry of the above time-limit the party retaining security property has still failed to deliver it as requested by the credit institution, the people's committee shall instruct its functional bodies to co-ordinate with the credit institution to undertake the necessary procedures to compel the party retaining security property to deliver it to the credit institution.

(a) With respect to security property being a means of transportation, based on the written request from a credit institution (specifying contact address, facsimile number and telephone number):

- The traffic police office shall, by means of the registry of means of transportation, if it discovers cases of requests by credit institutions, not transfer names and ownership but shall require owners or people authorized by owners of means of transportation to seek the opinion of the credit institution prior to transferring names and ownership.

- Where, by way of patrolling and checking, a traffic police office discovers that the person operating a means of transportation is using a copy of a certificate of registration of the means of transportation pursuant to article 12.2 of Decree 178 beyond the date of expiry of circulation, the traffic police office shall formulate minutes of temporary seizure of the means of transportation and provide written notice (forwarded directly, by facsimile or by some other means of communication) to the credit institution in order that the latter may receive delivery of the temporarily-seized means of transportation. The credit institution must appoint a person to attend to receive the property within a time-limit of fifteen (15) days from the date of receipt of such notice. The delivery from the traffic police office to the credit institution must be minuted and the credit institution must notify the owner and operator of the means of transportation of such delivery and receipt. If the credit institution has not attended to receive the property upon expiry of this time-limit, the traffic police office shall return the means of transportation to the operator from which it was temporarily seized.

- The credit institution must pay the expenses for the notice and temporary seizure of the means of transportation and any other reasonable expenses up until receipt of the temporarily-seized means of transportation. Such expenses shall be included in the expenses for realization of security property in accordance with the provisions in Section VIII of Part B. If a credit institution does not attend to receive the means of transportation pursuant to the notice from the traffic police office, the credit institution shall be responsible to pay the above expenses from its own resources.

(b) Where security property is a warehouse or residential housing or some other construction works, the credit institution shall permit the removal of furniture and other assets which do not form part of the security property to the office for bailment of property and shall accept the security property for the purpose of realization. The party with the property shall pay the expenses of bailment.

(c) Where security property is machinery, equipment, raw materials, fuel, supplies, consumer goods, precious metals and gemstones or other security property, a credit institution may seize and retain it.

3.3 The seizure and retention of security property must be minuted and witnessed by a representative of the local people's committee where the party retaining the property resides or where the security property and the offices concerned are situated.

3.4 If, when a credit institution is conducting seizure and retention of security property for the purpose of realization, the party retaining the security property resists or obstructs staff in the conduct of their duties, or takes any other action aimed at retaking the property, or endangers the health or life of staff in the conduct of their duties, or causes disorder or breaches security, the police office shall be responsible to take measures in accordance with law in order to prevent such action and to resolve it promptly; people's committees shall be responsible to facilitate and assist credit institutions to appoint a participant and to resolve in accordance with their powers any difficulties arising during the process of a credit institution conducting seizure and retention of security property for the purpose of realization.

C. IMPLEMENTING PROVISIONS AND DATE OF EFFECTIVENESS

I. This Circular shall apply to realization of security property and recovery of debts owing to all types of credit institutions stipulated in article 12 of the Law on Credit Institutions. Decree 165-1999-ND-CP of the Government dated 19 November 1999 on Security Transactions shall apply to the realization of security property to recover debts owing to domestic individuals and legal entities and to foreign entities other than credit institutions.

II. The provisions of this Circular shall apply to any realization where the time for repayment under a credit agreement expired prior to the effectiveness of this Circular but the security property has not yet been realized.

III. Where credit institutions provide credit under other forms and if the parties have agreed on measures for security, then the provisions of this Circular shall apply to realization.

IV. The provisions of Joint Circular 06-TTLT-TANDTC-VKSNDTC-BCA-BTC-BTP shall apply to any security property being material evidence in a criminal court case. Joint Circular 06-TTLT-TANDTC-VKSNDTC-BCA-BTC-BTP dated 4 October 1998 of the People's Supreme Court, the People's Supreme Inspectorate, the Ministry of Police, the Ministry of Justice and the Ministry of Finance provides guidelines on preservation and dealing with property being material evidence in and property which is attached during criminal investigations, prosecutions and court proceedings.

V. This Circular shall be of full force and effect after fifteen (15) days from the date of signing. Any problems arising during implementation should be reported to the joint ministries for prompt explanation, addition and amendment. The Governor of the State Bank, the Minister of Justice, the Minister of Police, the Minister of Finance and the General Director of the General Department of Land Administration shall decide on any addition to and amendment of this Circular.

For the Governor of the State Bank - Deputy Governor TRAN MINH TUAN

For the Minister of Police - Deputy Minister LE THE TIEM

For the Minister of Justice - Deputy Minister UONG CHU LUU

For the Minister of Finance - Deputy Minister LE THI BANG TAM

For the General Director of the General Department of Land Administration -Deputy General Director TRIEU VAN BE