Circular 06/2000/TT-NHNN1

THE STATE BANK OF VIETNAM CIRCULAR No. 06/2000/TT-NHNN1 OF APRIL 4, 2000 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No.178/1999/ND-CP OF DECEMBER 29, 1999 ON CREDIT INSTITUTIONS’ LOAN SECURITY Pursuant to Clause 1, Article 39 of the Government’s Decree No.178/1999/ND-CP of December 29, 1999 on credit institutions’ loan security (hereinafter referred to as Decree No.178 for short), the State Bank Governor hereby guides the implementation of such Decree as follows: Chapter I GENERAL PROVISIONS Section 1. REGULATION OBJECTS AND APPLICATION SCOPE 1. This Circular guides loan security measures applicable to the provision of credit in the form of loan by credit institutions to borrowing customers under the Law on Credit Institutions. 1.1. The credit institutions include: State-run credit institutions, joint stock credit institutions, cooperative credit institutions (cooperative banks, people’s credit funds, credit cooperatives), joint-venture credit institutions, foreign banks’ branches operating in Vietnam, non-bank credit institutions with 100% foreign capital. 1.2. The borrowing customers include: a) Legal persons other than credit institutions: State enterprises, limited liability companies, joint-stock companies, foreign-invested enterprises, cooperatives, economic organizations and other organizations meeting all conditions for being the legal persons as prescribed in Article 94 of the Civil Code; b) Family households; c) Cooperative teams; d) Private enterprises; e) Partnership companies; f) Individuals. 2. Where credit is granted in forms other than those prescribed by the Law on Credit Institutions, the parties may come to an agreement on the application of regulations on security measures as guided by this circular, except otherwise provided for by law. Section 2. LOAN SECURITY MEASURES Loan security measures include measures to secure loans with properties and loan security measures in cases where loans are not secured with properties. 1. Measures to secure loans with properties: 1.1. Pledge or mortgage of borrowing customers’ properties; 1.2. Guarantee with the third party’s property; 1.3. Security with properties formed from loan capital. 2. Loan security measures in cases where loans are not secured with properties: 2.1. The credit institutions will take initiative in selecting borrowing customers to provide them with loans without property security; 2.2. The State credit institutions may provide loans without property security according to the Government’s designation; 2.3. The credit institutions provide loans to individuals and poor families with trust guarantee of socio-political organizations. Section 3. PRINCIPLES FOR LOAN SECURITY 1. Credit institutions are entitled to select and decide loans with property security or loans without property security according to the provisions of Decree No. 178 and take responsibility for their decisions. Where State credit institutions provide loans without property security according to the Government’s designation, the losses caused to such loans due to objective reasons shall be handled by the Government. 2. Borrowing customers may be selected by credit institutions for loans without property security; if in the course of using the loan capital, the borrowing customers are detected by the credit institutions as having breached their commitments in the credit contracts, the credit institutions may request the borrowing customers to take property security measures or recover debts ahead of schedule. 3. Credit institutions may handle property used as loan security according to the provisions of Decree No. 178 and relevant law provisions in order to recover debts when the borrowing customers or the guarantors fail to perform or have improperly performed the debt repayment obligations as committed. 4. After the handling of loan security property, if the borrowing customers or the guarantors still fail to properly perform their debt repayment obligations, they shall have to continue performing their debt repayment obligations properly as committed. Section 4. PROTECTING LEGITIMATE RIGHTS AND INTERESTS OF PARTIES The State protects the legitimate rights and interests of the parties in the loan security. Not any organizations or individuals are allowed to illegally intervene in the loan security and the handling of loan security properties by the parties. Chapter II LOAN SECURITY WITH THE BORROWING CUSTOMERS’ PLEDGED, MORTGAGED PROPERTY, GUARANTEE WITH THE THIRD PARTY’S PROPERTY Section 1. PRINCIPLES FOR LOAN SECURITY WITH THE BORROWING CUSTOMERS’ PLEDGED, MORTGAGED PROPERTY, GUARANTEE WITH THE THIRD PARTY’S PROPERTY 1. The borrowing customers must pledge or mortgage their property or be guaranteed with the third party’s property in order to ensure the performance of debt repayment obligations towards the credit institutions, except where the borrowing customers are provided with loans secured with the property formulated from the loan capital or loans without property security under the provisions of Decree No. 178 and the guidance of this Circular. 2. The credit institutions and borrowing customers shall come to terms on the option for the application of measures of security with the borrowing customers’ pledged or mortaged property or measures of guarantee with the third party’s property. 3. The credit institutions may select qualified property as security for loans; select the third party to guarantee loans for the borrowing customers. Where the third party guarantees with property for the borrowing customers being foreign individuals or legal persons, the guarantee provision must comply with the provisions of Decree No.178, this circular and other relevant legal documents, except otherwise provided for by the international agreements which the Socialist Republic of Vietnam has signed or acceded to. 4. The guarantors may provide guarantee only with the property under their ownership. The credit institutions and the guarantors may come to term on measures of pledging or mortgaging the guarantors’ property to secure the performance of the guarantee obligations. Where the guarantors are credit institutions, the guarantee provision shall comply with the provisions on banking guarantee in Articles 58, 59, 60 and 79 of the Law on Credit Institutions and the regulations of the State Bank of Vietnam. 5. When mortgaging property affixed to land, the borrowing customers shall also have to mortgage the land use right together with such property, except otherwise provided for by the land legislation and other relevant legislation. Section 2. CONDITIONS AND PROCEDURES FOR EFFECTING LOAN SECURITY WITH THE BORROWING CUSTOMERS’ PLEDGED, MORTGAGED PROPERTY, GUARANTEE WITH THE THIRD PARTY’S PROPERTY 1. Borrowing customers’ property used as loan security 1.1. Pledged property: a) Machinery, equipment, raw materials, fuels, materials, consumer goods, precious metals, germstones; b) Foreign currencies in cash, credit balance on deposit accounts at the credit institutions in Vietnamese currency, foreign currencies; c) Bonds, shares, credit bills, debentures, deposit certificates, savings books, commercial bills and other papers valued in money; particularly for shares issued by credit institutions themselves, the credit institutions cannot receive them as pledged property; d) The property rights arising from the copyrights, industrial property rights; debt-reclaiming right, the right to take insurance money, and other property rights arising from contracts or other legal bases; e) The rights to the capital contributed to enterprises, including enterprises with foreign investment capital; f) The rights to exploit natural resources as prescribed by law; g) Sea-going vessels under the provisions of the Maritime Code of Vietnam, aircraft under the provisions of Vietnam’s Law on Civil Aviation in cases where they can be pledged; h) Other properties as prescribed by law. Income and rights arising from the pledged property also belong to the pledged property if so agreed upon by the parties or prescribed by law; where the pledged property is insured, the insurance money shall also belong to the pledged property. 1.2. Mortgaged property: a) Dwelling houses, constructions closely affixed to land, including property closely affixed to dwelling houses, constructions and other property affixed to land; b) Land use right which can be mortgaged as prescribed by the land legislation; c) Where the entire property with accessory is mortgaged, such accessory also belongs to the mortgaged property. Where a part of an immoveable property with accessory is mortgaged, such accessory shall belong to the mortgaged property only if the parties so agree; d) Sea-going vessels according to the provisions of the Vietnam Maritime Code and aircraft according to the provisions of the Vietnam Civil Aviation Law in case they are mortgaged; e) Other properties as prescribed by law. Yields, incomes and rights arising from the mortgaged property also belong to the mortgaged property if it is so agreed upon by the parties or prescribed by law; where the mortgaged property is insured, the insurance money also belongs to such mortgaged property. 1.3. Guaranteed property The third party’s properties used as the security for the performance of the guarantee obligations with property shall include the properties specified at Point 1.1 and Point 1.2 of this Section. 2. The credit institutions shall select properties for pledge, mortgage or guarantee with regard to properties which satisfy the following conditions: 2.1. The property must be under the ownership of the borrowing customers or the guarantors. Where the property is required by law to register the ownership, the borrowing customers or the guarantors must have the property ownership certificates. With regard to the land use right, the borrowing customers and the guarantors that have the land use right certificates may mortgage them according to land legislation. With regard to the property assigned by the State to State enterprises for management and use, the enterprises may pledge, mortgage or use them as guarantee according to the provision of legislation on enterprises and other relevant legislation; 2.2. Properties allowed for transaction Properties allowed for transaction are the properties which are allowed for or not banned by law from purchase, sale, present, donation, transfer, assignment, pledge, mortgage, guarantee and other transactions; 2.3. Undisputed property The property shall not be disputed over the lawful rights and interests in the legal relations at the time of signing the security contract. The borrowing customers and the guarantors shall have to commit in writing to the credit institutions about the pledged or mortgaged property without dispute at the time of signing the security contracts and bear responsibility before law for their commitments; 2.4. For properties that are required by law to be insured, the borrowing customers or the guarantors shall have to buy insurance during the loan security period. 3. The selection of the third party for property guarantee 3.1. Credit institutions may select the third party for guarantee with property (called the guarantor) for the borrowing customers. The guarantors must satisfy the following conditions: a) Having the civil-law capacity, for the guarantors being legal persons; having the civil-law and civil act capacity, for the guarantors being individuals; b) Having the capital and property capability to perform the guarantee obligations. 3.2. That whether or not the guarantors pledge or mortage properties to secure the performance of the guarantee obligations shall be agreed upon by the credit institutions and the guarantors. Where the guarantors shall not have to pledge or mortgage properties, the parties may reach agreement on the guarantors’ commitment to apply the measure of security with property if during the guarantee period the credit institutions detect that the guarantors are incapable of performing the guarantee obligations. Where the guarantors pledge or mortgage properties for the performance of the guarantee obligations, the contents and procedures shall comply with the regulations on pledge or mortgage of the borrowing customers’ properties. 3.3. The lending credit institutions must not accept the guarantee by subjects specified in Clause 1, Article 77 of the Law on Credit Institutions, which shall serve as basis for the provision of credit to borrowing customers, including: a) Members of the Management Board, the Control Board, General Directors (Directors), deputy-General Directors (deputy Directors) of the lending credit institutions; b) Persons who evaluate, consider and approve loans of the lending credit institutions; c) Fathers, mothers, spouses and children of members of the Management Board, the Control Board, General Directors (Directors), deputy General Directors (deputy Directors) of the lending institutions. 4. The mortgage of the land use right shall comply with the provisions of land legislation. 5. The credit institutions shall examine the legality and conditions of the properties before accepting them as loan security. 6. The pledge, mortgage or guarantee contracts (referred collectively to as the security contract) must be made in writing; they may be made in separate documents or inscribed in the credit contracts; for contracts on guarantee with properties, they must be made in separate documents. 7. Procedures for pledge, mortgage and guarantee contracts 7.1. The contracts on property pledge, mortgage or guarantee shall be certified by the Public Notary or the competent People’s Committees, if so agreed upon by the parties; where the law stipulates that they must be notaried or certified, the parties shall have to comply therewith. The People’s Committees competent to certify the pledge, mortgage or security contracts are the People’s Committees of different levels, which, as prescribed by the notary legislation, have the power to certify property pledge, mortgage or guarantee contracts. 7.2. Where a State enterprise pledges or mortgages a property being the entire principal technological chain according to the regulations of the techno-economic branch-managing agency, there must be a written consent of the agency which has decided the establishment of such enterprise. 7.3. For pledged property being commodities rotated in the production and business process, the borrowing customers or the guarantors may sell them only when it is approved in writing by the pledgee-credit institutions. For mortgaged property being houses, construction works built for sale or for lease, the borrowing customers or the guarantors may sell or lease them only when it is approved in writing by the pledgee-credit institutions. 7.4. Where the property rights (the copyright, the industrial property right, the debt claiming right, the right to receive the insurance money, the right to the contributed capital in enterprises, the right to exploit natural resources...) are pledged, the borrowing customers or the guarantors shall have to hand over to the credit institutions the originals of the papers evidencing such property rights and inform the concerned third persons of the pledge of such property rights. 7.5. The registration of the security transaction for the pledged, mortgaged or guaranteed property shall comply with Decree No. 08/2000/ND-CP of March 10, 2000 of the Government on registration of security transactions and relevant legislation. 8. Major contents of the pledge, mortgage and guarantee contracts 8.1. A property pledge or mortgage contract must have the following major details: a) Names and addresses of the parties; day, month and year; b) Obligations to be secured; c) Description of pledged, mortgaged property: list, quantity, catergory, technical properties, yields, arising income; if it is an immoveable property or land use right, the location, area, boundary and accessories must be clearly inscribed; d) The value of the pledged, mortgaged property: clearly inscribing the value of the pledged, mortgaged property according to the enclosed documents determining the property value which is determined under the mutual agreement between the parties or by the hired consultancy organizations or professional organizations; e) The parties that hold the property, papers on the pledged, mortgaged property; f) The rights and obligations of the parties; g) Agreements on cases of handling the pledged, mortgaged property and the handling modes; h) Other agreements. 8.2. The property guarantee contract must have the following major details: a) Names and addresses of the parties; day, month, year; b) The obligation to be guaranteed, the scope of guarantee: inscribing the number, day, month and year of the credit contract; the amount of money to be guaranteed (part or whole of the debt repayment obligation); c) The list, quantity, type, characters and value of the guarantee property; d) The rights and obligations of the guarantor and the guarantee credit institution; e) Modes of handling guarantee property; f) The guarantor’s commitment to the performance of obligation to repay debt for the borrowing customer when it becomes due but the borrowing customer fails to perform or improperly performs the debt repayment obligation; g) The guarantor’s commitment to the handling of guarantee property if it fails to fulfill the guarantee obligation when it is due; h) Other agreements. Section 3. RIGHTS AND OBLIGATIONS OF THE PARTIES WHEN PROPERTIES ARE PLEDGED, MORTGAGED OR USED AS GUARANTEE TO SECURE LOANS 1. Rights and obligations of the parties when properties are pledged 1.1. The rights of the borrowing customers: a) To exploit the utility of and enjoy revenue from the pledged properties if so agreed upon, except where the revenue also belongs to the pledged properties, if the borrowing customers keep the pledged properties; b) To request the credit institutions to stop using the pledged properties, if due to such use, their value may be lost or reduced, in case the credit institutions keep and use the properties; c) To request the credit institutions which keep the properties and papers on the pledged properties to make compensation if loss or damage is incurred; d) To request the third party which keeps the pledged properties to make compensation if loss or damage is incured; e) To receive back the pledged properties and papers certifying the ownership over the pledged properties (if any) when the secured obligation is fulfilled, in case they are kept by the credit institutions or the third party: 1.2. The borrowing customers’ obligations: a) To inform the credit institutions of the third party’s rights over the pledged properties (if any); b) To hand over the properties and the originals of the property ownership certificates (if any) to the credit institutions, in case the properties have been registered for their ownership as provided for at Point 1, Section 6 of this Chapter; c) To make the security transaction registration as prescribed by law; d) To pay the credit institutions the expenses for preservation of the pledged properties, except otherwise agreed upon; e) Not to sell the pledged properties, excluding those being commodities rotated during the production and business process which may be sold with the approval of the pledge-credit institutions. In this case, the borrowing customers shall have to exercise their right to claim the debts, the proceeds and properties earned from the sale of rotary commodities, the new rotary commodities shall be used as the security properties in replacement of the rotary commodities already sold or debt-repaid to the credit institutions; f) Not to exchange, give, donate, lease, lend, contribute as joint-venture capital the pledged properties; not to use the pledged properties to secure other obligations, except for the properties with ownership