Securing a loan with GTCG is a measure to ensure the borrower's obligation to repay the loan, a sanction with the function of pre-punishment, and a barrier to borrowers with the intention of fraud. The loan collateral is GTCG as a reserve to reduce losses for the credit institution when the borrower, for some reason, cannot repay the loan, the collateral is GTCG will be processed to recover the debt. Once there is a measure to secure the loan with GTCG attached to the loan contract, the credit institution can "rest assured" to "provide capital" to the borrower because the right to recover the loan from the borrower has been guaranteed.
Second, securing loans with GTCG is a "salvation" for borrowers because thanks to this measure, borrowers can borrow capital from credit institutions to invest in business or improve their living standards. Without GTCG as collateral and without any other assets or without another entity to guarantee, few customers will be "funded" by credit institutions. In addition, securing loans with GTCG contributes to enhancing the responsibility of the borrower to fulfill the obligation to repay the loan, motivating and influencing the borrower to repay the loan and use the loan effectively.
In addition, securing loans with GTCG at credit institutions also contributes to promoting stable development of socio-economic life, through supporting and ensuring that borrowing and lending relationships are carried out smoothly, and loan capital is circulated and used to improve and enhance living standards and develop production and business. Loans secured by GTCG play a role as one of the important capital creation channels for the economy, promoting economic development .
1.4. Contents of the law on securing loans with valuable papers at credit institutions
1.4.1. Overview of the law on securing loans with valuable papers at credit institutions
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Valuable papers in the form of bills of exchange, securities, etc. have existed for many years in developed capitalist countries. However, before
In the 1990s, the issuance of these documents was still a new issue for Vietnam.
For the first time, in 1990, types of national construction bonds and issuance transactions of valuable papers by credit institutions (more specifically, bank bonds) were regulated in the Ordinance on Banks, Credit Cooperatives and Financial Companies dated May 24, 1990.
In 1995, the first Civil Code of Vietnam was issued, officially recognizing GTCG as a type of property used as collateral for the civil obligations of the obligated party in civil transactions (Clause 2, Article 327 of the 1995 Civil Code).
By 1997, the issuance of bank bonds and other valuable papers continued to be regulated in the Law on Credit Institutions No. 07/1997/QHX passed by the 10th National Assembly of the Socialist Republic of Vietnam, 2nd session on December 12, 1997 (amended and supplemented by a number of articles by Law No. 20/2004/QH11 passed by the 11th National Assembly of the Socialist Republic of Vietnam, 5th session on June 15, 2004). In 1999, the Ordinance on Commercial Papers was issued, recognizing an additional type of valuable papers in the fields of commerce, banking and civil law.
When the 2005 Civil Code was issued to replace the 1995 Civil Code, GTCG continued to be recognized as a type of property used as collateral (in Article 321). By 2006, when Decree 163 was issued, the transaction of securing loans using GTCG was regulated more specifically regarding the content such as the type of GTCG used as collateral, the rights of the GTCG mortgagee, and the handling of secured assets being GTCG.
From 2005 to 2006, important legal documents related to GTCG were successively issued such as the Enterprise Law, Securities Law, Civil CCC Law, Decree No. 52/2006/ND-CP dated May 19, 2006 of the Government on issuance of corporate bonds (Decree No. 52). This is
Legal documents regulating stocks, securities, CCCNs... as types of valuable papers, in which the CCCN Law stipulates quite specifically the right to pledge, transfer CCCNs for pledge and handle pledged CCCNs.
In 2008, the Governor of the State Bank issued the Regulation on issuance of GTCG, continuing to recognize that GTCG issued by credit institutions can be used as collateral in civil transactions. Also in 2008, the State Bank issued Decision No. 03/2008/QD-NHNN dated February 1, 2008 on lending and discounting GTCG for investment and trading in securities, which stipulates that credit institutions are allowed to lend in the form of pledging securities and/or securing other assets to customers using borrowed capital to purchase securities. Most recently, in 2010, the Law on Credit Institutions, the Law on the State Bank and the Law on Securities were also newly issued, amended and supplemented with provisions related to GTCG.
Although, legal documents with provisions related to loan security by GTCG at credit institutions are listed quite a lot as above. However, a standard, complete and unified legal regulation for this measure has not been established. Considering the scope of operations of credit institutions, the State Bank has not issued any regulations or procedures on lending activities of credit institutions to customers secured by GTCG. Therefore, the implementation of loan security by GTCG at credit institutions is currently in a state of each person following their own regulations set by each credit institution, not following any unified legal "standard".
1.4.2. Contents of the law on securing loans with valuable papers at credit institutions
The content of the law on loan security by GTCG at credit institutions is a synthesis of legal provisions directly regulating and related to loan security by GTCG at credit institutions. The question is what does the law regulating loan security by GTCG at credit institutions stipulate? The answer to this question needs to be based on the system of legal documents on loan security by GTCG.
GTCG at credit institutions. Current legal documents mainly refer to the contents of GTCG, the rights of GTCG owners to use that GTCG as collateral, types of GTCG used as collateral, and contracts for securing loans using GTCG. These are the "materials" that create relationships, empower subjects to secure loans using GTCG, aiming to protect the rights and legitimate interests of the parties in the relationship of securing loans using GTCG at credit institutions. Below, the thesis would like to present some legal provisions on securing loans using GTCG at credit institutions.
1.4.2.1. Legal regulations on types of valuable papers used as collateral
In a transaction securing a loan using GTCG, the parties to the transaction are free and voluntary to agree on the type of GTCG used as collateral. However, such freedom of agreement must be within the framework and limits permitted by law, that is, the type of GTCG that the parties choose as collateral must be permitted by law to be included in the transaction and satisfy other conditions set forth by law.
It can be said that GTCG is very diverse, so the legal regulations on the type of GTCG used as collateral are not only contained in a single legal document but are scattered in many different legal documents such as the 2005 Civil Code, the Law on Civil CCCCN, the Regulations on issuance of GTCG, Decree No. 52, Decree No. 163,...
However, current law only stipulates in the direction of listing the types of valuable papers used as collateral (for example, Article 321 of the 2005 Civil Code stipulates that bonds, stocks, promissory notes and other valuable papers are used as collateral, while the Civil Code stipulates that bills of exchange, promissory notes and checks are used as collateral (Article 36, Article 57).
The conditions for valuable papers used as collateral are currently very generally stipulated that valuable papers used as collateral must be valuable papers.
allowed to be traded. In some cases, the law also stipulates that a specific GTCG is allowed to be used in other transactions but cannot be used in loan security transactions.
Although, the current law does not have clear and specific regulations on the conditions of GTCG used as collateral. However, through connecting the provisions of the law on loan security using GTCG at credit institutions, the author believes that a GTCG is used as collateral when it satisfies two basic conditions: the GTCG must be legally owned by the guarantor (the guarantor has full authority to decide on the use of that GTCG as collateral) and the GTCG must be permitted to be traded (allowed to participate in secured transactions).
1.4.2.2. Legal regulations on procedures for receiving loan collateral in the form of valuable papers
To protect the legitimate rights and interests of the borrower, the guarantor and the secured party (a credit institution), when securing loans with GTCG at a credit institution, the parties must comply with certain procedures and processes.
However, current law does not have specific regulations on the procedures for receiving GTCG as collateral for loans at credit institutions. The procedures in this case must comply with the general regulations on receiving collateral in the 2005 Civil Code and specific instructions in Decree No. 163, Decree No. 83 and other relevant legal regulations.
According to the provisions of Decree No. 163, the general procedures for receiving secured assets will be: entering into a secured transaction, notarizing and certifying the secured transaction, registering the secured transaction, performing the secured transaction (the guarantor transfers the assets and documents proving ownership of the assets to the secured party; the secured party exercises the right to manage, supervise and inspect the secured assets being GTCG during the validity period of the secured transaction) and finally handling the secured assets.
Through the provisions of Decree No. 163 and Decree No. 83, it can be seen that for loan security by GTCG, notarization and registration of secured transactions are not mandatory procedures. The validity of loan security by GTCG does not depend on whether this secured transaction is notarized or not. The procedure for registering loan security transactions by GTCG is also not "required" by law. These procedures are selected to be performed according to the agreement of the parties in the transaction if they deem it necessary.
1.4.2.3. Legal provisions on loan security contracts using valuable papers
When establishing a loan security measure using GTCG, the parties must clearly identify the type of security measure applied, whether it is a pledge, mortgage or deposit, and the corresponding type of contract that needs to be signed to establish that security measure.
According to the 2005 Civil Code, the difference between pledge and mortgage is whether the guarantor transfers the secured property to the secured party or not. Accordingly, pledge is the transfer of property to the pledgee, while mortgage does not involve the transfer of property to the mortgagee.
However, for some specific assets, the current law clearly stipulates that there is only mortgage or pledge, not entirely based on the transfer factor or not. For example, some types of assets can only be mortgaged, such as land use rights (Law on Land 2003), houses (Law on Housing 2005), fishing boats (Law on Fisheries 2003), and seagoing ships (Maritime Code 2005). And some other assets can only be pledged, such as CCCNs such as checks, bills of exchange, promissory notes (Law on CCCNs), bills of credit, bonds and other valuable papers issued by credit institutions (Regulations on issuance of valuable papers). In Article 19 on "Rights of the mortgagee in case of accepting a bill of lading, savings card, valuable papers", Decree No. 163 also stipulates that valuable papers are assets used for mortgage.
Thus, according to the legal documents listed above, current law has implicitly determined that GTCG is only used for pledge and not for mortgage. If GTCG were also mortgaged, the above documents would have had to add the word "mortgage" and Decree No. 163 would not have recorded GTCG in the "Pledge of assets" section. Therefore, the type of contract determined by law in the case of accepting GTCG as collateral is the GTCG mortgage contract. And in fact, credit institutions also only accept GTCG as collateral under the GTCG mortgage measure through the signing of a GTCG mortgage contract.
The law stipulates that a GTCG mortgage contract must be made in writing, which can be made in a separate document or recorded in the main contract. The mortgage contract does not need to be notarized, and notarization can be performed when the parties have an agreement.
Regarding the determination of the type of security contract, the Japanese Civil Code also has similar provisions on establishing a stock pledge contract. According to this code, " stocks are used as pledges. The condition for the validity of a stock pledge is the actual transfer of the stock" [25, pp. 279; 289].
In a GTCG mortgage contract, the subject of the contract is the specific type of GTCG that the mortgagor uses to mortgage. The GTCG must be of a type that the law allows to be used as collateral to perform obligations.
According to the provisions of law (Article 328 of the 2005 Civil Code), the parties to a contract of mortgage of fixed assets at a credit institution include the mortgagor (the party owning the fixed assets) and the mortgagee (the credit institution). The mortgagor is the borrower or a third party (usually having a close relationship with the borrower and accepted by the credit institution) using the fixed assets owned by him/her as collateral at the credit institution to secure the borrower's obligation to repay the loan.
The parties to a GTCG mortgage contract have the rights and obligations according to the agreement and the provisions of the 2005 Civil Code (from Article 330 to Article 333).
Decree No. 163 (from Article 16 to Article 18, Clause 3, Article 19), Law on Civil Responsibilities (Article 37, Article 57) and regulations in other legal documents related to loan security using GTCG.
1.4.2.4. Legal provisions on handling secured assets that are valuable papers
The handling of secured assets in the form of valuable papers must comply with the general provisions of the law on handling secured assets. Regarding the handling of secured assets in general, the 2005 Civil Code and Decree No. 163 both provide very specific regulations on the principles of handling secured assets (Articles 336, 338, 355 of the 2005 Civil Code and Article 58 of Decree No. 163), methods of handling secured assets, time limits for handling secured assets and other contents related to handling secured assets.
The handling of secured assets is, in principle, first implemented according to the agreement of the parties, which can be the agreement at the time of establishing the secured transaction or the agreement at any other time during the process of performing the secured transaction. In case there is no agreement, it will be handled according to the provisions of law such as when the deadline for performing the secured obligation comes but the obligated party fails to perform or improperly performs the obligation, or the obligated party must perform the secured obligation before the deadline due to a breach of the obligation according to the agreement, etc.
In addition to the general regulations, the handling of secured assets in the form of GTCG is also carried out according to the following specific regulations:
First of all, regarding the procedure for notifying the handling of secured assets, which are GTCG. The GTCG handler has the right to handle immediately and must notify other secured parties of the handling of that GTCG (while for other types of secured assets, before handling the assets, the handler must notify in writing the handling to other secured parties or register a written notice of the handling of secured assets in accordance with the provisions of law on registration of secured transactions).