The new decree No. 21/2021/ND-CP ("Decree 21") guiding the implementation of the Civil Code on securing the performance of obligations will come into force on 15 May 2021, replacing the current Decree No. 163/2006/ND-CP (amended by Decree No. 12/2012/ND-CP).
Notable new provisions in Decree 21
1. The definition of securing party now include the obligor in a duplex contract for the measure of lien.
2. Security property to be formed in the future:
The secured party establishes the right to part or all of the
security property being a future property from the time part or all
of such security property is formed. Previously, this right is only
formed when the securing party formed rights over such
property.
In addition, under Decree 163, if the secured party fails to
register the security property, the secured party still has the
right to dispose the property when it is due. However, Decree 21
sets out that the collateral only gave antagonistic effect against
third parties when (i) the contract for secured transaction
acquired legal validity and (ii) the secured asset is registered as
required by law or the secured party takes control over the asset.
Control means the direct management, control or domination of the
security property by the secured party or the management of the
security property by another person as agreed or as prescribed by
law, but the secured party still controls and dominates this
property.
3. Effect of the contract for secured transaction: takes effect upon parties' conclusion or after it is notarized or authenticated as required by the Civil Code or relevant laws or upon request. Where the collateral is withdrawn as agreed, the content of the security contract related to the withdrawn property shall no longer be effective. If the security property is supplemented or replaced, such changes must comply with the provisions of the Civil Code and other relevant laws.
4. Collateral being the right to claim debts, receivables, and other right to request payment: To secure the right to collect debts, receivables or other right to demand payment does not require the consent of the obligor but the secured party must notify them prior to the performance of the obligations under the agreement or in accordance with law.
5. Investments in collateral: Where the securing party exercises the right to invest in order to increase the value of the collateral, the additional investment value portion belongs to the collateral. The secured party must approve investment in a collateral if (i) a third party invests in collateral or (b) the securing party invests in the collateral giving rise to new assets that are not collateral as agreed in the contract.
For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.