The procedure for the asset auction of bad loans and secured assets bought by VAMC

Pursuant to Decree No. 53/2013 / ND-CP dated 18 May 2013 of Vietnamese Government on the establishment, organization and operation of the Asset Management Company (VAMC) of credit institutions in Vietnam (Decree 53), State Bank of Vietnam issued Circular No.18/2013/TT-NHNN dated 6th September 2013 providing regulation on purchase, selling and dealing with bad loans of credit institutions by VAMC. 

In order to provide the guidelines on procedures for asset auction of bad loans and secured assets bought by VAMC from credit institutions, Ministry of Justice has issued Circular 18/2014/TT-BTP dated 08 September 2014 providing guidance on asset auction of VAMC (Circular 18) effective from the date 10 November 2014.

The procedure for the asset auction of bad loans and secured assets bought by VAMC

The procedure for the asset auction of bad loans and secured assets bought by VAMC has some key following contents:

1. Auction

VAMC shall decide and select the method of asset auction bought by VAMC by one of two methods which are held by professional auctioneer or conducted by VAMC in accordance with the provisions of law on asset auction and the provisions of Circular 18.

2. The reserve price of the auction property

The reserve price of auctioned assets being bad loans was determined as follows:
- If VAMC purchased bad loans from credit institutions at market value, VAMC shall hire an appraisal company to assess the bad loans or assess the bad loans itself to determine the reserve price;
- If VAMC purchased bad loans from credit institutions at book value with special bonds, VAMC shall agree with such credit institutions on reserve price.
However, when determining the reserve price of the auctioned assets being secured assets for bad loans, VAMC shall agree with the asset owner on reserve price or  agree with pledger on reserve price if auctioned assets are land use right. In any case, the parties fail to reach agreement on reserve price within 05 working days, VAMC shall hire an appraisal company to assess the assets or assess itself to determine the reserve price.

3. Selection of professional auction organization to hold the auction

VAMC shall announce publicly the selection of professional auction organization on web portal of State Bank of Vietnam”s website and VAMC’s website. VAMC shall be responsible for selection of professional auction organization based on professional criteria of competence, experience, prestige, operating duration, the number of auctioneers, the quantity of successful auction contracts, auction plan, scale and facilities.

4. The auction held by professional auction organization

The auction which is held by a professional auction organization shall be carried out under the law on asset auctions and regulations as prescribed in Circular 18. VAMC shall facilitate and supervise the auctions that are held by professional auction organizations.  

5. VAMC holds the auction

In case VAMC holds an auction, one senior representative of VAMC shall take responsibility for conducting the auction. Besides, there are entities that shall support the leaders of VAMC such as: representatives of relevant functional Departments of VAMC ; representatives of debt-selling credit institutions in case asset auctions are purchased at book value by special bonds and auctioneers may be also involved. The auction is conducted in accordance with the provisions of the law on asset auction and regulations of Circular 18.

6. Reduce the duration of information disclosure

  In order to create favorable conditions for asset auction of VAMC to process bad debt thoroughly and quickly, ensure auction was transparent and publicly, the reduction of the duration of information disclosure shall be at least four (04) working days if the assets are movable assets, or at least fifteen (15) days if the assets are real estate before the auction takes place.
The duration of information disclosure shall be at least seven (07) working days if the assets are movable assets, or at least thirty (30) days if the assets are real estate before the auction takes place. However, this period may be reduced as agreement for assets owned by individuals and organizations.

7. Hold the asset auctions in case only one bidder attends.

If only one bidder registers to purchase the auctioned assets and wish to bid at the reserve price, assets shall be sold to such bidder.  The sale of the property in this case was conducted only after the full implementation of on information disclosure and there are no complaints about procedures until the end of the auction.

8. The contract to sell auctioned assets

Within two (02) working days from the end of the auction, the senior representative of VAMC or the professional auction organization must transfer all documents and records about the auction, deposit of the buyers of auctioned assets to VAMC. The sale contract shall be signed by VAMC and the buyers and implemented under the law.

9 Handling of auctioned assets in case the auction is not successful or not attended by any bidder.

If the assets are bad debts and the auction is not successful or not attended by any bidder, VAMC shall select other methods under regulations of the State bank of Viet Nam guiding Decree No. 53/2013/ND-CP.
If the assets are collateral against bad debts and the auction is not successful or not attended by any bidder, within five (05) working days, VAMC must negotiate an agreement with the owner of such collateral on method of handling assets; in case of putting up the land for auction, they must negotiate an agreement with the pledgor on method of handling land; in case of failing to reach an agreement, they shall select other methods under regulations of the State bank of Viet Nam guiding Decree No. 53/2013/ND-CP

10 . Invalidation of auction result

(i) In case the auctioned assets are purchased from credit institutions by VAMC at the book value with special bonds and the auction is held by a professional auctioneering organization, the invalidation of auction result must be agreed in writing between VAMC, debt-selling credit institutions, the buyers of auctioned assets and professional auctioneering organization; in case VAMC holds the auction, the invalidation of auction result must be agreed in writing between VAMC , debt-selling credit institutions and the buyers of auctioned assets.
(ii). In case the auctioned assets are purchased by VAMC at the market value and the professional auctioneering organization hold the auction, the invalidation of auction result must be agreed in writing between VAMC, the buyers of auctioned assets and professional auctioneering organization; in case VAMC holds the auction, the invalidation of auction result must be agreed in writing between VAMC and the buyers of auctioned assets.

Circular 18 is the legal basis for implementation of procedures for the asset auction of bad loans and secured asset purchased by VAMC from credit institutions in Vietnam in a flexible and transparency manner which enable the processing of bad debt being carried out quickly, saving time and cost.

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