Is the Asset Management Company entitled to seize security to handle debt recovery? Is it necessary to perform an audit?

Pursuant to the provisions of Article 3 of Decree 53/2013/ND-CP, the establishment of an Asset Management Company is carried out for the following purposes:

(1) The State Bank of Vietnam (hereinafter referred to as the State Bank) established an Asset Management Company to handle bad debts and promote reasonable credit growth for the economy.

(2) Asset Management Company is a special enterprise, organized in the form of a one-member limited liability company, 100% charter capital owned by the State and subject to state management, inspection and supervision of the State Bank.

Based on the above regulations, Article 1 of Decision 1459/QD-NHNN was issued to regulate the establishment of a single-member Limited Liability Company for Asset Management of Vietnamese credit institutions (hereinafter referred to as Asset Management Company) to handle bad debts and promote reasonable credit growth for the economy, specifically as follows:

(1) Asset Management Company is a special enterprise with 100% charter capital owned by the State; Subject to state management, inspection and supervision of the State Bank of Vietnam.

(2) The Asset Management Company has its own legal status and seal; are allowed to open accounts in Vietnamese Dong and foreign currencies at the State Treasury and domestic commercial banks according to the provisions of law.

(3) Name of Asset Management Company:

a) Full name in Vietnamese: One-member limited liability company Asset management of Vietnamese credit institutions.

b) Abbreviated name in Vietnamese: Asset Management Company.

c) Full name in English: Vietnam Asset Management Company.

d) Abbreviated name in English: VAMC.

(4) The charter capital of the Asset Management Company is 500,000,000,000 VND (Five hundred billion VND even).

Thus, the Asset Management Company was established with specific regulations on name, charter capital and organizational form according to current laws with the goal of handling bad debts and promoting reasonable credit growth for the economy.

Can the Asset Management Company seize assets to ensure debt settlement and recovery?

Pursuant to the provisions of Clause 1, Article 13 of Decree 53/2013/ND-CP, supplemented by Clause 4, Article 1 of Decree 34/2015/ND-CP, the Asset Management Company has the following specific powers:

a) Request the credit institution selling the debt, the borrower, the party obligated to repay the debt, the guarantor and relevant agencies, organizations and individuals to provide information and documents on the organization and activities of the borrower, the party obligated to repay the debt, and the guarantor; information and documents on bad debts and collateral assets of bad debts that have been sold to the Asset Management Company;

b) Request the credit institution to sell bad debts to the Asset Management Company;

c) Participate in the process of restructuring the borrower after contributing capital and purchasing shares at the borrower;

d) Receive the collateral itself as a substitute for the performance of the securing party’s obligations according to the provisions of law; Seizing security assets to handle and recover debt;

d) Request relevant state management agencies and law enforcement agencies to complete procedures and legal documents on collateral assets and coordinate and support the process of seizing collateral assets and recovering and handling debt and collateral assets;

e) Request the security transaction registration agencies to register secured transactions related to the security assets of bad debts purchased by the Asset Management Company that have not yet been registered for secured transactions;

g) The Asset Management Company becomes the secured party and is allowed to register secured transactions based on the bad debt sale contract without having to re-sign the security contract with the securing party;

h) Supervise and inspect credit institutions in carrying out activities authorized by the Asset Management Company according to the provisions of Clause 2, Article 12 of Decree 53/2013/ND-CP;

i) For bad debts purchased with special bonds, the Asset Management Company is entitled to collect an amount of money on the amount recovered from the Bad Debt according to the ratio prescribed by the State Bank after agreement with the Ministry of Finance, minus the amount collected by the Asset Management Company according to the provisions of Point l of this Clause, in case the amount collected from recovering the Bad Debt is greater than the amount collected according to Point l of this Clause.

In case this amount is smaller than the amount collected by the Asset Management Company according to Point l of this Clause, the Asset Management Company does not have to refund the credit institution the amount collected according to Point l of this Clause (amended by Clause 1, Article 1 of Decree 18/2016/ND-CP);

k) Other rights of creditors and secured parties according to the provisions of law.l) For bad debts purchased with special bonds, every year, the Asset Management Company is entitled to collect an amount of money at a rate prescribed by the State Bank after agreement with the Ministry of Finance, calculated on the remaining principal balance at the end of the period of the Debt being accounted on-board on the Asset Management Company’s balance sheet.

The amount paid by the credit institution to the Asset Management Company according to the provisions of Points i and l of this Clause is accounted into the credit institution’s expenses (amended and partly abolished by Clause 1, Article 1, Clause 2, Article 2 of Decree 18/2016/ND-CP)

m) Inherit the rights and obligations of creditors of the debt-selling credit institution, including procedural rights and obligations in suing the borrower, the party obligated to repay the debt, and the guarantor at Court; inherit the rights and obligations of creditors of credit institutions selling debt during the judgment enforcement process.

n) The Asset Management Company is not required to register a change in the secured party in the registered security contract when repurchasing bad debts from a debt-selling credit institution, and the debt-selling credit institution is not required to register a change in the secured party when repurchasing or receiving back bad debts from the Asset Management Company.

Based on the powers specified above, the Asset Management Company can seize security assets to handle and recover debt. In order for implementation to take place conveniently, the Asset Management Company has the right to request relevant state management agencies and law enforcement agencies to complete procedures and legal documents on collateral assets and coordinate and support the process of seizing collateral assets and recovering and handling debt and collateral assets.

Is the Asset Management Company required to perform audit activities?

The Asset Management Company’s obligations are listed in Clause 2, Article 13 of Decree 53/2013/ND-CP as follows:

a) Preserve and develop capital assigned by the State;

b) Conduct an annual independent audit;

c) Carry out the registration of debt collection rights purchase and sale contracts according to the provisions of law on secured transactions;

d) Be accountable to state management agencies and the public for operational status;

d) Perform other obligations according to the provisions of the Charter and the provisions of law;

Accordingly, performing an annual independent audit is one of the basic obligations that an Asset Management Company must perform.

Thus, the State Bank of Vietnam established the Asset Management Company (VAMC) in the form of a one-member limited liability company to handle bad debts and promote credit growth for the country’s economy. The specific rights and obligations of the Asset Management Company are stipulated in relevant documents, in which the Asset Management Company is allowed to seize security assets to serve debt handling and recovery.