Law No. 56/2024/QH15 was passed by the National Assembly on November 29, 11, amending and supplementing a number of articles of the Securities Law, the Accounting Law, the Independent Audit Law, the State Budget Law, the Law on Management and Use of Public Assets, the Tax Administration Law, the Personal Income Tax Law, the Law on National Reserves, and the Law on Handling of Administrative Violations (hereinafter referred to as “Law No. 56/2024/QH15”) and officially takes effect from January 01, 01. Within the scope of this article, we would like to only mention the changes to the Securities Law No. 2025/54/QH2019 dated November 14, 26 (“Securities Law 2019”) and is limited to referring only to contents related to bond issuance activities of enterprises.
Regarding securities and securities market activities, the provisions of Law No. 56/2024/QH15 aim to improve transparency and efficiency in the issuance and sale of securities; strictly handle fraudulent and deceptive acts in securities issuance; and enhance the responsibility of organizations and individuals involved in securities issuance and sale activities. Below are some important contents that we have compiled and analyzed related to bonds issued by enterprises (“TPDN“).
1. Expanding the target audience of professional securities investors:
Professional stock investor (“NĐTCKDN”), as defined in the Securities Law 2019 (Article 11), is “Investors with financial capacity or expertise in securities” and lists the subjects considered as technical investors. Law No. 56/2024/QH15 (Clause 3, Article 1), stipulates that technical investors include “Investors Foreigner is an individual with foreign nationality, organization Established under foreign law to conduct business investment activities in Vietnam“to attract foreign organizations and individuals to participate in the Vietnamese stock market.
Regarding the above changes, Decree 155/2020/ND-CP[1] (specifically, Article 5 stipulates documents for identifying foreign securities investors) will be amended and supplemented with regulations on the use of documents, reports proving compatibility with foreign documents, documents… when identifying foreign securities investors. For privately issued bonds that have not been traded centrally, the registration and depository organization issued by the enterprise (“DNPH”) is responsible for checking the qualifications of professional securities investors before transferring bond ownership.
2. Types of individual corporate bonds that can be traded by individual securities investors
According to current law[2], for enterprises with a total value of bonds mobilized in 12 months greater than VND 500 billion and greater than 50% of equity, or total outstanding bonds greater than 100% of equity based on the most recent financial report, it is mandatory to have the credit rating results for the enterprise in the corporate bond offering dossier. Note that this credit rating requirement does not apply to corporate bonds and there is no minimum rating level to be eligible to issue corporate bonds.
Law No. 56/2024/QH15 stipulates that investors in securities are individuals. được Purchase, trade, and transfer of individual corporate bonds that meet the following conditions:[3] (i) Corporate bonds with credit ratings; and (ii) Corporate bonds with collateral or payment guarantees from credit institutions. This regulation will officially take effect from January 01, 01.[4].
Thus, in the future, if DNPH wants to expand the target audience for purchasing individual corporate bonds issued by it to include individual investors, in the process of preparing bond issuance documents, it will have to carry out the following: credit rating TPDN. The credit rating of individual TPDN is expected to help the enterprises build trust in the market, be an important basis for investors to assess financial risks and promote transparency in the bond market in Vietnam. In our opinion, the application of individual TPDN credit rating instead of requiring credit rating only for the enterprises can also have positive factors when in many cases, the rating of individual TPDN is higher than that of the enterprises because the bonds are guaranteed by banks.
3. Enhance responsibility in preparing and confirming records and reporting documents
Securities Law 2019 (Article 23) just regulations on the responsibilities of issuance consulting organizations, underwriting organizations, auditing organizations and report signatories for public offering registration dossiers. Law No. 56/2024/QH15 has abolished the above provisions and added general provisions on the responsibilities of organizations and individuals participating in the process of preparing or confirming dossiers and reporting documents. relating to securities and securities market activitiesThese subjects will be held legally responsible for:
- the legality, accuracy, truthfulness and completeness of such records, reports and documents; and
- Such records and reports must ensure clear information, not cause misunderstandings and contain all important contents that affect the decisions of agencies, organizations and investors.
According to current legal documents, the scope of securities and securities market activities is quite broad and diverse. These activities may include the issuance of securities, registration, depository and listing of transactions, securities trading on the market, information disclosure and reporting, etc. Therefore, the requirement for organizations and individuals to participate in the process of preparing or confirming records and reporting documents must ensure that there is no misleading information and that there is full Important contents (which may be qualitative factors) for some specific activities may cause difficulties for DNPH as well as consulting units in compliance.
4. Responsibility for consulting organizations, auditing organizations and practitioners
Law No. 56/2024/QH15 stipulates that dossier consulting organizations and practitioners participating in dossier consulting have the following responsibilities:[5] (a) must be honest, careful and comply with legal regulations in consulting on documents; (b) review and check information in the documents, ensuring that analysis and evaluation are performed reasonable, careful Based on the information, data and documents provided and responsible within the scope of consultation related to the records and reporting documents.
Auditing organizations, approved auditors, and persons signing audit or review reports must comply with the provisions of law on independent auditing; comply with auditing standards when auditing financial statements and be responsible for their opinions on the truthfulness and reasonableness of audited reports and figures; comply with standards on assurance service contracts; and be responsible for giving opinions on the summary of financial information according to convention.
It is an inevitable trend for investors to use information on financial statements that have been independently audited to understand the financial health of the enterprise before making an investment decision. This method is very suitable, promoting the specialization of the auditing unit, helping to save costs for investors in understanding the financial health of the enterprise. Without confirmation of the honesty of the audit, investors will find it difficult to feel secure and confident when investing in the enterprise. Therefore, it is really necessary to closely link the legal and material responsibilities of auditors with the comments and conclusions they provide to the market. We would like to further note that in a number of criminal cases brought to trial recently (cases involving Tan Hoang Minh Group, FLC Group and related companies), a number of auditors in charge of auditing the financial statements of enterprises were charged with criminal liability by the Procuracy and convicted by the Court for issuing audit reports with content that was not true to reality and not in compliance with the provisions of Vietnamese auditing standards.
5. Additional informationconditions for the public offering of bonds
Law No. 56/2024/QH15 supplements conditions for public bond offerings. Specifically, DNPH must “Meet Government regulations on bondholder representation, debt ratio, issue price per equity and credit rating“[6] and the public bond offering registration dossier must include “contract between the issuer and the bondholder representative“[7].
We have learned about the Decree amending and supplementing a number of articles of Decree 155/2020/ND-CP[8] This condition is being drafted with specific contents summarized as follows:
- The DNPH or TPDN registered for offering must be credit rated by a licensed credit rating organization;
- DNPH has appointed and signed a contract with the Bondholder Representative before the TPDN is issued;
- The debt-to-equity ratio of the enterprise (including the value of the corporate bonds expected to be issued) to the equity capital must not exceed 3 times, except in cases where specialized laws provide otherwise; and
- The value of corporate bonds expected to be issued at par value is not greater than equity.
6. Amendment of conditions for offering bonds of public companies
Law No. 56/2024/QH15 amends the conditions for offering individual convertible bonds and bonds with individual warrants of public companies, specifically as follows:[9]
- In the dossier for issuing individual bonds (convertible or with warrants), the enterprise must have a decision approved by the General Meeting of Shareholders. Plan for issuance and use of proceeds from the offering; clearly define investor criteria; number of shares, stock offering price or principle of determining stock offering price.
The time from the decision to seek shareholders’ opinions until the public company can issue the decision of the General Meeting of Shareholders (regardless of the method, through convening a direct meeting or obtaining shareholders’ opinions in writing) is relatively long due to the mandatory implementation of procedures and compliance with the minimum time frames prescribed by law (sending notice of closing the shareholder list, sending documents after having a list of entitled shareholders, collecting enough or having to wait until the deadline for submitting shareholders’ opinions, etc.). Meanwhile, the commercial conditions of the transaction of issuing convertible bonds or bonds with warrants depend on the market supply and demand at the time of issuance and depend on the results of consultation of related parties after the market exploration stage. Therefore, to ensure the success of the issuance of corporate bonds, public companies need to pay close attention to this condition when developing a plan to implement the transaction in a timely manner. In our experience, asking shareholders for approval of the policy for each specific content of the regulation in an appropriate manner in advance, and then the Board of Directors (on the basis of specific authorization from the General Meeting of Shareholders) approves the details afterwards is also a feasible and feasible option in practice. - For convertible bonds, public companies are allowed to issue them to strategic investors and professional securities investors as prescribed. Meanwhile, for bonds with warrants, public companies are only allowed to issue them to strategic investors and professional securities investors as prescribed in Section 2 above.
The above regulation will officially take effect from January 01, 01.
Suspension and cancellation of bond offerings[10]
Law No. 56/2024/QH15 stipulates that the State Securities Commission (“SSC”) may cancel the public bond offering even if the bond offering has ended if (i) the public bond offering registration dossier contains false information, omits important content that may affect investment decisions and cause damage to investors; or (ii) the distribution of bonds is not carried out in accordance with the provisions of law. However, from the time the shares converted from convertible bonds or shares purchased from warrants have been listed or registered for trading, even if the above violations are discovered, the SSC does not have the right to cancel previously issued bonds.
In early 2022, the State Securities Commission caused a stir when it issued Decision No. 181/QD-UBCK to cancel 09 private bond offerings from July 7 to March 2021 with a total value of VND 3 billion of 2022 affiliated companies (non-public companies) of Tan Hoang Minh Group. As stated by the State Securities Commission, the issuance of this Decision was based on the records, documents and proposals of competent authorities to cancel the bond issuances of these 10.030 companies due to their acts of disclosing false information and concealing information in the private bond issuance activities.
Law No. 56/2024/QH15 has added the right of the SSC to suspend a private bond offering registered with the SSC for a maximum of 60 days if it discovers violations in the registration dossier for a private securities offering or the distribution of bonds as stated above. In case, after the suspension period as stated above, the enterprise fails to remedy the shortcomings leading to the suspension of the bond offering or after the end of the private bond offering, it is discovered that the offering violates the above provisions, the SSC has the right to cancel the registered bond offering. However, from the time when shares converted from convertible bonds or shares purchased from warrants have been listed or registered for trading, even if the above violations are discovered, the SSC does not have the right to cancel previously issued bonds.
Within 07 working days from the date of cancellation of the private bond offering, the issuing enterprise must announce the cancellation of the private bond offering and must recall the issued bonds, and refund the money to investors within 15 days from the date of cancellation of the offering. After this period, the issuing enterprise must compensate investors for damages according to the terms committed to the investors.
[1] Decree 155/2020/ND-CP dated December 31, 12 of the Government detailing the implementation of a number of articles of the Law on Securities (“Decree 155 / 2020 / ND-CP“).
[2] Clause 2, Article 12 of Decree No. 153/2020/ND-CP dated December 31, 12 of the Government regulating the offering and trading of individual corporate bonds in the domestic market and the offering of corporate bonds to the international market (amended and supplemented by Decree 2020/65/ND-CP dated September 2022, 16 of the Government).
[3] Clause 3, Article 1 of Law No. 56/2024/QH15.
[4] Clause 2, Article 10 of Law No. 56/2024/QH15.
[5] Clause 4, Article 1 of Law No. 56/2024/QH15.
[6] Clause 6, Article 1 of Law No. 56/2024/QH15.
[7] Clause 7, Article 1 of Law No. 56/2024/QH15.
[8] Decree 155/2020/ND-CP dated December 31, 12 of the Government detailing the implementation of a number of articles of the Law on Securities.
[9] Clause 9, Article 1 of Law No. 56/2024/QH15.
[10] Clause 10, Article 1 of Law No. 56/2024/QH15.
Disclaimer: This article was prepared by PTN Law Firm LLC (“PTN Legal”) is for informational purposes only. PTN Legal does not warrant or guarantee the accuracy or completeness of this information. The content of the article may be changed, adjusted, or updated without prior notice. PTN Legal is not responsible for any errors or omissions in this article or damages arising from the use of this article in any case.
Article written by Lawyer Phung Anh Tuan and Assistant Lawyer Nguyen Pham Hoang