How should the issuer use the proceeds from the sale of corporate bonds in contravention of the bond issuance plan in Vietnam?
What should the corporate bond issuance plan be based on?
According to the provisions of Clause 1, Article 13 of Decree 153/2020/ND-CP of Vietnam (amended by Clause 10, Article 1 of Decree 65/2022/ND-CP of Vietnam), a corporate bond issuance plan shall, inter alia, include the following contents:
- Particulars of the issuer (including name, type of business, headquarters address, enterprise registration certificate or business registration certificate or another license of equivalent validity as regulated by law);
- Bond issuance purposes, including information about the investment program/project; business operations requiring funds; restructured funding source (restructured debts or the owner's equity, and value thereof). The bond issuance purposes of a credit institution or securities company are to increase tier-2 capital, or raise funds for granting loans, making investments or serving other purposes as prescribed in the specialized law.
- Documents proving the issuer’s satisfaction of every requirement for bond offering prescribed in Article 9 and Article 10 hereof. With regard to the requirement in Point b Clause 1 Article 9 hereof, the issuer is required to provide the commitment to meet this requirement;
- Terms and conditions of bonds to be offered. In case of offering of bonds in multiple waves, the planned number of bond offering waves, quantity of bonds offered in each wave, and offering time of each wave must be specified;
- The plan for conversion of bonds into shares in case of offering of convertible bonds (requirements, time limit, ratio or method of determining conversion price, compliance with regulations on holding of shares by foreign investors as prescribed by law, and other terms);
- The plan for exercise of warrant in case of offering of warrant-linked bonds (requirements for warrant exercise, time limit, ratio, price or pricing method, compliance with regulations on holding of shares by foreign investors as prescribed by law, and other terms);
- Terms and conditions for redemption of bonds before maturity or bond swap (if any);
- Some financial indicators of the issuer in 03 consecutive years preceding the year of issuance and any changes therein after the bond issuance, including:
+ Equity;
+ Debt-to-equity ratio;
+ Ratio of outstanding bond debt to equity;
+ Losses/gains (in case of losses, losses in the fiscal year and accumulated losses are specified);
+ Return on equity (ROE).
+ Payment of principal and interest amounts of the issued bonds or mature debts over the last 03 consecutive years before the bond offering (if any);
- The auditor’s audit or review opinions about the financial statements;
- Method of bond issuance;
- Plan for use of funds raised from the bond issue;
- The plan for arrangement of funding sources and method of bond principal and interest payment;
- The issuer’s commitment to disclose information;
- Other commitments to bondholders (if any);
- Provisions on registration and depositing of bonds;
- Provisions on trading of bonds as prescribed in Article 0 of this Decree;
- Rights and responsibilities of bondholders;
- Rights and responsibilities of the issuer;
- Responsibilities and obligations of each bond issue-related service provider.
- Criteria for selection of strategic investors and list of strategic investors in case of issuance of convertible bonds and warrant-linked bonds.
How should the issuer use the proceeds from the sale of corporate bonds in contravention of the bond issuance plan in Vietnam?
Who has the authority to approve the corporate bond issuance plan in Vietnam?
According to the provisions of Clause 2, Article 13 of Decree No. 153/2020/ND-CP of Vietnam on the authority to approve the corporate bond issuance plan as follows:
- With regard to a joint-stock company:
+ The plans for private placements of convertible bonds and warrant-linked bonds must be approved by the GMS. Voting for ratification of the resolution on approval of the bond issuance plan must be carried out according to the Law on enterprises.
+ The plan for offering of non-convertible bonds without warrant shall be approved by a competent authority as prescribed in the company’s charter. Unless otherwise prescribed by the company’s charter, the Board of Directors is entitled to approve the bond issuance plan but must report it to the nearest GMS. Such report must be enclosed with the bond offering dossier and relevant documents.
- The authority to approve the bond issuance plan of a limited liability company is given to the Board of Members or President or owner of the company as prescribed in the company’s charter.
- Apart from the provisions in Point a and Point b of this Clause, state enterprises shall comply with regulations on limits on and authority to decide on raising of funds in accordance with provisions of the Law on management and use of state funds invested in enterprises’ business and production activities and the Law on enterprises.
- Apart from the provisions in Point a, Point b and Point c of this Clause, the authority to approve the bond issuance plan of an enterprise operating in conditional business lines shall comply with the specialized law (if any).
How should the issuer use the proceeds from the sale of corporate bonds in contravention of the bond issuance plan in Vietnam?
According to Point b, Clause 4, Article 8 of Decree 156/2020/ND-CP of Vietnam (amended and supplemented in turn by Point d Clause 7 Article 1 of Decree 128/2021/ND-CP of Vietnam) stipulating administrative sanctions for this act as follows:
Violations against regulations on private placement of securities
…
4. A fine ranging from VND 150.000.000 to VND 200.000.000 shall be imposed for committing one of the following violations:
…
b) Using the proceeds of the private placement against the plan approved by GMS, Board of Directors, Board of Members or Company’s President, or the information disclosed to investors or the report submitted to or approved by competent authorities.
Thus, issuers that use proceeds from the sale of corporate bonds in contravention of the bond issuance plan may be fined from VND 150,000,000 to VND 200,000,000.
Note that this fine level applies to organizations and individuals that commit violations similar to those of organizations, the fine level is 1/2 of the fine level for organizations.
LawNet
