Government bond (also referred to as sovereign bond), one of the debt instruments[1], is defined as the bond issued by the government intended for raising funds for the state budget or debt restructuring[2].
According to Article 7 of Decree 95, holders of debt instruments, including government bonds, are entitled to pledge these bonds as collateral for securing loans.
While a pledge is legally valid even without registration, registration provides crucial protection against third-party claims[3]. This is particularly important in cases of insolvency or disputes, where registered security interests take precedence.
Moreover, the registration is recommended under Decree 99 for circumstances such as mortgage, pledge, performance bond, security deposit, escrow deposit, and reserve of ownership arrangements.[4]
Under Securities Law and Article 169.1(a) of Decree 155, the Vietnam Securities Depository and Clearing Corporation (“VSDC”) has the right to provide services including registration of collateral for securities registered at VSDC upon request of clients.[5] If an entity or individual wishes to register a government bond as collateral, the registration must be made with VSDC.
The effective date of a security interest is the time written by VSDC on the security interest register.
As part of security perfection, the registration of Vietnamese Government Bonds as collateral must be carried out prior to the financial closing of the relevant transactions where the lenders take those bonds.
The procedures for foreign organizations may take time as opening their first securities account must follow certain requirements.
According to Article 4.1 of Decision 21, the parties wishing to register, change, correct security interests, or deregister security interests for securities centrally registered at VSDC shall submit dossiers together with securities freezing and unfreezing dossiers to VSDC through depository members.
The dossier for registration of security interests
* The application form No. 52[6] in the Appendix accompanied by Decree 155;
* The list of securities registered as security interests according to form No. 53[7] in the Appendix accompanied by Decree 155;
* The authorization letter in case the applicant is an authorized person.
The dossier for freezing securities:
* Request for transfer of frozen securities by the depository/TCMTKTT (Form 01/BD[8] of this Regulation) (02 copies);
* Request for freezing securities by the guarantor (Form 02/BD[9] of this Regulation) (01 copy).”
VSDC shall issue a written confirmation of the registration and at the same time record the information on the registration of security interests in the security interest register at VSDC and return the results (including confirmation of securities freezing) to the depository members or if the parties are organizations maintaining direct accounts with VSDC, such organizations will receive results directly.
