Professional articles

Overview of legal regulations on public bond issuance

In the previous article, we analyzed the responsibility to disclose information (“Information disclosure”) of the individual bond issuer[1]In this article, we will continue to discuss the regulations applicable to the issuance of corporate bonds (“TPDN“) issued to the public in the domestic market and limited to non-convertible bonds without warrants according to relevant provisions of the Securities Law.[2]Decree 155[3]Circular 118[4]Circular 96[5]Circular 119[6], Regulations on securities registration and transfer of ownership[7], Regulations on securities depository activities[8]Regulations on domestic securities code issuance and international securities identification number issuance[9].

Conditions for public offering of corporate bonds

Issuing Enterprise (“DNPH”) must meet the following conditions to conduct a public bond offering:[10]:

  • Enterprises with contributed charter capital from the time of registration for offering from 30 billion VND or more calculated according to the value recorded in the accounting books;
  • Business operations in the year immediately preceding the year of registration for offering must be profitable, and there must be no accumulated losses up to the year of registration for offering, and no overdue debts of more than 01 year;
  • have an issuance plan, a plan to use and repay the capital raised from the offering approved by the General Meeting of Shareholders (“General Meeting of Shareholders”) or the Board of Directors (“Board of Directors”) or Board of Members (“Councilmember”) or the company owner through;
  • There is a commitment to fulfill the obligations of the DNPH to investors regarding the conditions of issuance, payment, ensuring the legitimate rights and interests of investors and other conditions;
  • There is a securities company that advises on the registration documents for public bond offerings;
  • DNPH is not under criminal prosecution or has been convicted of one of the crimes of violating economic management order and has not had its criminal record cleared;
  • have credit rating results for DNPH in cases where credit rating is required and when it is applied[11];
  • The issuing enterprise must open an escrow account to receive money to buy bonds from the offering; and
  • The issuing enterprise has a commitment and must list the bonds on the stock exchange system after the end of the offering.

Prepare documents for public offering of corporate bonds

DNPH is obliged to prepare key information about DNPH and the bond offering to complete the bond offering dossier, including[12]:

  • Public bond offering registration form according to Form No. 07 issued with Decree 155;
  • Decision of the General Meeting of Shareholders or the Board of Directors or the Board of Management or the company owner approving the issuance plan, the plan to use and repay capital raised from the public offering of bonds, through the listing of bonds on the stock exchange[13]; and capital usage plan (if any)[14];
  • Financial statements of the enterprise in the last 02 years; consulting contract for public bond offering registration dossier with securities company;
  • Underwriting commitment[15] (if any); credit rating report for the enterprise or for bonds registered for offering within 12 months from the date of submission of the offering registration dossier (if any);
  • Commitment letter of the Board of Directors or Chairman of the Board of Members or Chairman of the company on listing on the stock exchange after the end of the offering; decision of the Board of Directors or Board of Members or owner of the company approving the registration dossier for public offering of bonds;
  • Charter of the DNPH; commitment to perform the DNPH’s obligations to investors;
  • Confirmation document from the bank or foreign bank branch on opening a blocked account to receive money to buy bonds of the offering;
  • a written commitment that the person is not currently being prosecuted for criminal liability or has been convicted of one of the crimes of violating economic management order and has not had his/her criminal record expunged; and
  • prospectus[16].

For the registration dossier for public offering of secured bonds, DNPH must prepare the following additional documents:[17]:

  • Payment guarantee commitment of credit institutions and foreign bank branches (in case bonds are secured by payment guarantee method);
  • Bondholder representation contract between DNPH and Bondholder Representative.

In case of issuing bonds secured by assets, the issuing enterprise needs to supplement the following documents:[18]:

  • documents proving ownership of assets used to secure bond payments;
  • commitment of the third party owning the secured property to use that property to secure the performance of the bond payment obligation (in case of security by third party property);
  • contract with secured obligations between the secured asset owner, the Bondholder Representative, other secured asset recipients (in case the Bondholder Representative is not allowed to receive secured assets) and the DNPH;
  • property insurance contracts (if any) for these assets;
  • valid collateral valuation certificate; and
  • Confirmation of registration of security measures for assets used as security (if any). This document must be sent to the State Securities Commission before the date of issuance of the certificate of registration for public offering of securities.

Obtained the Certificate of Registration for Public Offering of Securities (“Certificate of Registration for Public Offering of Securities”)

DNPH is responsible for submitting bond offering documents to the State Securities Commission (“SSC”).SSC“)[19]. During the time the public bond offering registration dossier is under review, the issuing enterprise is obliged to amend or supplement the dossier if it discovers inaccurate information or missing content as required in the dossier or finds it necessary to explain issues that may cause misunderstanding. At the same time, the State Securities Commission has the right to request the issuing enterprise to amend or supplement the public securities offering registration dossier.[20].

Within 07 days from the date of receiving the notice from the State Securities Commission regarding the request to complete the procedures for granting the Certificate of registration for public offering of bonds, the DNPH must send 06 official Prospectuses to the State Securities Commission to complete the procedures for granting the Certificate of registration for public offering of bonds.[21].

Within 30 days from the date of receipt of a complete and valid public bond offering registration dossier, the State Securities Commission shall issue a Certificate of Registration of Public Bond Offering. In case the dossier is invalid, the State Securities Commission shall send the enterprise a written refusal stating the reasons.[22].

After the State Securities Commission issues the Certificate of Registration of Public Bond Offering, if important information arises related to the registration dossier for public bond offering, within 07 working days, the enterprise must publish the arising information in 01 electronic or printed newspaper in 03 consecutive issues and make amendments and supplements to the dossier.[23].

Disclosure of information before offering corporate bonds to the public

Within 07 working days from the effective date of the Certificate of Business Registration, the Enterprise shall publish the Notice of issuance in 01 electronic or printed newspaper in 03 consecutive issues, and at the same time publicly disclose the information on the Enterprise’s electronic information page.[24]. The content of information disclosure on public bond offering is prepared according to the form of Appendix No. 14 of Circular 118, including: Introduce DNPH, purpose of offering, offering plan and related organizations.

At the same time, DNPH shall post the official Prospectus on the DNPH’s website and the Stock Exchange (“Stock Exchange“)[25]. The content of the Prospectus for public bond offering is prepared according to the form of Appendix No. 05 of Circular 118, including: persons primarily responsible for the contents of the Prospectus, risk factors, concepts, situation and characteristics of the issuing enterprise, business performance, financial situation and expected plans, information about the offering; purpose of the offering, plan to use and repay capital raised from the offering, partners related to the offering and other important information that may affect investors’ decisions.

Register to buy and distribute TPDN to the public

The distribution of securities shall only be carried out after the issuing enterprise ensures that securities buyers have access to the Prospectus in the public securities offering registration dossier published at the locations stated in the Issuance Notice.[26].

The issuing enterprise must distribute bonds fairly and publicly and ensure that the registration period for bond purchase for investors is at least 20 days, except in the case of bonds offered for sale as secured warrants, this period must be stated in the Issuance Notice. In case the number of bonds registered for purchase exceeds the number of bonds permitted for issuance, the issuing enterprise must distribute all the bonds permitted for issuance to investors corresponding to the registration rate of each investor.[27].

The time for offering and distributing corporate bonds to the public is within 90 days from the effective date of the Certificate of Registration of Corporate Bonds. In case the enterprise cannot complete the distribution of bonds to the public within the above-mentioned time limit, the State Securities Commission shall consider extending the distribution but not exceeding 30 days. In case of registering to offer securities for multiple periods, the maximum interval between the next and previous periods shall not exceed 12 months.[28].

Investors purchasing bonds must transfer money to buy bonds into a blocked account opened at a bank or foreign bank branch until the offering is completed and report to the State Securities Commission.[29].

The DNPH must transfer the bonds or securities ownership certificates to the buyer within 30 days from the end date of the offering.[30].

Announcement of results of public offering of corporate bonds

Within 10 days from the end of the offering, the issuing enterprise shall make a report on the results of the offering, together with a written confirmation from the bank or foreign bank branch where the blocked account is opened regarding the proceeds from the offering to the State Securities Commission. At the same time, the issuing enterprise shall be responsible for sending the information disclosure on the results of the bond offering in the form of information disclosure on the electronic information page of the issuing enterprise and the Stock Exchange.[31]. The information disclosure on the results of the public bond offering sent to the State Securities Commission is made according to the form in Appendix No. 22 of Circular 118, including: Introduction of the issuing enterprise, offering plan, bond offering results, summary of bond offering results and capital structure of the issuing organization after the offering.

Request to terminate the freezing of the proceeds from the offering

Within 3 working days from the date of receipt of the complete and valid report on the offering results, the State Securities Commission must notify the DNPH in writing of its receipt of the report on the offering results or decide to cancel the offering if the results fall under the cases prescribed by the Law on Securities. At the same time, this information must also be sent to the Stock Exchange, the Vietnam Securities Depository and Clearing Corporation (“VSD”).VSD extension”), and posted on the website of the State Securities Commission. After receiving this notice, the DNPH is required to stop blocking the proceeds from the offering.[32].

Register TPDN

Bonds of listed enterprises and registered for trading on the securities trading system must be centrally registered at VSDC. Enterprises must register the following information with VSDC:[33]: Information about the issuing enterprise, information about the bonds of the issuing enterprise and information about the bond owners including: list of bond owners, bond types, number of bonds owned and bond depository account in case the bond owner needs to register the bond at the same time as depositing the bond.

DNPH shall carry out securities registration procedures directly with VSDC or through a securities company. If there is any change in the registered information, DNPH must directly update and adjust the information with VSDC without going through a securities company.[34]

The first TPDN registration dossier includes:[35]:

  • DNPH bond registration application form[36];
  • bondholder register;
  • bond code application form[37];
  • valid copy of Business Registration Certificate;
  • company charter;
  • Securities ownership certificate/book form;
  • list of conditionally transferable bond holders;
  • Shareholder management contract and minutes of liquidation of shareholder management contract;
  • Audited financial statements of the most recent year confirming the actual contributed capital;
  • Service supply contract between VSDC and DNPH;
  • written notice of maximum foreign ownership ratio in the enterprise; and
  • A copy of the document from the State Securities Commission confirming that the issuing enterprise has completed registration with a public company (in case the enterprise is registering shares as a public company).

The deadline for submitting corporate bond registration dossiers at VSDC is within 30 days from the date of establishing the bondholder register. The list of corporate bondholders is established according to Form No. 02B/DKCK issued with the Regulations on registration and transfer of securities ownership.[38]. The issuance of bond codes will be carried out simultaneously with the issuance of Bond Registration Certificates.[39].

TPDN Depository

Bond depository is the activity of receiving deposits, safekeeping, transferring and recording bond ownership of customers on the securities depository account system managed by VSDC to ensure the rights and interests related to the bonds of the owners.[40].

DNPH bonds must be centrally deposited at VSDC before transactions are made, except in other cases as prescribed by the Minister of Finance.[41]. The depository of customer bonds at VSDC is carried out according to the following principle: the enterprise deposits the bonds at the depository member; then the depository member will re-deposit the enterprise’s bonds at VSDC.[42]Accordingly, depository members are securities companies, commercial banks, and foreign bank branches that are granted a Certificate of registration for securities depository activities by the State Securities Commission and are approved by VSDC to become depository members.[43].

Listing of TPDN offered to the public

Listing bonds is the act of putting bonds that meet the listing conditions into trading on the trading system for listed securities.[44]Within 30 days from the end of the offering, the DNPH must complete the registration dossier for listing on the Stock Exchange.[45].

The registration dossier for public company trading will be carried out according to the provisions of Article 134 of Decree 155. The registration dossier for bond listing includes:[46]:

  • Application for bond listing registration according to form No. 28 issued with Decree 155;
  • The bondholder register of the organization registering for listing is established within 01 month before the time of submitting the listing registration dossier;
  • commitment to perform the obligations of the organization registering for listing to investors, including payment conditions, debt-to-equity ratio, conversion conditions (in case of listing convertible bonds) and other conditions;
  • Bond listing consultancy contract between DNPH and securities company; and
  • VSDC certificate on the bonds of the organization registering for listing has registered for centralized securities.

Within 30 days from the date of receipt of a complete and valid listing registration dossier, the Stock Exchange will issue a decision approving the listing. After receiving the listing approval, the issuing enterprise is responsible for putting the bonds into trading within 90 days from the date of approval.[47].

Periodic information disclosure on DNPH and TPDN

Every 6 months and every year according to the financial year from the end of the public bond offering until the completion of bond payment or disbursement of all mobilized funds, whichever comes first, the enterprise is obliged to periodically disclose information to bond investors and the State Securities Commission on the following contents:[48]:

  • The annual financial statements have been audited by an approved auditing organization. The deadline for publishing the audited annual financial statements is within 10 days from the date of the audit organization’s audit report period, but not exceeding 90 days from the end of the fiscal year;[49]
  • Annual report and resolution of the annual general meeting of shareholders (for enterprises that are joint stock companies). The time for announcing the minutes of the meeting, resolutions of the annual general meeting of shareholders and accompanying documents in the documents and resolutions is 24 hours from the time of approval of the decision of the general meeting of shareholders;[50]
  • Report on the use of capital raised from the offering, report on the progress of capital use[51] (in case of capital mobilization to implement investment projects). DNPH shall publish information on the progress of capital use from the offering every 06 months, within 05 working days from the end of the reporting period; and
  • Announce information on the payment status of principal and interest of bonds within 30 days from the end of the first 06 months of the year and the end of the calendar year. DNPH shall announce information on the payment status of principal and interest of bonds according to the corresponding form in Appendix VI issued with the Circular.

Unusual information disclosure by DNPH

DNPH shall make an unusual announcement within 24 hours and must clearly state the event, its cause, and remedial solution (if any), from the occurrence of one of the following events:[52]:

  • DNPH’s account is blocked or shows signs of fraud, or when the account becomes active again after being blocked
  • Partially or completely suspend business operations, have operations suspended or have the Business License revoked; when there is a Decision on business reorganization or conversion;
  • through the decision of the extraordinary General Meeting of Shareholders;
  • repurchase of shares or sale of treasury shares, date of exercise of stock purchase rights or date of conversion of bonds, decisions related to offering and issuance of securities;
  • decision to buy dividends, form of dividend payment, time of dividend payment, decision to split and consolidate shares;
  • reorganize the enterprise (divide, separate, merge, consolidate), change the name, location or seal; establish new or close the head office, branch, factory, representative office; issue, amend, supplement the Charter; strategy, medium-term development plan and annual business plan of the company
  • change the accounting period, applied accounting policies, notify the auditing firm that has signed the annual financial statement audit contract or change the auditing firm, cancel the signed audit contract;
  • participate in contributing capital to establish, purchase to increase ownership or sell to reduce ownership ratio of a company, resulting in that company becoming or ceasing to be a subsidiary or affiliated company;
  • Decision of the General Meeting of Shareholders or the Board of Directors approving contracts and transactions between the company and insiders or related persons;
  • when there is a change in the number of voting shares;
  • change, new appointment, reappointment, dismissal of insiders, receive resignation letter from insiders[53];
  • buy, sell assets or conduct transactions with a value greater than 15% of the company’s total assets based on the most recent annual financial report or the most recent 06-month financial report;
  • Upon receiving a decision to prosecute the company, the company’s insiders, to detain and prosecute the company’s insiders;
  • Upon receiving a legally effective judgment or decision of the Court related to the company’s operations, a decision to sanction violations of tax laws;
  • The company receives a notice from the Court accepting the application to open bankruptcy proceedings;
  • The company is aware of events and information that affect the price of its own securities;
  • other events occur that have a major impact on the company’s production, business or governance; and
  • approved or delisted from foreign stock exchanges.

Article written by Lawyer Phung Anh Tuan and Assistant Lawyer Bui Bao Ngoc

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.

[1] https://ptnlegal.com/5272-2/

[2] Securities Law 2019

[3] Decree 155/2020/ND-CP dated December 31, 12 detailing a number of articles of the Securities Law

[4] Circular No. 118/2020/TT-BTC dated December 31, 12 Guiding a number of contents on offering, issuing securities, public offering, repurchasing shares, registering public companies and canceling public company status

[5] Circular 96/2020/TT-BTC dated November 16, 11 Guiding information disclosure on the stock market

[6] Circular 119/2020/TT-BTC dated December 31, 12 Regulating the activities of registration, depository, clearing and payment of securities transactions

[7] Decision 50/QD-HDTV dated November 01, 11 Promulgating regulations on securities registration and transfer of ownership at Vietnam Securities Depository and Clearing Corporation

[8] Decision 18/QD-HDTV dated August 10, 8 Promulgating regulations on securities depository activities at Vietnam Securities Depository and Clearing Corporation

[9] Decision No. 11/QD-HDTV dated August 10, 8 Promulgating regulations on domestic securities code issuance and international securities identification code issuance at Vietnam Securities Depository and Clearing Corporation

[10] January 19th January 155th

[11] If (i) the total value of bonds at par value mobilized in each 12 months is greater than VND 500 billion and greater than 50% of the enterprise’s equity based on the financial statements; or (ii) the total outstanding 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

[12] January 20th January 155th

[13] Including: issuance plan (clearly stating the type of bonds offered, the number of bonds of each type offered, bond interest rate or principles for determining bond interest rate, bond term)

[14] Including the content of the plan to compensate for the shortfall in capital expected to be raised from the offering to implement the project.

[15] Form No. 08 Appendix issued with Decree 155

[16] Article 19 of the Law on Securities

[17] Clause 2, 4 Article 25 Decree 155

[18] Clause 3, Article 25, Decree 155

[19] Clause 1, Article 41, Decree 155

[20] Clause 1, 2, Article 22 of the Securities Law

[21] Clause 3, Article 41, Decree 155

[22] Clause 1, Article 25 of the Securities Law

[23] Clause 3, Article 22 of the Law on Securities

[24] Clause 3, Article 25 of the Law on Securities

[25] Clause 5, Article 41, Decree 155

[26] Clause 1, Article 26 of the Law on Securities

[27] Clause 2, Article 26 of the Law on Securities

[28] Clause 4, Article 26 of the Law on Securities

[29] Clause 3, Article 26 of the Securities Law

[30] Clause 6, Article 26 of the Law on Securities

[31] Clause 7, Article 41, Decree 155

[32] Clause 8, 9 Article 41 Decree 155

[33] Article 3 Circular 119

[34] Clause 3, Article 3, Circular 119

[35] Clause 2, Article 5 of the Regulations on securities registration and transfer of ownership

[36] Form No. 01B/DKCK issued with the Regulations on securities registration and transfer of ownership

[37] Form No. 01/CMCK issued with the Regulations on domestic securities code issuance and international securities identification code issuance.

[38] Point b, Clause 2, Article 5 of the Regulations on securities registration and transfer of ownership

[39] Point a, Clause 1, Article 9 of the Regulations on domestic securities code issuance and international securities identification number issuance

[40] Clause 34, Article 4 of the Law on Securities

[41] Clause 1, Article 62 of the Law on Securities

[42] Clause 1, Article 13, Circular 119

[43] Point a, Clause 1, Article 56 of the Law on Securities

[44] Clause 24, Article 4 of the Law on Securities

[45] Clause 2, Article 29 of the Law on Securities

[46] Clause 1, 2 Article 118 Decree 155

[47] Clause 3, Article 118, Decree 155

[48] Points a, b, c, Clause 2, Article 19, Circular 96

[49] Point c, Clause 1, Article 10, Circular 96

[50] Point b, Clause 3, Article 10, Circular 96

[51] Form No. 01 issued with Decree 155

[52] Point d, Clause 2, Article 19 and Article 11, Circular 96

[53] Information provision of new insiders according to the form prescribed in Appendix III of Circular 96