CONTENT

OVERVIEW OF THE LEGAL FRAMWORK GOVERNING SECURED ASSETS............3

I. The concept of secured assets.................................................................................................3
II. Requirements for secured assets............................................................................................3
1. Collateral must be under the ownership rights of the securing party, except for the
cases of lien on property or title retention................................................................................3
2. Collateral may be described generally but must be identified.......................................5
3. Collateral may be existing property or off-plan property..............................................7
4. The value of collateral may be greater, equal or smaller than the value of the secured
obligation.....................................................................................................................................9
III. Some notes relating to collaterals for pledge and charge..................................................11
BIBLIOGRAPHY.........................................................................................................................13
 OVERVIEW OF THE LEGAL FRAMWORK GOVERNING SECURED ASSETS
I. The concept of secured assets
Under Article 3.7 of Decree 163/2006/ND-CP: “Security asset means an asset used by the
securer to secure the performance of a civil obligation toward the securee”. Accordingly, the
secured asset includes all types of assets specified in the Civil Code, regardless of the movable
property or immovable property, existing assets, or future assets, which the securing party uses as
collateral for performance of obligations for the secured party.
II. Requirements for secured assets
1. Collateral must be under the ownership rights of the securing party, except for the
cases of lien on property or title retention
According to Article 295.1 of the Civil Code, the securing party must have the including the
rights to possess, use and dispose of the property in accordance with law.
Note 1: In some cases, although the property does not owned by the securing party, the property
can be considered as collateral, including:
 Property owned by the state but assigned to state enterprises directly to manage and use
 About the property of the ward, the guardian may use the property of the ward to secure
the performance of the obligation as long as being approved by the supervisor of
guardianship and must be for the benefit of the ward.
 Machinery, equipment or another movable not subject to the ownership registration and
the contract on purchase on deferred payment, payment in installments or rent registered
at a competent security transaction registry within fifteen days after that contract is
entered into, the seller may retain the ownership and the renter is on the top payment
priority upon the disposal of security assets. If no registration is made or the registration is
made after the above time limit and after the security transaction is registered, the securee
is considered as a bona fide securee and on the top payment priority upon the disposal of
security assets.1
Note 2: Although some secured assets are under the ownership rights of securing parties, they
are not allowed to use as collaterals, including: (i) Rights to use leased land annually; (ii)
Houses, construction works on land which are built on the leased land have expired the term of
the land lease without extension or are not transferred to the form of land allocation for
permanent use; (iii) Assets have been distrained to ensure judgment enforcement; (iv) Estates
used for worship purposes; (v) The right to demand payment of a debt, other property rights

1
Article 13.2 of Decree 163/2006/ND-CP on Security Transactions
1
arising from the contract, which regulated that rights shall not be used to ensure the performance
of other obligations; (vi) Voting preference shares.
Note 3: In order to minimize risks, the bank should not accept an asset which is subject to a
retention of title clause as a collateral for performance of obligation due to a number of reasons:
With regard to buyers in retention of title:
First, in principle, collateral must be under the ownership rights of the securing party, except
for the cases of lien on property or title retention. Nevertheless, the retentation of title means the
ownership of property of the seller may remain until the buyer pays the purchase price in full.
Thus, if the buyer does not fulfil payment obligations, the buyer is not allowed to bring collateral
for the performance of other obligations.
Second, it is believed that an asset subject to a retention of title clause may be used as
security on the basis of the Article 13.2 of Decree 163/2006/ND-CP. However, it should be noted
that the Decree was enacted to guide the implementation of the Civil Code 2005 that did not
regulate retention of title as a security device. The provision only applies to deferred payment and
installment sale contracts (objects are movable property which shall not be required to be
registered). Besides, this Article does not provide the legal consequences of not registering the
deferred payment/ installment sale contracts including provisions on retention of title in general.
Thus, if the bank accept collateral subject to a retentation of title clause, whether in good faith or
not, it is possible for the security transaction to be invalidated.
With regard to sellers in retention of title:
Due to the fact that an asset subject to retention of title are still under the ownership rights of
the seller; therefore, the seller can use the asset subject to retention of title as a security for
performance of obligations in principle. However, in case the buyer fulfils their payment
obligation, security transaction between the bank and seller may be invalidated in line of Article
408 of the Civil Code (Invalidity of civil contracts due to impossibility of performing subject
matter)
2. Collateral may be described generally but must be identified
Note: How to properly desribe the secured assets including in case of use of circulating assets
as security?
This essay guides how to properly desribe several popular collaterals, including:
a. Land use rights: Lot number, map number (if any),Purpose of land use, Term of land
use, Address of parcel land, Area of mortgage, Certificate land use rights, ownership of houses
and other land-attached assets (Issue number, number entered in the issue book, issuing authority,
date of issue)

2
 In case the customer mortgages only a portion of the land area, the land parcel must be split
(corresponding to the value of the loaned property) and detailed description of the parcel
elements must be performed land is as follows: Land use right holder; the address of the parcel of
land is described, Outline of the boundary, landmarks of the parcel of the land, Detailed
description of the landmarks, the boundary of the parcel, Certification of the land user or adjacent
land manager; certification of the cadastral official and the cadre performing the measurement.
b. Formed houses, construction works
If collateral is house, type of house (house, factory, warehouse, ...), number of floors,
construction area (land acquisition area), usable area, address of that house.
If the collateral is an apartment building, write the name of the apartment building, number
of floors, construction area (area occupied by land), total number of apartments, and address of
that apartment building.
If the mortgaged property is an apartment building, write “apartment building” and write the
number of the apartment, number floor, usable area of the apartment, and address of that
apartment building.
If the mortgaged property is a technical infrastructure work, write the type of infrastructure
work, name of each work item and the land area of that work item. For other architectural works,
write the work's name and the work's land-occupied area, and address of the work site.2
c. Movable assets
With respect to non-registered movable assets:
There are currently no clear regulation by law. Because estates for which the law does not
require registration of property rights appear very diverse and complex. However, in order to
make a description of this type of asset, it is necessary to pay attention to the following features:
• Contract, invoice for the sale of the property (in paper or electronic information)
• An objective description of the movable property (type of property, design, shape, color,
etc.) described and agreed upon by the parties to the mortgage agreement.
• A special description of property in the case of movable property as special property
(highly specialized assets such as industrial machinery, scientific materials, medical, ...)
that have been tested, check by a third party with technical expertise about the specific
property description.
In case the collaterasl are circulating assets, the description is carried out in accordance
with the following instructions:
• The name of goods, types, quantities and specific addresses of warehouses or other
information related to such goods;
2
Circular 07/2019/TT-BTP Elaborating to registration for mortgage of land use rights and assets attached to land
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 • Where the collateral is a motor vehicle and this property is circulating goods in the
process of production and business, the registered requester or registration-implementer
must not describe the frame number of the vehicle but must describe the collateral "as a
circulating goods in the production process, business"
• The specific name of the property rights, legal grounds for arising rights and value into
money of property rights (if any) or other information related to such property rights in
case the collateral is the property right3
With respect to registered movable assets (for example means of transport): If the motor
vehicle has a frame number, detailed description in the direction: Type of motor vehicle, brand,
number plate , chassis number and engine number according to the vehicle release note or the
customs declaration in case the vehicle is imported;
3. Collateral may be existing property or off-plan property
Existing assets are assets formed and subject to ownership rights and other rights to assets
before or at the time of transaction establishment.
Future assets include: (i) Unformed assets; (ii) The property has been formed but the subject
establishes the ownership of the property after the transaction is established.
Note 1: The concept of future assets of the Civil C ode 2015 is differenent from one of housing
and construction works in the future defined in the specialized laws, whereby:
According to Article 3.4 of Law on Real Estate Bussiness: “Off-the-plan building means any
building which is under construction and has not been permitted to put into operation.”
Likewise, Article 3.19 of the 2014 Law on Housing stipulates: “Off-the-plan house  means
any house which is under construction and has not been permitted to put into operation.”
Thus, with regard to houses, construction works, if they have been formed (completed,
accepted, and put into use) but the ownership certificate has not been issued at the time of the
establishment of the secured transaction, they are not recognized as a future asset.
Note 2: Identify all conditions for an asset attached to land to be used as future secured property
and compare them with those applicable to future ordinary assets under the Civil Code:
First, identify all conditions for an asset attached to land to be used as future secured
property
Under Article 3.2 of Circular 07/2019 /TT-BTP, assets attached to land to be formed in the
future include:

3
Article 10.2 Cirular 08/2018/TT-BTP Providing guidelines for registration of and provision of information about
security in interests and contracts, and exchange of information about security interest registration with centers for
registration of transactions and assets of the national registration agency for secured transactions affliated to the
ministry of justice
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“a) House and construction works which are under construction and has not been permitted to
put into operation, including: Houses and construction works in housing construction project or
separate houses according to the Law on Housing; other construction works in accordance with
the Law on real estate business, investment and other relevant laws;
b) Production forests are planted forests, perennial trees that have not been formed or have been
established but the mortgagor establishes their ownership rights after the time of making the
mortgage contract.”
As houses in the project on housing construction are popular collateral in banks, the essay
focuses on clarifying this property:
According to Article 118.2 of the Law on Housing 2014, the Transactions in off-the-plan
housing mortgage are not required the Certificate. However:
a. In case the mortgagor who mortgages his/her off-the-plan house buys a house in the
project on housing construction from the investor, he/she is required to conclude (i) an agreement
on housing sale with the investor, or obtain a grant deed of the house if he/she is the transferor,
(ii) documentary evidence for payment of the house on contractual schedule (iii) he/she is not
subject to any complaints, lawsuit, or dispute about agreement on housing sale or transfer of the
agreement; (iv) the house is not distrained; (v) there is no decision on land revocation,
notification of housing clearance or demolishment issued by the competent agency.
b. In case the mortgagor who mortages an off-the-plan house on their lawful piece of land,
he/she is required to conclude (i) the Certificate of land use right in accordance with the Land
Law; (ii) the License for construction in case of a house which is granted the License for
construction; and point (iii), (iv), (v) of (a)
c. In case the investor mortgages an off-the-plan house in the project, he is required to
satisfy requirements: (i) a approved technical design; (ii) the Certificate or Decision on land
allocation or land lease issued by the competent agency are required; (iii) the foundation of that
house must be finished as prescribed in law on construction; (iv) it is not subject to the part or all
of the project which is mortgaged by the investor;(v) there is no dispute, complaint, or
proceedings for homeownership; (v) The house is not distrained; (vii) there is no decision on land
revocation, notification of housing clearance or demolishment issued by the competent agency.
Second, compare with those applicable to future ordinary assets under the Civil Code
Future ordinary assets means: movable property not subject to ownership right registration
such as machines, equipments (goods in general); yield and income; movable property subject to
ownership right registration such as cars and motorcycles that have been purchased but have not
been granted car or motorcycle registration…

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 Similarity: At the time of entering into a security transaction, the securing party must have
evidence that he or she surely establish the ownership rights to the property in the future.
Difference:
With property subject to ownership registration, the securing party must satify: a certificate
of ownership is issued by an authorized state agency to the current owner and a document of legal
assignment for the future owner.
With movable property not subject to ownership right registration, the securing party is able
to provide specific documents to prove the origin of the property, which in turn leads to the
establishment of ownership for the securing party in the future. For example: documents about
origin of goods, contract of property transfer, receipt of stock-discharge, purchase and sale
invoice, receipt of payment of goods, import document, warranty note, ...).
4. The value of collateral may be greater, equal or smaller than the value of the secured
obligation
In general, in internal documents of credit institutions, it is often noted that the value of
collateral must be greater than the value of the secured obligation. Valuation of a secured asset is
conducted at the time the secured transaction is established, hence it is necessary to take into
account the slippage in prices of the asset at the time of foreclosure. Therefore, the value of the
loan/total loans is usually not more than 70% of the value of the collateral.
Note: May an asset secure different loans taken out from different banks? Elaborate on how to
enfore such security?
An asset to be used as security for performance of different debts in different banks.
Under Article 296 of the Civil Code, an asset can be used to secure for several obligations.
However, this provision does not specify whether an asset can be used to secure the performance
of many obligations for one secured party or multiple secured parties. In addition, theoretically,
each party has the right to establish, exercise and terminate civil rights and obligations on the
basis of freely and voluntarily entering into agreements that do not violate regulations of law and
social ethics. Therefore, it is possible for an asset to be used as security for performance of
different debts in different banks. However, most of banks take this situation into consideration
due to its risks, especially inventory.
With regard to elaborating on how to enfore such security, in case that an asset is used as
security for performance of different obligations in different banks, if the collateral must be
enforced in order to satisfy one obligation which has fallen due, the other obligations which have
not yet fallen due shall also be deemed due and all secured parties shall be entitled to take part in
the enforcement of collateral. The secured party which provided notice of realization of the

6
property shall be responsible for realizing the property, unless otherwise agreed by the secured
parties (Article 296.3 of the Civil Code).
With respect to methods of enforcing collateral (pledge/charge), there are two situations:
First, in case there is an agreement on methods of enforcing collateral between parties,
parties can choose: a) Put collateral up for an auction; b) The secured party sells collateral itself;
c) The secured party accepts the collateral as substitutions for the performance of obligations of
the securing party; d) Other methods.
Second, if there is no agreement on methods of enforcing collateral as prescribed in (a), (b),
(c), (d), the collateral shall be put up for auction, unless otherwise prescribed by law.
With regard to payment of the sum of money obtained from the realization of collateral and
the order of priority for payment between joint secured parties:
The sum of money obtained from the realization of the collateral after deducting from the
cost of preservation, capture and realization of the collateral shall be paid in order of priority, as
follow:
• If all types of security take effect against a third party, the order of priority for payment shall
be determined according to the order of effect against the third party;
• If there are some types of security take effect against a third party while some types of
security do not take effect against the third party, the payment of obligations with security
taking effect against the third party shall be given priority;
• If all types of security do not take effect against a third party, the order of priority for
payment shall be determined according to the order of establishment of types of security
Where the sum of money obtained from the realization of the collateral, after deducting from
the cost of preservation, seizure and realization of the collateral is greater than the value of
secured obligations, the difference amount must be paid to the securing party.
Where the sum of money obtained from the realization of the collateral, after deducting from
the cost of preservation, seizure and realization of the collateral is less than the value of secured
obligations, part of the unpaid obligations are defined as unsecured obligations, unless the parties
otherwise agree additional collateral. The secured party may request the obligor to perform the
unpaid secured obligations.
III. Some notes relating to collaterals for pledge and charge
There are some types of property may only be charged but not pledged:
Article 317 Civil Code 2015 stipulates: “Mortgage of property means the use by one party
(the mortgagor) of property under the ownership of the obligor as security for the performance
of an obligation to the other party (the mortgagee) without transferring such property to the
mortgagee”. According to Article 309 Civil Code 2015, “pledge of property means the delivery
7
by one party (the pledgor) of property under its ownership to another party (the pledgee) as
security for the performance of an obligation”. As can be seen from these provisions, a major
difference between a charge and a pledge is that the charge does not require delivery of
possession of the charged property to the chargee, while the pledgor must deliver the possession
of the pledged property to the pledgee4.
Consequently, pledges may only be applied over existing property because only this type of
property is able to be physically transferred to the pledgee. Thus, this security device is not
applicable to future asset. Furthermore, in principle only tangible movable property is eligible for
“delivery of asset” criterion. In other words, pledges are not applied to intangible assets that
Vietnamese law calls “proprietary rights”. For instance, savings deposit, by nature, represents the
depositors’ right to demand payment of a debt from credit institutions that have received the
deposit and thus it is not physically transferable. As a result, it cannot be pledged. 5 Also, Article
22 Decree 163/2006/NĐ-CP inclines towards “charges over receivables” instead of “pledges over
receivables”. Besides receivables, contractual rights, intellectual property rights, shares, and bank
account credit balances cannot be pledged but may only be charged as it is impossible to deliver
their possession6.
In terms of immovable property, Article 310.2 Civil Code 2015 specifies: “If an
immovable property is the subject of pledge as prescribed in law, the pledge on immovable
property shall take effect against third party from the time of registration”. This provision is
understood that only when a legal document such as Land Law, the Housing Law or the Real
Estate Business Law officially acknowledges this security device will it be considered legal.
Indeed, pledges over houses and right to use land are not listed in Article 10.1(d) Housing Law
20147 and Article 167.1 Land Law 20138 as one of the transactions over real estate allowed by
law. Therefore, pledges over immovable asset are not in accordance with current law.
Another type of property which may only be charged but not pledged is inventory. Because
of its turnover, which means “always moving”, inventory cannot be pledged/be held by the
pledgee,.Article 321.4 allows businesses to use inventory as mortgage for loans. However, it will
be a great risk for credit institutions when lending with inventory as collateral without being
knowledgeable about this commodity. Thus, the bank must be very careful in preparing the

4
Bui Duc Giang (2018), “Charges over property: attachment”, Vietnam Law & Legal Forum, p. 17-18.
5
Bùi Đức Giang (2020), “Pháp luật về cầm cố tài sản – Góc nhìn từ thực tiễn”, Ngân hàng, (18), p. 16.
6
Bui Duc Giang, supra note 1, p. 18.
7
“If the homeowner is a Vietnamese entity or an oversea Vietnamese, he/she shall have rights to: Sell housing or
transfer the agreement on housing purchase, lease , lease and purchase, gifting, exchange, inheritance, mortgage,
capital contribution, lending, permission for stay, or authorize housing management;”
8
“Land users may exercise the rights to exchange, transfer, lease, sublease, inherit, donate, mortgage land use
rights and to contribute land use rights as capital in accordance with this Law”
8
guarantee documents and conducting an asset appraisal to ensure sufficient quantity and correct
value of goods9.

BIBLIOGRAPHY
Legal instruments
1. Civil Code in 2015
2. Law 65/2014/QH13 on Housing
3. Law 45/2013/QH13 on Land
4. Cirular 08/2018/TT-BTP Providing guidelines for registration of and provision of information
about security in interests and contracts, and exchange of information about security interest
registration with centers for registration of transactions and assets of the national registration
agency for secured transactions affliated to the ministry of justice
5. Circular 07/2019/TT-BTP Elaborating to registration for mortgage of land use rights and assets
attached to land
6. Decree 163/2006/ND-CP on Security Transactions
Dissertation, Journals
7. Lò Thanh Thùy (2016), Pháp luật về xử lý tài sản bảo đảm trong ngân hàng thương mại tại Việt
Nam - Thực tiễn áp dụng tại Ngân hàng Thương mại Cổ phần Đầu tư và Phát triển Việt Nam, chi
nhánh Sơn La, Luận văn Thạc sĩ Luật học, Trường Đại học Luật Hà Nội.
8. Bùi Đức Giang (2020), “Pháp luật về cầm cố tài sản – Góc nhìn từ thực tiễn”, Ngân hàng, (18).
9. Trần Quang Vinh, Bùi Đức Giang (2018), “Quản lý rủi ro pháp lý gắn với thế chấp hàng hoá luân
chuyển trong quá trình sản xuất, kinh doanh”, Ngân hàng, (11).

9
Trần Quang Vinh, Bùi Đức Giang (2018), “Quản lý rủi ro pháp lý gắn với thế chấp hàng hoá luân chuyển trong quá
trình sản xuất, kinh doanh”, Ngân hàng, (11), p. 17-18.
9