Pledge and mortgage assets at Global Petroleum Joint Stock Commercial Bank GP.Bank

- In case the mortgagor or a third party invests in the mortgaged property (hereinafter referred to as the person who invested in the mortgaged property), but does not use the additional assets due to the investment to secure the performance of civil obligations, the settlement shall be as follows:

+ In case the additional asset due to investment can be separated from the mortgaged asset without losing or reducing the value of the mortgaged asset, when handling the secured asset, the person who invested in the mortgaged asset has the right to separate the additional asset due to investment from the mortgaged asset, unless otherwise agreed.

+ In case the increased asset due to investment cannot be separated from the mortgaged asset or if separated, it will cause loss or decrease in value of the mortgaged asset, the investor in the mortgaged asset may not separate the increased asset due to investment from the mortgaged asset, but when handling the mortgaged asset, the investor in the mortgaged asset shall have priority in payment of the increased value, unless otherwise agreed.

2.2.3. Handling of secured assets

Before the issuance of Joint Circular No. 16/2014/TTLT-BTP-BTNMT-NHNN guiding a number of issues on handling secured assets (TTLT 16), from 2006 to present, Decrees 163/2006/ND-CP of the Government on secured transactions and Decree 11/2012/ND-CP on amending and supplementing a number of articles of Decree 163 on secured transactions, there were provisions creating favorable conditions for organizations and individuals in the process of handling secured assets to recover debts. However, due to the lack of specific guidance on how to handle secured assets and the responsibilities of relevant competent state agencies, organizations and individuals have encountered many difficulties and confusion in the application process. With the issuance of Circular 16, the legal framework for handling secured assets for bank loans has been completed one step further, solving many problems.

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Difficulties and obstacles in the process of handling secured assets and registering ownership and usage rights of assets after handling secured assets.

In fact, collateral in banks today has two common forms: collateral in movable property and real estate.

* First, with secured assets that are movable assets that do not require ownership registration (machinery, production lines, etc.), according to current regulations, based on the agreements in the credit contract signed by the bank and the borrower, the bank is allowed to sell through auction to recover capital. As for assets that are goods circulating in the production and business process, not only one but many banks have a lot of bad debts due to businesses borrowing money and assets that are goods circulating in the production and business process have been sold by the business owner. This is the type of asset that the law allows the mortgagor to sell/replace without the consent of the mortgagee. The rights of banks that mortgage this type of property have not been properly protected. Now, Joint Circular No. 16 has provided a mechanism for recovering mortgaged property sold or replaced by the mortgagor without the consent of the mortgagee while the mortgage contract has been registered as a secured transaction and there is an agreement between the mortgagor and the mortgagee that the sale or replacement of mortgaged property must have the consent of the mortgagee, specifically:

- Recovery procedure:

According to the provisions of Article 63 of Decree No. 163/2006/ND-CP amended and supplemented by Decree No. 11/2012/ND-CP:

1. The party holding the secured property must deliver the property to the asset disposer according to the latter's notice; if the party holding the secured property fails to deliver the property within the time limit specified in the notice, the asset disposer has the right to seize the secured property according to the provisions of Clause 2 of this Article for disposal or request the Court to resolve;

2. When seizing secured assets, the asset handler shall be responsible for: a) Notifying the asset holder in advance of the application of measures to seize secured assets within a reasonable period of time. The notice must clearly state the reason, time of seizing secured assets, rights and obligations of the parties; b) Not applying measures that violate prohibitions of law or are contrary to social ethics during the process of seizing secured assets;

3. In case the holder of the secured property is a third party, the guarantor shall be responsible for coordinating with the asset handler to carry out the seizure of the secured property;

4. The guarantor or third party holding the secured property must bear reasonable and necessary costs for the seizure of the secured property; in case of failure to hand over the property for handling or acts of obstructing the legal seizure of the secured property causing damage to the secured party, compensation must be paid;

5. During the process of seizing secured assets, if the secured asset holder shows signs of resistance, obstruction, causing insecurity and disorder in public places or committing other illegal acts, the secured asset handler has the right to request the People's Committee of the commune, ward or town and the police agency where the secured asset is seized, within the scope of their functions, duties and powers, to apply measures as prescribed by law to maintain security and order, ensuring that the secured asset handler exercises the right to seize secured assets [20].

+ Accordingly, the mortgagee shall send directly or by post a written notice to the transferee of ownership and right to use the property regarding the recovery of the property, together with an original copy of the guarantee contract or a

A copy of the security contract certified by the People's Committee of the commune level, issued by a notary public from the original or 01 copy of the Certificate of registration of secured transactions issued by the agency registering secured transactions. The notice sent to the transferee of ownership or right to use must clearly identify the mortgaged property, the term, the place of delivery of the mortgaged property, and the subject entitled to receive the mortgaged property;

+ If the party receiving the transfer of ownership and right to use the property returns the property in accordance with the request of the mortgagee, the parties shall draw up a record of property handover, with the signatures and seals (if any) of the parties;

+ Expenses related to the preservation of mortgaged property are included in the cost of handling secured property. After receiving back the mortgaged property, the mortgagee is responsible for preserving and maintaining the mortgaged property; if the mortgaged property is lost or damaged, compensation must be paid to the mortgagor, except for damages and losses that occurred before the mortgagee recovered the mortgaged property or due to force majeure;

+ In case the property is not seized in any form, the customer can be sued at a competent court according to the provisions of the law on civil proceedings.

- Method of asset recovery:

+ In case the mortgagor sells the mortgaged property, the mortgagee has the right to request the mortgagor to transfer the proceeds or assets formed from the proceeds from the sale of the mortgaged property to pay for the value of the obligation agreed upon in the mortgage contract. If the mortgagor has not received the payment or has only received a part of the payment, the mortgagee has the right to request the buyer to pay the amount for purchasing the mortgaged property. In case the proceeds or the value of the assets formed from the proceeds are not enough to pay the value of the obligation, the mortgagor must pay

The mortgagee shall pay the outstanding amount to the mortgagee if the mortgagor is also the secured obligor, or the secured obligor shall pay the outstanding amount to the mortgagee if the mortgagor is not also the secured obligor, unless otherwise agreed by the parties. In case the proceeds or the value of the property formed from the proceeds is greater than the value of the obligation, the mortgagee shall pay the difference to the mortgagor.

+ In case the mortgagor replaces the mortgaged property, the mortgagee has the right to seize and dispose of the replacement property and pay the difference in value (if any) to pay for the mortgagor's obligations.

- In case the mortgagee cannot exercise the right to recover the mortgaged property due to the loss, damage, loss or decrease in value of the mortgaged property, the mortgagee has the right to request the mortgagor to repair, supplement or replace other property of equivalent value or supplement or replace other security measures or request compensation for damages according to the provisions of law, unless the parties have other agreements.

* As for real estate as collateral, these assets must be registered for ownership and are subject to the scope of regulation of many other laws. Although, according to the provisions of the Civil Code, Decree No. 163/2006/ND-CP amended and supplemented by Decree No. 11/2012/ND-CP and the agreements in the Contract between the parties, the full authority to handle the collateral belongs to the mortgagee. However, if the customer does not sign the contract to transfer the real estate to the bank/Minutes of property handover, the bank will not transfer ownership of that property or transfer it to a third party. Therefore, in order to handle the collateral and recover the debt, the mortgagor will often choose the litigation path. This is the most popular path today, both having a judgment/decision from the competent state agency and saving on transfer tax.

Property name. At this time, the sale of assets to recover debt is supported by the Enforcement Agency. However, this method takes a lot of time, complicated procedures, goes through many levels of trial with many litigation processes... which has significantly affected the business and investment activities of the secured party. Or, when the bank files a lawsuit against the customer in court, but if the customer intentionally avoids or runs away to hide his address, making it impossible for the Court to serve the litigation documents, the lawsuit process is suspended or the petition is returned, leading to the debt settlement not being carried out, without any sanctions to intervene.

In addition, there are cases where the secured party wins the lawsuit but is still not sure whether the secured property can be handled in practice because when the property is foreclosed according to the judgment/decision, the enforcement agency replies: the judgment/decision is unclear or can be understood in many different ways, so there is no basis for enforcement, causing the enforcement process to be prolonged and endless.

Returning to Joint Circular No. 16, with the new provisions in this document, the bottlenecks in handling secured assets mentioned above can be resolved. Specifically, according to Article 10 of this Circular, if the mortgagor (borrower) and the mortgagee (bank) cannot agree on the selling price of the secured asset, even in the case of the mortgagor not cooperating, the bank can still appoint a valuation organization to determine the selling price of the asset.

In case the secured assets cannot be sold at the price given by the valuation organization, the bank has the right to reduce the price of the secured assets by a maximum of 30% (within 3 months) compared to the original selling price. Allowing banks to reduce the selling price of secured assets without the consent of the mortgagor creates conditions for banks to liquidate assets and recover debts better.

In case the collateral has been reduced by 30% compared to the price given by the appraisal organization but the asset is still not sold, the banks can receive the collateral, which is real estate, to carry out the conversion procedure.

ownership rights according to law. The transfer of ownership rights according to the provisions of Article 12 of the above Joint Circular, in case the mortgagor does not voluntarily sign the contract, papers, documents, banks can still carry out the transfer on the condition that they only need to attach the original notarized guarantee contract in the transfer dossier.

Thus, it can be seen that, with the new regulations and guidelines in Joint Circular No. 16, the foreclosure of real estate mortgaged assets in the coming time may be handled more quickly. This legal mechanism has a breakthrough meaning in handling bad debts at banks, because currently, of the total outstanding debt of the entire economy, 72% of outstanding debt has collateral, of which 66% is secured by real estate. If calculated on the total bad debt of the entire banking system, up to 57% of collateral is real estate. Once this real estate "blood clot" is handled better, the blockages in credit flow will be significantly cleared.

* In addition, Joint Circular No. 16 specifically regulates the handling of mortgaged assets that are debt claims and types of assets formed in the future:

- Regarding debt collection rights (property rights arising from future housing sale and purchase contracts are considered a form of debt collection rights and the handling of assets is applied similarly to the handling of mortgaged assets as debt collection rights):

Firstly , at least 07 (seven) working days before the time of debt claim settlement, the mortgagee shall send to the party with the debt repayment obligation a written notice of debt claim settlement and a copy certified by a notary public of the notarized debt claim mortgage contract or the original debt claim mortgage contract with signatures and seals (if any) of the parties or the Certificate of registration of secured transactions using debt claims issued by the secured transaction registration agency.

Second , within 07 (seven) working days from the date of receipt of the notice of debt claim settlement, the party with the debt repayment obligation shall be responsible for paying the debt to the mortgagee according to the following instructions: (i) If the time of performing the debt repayment obligation under the contract has grounds for the arising of the debt claim of the mortgagor before the time of settling the debt claim under the mortgage contract, the party with the debt repayment obligation shall be responsible for transferring the debt repayment amount to the account opened by the party with the debt repayment obligation at the Bank as designated by the mortgagee. The mortgagee shall have the right to request the Bank to freeze this account and shall have the right to request the Bank to release it when the time comes to handle the mortgaged property. From the time of depositing money into the account, the party with the debt repayment obligation shall not have the right to request the Bank to release and conduct transactions on this amount; (ii) If the time of performance of the debt repayment obligation under the contract is based on the arising of the mortgagor's right to claim the debt after the time of settlement of the debt repayment right under the mortgage contract, the mortgagee is entitled to request the party with the debt repayment obligation to pay that debt to him/her at the time the debt repayment obligation is due. The mortgagee is not allowed to request the mortgagor to pay when the debt repayment obligation has not yet become due, unless the parties have agreed otherwise;

Third , in case of direct receipt of money or assets from the party with the obligation to pay the debt, the mortgagee must make a record with the signatures of the mortgagor, the mortgagee and the party with the obligation to pay the debt. The record of receipt of money or assets must clearly state the handover and receipt of money or assets and determine the value of the assets. In case the mortgagor does not sign the record, the record only needs the signatures of the mortgagee and the party with the obligation to pay the debt. The mortgagee is responsible for sending the record of receipt of money or assets to the mortgagor.

Fourth , if the party obligated to pay the debt does not comply with the above provisions,

Pledge and mortgage assets at Global Petroleum Joint Stock Commercial Bank GP.Bank - 6

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