Law on Handling Assets Formed from Loan Capital

International Asset Valuation Standards (TIAVSC) and ASEAN. This is an inevitable process to ensure that Vietnamese legal regulations are consistent with international practices, especially when Vietnam has joined the WTO and actively participated in the globalization process. In addition, we also need to promote the process of exchanging and learning experiences on asset valuation from advanced countries through seminars with the participation of domestic and foreign credit institutions and valuation experts. These are useful practical lessons for the valuation of secured assets in general and assets formed from loans in particular.

In addition to the general provisions of the law, each credit institution must also issue internal documents on valuation of collateral assets. These documents must specify the content of the Vietnamese valuation standards issued together with Decision No. 24/2005/QD-BTC dated April 18, 2005 and Decision No.

Decree No. 77/2005/QD-BTC dated November 1, 2005 and in accordance with the organizational structure of each unit. For credit institutions that have issued documents on collateral valuation, it is necessary to review regulations that are not in accordance with the law and practice, in order to

ensure that these documents are guiding tools for collateral valuation activities.

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At the same time, to limit and move towards building a common system of principles and methods of valuation at credit institutions, in accordance with international practices, the Banking Association should organize seminars, collect opinions from credit institutions and recommend to State agencies to issue documents guiding credit institutions to apply uniformly. The reason for the above recommendation is because there are currently 07 Vietnamese valuation standards, but the application of these standards is not uniform at credit institutions, causing difficulties in the process of co-financing loans or debt trading with collateral.

On the other hand, each credit institution needs to establish a specialized department for collateral valuation. This department has some main functions as follows: valuation of collateral for new loans, re-granted loans; valuation of assets

guarantee for loans as requested and proposed by the re-appraisal department and credit decision-making agency; Draft regulations, procedures, and standards guiding the valuation of collateral assets in the credit institution system, train and update new regulations on asset valuation for credit officers and asset appraisers. Regarding the organizational structure, the specialized department on asset valuation needs to be organized to the Transaction Office to limit the current situation where credit officers concurrently hold the function of a valuation specialist, leading to a lack of specialized knowledge and sometimes lack of objectivity in valuation. In addition, another reason is that credit institutions often determine the loan amount based on the value of the collateral asset, so credit officers often tend to

valuing assets higher than actual value to increase lending levels. However, this is a long-term solution because organizing such an asset valuation department will be costly, and there are not enough appraisal staff to do it. To overcome this situation, credit institutions need to improve the expertise and responsibility of credit officers; collateral appraisal specialists; strengthen internal inspection and control of compliance with appraisal procedures; regularly organize training and draw experience on valuation work throughout the credit institution system; summarize practices and publish documents such as asset valuation handbooks and appraisal training programs to disseminate to relevant departments.

In addition, the State needs to have policies and solutions to support the development of the real estate market and the stock market to help the asset valuation department easily determine the market price of secured assets. On the other hand, the State needs to create conditions for professional valuation organizations to develop, in order to actively support the need to appraise complex secured assets of credit institutions.

Particularly for assets formed from loan capital, in addition to the general characteristics of normal assets, when applying regulations on valuation of secured assets, valuation officers pay special attention to the weak legality of this type of asset (not yet subject to the law).

(owned by the secured party or not yet formed), flexible selection of valuation methods and principles appropriate to the intended use of the asset.

This requires asset valuation officers to have experience and a clear opinion in analyzing the factors affecting valuation. Credit institutions should require asset valuation officers to have 5 years of experience in the field of valuation or have a valuation certificate.

In case of disagreement on the value of the appraised asset, seek guidance from the Head of the collateral valuation department at the same level or higher.

On the other hand, to avoid the situation where the guarantor declares an increase in the value of the insured property,

To ensure, credit institutions need to strengthen the management of assets in the process of forming from loan capital, especially materials and goods participating in the project through the capital payment stage. To do so, when lending, credit institutions should agree with customers to lend according to the project, disburse payment based on documents and invoices related to the price of materials and goods participating in the project, but must be strictly controlled. When necessary, it is possible to check and compare the data on documents and invoices with the actual occurrence.

3.1.2. Law on notarization and certification

Regarding certification authority: Propose to amend Clause 3, Article 93 of the Housing Law as follows: “ Housing contracts must be certified by a notary or certified by the People's Committee at the commune level regardless of urban or rural housing, except in the following cases…”

For notarization regulations:

Propose that the National Assembly Standing Committee issue a document guiding Article 5 of the Notarization Law on “real” and the records and procedures for notarization of assets formed from borrowed capital. Specifically, the legal document needs to provide detailed and clear regulations on documents proving assets formed from borrowed capital in particular and assets formed from

future success in general to have a basis to promote notarization and certification activities for this type of property.

Amend Clause 2, Article 44 of the Law on Notarization as follows: “ The person requesting notarization has the right to choose to perform the notarization of amendments, supplements, or cancellations of the Transaction Contract at the notary organization that performed the notarization or another notary organization. The notary organization is responsible for providing information related to the notarization records it has performed when requested.”

On the other hand, many problems of people requesting notarization stem from the subjective will of notaries. Therefore, the law needs to clearly stipulate the responsibilities and obligations to compensate for damages of notaries when refusing to notarize without legal basis. In addition, the Ministry of Justice needs to have a general direction and guidance for all notary offices nationwide on the agreements of the parties in the contract to ensure that they are not contrary to the law and social ethics, then it is recommended that the notary office should respect and not be rigid in requesting the notary's form.

However, all of the above recommendations are only aimed at overcoming current difficulties and have not thoroughly resolved the issue of the legal value of notarization procedures for the validity of transactions when notarized and certified. In my opinion, when the parties have full civil capacity, are completely voluntary, freely participate in the secured transaction and the content and purpose of the transaction are not contrary to the provisions of law and social ethics, then the transaction is valid. Notarization and certification are only confirmation by the State that a transaction has occurred and cannot be a condition for the validity of the transaction. Therefore, the author proposes to abolish Clause 2, Article 122 of the 2005 Civil Code to completely resolve this issue.

Point out the difficulties of subjects when notarizing assets formed from loans due to problems with paperwork procedures, while still protecting their rights.

of the secured party because even if not notarized, the transaction meets the conditions specified in Clause 1, Article 122, it is still valid.

3.1.3. Law on secured transactions

Decree 163/2006/ND-CP was issued to unify legal regulations on secured transactions, and at the same time, to cancel the validity of Decree No. 178/1999/ND-CP; Decree No. 86/2002/ND-CP on loan guarantees. Due to Decree

Decree No. 163/2006/ND-CP is a legal document providing general regulations on insurance transactions.

ensure that some specific contents of loan security transactions are not

are specified in this document such as the concept of assets formed from loan capital, procedures, and documents for registration of collateral with assets formed from loan capital. While these are still new issues, there are not many studies on types of assets and forms of loan collateral with assets formed from loan capital, so leaving it up to credit institutions to self-regulate in internal documents will create inconsistency in terminology in this field. Therefore, it is recommended that State agencies soon issue documents guiding the above contents, creating a basis for credit institutions to issue internal documents within their organizations.

Regarding the registration authority, it is proposed to boldly assign the authority to the People's Committee at the commune level to register secured transactions. The regulation will facilitate the subjects participating in secured transactions, especially in remote areas where the terrain is rugged, travel is difficult and the district-level secured transaction registration agencies are mainly located in the central area. In addition, it is also necessary to clearly define the responsibility for receiving and processing dossiers at the People's Committee at the district and commune levels (after

authorized) on all working days of the week and shorten the time for receiving secured transaction registration to 03 working days from the date the office receives valid registration documents.

In addition, lawmakers need to absorb the above feedback and complete them in the Law on Registration of Secured Transactions, which is expected to be considered and approved by the National Assembly in the upcoming session. Specifically, the provisions of the Law need to pay attention to

Focus on perfecting the organizational model of the secured transaction registration system in the direction of reducing the number of registration agencies, moving towards organizing registration centrally in a system of agencies. At the same time, it is necessary to concentrate the State management function of registration in a single agency to ensure consistency.

Regarding the procedure for registering assets formed from loan capital, it is proposed to regulate in the direction of simplifying the procedure. That is, after the asset is formed, the party requesting notarization only needs to supplement documents related to the formed asset to the secured transaction registration agency to update the secured transaction registration file. The procedure for supplementing documents has legal value as re-registration and still ensures priority rights for the mortgagee. This procedure, if allowed,

The application will save customers' loan transaction costs and contribute to the administrative procedure reform process. On the other hand, it is necessary to promote the implementation of the project.

Register secured transactions (both real estate and immovable property) via computer network to save time and costs. Complete the National Database System on secured transactions, so that registration and provision of related information

to secure transactions in the most convenient, fastest and most accurate way, creating a reliable basis for organizations and individuals to learn through information before establishing secured transactions, which is also one of the measures to contribute to the health and effectiveness of the secured transaction registration system.

At the time this thesis was completed, draft 07 of the law on registration of secured transactions was being submitted for comments. According to the content of this draft, some of the shortcomings reflected in chapter 2 have been

is fixed in this document. In my opinion, the most progressive point in these drafts is that the law has recognized the view that registration of secured transactions is only legally valid for third parties and is the basis for determining the order of priority of payment. This provision is correct because it respects the freedom of decision and commitment of the subjects towards recognizing the validity of secured transactions.

from the time of legal conclusion, regardless of whether the transaction is

registered or not. Registration does not create additional rights for the parties to the transaction but is only valid for third parties. In addition, if the time of validity of the secured transaction depends on the time

registration, it may make the transaction unstable in some cases, affecting the legitimate rights and interests of the parties. Article 34 of the Law on Registration of Secured Transactions stipulates: “ In case the secured asset is an asset formed in the future, the person requesting registration does not have to describe the asset in detail. When the secured asset is formed, the person requesting registration does not have to submit a dossier for registration of changes to the content of the secured transaction as prescribed in Point b, Clause 1, Article 27 of this Law. In case the asset formed in the future is a construction work, when the work is formed, the person requesting registration must submit a dossier for registration of changes to the content of the registered secured transaction as prescribed in Point b, Clause 1, Article 27 of this Law .” Thus, this provision not only recognizes the registration of secured transactions

The draft Law on Registration of Secured Transactions has not yet been resolved. That is, the draft has not yet stipulated how to determine the time of registration of secured transactions when the secured party has changed information related to legal status such as name change, representative change or there is an error in information when filling out the application or registration file for secured transactions. On the other hand, the provision on detailed description of secured assets in Clause 1, Article 23 is not suitable for assets formed from loans because at the time of registration, the assets have not yet been formed and therefore cannot be described in detail. Furthermore, Clause 2, Article 34 stipulates that when a construction project is completed in the future, the person requesting registration must submit a registration application for changes to the registered security content.

signed in accordance with the provisions of Point b, Clause 1, Article 27 of this Law. In addition, the provisions on termination of registration need to be amended in the direction of protecting the interests of creditors. In addition, the provisions on conditions and fees for conducting online information searches on the data system have not been specifically mentioned in the draft. Hopefully, the problems analyzed above will be accepted by lawmakers and appropriate legal regulations will soon be developed so that the Law on Registration of Secured Transactions can truly be an effective tool for subjects in secured transactions.

3.1.4. Law on handling assets formed from loan capital

Handling of secured assets is one of the important and meaningful activities for loan recovery. The laws regulating this field are quite broad, including the 2005 Civil Code; Land Law; 2004 Civil Procedure Code; Decree 163/2006/ND-CP; Decree 05/2005/ND-CP; and documents guiding the implementation of the above documents. Because the regulations on handling secured assets are referred to in many documents, overlap and contradiction are inevitable. Based on the difficulties that entities often encounter when handling secured assets, the author proposes the following solutions:

Currently, the law still lacks regulations on handling secured assets formed from loans, especially during the stage when the assets are being formed. Therefore,

It is proposed to supplement legal regulations on records, procedures, formalities, and methods of handling this type of asset. Specifically, regarding the method of handling, the law should recognize the right to appoint members designated by credit institutions to participate in the investment project management board or allow credit institutions to convert loans into capital contributions to the company and the capital contribution must be carried out in accordance with the procedures prescribed by law.

Supplementing regulations on handling assets attached to land whose use rights are

Land is not mortgaged property, in cases where land use rights and attached assets cannot be separated (houses, construction works, etc.). For cases