1. TYPES OF COLLATERAL SECURITY IN VIETNAM

Under Art. 292 Civil Code 2015:

1. Pledge (Cầm cố) - Art. 309 - movable delivered to creditor - e.g., machinery, shares certificate
2. Mortgage (Thế chấp) - Art. 317 - immovable or movable not delivered - land use rights (LUR), house, future assets, factory
3. Deposit (Đặt cọc) - Art. 328
4. Security Collateral (Ký cược), Escrow, Retention of Title, Guarantee

Key difference from common law: Land belongs to State, only LUR is mortgaged, under Land Law 2024.

2. PERFECTION - WHEN ENFORCEABLE AGAINST THIRD PARTY

You cannot enforce if not perfected.

• Movable: Registration at National Registration Agency for Secured Transactions (NRAST) - Cục Đăng ký giao dịch bảo đảm - online at moc.gov.vn. Not mandatory but determines priority. Under Art. 298 Civil Code - priority by time of registration.
• Immovable/LUR: Compulsory registration at Land Registration Office (Văn phòng đăng ký đất đai). Under Land Law 2024 Art. 130, mortgage effective from registration time.
• Shares in unlisted company: Registration at company. Listed: at VSDC.

Enforcement Gap: Many foreign lenders only notarize mortgage but forget to register at NRAST - enforcement fails against bankruptcy receiver.

3. ENFORCEMENT TRIGGERS - Art. 299 Civil Code

Creditor can enforce when:

a) Obligor fails to perform obligation when due
b) Obligor must perform before due date but fails (bankruptcy, asset dissipation)
c) Other cases agreed - e.g., cross-default, DSCR <1

Must notify debtor 15 days before enforcement for movable, 10 days for enforcement at auction? Actually under Decree 21/2021 Art. 51: Notice of enforcement must be sent at least 15 days before enforcement for non-possessed collateral, unless contract says shorter.

4. METHODS OF ENFORCEMENT - Art. 303 Civil Code + Art. 52-63 Decree 21/2021

This is where disputes arise. Parties can agree method in security contract. If not agreed:

Method 1: Sale at Auction (Bán đấu giá) - Most common for LUR
Must be via licensed Auction Organization under Law on Property Auction 2016. Starting price: agreed or by valuation. If debtor does not hand over, creditor must sue.

Method 2: Self-Sale (Tự bán)
Creditor can sell himself at market price. Requires transparency - must notify debtor of sale price. Often used for machinery, inventory.

Method 3: Appropriation (Nhận chính tài sản bảo đảm) - Creditor takes collateral
Only if agreed in contract AND for movable only, or LUR if parties are both commercial entities? Under Decree 21 Art. 59: Appropriation of LUR allowed if security contract notarized and parties agree, but must pay excess value to debtor. If value > debt, creditor must return difference.

Method 4: Payment in Lieu (Xử lý khác)

5. MAJOR CASE LAWS - VIETNAM

Case 1: Judgment No. 09/2018/KDTM-PT - Hanoi High Court - Appropriation of LUR Without Auction Invalid

Facts: Bank ACB mortgaged LUR of 5,000 m2 in Long Bien. Contract said bank can appropriate if default. Borrower defaulted $2M. Bank appropriated and transferred LUR to itself, no auction.

Court: Under Art. 323 Civil Code 2005 (now 303/2015), appropriation of LUR is only valid if agreed AND asset is properly valued by independent valuer AND excess paid. Bank did not value. Appropriation void. Must auction.

Lesson: Draft mortgage with clause: "Bank has right to appropriate at price determined by [Big4 valuer] and return excess within 30 days".

Case 2: Judgment No. 27/2021/KDTM-ST - Ho Chi Minh City Court - Future Assets Mortgage

Developer mortgaged future apartments in District 2 to Vietcombank to finance construction. Borrower sold some apartments to homebuyers without bank release. Homebuyers sued.

Court applied Decree 21 Art. 31: Mortgage of future assets only effective when assets come into existence. Developer must not sell without bank consent. Sale without consent is voidable, homebuyers are bona fide but bank's mortgage prevails if registered before sale contract notarization.

This is Vietnam's biggest enforcement gap: future asset vs homebuyer.

Case 3: Resolution No. 42/2017/QH14 on Bad Debt Settlement - Supreme Court Case 2019 - Right to Seize Without Court

This is special regime for VAMC bad debts. Under Resolution 42, secured creditor (credit institution) can seize collateral without court judgment if contract has seizure clause and debtor was notified.

Judgment No. 12/2020/DS-ST - Dong Nai: BIDV seized factory even though debtor locked gate. Court upheld seizure - Resolution 42 allows creditor to request Commune Police support.

But Resolution 42 expired 15 Aug 2022. Now under new Law on Credit Institutions 2024 Art. 198, this right is retained but narrower.

Case 4: Case No. 02/2019/KDTM-GDT - Supreme People's Court - Council of Judges - Priority Between Two Mortgages

Same LUR mortgaged to Agribank in 2016 (registered) and to SHB in 2017 (registered but contract says first mortgage is disclosed). Borrower bankrupt. Who has first right to sale proceeds?

Supreme Court: Under Art. 308 Civil Code 2015, priority is by order of registration at Land Office, not by contract date. Agribank first. Even if second lender didn't know, registration wins.

Case 5: Judgment No. 13/2020/KDTM-PT - Da Nang - Enforcement of Shares Pledged

Pledge of 60% charter capital of LLC. Creditor tried to enforce by taking over management (voting rights). Debtor argued pledge only over economic value, not management rights.

Court: Under Enterprise Law 2020 Art. 46, pledge of capital contribution does not transfer membership rights unless charter allows. Creditor can only sell the stake, cannot automatically become member and run company. Must auction the stake.

This is major gap for foreign lenders taking share pledge in Vietnam LLC.

Case 6: Case No. 68/2018/DS-PT - Enforcement Against Third Party Holding Collateral

Debtor pledged car but kept using. Sold car to third party without informing creditor, third party in good faith. Creditor sued third party.

Court applied Art. 302 Civil Code: If collateral is movable not required to register, bona fide third party who takes possession in good faith wins over unregistered pledge. Since creditor did not register at NRAST, lost.

Lesson: Always register even movable pledge at NRAST online - fee VND 80,000 - determines priority.

6. ENFORCEMENT OBSTACLES AND HOW COURTS SOLVE

Obstacle 1: Debtor refuses to hand over
Law says creditor cannot use force (except Resolution 42 cases). Must file lawsuit for handover. Civil Procedure takes 6-12 months first instance. During that, debtor can dissipate.

Solution: Add clause: "Debtor authorizes creditor to enter premises to take collateral" - but courts often deem it void as violation of public order. Better to apply for provisional urgent measure under Civil Procedure Code Art. 114 - seizure of collateral pending judgment.

Obstacle 2: Land Use Rights - Valuation Gap
Auction law requires starting price agreed. If not agreed, valuer appointed. Debtor challenges valuation to delay 2-3 years via Valuation Complaint.

Obstacle 3: Bankruptcy - Art. 53 Law on Bankruptcy 2014
Once court accepts bankruptcy petition, enforcement of secured asset is suspended unless asset is not necessary for business recovery. Secured creditor must file claim and enforcement stays 3-6 months. Supreme Court guidance: If collateral is factory essential to rescue plan, stay; if it is separate LUR, creditor can still enforce.

7. COMPLIANCE CHECKLIST FOR ENFORCEMENT

For foreign bank syndicate in energy project like you asked earlier:

1. Mortgage LUR - Notarized + Registered at Land Office + Registered at NRAST for future assets clause
2. Mortgage of Movable (turbines) - Notarized + NRAST registration
3. Pledge of Shares - Registered at company + at VSDC if JSC
4. Contract must contain: Enforcement trigger, Method (auction / self-sale / appropriation), Valuation mechanism (by e.g., CBRE), Notice address, Right to seize under Law on Credit Institutions 2024 Art. 198
5. Before enforcement: Send Notice of Enforcement (15 days) by courier + email as per contract, register Notice at NRAST.
6. If appropriation: Have independent valuation report <6 months, pay excess.