What are cases of corporate bond eligible for trading in Vietnam?

What are cases of corporate bond eligible for trading in Vietnam? (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What are corporate bonds?

According to Clause 1, Article 3 of Circular 16/2021/TT-NHNN, corporate bond is a type of debt security with a term to maturity of at least 01 year, issued by an enterprise to confirm the bondholder's legitimate rights and interests over a part of its debts

2. What are cases of corporate bond eligible for trading in Vietnam?

According to Article 5 of Circular 16/2021/TT-NHNN, a corporate bond is eligible for trading when all requirements below are satisfied:

- The corporate bond is issued in accordance with regulations and law.

- The corporate bond is issued in VND.

- The corporate bond is under legal ownership of the seller, has not reached maturity which requires payment of both principal and interest, is not subject to any dispute, is allowed to be traded as per the law, is not under forward contract or discount contract or rediscount contract as guaranteed by the seller (except for cases where a credit institution purchases corporate bond to sell for the first time).

3. Responsibilities of credit institutions in purchasing corporate bonds in Vietnam

According to Article 7 of Circular 16/2021/TT-NHNN, responsibilities of credit institutions in purchasing corporate bonds include:

- Inspect fulfillment of principles under Article 4 hereof.

- Monitor and supervise the use of revenues generated by corporate bond issuance of the issuers; in case the issuers are found to be using revenues generated by corporate bond issuance incorrectly according to the plans and commitment with credit institutions, credit institutions shall request the issuers to repurchase corporate bonds under forward contracts.

- Request the issuers to settle both principal and interest of corporate bonds when the bonds reach maturity.

In case the issuers are incapable of settling principal or interest of corporate bonds that reach maturity or when the issuers fail to repurchase corporate bonds under forward contracts according to commitment under Point c Clause 6 Article 4 of Circular 16/2021/TT-NHNN, credit institutions shall collect principal and interest of corporate bonds.

- During the period in which credit institutions are holding corporate bonds, the credit institutions must assess business operations of the issuers, financial situations, and the ability to settle corporate bond principal and interest of the issuers at least once every 6 months.

- Deal with issues that arise during the process of trading corporate bonds in accordance with relevant law provisions in order to guarantee the ability to recover principal and interest of corporate bonds.

4. What are the cases where a credit institution is allowed to purchase corporate bond in Vietnam?

According to Clause 6, Article 4 of Circular 16/2021/TT-NHNN, a credit institution is only allowed to purchase corporate bond when:

- Corporate bond satisfies Article 5 of Circular 16/2021/TT-NHNN;

- Use purpose of revenues generated from corporate bond issue is legitimate and compliant with bond issuance plans and/or plans for utilizing capital, revenues generated from bond offering and issuance approved as per the law (hereinafter collectively referred to as “plans”);

- Issuer guarantees to redeem bond before maturity when: The issuer repurposes revenues generated from bond issuance during the period in which credit institutions hold the bond; the issuer violates regulations and law on issuance of corporate bond; the issuer violates the plans;

- The plans are feasible and the issuer is financially capable in order to settle both principal and interest of the bond adequately;

- The issuer has no non-performing loan in credit institutions in the last 12 months prior to the date on which credit institutions purchase corporate bond.

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