What are bonds in Vietnam? What are the subjects, conditions, and forms of bond issuance to the public in 2022?
What are bonds?
Pursuant to the provisions of Clause 1, Clause 3, Article 4 of the Law on Securities, 2019 and Clause 1, Article 3 of Decree 153/2020/ND-CP on bonds, accordingly:
A bond is an asset class, a type of security that confirms the owner's legitimate rights and interests towards a portion of the debt of the issuing organization.
- "Corporate bonds" are securities with a term of 01 year or more issued by an enterprise, confirming the lawful rights and interests of the owner with respect to a portion of the debt of the issuing enterprise.
- Some types of corporate bonds include:
+ "Green corporate bonds" are corporate bonds issued to invest in projects in the field of environmental protection, projects that bring about environmental benefits in accordance with the provisions of the law on environmental protection.
+ “Convertible bond” is a type of bond issued by a joint-stock company, which can be converted into ordinary shares of the issuing enterprise according to the terms and conditions specified in the issuance plan. bonds.
+ "Secured bond" is a type of bond that is guaranteed to pay all or a part of interest and principal upon maturity with the issuer's assets or the assets of a third party as prescribed by law. on secured transactions; or guaranteed payment as prescribed by law.
+ "Warranty bond" is a type of bond issued by a joint-stock company with warrants, allowing the holder of the warrant to purchase a number of common shares of the issuing enterprise according to the following conditions: terms have been determined in the bond issuance plan.
What are the characteristics of bonds?
Pursuant to the provisions of Article 2 of Decree 153/2020/ND-CP stipulating the subjects of bond issuers, accordingly:
“Article 2. Subjects of application
1. Bond issuer is a joint stock company or a limited liability company established and operating under Vietnamese law.”
Thus, the bonds will be issued by a joint stock company or a limited liability company established and operating in accordance with the laws of Vietnam.
In addition, bonds also have some characteristics as follows:
- The bond ownership period is clearly stated in the bond. The issuer must repay the original loan when it matures.
- Income of bonds is from interest, this is a fixed income and does not depend on the business results of the issuing company.
- When the business goes bankrupt, because bonds are considered debt, they will be prioritized for payment over stocks.
What are bonds in Vietnam? What are the subjects, conditions, and forms of bond issuance to the public in 2022?
What are the conditions to issue bonds in Vietnam to the public?
Pursuant to the provisions of Article 19 of Decree 155/2020 and Article 26 of Decree 155/2020, the conditions for the public offering of bonds in Vietnam are as follows:
“Article 19. Conditions for the public offering of bonds
1. The conditions specified in Clause 3, Article 15 of the Law on Securities.
2. Issuing organizations or bonds registered for sale must be rated by a credit rating organization granted the Certificate of business eligibility by the Ministry of Finance in the following cases:
a) Total value of bonds at par value mobilized in each 12 months is more than VND 500 billion and more than 50% of equity based on the most recent financial statements in the following reports: financial statements the most recent audited year or the most recent reviewed semi-annual financial statement (in case the issuer is the subject of the audited semi-annual financial statement) by an approved auditing organization; or
b) Total outstanding balance of bonds at par value up to the time of registration for offering is greater than 100% of equity based on the most recent financial statements in the following reports: audit or the most recent reviewed semi-annual financial statement (in case the issuer is the subject of the audited semi-annual financial statement) by an approved auditing organization.
...
Article 26. Conditions for the public offering of bonds in Vietnam dong by international financial institutions
1. Issuing organization is an international financial institution prescribed by law on credit institutions to which the Socialist Republic of Vietnam is a member.
2. Bonds offered for sale are bonds with a term of not less than 10 years.
3. Having a plan to issue and use the entire amount raised from the public offering of bonds for projects in Vietnam approved by a competent authority in accordance with law.
4. The total amount raised from the offering in Vietnam does not exceed 30% of the total investment capital of the project.
5 . There is a commitment to fulfill the obligations of the issuer to the investor regarding the conditions for issuance, payment, guarantee of the legitimate rights and interests of the investor and other conditions.
6. There is a commitment to list bonds on the securities trading system after the end of the offering.”
- Article 9 of Decree 153/2020 stipulating the conditions for offering non-convertible bonds in Vietnam without warrants are specified as follows:
“Article 9. Conditions for bond offering
1. For the offering of non-convertible bonds without warrants (excluding the offering of bonds by securities companies, securities investment fund management companies that are not public companies), enterprises must meet the following conditions:
a) Being a joint stock company or a limited liability company established and operating under the laws of Vietnam.
b) Make full payment of both principal and interest of issued bonds or fully pay due debts for 03 consecutive years before the bond issuance (if any); except for the case of bond offering to creditors being selected financial institutions.
c) Satisfy financial safety ratios and operational safety ratios as prescribed by specialized laws.
d) Having an approved and approved bond issuance plan as prescribed in Article 13 of this Decree.
dd) Having a financial statement for the year immediately preceding the year of issuance which is audited by a qualified auditing organization as prescribed in this Decree.
e) Entities participating in the offering according to the provisions of Point a, Clause 1, Article 8 of this Decree.
2. For the offering of non-convertible bonds without warrants by a securities company or a securities investment fund management company that is not a public company: the enterprise must satisfy the conditions specified at Point a, point c, point d, point dd and point e, Clause 1 of this Article.
3. For the offering of convertible bonds or warrant-linked bonds:
a) The issuing enterprise is a joint stock company.
b) Entities participating in the offering according to the provisions of Point b, Clause 1, Article 8 of this Decree.
c) Satisfy the conditions for offering for sale specified at Points b, c, d and dd, Clause 1 of this Article.
d) The private placement of convertible bonds and warranties must be separated by at least 06 months from the date of completion of the latest offering.
dd) The conversion of bonds into shares and the exercise of warrants must satisfy the regulations on foreign investors' ownership ratio as prescribed by law.”
Thus, your company wants to issue bonds in Vietnam through the mass media, that is, to issue bonds in Vietnam to the public. And to do that, your company needs to fully meet the conditions specified in Clause 1, Article 15 of the Securities Law 2019 as mentioned above.
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