17/10/2022 10:16

Regulations on corporate bond issuance in Vietnam

Regulations on corporate bond issuance in Vietnam

Currently, large real estate enterprises are massively issuing bonds to raise capital. Along with that are mistakes from large enterprises in issuing bonds. Thus what are the regulations in Vietnam regarding this matter? "Hanh Nguyen-Long An"

Hello, The Editorial Board would like to provide some information as follows:

1. What type of business can issue bonds?

According to the provisions of Clause 1, Article 2 of Decree 153/2020/ND-CP: "Issuers that are joint-stock companies or limited liability companies duly established and operating under the law of Vietnam."

Thus, only joint stock companies and limited liability companies established and operating under Vietnamese law can issue bonds.

2. How do enterprises issue bonds?

Regarding the face value of a bond

In Clause 4, Article 1 of Decree 65/2022/ND-CP, the par value of bonds is specified as follows:

+ Face value of a bond offered in the domestic market is VND 100.000.000 (one hundred million) or a multiple of VND 100.000.000 (one hundred million);

+ Bonds offered for sale in the international market, par value comply with regulations in the issuing market.

Regarding the subjects eligible to buy corporate bonds

Clause 1, Article 8 of Decree 153/2020/ND-CP, the subjects eligible to buy corporate bonds include:

+ For non-convertible bonds without warrants: Buyers without warrant are professional investors as defined in the Law on securities.

+ For convertible bonds and warrant-linked bonds: Buyers are professional investors and less than 100 strategic investors.

Clause 1, Article 11 of Vietnam's Law on Securities 2019 stipulates that professional investors are investors that have adequate financial capacity or securities qualifications, including:

- Commercial banks, foreign branch banks (FBB), finance companies, insurers, securities companies, fund management companies, securities investment funds, international financial institutions, off-budget financial funds, state-owned financial institutions permitted to buy securities as prescribed by relevant laws;

- Any company whose contributed charter capital exceeds 100 billion VND; every listed or registered organization;

- Holders of securities professional certifications;

- Any individual holding a quantity of listed or registered securities that is worth at least 02 billion VND as confirmed by the securities company;

- Any individual whose taxable income in the latest year is at least 01 billion according to his/her submitted tax return or tax deduction documents of his/her income payer.

At the same time, in Clause 17, Article 4 of the Securities Law 2019 also stipulates that strategic investors are the investors selected the General Meeting of Shareholders according to their financial capacity, technological capacity and commitment to cooperate with the building work for at least 03 years.

Thus, according to the above provisions, the law only allows professional securities investors to buy privately issued corporate bonds. If investors are not professional investors, they are not allowed to buy this type of bond.

3. Responsibilities of enterprises in private bond issuance?

Pursuant to Clause 5, Article 1 of Decree 65/2022/ND-CP, cases in which bonds are redeemed before maturity include:

- 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 65 (if any).

In addition, before and after issuing bonds, enterprises must disclose information on solvency, audit reports on financial situation and audit capital use for the purpose of public issuance. Father.

Best regards!

Nhu Y

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