Mortgage over receivables (thế chấp khoản phải thu) is a very common type of mortgage  in Vietnam. Article 33 of Decree 21/2021 provides that a mortgage over receivables does not require a consent by the obligor but such person must be notified by the secured party to know before implementing the obligations in accordance with agreement or law. Under the Civil Code 2015, only a transfer of rights (not mortgage of rights) need to be notified to the obligor. It is not clear if the notice requirement is a perfection requirement and what the consequence is if the notice about the mortgage over receivable is not made to the relevant obligor.

The following provisions support the view that the notice to the obligor is a perfection requirement:

• Article 33 is located in the section dealing with creation of a mortgage in Decree 21/2021. So it is reasonable to consider that notifying the obligor is a requirement for creating a mortgage over receivable; and

• The Civil Code 2015 provides that, if the security asset is insured, the insurer will pay the securing party if the secured party does not notify the insurer. The insurance money is a type of receivable. So, applying on analogy basis, the obligor may argue that it does not have to pay the secured party if it does not receive a notice of the mortgage.

However, it appears that failure to comply with the notification requirement under Article 33 of Decree 21/2021 does not render the mortgage ineffective. This is because:

• Article 54.2 of Decree 21 provides that the secured party in a mortgage over receivable has the right to request the obligor to pay the secured party the amount due under the relevant receivable. And that the obligor can request the secured party to prove its rights, rather than the obligor has the right to refuse to pay; and

• The enforcement of a mortgage over receivables will create a transfer of the right to request for payment from the securing party to the secured party. Under Article 369.1 of the Civil Code 2015, the obligor under a receivable can refuse to pay to the transferee of such receivable when the obligor does not receive the notice on the transfer of the right to request for payment and the transferee does not prove the authenticity of such transfer. Under Article 369.2 of the Civil Code 2015, if the obligor has not received a transfer notice and the obligor has paid the obligee, the secured party is not entitled to request the obligor to pay the receivable to the secured party. So if the obligor has not settled the relevant receivable, it is arguable that upon enforcement of the mortgage over such receivable, the secured party could be entitled to payment of the receivable as long as the secured party can prove the transfer.

This post is written by Nguyen Hoang Duy and edited by Nguyen Quang Vu.