On 6th June 2014, the Ministry of Justice, the Ministry of Natural Resources and Environment, and the State Bank promulgated the Joint Circular No. 16/2014/TTLT-BTP-BTNMT-NHNN (“Circular 16”) guiding a number of issues on disposal of security assets. The Circular 16 creates a clear legal corridor guiding on custody, sale of security assets, receiving the security assets as substitute for obligation performance of securer and procedure  of transferring ownership, using right of the assets after disposing the security assets. This Circular shall not be applied for cases of disposal of security assets in enforcement of civil judgments operation.

Generally speaking, subjects being organizations, households or individuals relating to disposal of assets must abide by principles of agreement and perform objectively, publicly and transparently as per Article 58 of the Decree No. 163/2006/ND-CP on security transactions and Clause 15 Article 1 of the Decree No 11/2012/ND-CP amending, supplementing a number of articles of the Decree No. 163/2006/ND-CP and other provisions of relating laws.

Circular 16 is to detail measures of disposal of security assets including: mortgaged assets being circulating goods in manufacturing – business process, held assets in a binding contract, land use right and assets attached to land in case of the mortgage contract being registered before being recovered by competent authority, debt claims, assets forming in future.

Especially, in case of the mortgaged assets being held to discharge obligation in a binding contract, Circular 16 allow the mortgagee to implement obligations to take back the mortgaged assets from the holder, then require the mortgagor to repay the implemented obligations and arising cost.

For security assets being land use right, assets attached to land, the mortgage contract of which has been registered now being recovered by competent Government authority, the parties shall be notified in writing the content of recovery. In case of absence of provision on recovery of security assets in mortgage contract, the paid damages shall be transferred to the securee (if the securer agree), or shall be held in bank until the parties reach an agreement on disposal of security assets or having judgment of Court.

In case of the mortgaged assets being assets forming in future, whether such assets is required to register the ownership right, the circulation right, or whether the assets is transferred to securer, the securee shall still dispose the security assets if the securer fails to perform or improperly performs the agreed obligation in the mortgage contract.

This Circular shall take effect officially on 22nd July 2014.