Are all individuals allowed to buy corporate bonds? What benefits do investors receive when purchasing corporate bonds?
Can banks act as agents for the issuance of corporate bonds?
As stipulated in Clause 4, Article 14 of Decree 153/2020/ND-CP (amended by Clause 11, Article 1 of Decree 65/2022/ND-CP) regarding this matter as follows:
Methods of issuing bonds and organizations providing services
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4. Organizations that auction, underwrite, and act as agents for the issuance of corporate bonds include:
a) Securities companies permitted to provide auction, underwriting, and issuance agent services according to the Securities Law;
b) Commercial banks, branches of foreign banks allowed to provide issuance agent services when licensed by the State Bank of Vietnam in accordance with the Law on Credit Institutions and certified by the State Securities Commission to operate securities custody according to the Securities Law.
Commercial banks and branches of foreign banks are only permitted to provide issuance agent services for corporate bonds when licensed by the State Bank and certified by the State Securities Commission to operate securities custody according to the securities law.
Are all individuals allowed to purchase corporate bonds? What benefits will investors in corporate bonds receive?
Are all individuals allowed to purchase corporate bonds?
According to Clause 1 and Clause 3, Article 4 of the Securities Law 2019 and Clause 1, Article 4 of Decree 153/2020/ND-CP regarding bonds, as follows:
A bond is a type of asset, a security that confirms the legal rights and interests of the owner concerning part of the debt of the issuing organization.
- Corporate bonds are securities with a term of one year or more issued by enterprises, confirming the legal rights and interests of the owner concerning part of the enterprise's debt.
Thus, it can be understood that Corporate bonds are a loan from the enterprise. The bond purchaser becomes a creditor of the enterprise. When the bond's term ends, the enterprise will repay the debt by repurchasing the issued bonds or by paying both the principal and interest.
According to Clause 1, Article 8 of Decree 153/2020/ND-CP (amended by Clause 6, Article 1 of Decree 65/2022/ND-CP), the following groups are eligible to purchase corporate bonds:
- For non-convertible bonds without warrants: the purchase target is professional securities investors as stipulated by the securities law.
- For convertible bonds and bonds with warrants: the purchase target is professional securities investors, strategic investors, ensuring that the number of strategic investors is under 100.
- A professional securities investor is an investor with financial capability or securities expertise as defined in Article 11 of the Securities Law 2019, including:
+ Commercial banks, branches of foreign banks, financial companies, insurance enterprises, securities companies, fund management companies, securities investment companies, securities investment funds, international financial organizations, state financial funds outside the budget, state financial organizations allowed to purchase securities according to relevant laws;
+ Companies with contributed charter capital exceeding 100 billion VND or listed entities, registered trading organizations;
+ Individuals holding securities practice certificates;
+ Individuals holding a minimum portfolio of listed or registered trading securities worth at least 2 billion VND confirmed by securities companies at the time they are recognized as professional securities investors;
+ Individuals with a taxable income of at least 1 billion VND in the latest year as of the time they are recognized as professional securities investors according to tax return records submitted to the tax authorities or tax withholding statements by organizations or individuals paying the income.
What benefits will investors in corporate bonds receive according to the law?
According to Clause 3, Article 8 of Decree 153/2020/ND-CP (amended by Clause 6, Article 1 of Decree 65/2022/ND-CP) regarding the benefits for bond investors, they are as follows:
- Being fully informed by the issuing enterprise and entitled to access the bond issuance dossier upon request.
- Receiving full and timely payment of interest and principal bonds when due, and exercising accompanying rights (if any) according to the terms and conditions of the bonds and agreements with the issuing enterprise.
- Being entitled to request the issuing enterprise to repurchase bonds before maturity in the following cases:
+ Early redemption as agreed between the issuing enterprise and bondholder.
+ Mandatory repurchase at the investor's request when:
++ The issuing enterprise violates the law on offering and trading corporate bonds following decisions by competent authorities, and such violation cannot be remedied or the remedial measures are not accepted by bondholders representing at least 65% of the total bonds of the same type in circulation.
++ The issuing enterprise violates the bond issuance plan, and such violation cannot be remedied or the remedial measures are not accepted by bondholders representing at least 65% of the total bonds of the same type in circulation.
++ Other specific cases mentioned in the bond issuance plan defined in Article 13 of Decree 153/2020/ND-CP (if any).
+ Being entitled to request bond sellers to provide full disclosure of the issuing enterprise's information when purchasing bonds on the secondary market.
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