NO&T Asia Legal Review
The Government has recently issued Decree No. 99/2022/ND-CP on registration of security interests (“Decree 99”) to replace Decree No. 102/2017/ND-CP dated September 1, 2017. Effective from January 15, 2023 (except for certain provisions on online registration which are to come into effect as of January 1, 2024), Decree 99 is expected to increase efficiency in the field of secured transactions and improve the quality of the current secured transactions registration system.
As opposed to the regulations of Decree 102/2017/ND-CP which divide security interests to be registered into only two groups (i.e. security interests that are required to be registered and security interests to be registered upon request), Decree 99 specifies four cases for registration of secured transactions as follows:
(1) Mortgage, pledge and reservation of ownership over assets under Civil Code and relevant laws;
(2) as agreed between securing party and secured party or on request of the secured party, except reservation of ownership;
(3) notification of disposal of secured assets in case such assets are used to secure many obligations for many secured parties, if there is an agreement between securing party and secured party;
(4) registration for change or deregistration of the aforementioned cases.
In order to ensure compliance with relevant laws, in addition to regulations on the general authority of the registration agency, Decree 99 clearly classifies registration cases under the respective jurisdiction of each registration agency as follows:
The registration will be effective from the effective date of registration until the time of deregistration. In general, the change of registration contents will not change the effective time or terminate the validity of the registration. When an asset is used to secure more than one obligation, the registration for the subsequent obligation would not alter or revoke the validity of the registration for earlier registered obligation.
Under Decree 99, the registration may be revoked in one of the following situations:
In case of revocation, the registration will be invalid. However, the revocation of a part of the registration will not affect the remainder of its contents. In case of overlapping registrations, the validity of the registration will be determined based on the order of registration.
The registration’s validity period is a basis to determine the duration of enforceability against the third party in accordance with the Civil Code.
Applications for the registration of security interests may be submitted online, in hard copy, by postal service or by email. Digital signatures and digital seals are accepted in case of online submission.
Regarding the applicant, to ensure compliance with the authority to request registration in accordance with the law on security for performance of obligations and relevant laws, Decree 99 distinguishes between the applicant for registration, applicant for registration for change and applicant for deregistration. Decree 99 also specifies information about the representative in the registration, the rights and obligations of the applicant.
In order to ensure transparency and avoid wasting time and costs for the applicant in case the registration authority unreasonably refuses to accept the registration application, Decree 99 stipulates that the registration authority is not allowed to request any additional documents or to provide any additional information unless there are grounds to do so in the Decree. If the registration agency refuses the registration application, it must issue a letter clearly stating the grounds for such refusal. The registration agency will be held liable for any violations of the aforementioned principles, and the applicant has the right to file a complaint, initiate a lawsuit, or request the registration agency to compensate for damage in case of an inappropriate refusal.
Decree 99 also outlines a mechanism for information disclosure, contents, methods, and criteria for searching and providing information on secured transactions in order to ensure consistency with law and regulations on access to information.
Decree 99 sets out a clear mechanism for the registration and deregistration of security interests thereby ensuring transparency for lenders and investors in determining the borrowing capacity of borrowers and availability of unencumbered assets over which security interest can be created.
This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.
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