“On March 19th 2021, the Government promulgated Decree No. 21/2021/ND-CP guiding on enforcing the Civil Code on security for performance of obligations which took effect on 15th May 2021, replacing Decree No. 163/2006/ND-CP on secured transactions and Decree No. 11/2012/ND-CP on amending and complementing a number of articles of Decree No. 163/2006/ND-CP.
This newsletter shall explain several updated points of Decree No. 21/2021/ND-CP in comparison with Decree No. 163/2006/ND-CP.”
Heretofore, Decree No. 163/2006/ND-CP only regulated collateral in one article. In this new Decree, collateral is prescribed in one Chapter (Chapter II) to regulate collateral in detail, which has a few notable points as follows:
– Existing properties or off-plan properties, except for cases that the Civil Code or other relevant laws forbid sale, transfer or other change of ownership at the time of establishing security contracts, security measures;
– Properties sold under property sale agreements with retention of title;
– Properties considered as subjects of obligations under infringed bilateral contracts in case of lien measures;
– Properties under general public’s ownership in cases prescribed by relevant laws.
(Heretofore, collateral only comprised existing properties or off-plan properties)
Description of collateral is agreed between securing party and secured party in accordance with following regulations:
Security contracts notarized according to provisions of the Civil Code, relevant laws or requests take effect from the date of notarization.
Security contracts not in above case take effect from the date of agreement. In cases without agreements, security contracts take effect from the contracting date.
In case of collateral withdrawal according to agreement, the contents of security contracts relating to withdrawal of collateral are no longer valid.
Security interests which have not yet arisen antagonistic effect against third party do not alter or terminate the effect of security contracts.
Antagonistic effect of escrow deposit interest against third party takes effect from the time such escrow deposit is sent to escrow accounts at credit institutions where escrow deposit is made.
Herein fore, the Government only regulated cases which are entitled to invest in mortgaged properties. In this new Decree, to protect rights and interests of the parties, the Government has brought about conditions to implement investment in mortgaged properties as follows:
In ‘Chapter IV’ of Decree No. 21/2021/ND-CP guiding on the realization of collateral, notice on realization of collateral in case collateral is used to secure multiple obligations is prescribed as follows:
Duration of informing the realization of collateral to securing party is according to the agreements in security contracts or other agreements. In cases there is no agreement, it must be in a reasonable duration, but before at least 10 days over real estate or before at least 15 days over movable properties until the time of realization of collateral. Except for cases properties are in danger of being damaged, causing the deterioration in value or loss of the whole value, it must be realized immediately.
In general, the new Decree has more clear and detailed provisions on issues of secured transactions for the purpose of implementing such transactions more effectively as well as best protecting rights and interests of parties in such kind of transactions.
The article is based on the current laws at the time of drafting as noted above and may no longer be appropriate at the time the reader accesses this article due to changes in applicable law and specific cases that the reader wants to apply. Thus, the article is for informational reference only.