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Rule looks to enforce security interests
Granting a security interest is a civil transaction under which a party grants security in an asset to another party to guarantee performance of a civil obligation.
Security interests are currently governed by the Civil Code and guided by Government Decree 163/2006/ND-CP.
The registration of a security interest, compulsory in some instances, is a method to protect the legal rights of the guaranteed party. The registration of security interests establishes the guarantee’s payment priority with respect to asset in the case of a breach of an obligation.
A number of regulations govern the registration of security interests, procedures that can become complex and time-consuming with respect to security interests in land-use rights or assets attached to the land. Some provisions in Decree 08/2000/ND-CP as well as in Circular 06/2006/TT-BTP, are considered inadequate.
In practice, many security interests are also not registered simply because parties are keen to keep information confidential. The problem, however, is that assets subject to security interests might be used to secure many other transactions to the detriment of the rights of an earlier holder of a security interest in those assets. Assets may also be mortgaged or sold to another person, destroying any unregistered security interests.
A Law on Registration of Security Interests has been drafted and is being considered to meet practical demands. The proposed legislation is already in its eighth draft.
Under the draft, compulsory registration of security interests would be required in the case of mortgages of land-use rights, forest-use rights, security interests in aircraft and ships, and in other cases as required by law. Voluntary registration would apply to pledges or mortgages of other assets, and in financing or leasing agreements.
To remedy the scattering of provisions on registration of security interests acrosss a number of regulations, the draft law would contain general provisions on registration of security interests, procedures for registering them, terms of validity, and particular provisions on specific kinds of security interests in assets such as aircraft and ships, land-use rights, fixed assets attached to land, forest-use rights, water surfaces for aquaculture or agricultural production-use rights, among others.
Current regulations on the terms of validity for registered security interests provide for five years for movable assets, excluding aircraft and ships. For security interests in land-use rights and assets attached to the land, the validity would continue from the time of registration of the security interest until the dishcharge of the underlying obligation being secured. The duration of security interests in ships and aircraft, meanwhile, is that stated in the application to register the security interest. The draft law generally provides that the valid period of the security transaction counting from the registration time to the clearance of the registration according to the application.
The draft law does not enlarge the current system of registrars, but it does provide for online registration of security interests.
Although the Government is trying to advance regulations on registration of security interests, concerns remain as to the enforceability of security interests in Viet Nam. Efforts to enforce a security interest by forcing the sale of assets frequently lack needed co-operation from People’s Committees or police, rendering the security interest of little real value, unless the secured party goes to court, a process that can take several years.
An obsolete joint circular 03/2001/TTLT-BTP-BCA-NHNN-TCDC issued in 2001, it requires that when enforcing security interests, local People’s Committees and police are responsible for assisting the secured party to enforce his/her interests. Decree No 163/2006/ND-CP actually backed away from this provision by removing this obligation of local People’s Committees and police. The current draft law is, discouragingly, silent as to this shortcoming perhaps.
VietNamNet, VNS
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