Perfecting and Enforcing Security Interests in Laos

Laos law provides for security pursuant to law and security pursuant to contract. Security pursuant to law includes tax and wage obligations and takes priority over any security pursuant to contract. Security pursuant to contract can be of two kinds: 1) secured by movable assets; and 2) secured by immovable assets..

Movable Assets

Security can be obtained over a long list of movable assets including intellectual property, accounts receivable, and valuable papers. Security over movable assets must be pursuant to contract in which the collateral assets are clearly defined and identified. The contract must also include an agreement to repay a debt.

In general, security in movable assets is perfected by one of four methods: 1) registration of security, which takes place at the ministry of finance; 2) possession of collateral, which may be obtained voluntarily pursuant to contract; 3) control of collateral, also pursuant to contract; and 4) automatic perfection which occurs when the borrowed money is used to purchase the collateral or in case of disposition of the collateral by the debtor. Perfection continues in collateral notwithstanding “sale, lease, license, exchange, or other disposition,” except as may otherwise be agreed between the parties. Perfection continues until such time as the security contract is satisfied or, in the case of registration, five years renewable.

Enforcement of a security over a movable asset in case of default by the debtor may occur on a voluntary basis or through legal proceedings. If the creditor has possession or control of the collateral the creditor, after giving ten days notice to the debtor and any other creditors with an interest in the collateral, may dispose of the collateral as the creditor deems fit. If the creditor does not have possession or control of the collateral and if the debtor refuses to voluntarily relinquish possession or control the creditor may petition the court to enforce his rights against the debtor.

Immovable Assets

Security over immovable assets must be obtained by security contract. It is unclear whether a security contract must be signed by three witnesses and a notary or whether three witnesses are sufficient. Perfection of an interest in immovable property requires registration with the relevant land management authority. To register the creditor must have verified that the debtor owns title to the land and have obtained a notary verification of the security contract. After registration the creditor is responsible for notifying the land management authority when the security contract is terminated.

Enforcement of security interests in immovable property is first on a voluntary basis and then through legal proceedings. Although a default entitles the creditor to automatic entry and possession of the immovable property, if the debtor refuses to surrender the property the creditor may not use force to evict the debtor. If the creditor does obtain possession of the secured property he may dispose of the property after giving fifteen days notice to the debtor and other creditors who have an interest in the property. If the creditor is unable to secure possession of the property on a voluntary basis he may petition the court to enforce his rights against the debtor. There is no provision that addresses disposition of immovable property when the creditor is not a Laos national.