What are the 03 cases where insurers are compulsory to redeem bonds before maturity in Vietnam? How does an insurer change the conditions of issued bonds under Decree 08?
What are the rights and benefits of bond buyers in Vietnam according to the law?
According to the provisions of Clause 3, Article 8 of Decree No. 153/2020/ND-CP (amended by Clause 6, Article 1 of Decree No. 65/2022/ND-CP), the rights and benefits of bond buyers in Vietnam are as follows:
- Access adequate information disclosed by the issuer, and bond offering dossiers as requested.
- Receive full and timely payments of bond principal and interests when they become due, and perform other corporate actions (if any) under terms and conditions of bonds and as agreed upon with the issuer.
- Request the issuer to redeem bonds before maturity in the following cases:
+ The redemption is made under an agreement between the issuer and bondholder.
+ Bonds shall be compulsorily redeemed at the request of investors in the following cases:
++ The issuer commits violations against regulations of law on offering and trading of corporate bonds according to decision issued by a competent authority, and such violations cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for such violations.
++ The issuer fails to comply with the bond issuance plan, and that violation cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for that violation.
++ Other cases defined in the bond issuance plan which is prepared according to Article 13 of Decree No. 153/2020/ND-CP (if any).
- When buying bonds in the secondary market, request bond sellers to provide adequate information which has been disclosed by the issuer.
What are the 03 cases where insurers are compulsory to redeem bonds before maturity in Vietnam? How does an insurer change the conditions of issued bonds under Decree 08?
What are the 03 cases where insurers are compulsory to redeem bonds before maturity in Vietnam?
Pursuant to the provisions of Clause 3, Article 7 of Decree No. 153/2020/ND-CP (amended and supplemented by Clause 5, Article 1 of Decree No. 65/2022/ND-CP) as follows:
Redemption of bonds before maturity and bond swaps
1. The issuer is entitled to redeem bonds before maturity or conduct bond swaps. The redemption of bonds offered in the international market before maturity must comply with SBV’s regulations on foreign exchange management. Bonds must be disposed of after redemption.
2. The entity competent to approve the bond issuance plan shall have the power to approve the plan for redemption of bonds before maturity or bond swap, except cases of compulsory redemption prescribed in Point b Clause 3 of this Article.
3. Cases in which bonds are redeemed before maturity:
a) The redemption is made under an agreement between the issuer and bondholder.
b) Bonds shall be compulsorily redeemed at the request of investors in the following cases:
- The issuer commits violations against regulations of law on offering and trading of corporate bonds according to decision issued by a competent authority, and such violations cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for such violations.
- The issuer fails to comply with the bond issuance plan, and that violation cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for that violation.
- Other cases defined in the bond issuance plan which is prepared according to Article 13 of this Decree (if any).
4. The provisions of Point b Clause 3 of this Article shall not apply to bonds which are withdrawn according to decision of a competent authority.
Thus, the 03 cases where insurers are compulsory to redeem bonds before maturity include:
- The issuer commits violations against regulations of law on offering and trading of corporate bonds according to decision issued by a competent authority, and such violations cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for such violations.
- The issuer fails to comply with the bond issuance plan, and that violation cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuses to give approval for remedial measures for that violation.
- Other cases defined in the bond issuance plan which is prepared according to Article 13 of Decree No. 153/2020/ND-CP (if any).
How does an insurer change the conditions of issued bonds under Decree 08?
Point c, Clause 2, Article 44 of Decree No. 153/2020/ND-CP stipulates:
Transition
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2. With regard to corporate bonds issued before this Decree comes into force:
a) They shall be treated according to the Government’s Decree No. 163/2018/ND-CP dated December 04, 2018 and the Government’s Decree No. 81/2020/ND-CP dated July 09, 2020 until their maturity, except provisions on reporting and periodic information disclosure in Point b of this Clause.
b) Reporting and periodic information disclosure shall be carried out according to regulations herein until bonds reach their maturity dates.
c) Terms and conditions of bonds specified in the approved bond issuance plans shall be kept unchanged.
According to the previous regulations, enterprises are not allowed to change the conditions and terms of bonds specified in the approved bond issuance plans.
By 2022, the Government of Vietnam has allowed enterprises to change the conditions and terms of the issued bonds in Clauses 3 and 17, Article 1 of Decree No. 65/2022/ND-CP, but no specific guidance has been provided.
On March 5, 2023, the Government of Vietnam issued Decree No. 08/2023/ND-CP on amendments to and suspension of some articles of Decrees prescribing private placement and trading of privately placed corporate bonds.
In particular, in Article 2 of Decree No. 08/2023/ND-CP, the Government of Vietnam stipulates more specifically on this issue, specifically, changes in terms and conditions of bonds must comply with the following provision:
- The change is approved by the issuer’s competent authority;
- The change is approved by a number of bondholders that represents at least 65% of total outstanding bonds of the same type;
- Information about any changes in terms and conditions of bonds must be disclosed by the issuer as ad hoc information as prescribed in Article 22 of Decree No. 153/2020/ND-CP.
- The initial maturity of bonds, as defined in the issuance plan disclosed to investors, may be extended by up to 02 years.
- The issuer shall enter into a negotiation with the bondholder that does not accept changes in terms and conditions of the bond so as to ensure investors’ rights and benefits.
If the bondholder refuses negotiation, the issuer shall perform all obligations to the bondholder according to the issuance plan disclosed to investors (even if changes in terms and conditions of bond have been accepted by bondholders representing at least 65% of total bonds).
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