To secure payment from a Vietnamese buyer or borrower, foreign creditors most often rely on bank guarantees or letters of credit, corporate or personal guarantees, pledges or mortgages over assets, and retention of title, with registration where the law requires it so the security can be enforced against third parties. Which tool works best depends on what the debtor owns, where it is located and whether you are an offshore creditor or a lender licensed in Vietnam.
This guide is an overview for trade creditors, suppliers and investors, not a manual for bank lending. It explains the main security measures recognised by Vietnamese civil law, the practical limits foreigners face, and a simple way to choose among them.
The security measures Vietnamese law recognises
The Civil Code lists nine measures that can secure performance of an obligation: pledge (cam co) of assets, mortgage (the che) of assets, deposit (dat coc), security deposit for movable leases (ky cuoc), escrow (ky quy), retention of title (bao luu quyen so huu), guarantee (bao lanh), fidelity guarantee by a socio-political organisation (tin chap), and lien (cam giu tai san). In commercial practice between companies, guarantees, pledges, mortgages, escrow and retention of title do most of the work.
The distinction between pledge and mortgage is about possession. In a pledge, the asset is handed over to the creditor or a third party. In a mortgage, the debtor keeps the asset and continues to use it, while the creditor holds a right to have it sold if the debt is not paid. Land use rights, buildings, machinery in a working factory and receivables are normally mortgaged rather than pledged.
A security interest is only as useful as its enforceability against other creditors. Vietnamese law distinguishes between the effect of the security between the parties, which arises from the contract, and its effect against third parties, which typically arises from registration, possession or control. A creditor who skips registration may find that another creditor with a registered interest ranks ahead.
Choosing a security tool: a practical comparison
For a foreign supplier or investor, the right choice is usually the strongest tool the counterparty will accept without killing the deal.
| Tool | How it protects you | Practical limits |
|---|---|---|
| Letter of credit | Bank pays against compliant shipping papers; commonly used in import-export | Paperwork must comply exactly; buyer pays bank charges and may resist |
| Bank guarantee | Bank pays on demand or on proof of default, depending on its terms | Costs the buyer a fee and uses its credit line; check the issuing bank's standing |
| Corporate guarantee from a parent | A financially stronger group company promises to pay if the buyer does not | Only as good as the guarantor's assets; check authority and internal approvals |
| Personal guarantee from an owner | An individual owner promises to pay | Spousal consent may be needed for marital assets; enforcement against individuals is slow |
| Mortgage over movable assets or receivables | Right to have assets sold on default | Must be registered to rank against third parties; asset value may fall |
| Retention of title | Seller remains owner of goods until paid | Weakened once goods are mixed, processed or resold; register where required |
| Escrow (ky quy) | Funds held by a bank and released on agreed conditions | Ties up the buyer's cash; terms must be precise |
Offshore creditors face one more limit: rights over land use rights and certain real property in Vietnam can generally be mortgaged only in favour of credit institutions licensed to operate in Vietnam. Foreign trade creditors without such a licence usually rely on guarantees, bank instruments and movable assets instead.
Guarantees: corporate, personal and bank
A guarantee (bao lanh) is a promise by a third party, the guarantor, to perform the debtor's obligation if the debtor fails. Vietnamese law allows the parties to agree that the guarantor is liable only when the debtor fails to pay, or that the creditor can claim from the guarantor directly once the debt falls due. The difference matters: a guarantee that requires the creditor to pursue the debtor first is much weaker in practice. State clearly which type you are taking.
For a corporate guarantee, check that the guarantor company is authorised to give it under its charter and that the right body approved it. Guarantees by a company for a related party can require approval by shareholders or members under the Enterprise Law, especially where the guarantor's managers or owners have an interest. Without proper approval, the guarantee may be challenged.
For a personal guarantee, remember that assets acquired during marriage are generally joint property of the spouses. If the guarantee is to be backed by those assets, spousal consent is usually needed. Personal guarantees are useful for focusing an owner's mind but enforcement against an individual's assets is often slow.
Bank guarantees issued by Vietnamese banks are common for performance, advance payment and payment obligations. Read the terms: some pay on first written demand, others require evidence of default. Check the expiry date and the claim procedure, and diarise the deadline. A demand made one day late can be rejected.
Retention of title for suppliers
Retention of title allows a seller to remain the owner of goods until the buyer has paid in full. The Civil Code recognises it as a security measure, and it can be useful for suppliers of equipment, vehicles and other identifiable goods. If the buyer defaults, the seller can reclaim the goods and, depending on the contract, keep amounts already paid to cover depreciation and costs.
The weakness lies in what happens to the goods. Raw materials that are mixed or processed into new products, or stock that is resold to customers, are hard to reclaim. Retention of title works best for durable items with serial numbers that remain in the buyer's possession, such as machines installed in a factory. Mark the goods, keep a list of serial numbers, and require the buyer to keep them insured and identifiable.
To be enforceable against third parties, retention of title must be registered in cases set by the law on registration of security measures. Unregistered retention may still bind the buyer but can lose out to a bank that takes a mortgage over the same goods. Check the registration requirement when you first ship.
Check the counterparty before you extend credit
Security is the second line of defence. The first is knowing who you are dealing with. Before granting payment terms to a Vietnamese buyer, pull its record from the national business registration portal: full name, enterprise code, registered address, legal representative, charter capital and recent changes. Frequent changes of address or legal representative, or charter capital far below the size of the orders, deserve questions.
Ask for audited financial statements where the buyer is large enough to have them, and compare reported revenue with the credit you are about to extend. Search the secured transactions registry for existing security over the buyer's main assets; a buyer whose stock and receivables are already pledged to a bank leaves little for an unsecured supplier. Trade references from other foreign suppliers are often more revealing than any document.
Use what you learn to set terms. A new buyer with thin capital might start on a letter of credit or partial prepayment, moving to open account with a parent guarantee once a payment history exists. Credit limits, reviewed regularly, keep exposure proportional. None of this replaces security, but it reduces how often you need to rely on it.
How registration works in practice
Registration of security measures in Vietnam is handled by state registration systems that differ by asset type. A typical path for a creditor taking security over movable assets or receivables:
- Identify the asset type: movable assets, receivables, vehicles, aircraft or vessels, securities, or land and houses. Each has its own registration rules and registry.
- For most movable assets and receivables, registration is made with the national system for registering secured transactions operated under the Ministry of Justice, which offers online filing.
- For land use rights and assets attached to land, registration is made with the land registration authority where the land is located.
- Prepare the security agreement and the registration application with accurate descriptions of the parties and assets.
- File the registration promptly after signing; priority among competing creditors generally follows the order of registration.
- Search the registry before you lend or ship, to see whether the assets are already encumbered.
- Update or release the registration when the debt is repaid or terms change.
Registry names, filing fees and procedures have changed several times. Check the current rules on the registration portal or with a licensed lawyer before filing.
Enforcing security when the debtor defaults
Read the agreement first. The security agreement should state how the asset is to be dealt with on default: sale by auction, private sale by the creditor, or the creditor taking the asset in exchange for the debt. Vietnamese law allows these methods if agreed.
Give notice. Before enforcing, the secured creditor generally has to notify the debtor and other secured creditors. Skipping notice can make the enforcement unlawful.
Get possession. If the debtor refuses to hand over a mortgaged asset, the creditor may need help from the authorities or a court. Self-help through force is not allowed and can expose you to liability.
Respect priority. Proceeds are distributed according to the ranking of security interests, usually by registration date. An unregistered creditor may receive little.
Account for the surplus. If the sale raises more than the secured debt and costs, the surplus goes back to the debtor or to other creditors.
When you need a Vietnamese lawyer
Security is technical, and mistakes are only discovered when the debtor defaults. A licensed Vietnamese lawyer should review any guarantee or security agreement involving significant sums, check the authority of the person signing for the guarantor, confirm approvals under the Enterprise Law, handle registration and run searches against the debtor's assets. If the asset is land or a building, a lawyer is essential because foreign creditors face specific restrictions.
When a default occurs, a lawyer can guide the notice process, negotiate with other creditors and, if needed, apply to the court for interim measures or assistance in taking possession. Bring the security agreement, registration certificates, the underlying contract and evidence of the debt. Ask a lawyer on AI Co Van if you want a first view on which security tool suits a particular buyer.
Rules on secured transactions and registration have been revised in recent years. Check the current rules with a licensed lawyer before relying on an older template.
Frequently asked questions
Can a foreign company take a mortgage over land in Vietnam?
Generally not, unless it is a credit institution licensed to operate in Vietnam. Mortgages over land use rights are mostly limited to such institutions. Offshore trade creditors usually rely on guarantees, bank instruments or security over movable assets instead.
Do I need to register a guarantee?
A guarantee is a personal promise and does not usually need registration. Pledges, mortgages and retention of title may need registration to be effective against third parties, depending on the asset type and the current registration rules.
Is a guarantee from the buyer's parent company enough?
It can be valuable if the parent has real assets and properly approved the guarantee. Check the parent's charter, internal approvals and whether related-party rules require shareholder consent. A guarantee from an empty holding company offers little protection.
What is the difference between a pledge and a mortgage?
In a pledge, the asset is handed over to the creditor or a third party. In a mortgage, the debtor keeps and uses the asset while the creditor holds a right to have it sold on default. Mortgages suit land, buildings and working machinery.
Does retention of title work if the buyer resells the goods?
Usually not well. Once goods are resold to a buyer acting in good faith, or mixed into other products, reclaiming them becomes very difficult. Retention of title works best for identifiable durable goods kept by the buyer.
Can I seize the debtor's assets myself if it defaults?
No. You must follow the enforcement method agreed in the security agreement and the law, including giving notice. If the debtor refuses to hand over the asset, seek help from the authorities or the court; using force or pressure is unlawful.