Abstract
Enabling the use of future receivables as collateral to access to credit is highly economically meaningful, as its development is for one thing to assist businesses and individuals to access the capital easily with movable assets to be accrued in the future, and for another thing to encourage lending by reducing the financial vulnerability of lenders. In Vietnam, the recognition of future objects as a form of property eligible to be used as collateral since the 2005 Civil Code has had positive impacts on business financing. However, the term “future objects” does not explicitly cover all types of assets to be formed in the future such as future property rights not categorized as eligible collaterals. This shortcoming later has been revised and supplemented under Decree 163/2006/ND-CP, amended by Decree 11/2012/ ND-CP (Collectively Decree 163) which permits the creation of security over both existing and future receivables. The 2005 Civil Code has been replaced by the 2015 Civil Code, and it is necessary to revise or replace Decree 163 to reflect the changes in the Civil Code and the new practice. Vietnamese Government has been collecting comments for a draft decree on security measures to replace Decree 163, and this article aims to analyze the legal schemes in the former and current Civil Code regarding the use of future receivables as security for performance obligations, and compare with Japanese laws on securitization of future receivables in Japan. The author will try to provide suggestions drawing from Japanese lawmaking for reforming Vietnamese statutory.
Highlights
Immovable assets, land, are probably the most commonly used form of collateral in secured financing since the collateral realization upon default by the debtor is more often than not guaranteed
Since the recent crisis of credit market based on real estate has, to some extent, discouraged creditors to excessively rely on real estate as collateral, many countries start to recognize a wide range of asset selection of collateral rather than real estate, thereby granting chances for businesses to access to finance with the available movable assets to expand their business and simultaneously to reduce the risk borne by lenders thanks to realization of collateral in case of default
Receivables mean claims held against customers and others for money, goods, or services.a Receivables, as an asset, can be assigned and utilized as collateral to secure the performance of obligations
Summary
Land, are probably the most commonly used form of collateral in secured financing since the collateral realization upon default by the debtor is more often than not guaranteed. Receivables undoubtedly become more important, for small companies, as they usually cover a high proportion of a company’s assets. Future receivables are still used by businesses as collateral for secured loans. In financing for commercial housing projects, banks often accept investor’s collateral that are future receivables arising out of selling eligible housing.b a Joel G.
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