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CONDITIONS OF CORPORATE BONDS UNDER LEGAL REGULATIONS

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Table of Contents

  1. Definition of Corporate Bonds
  2. Principles of Issuance and Utilization of Bonds under Legal Regulations
  3. Conditions of Corporate Bonds under Legal Regulations

1. Definition of Corporate Bonds

Pursuant to Clause 3, Article 4 of the 2014 Securities Law, “Bond means a type of securities certifying the lawful rights and interests of an owner of a part of the debt of the issuing organisation”

Additionally, according to Decree 153/2020/ND-CP, which regulates the private offering, trading of corporate bonds in the domestic market, and the offering of corporate bonds in the international market, corporate bonds are defined as securities with a maturity of one year or more, issued by an enterprise, certifying the rights and legal interests of the holder over a portion of the debt of the issuing enterprise.

2. Principles of Issuance and Utilization of Bonds under Legal Regulations

Pursuant to Article 5 of Decree 153/2020/ND-CP and Clauses 2 and 3 of Article 1 of Decree 65/2022/ND-CP, the principles for the issuance and use of corporate bonds are as follows:

  1. The issuing enterprise shall issue bonds under the principle of self-borrowing, self-repayment, bearing responsibility for the effective use of funds, and ensuring the ability to repay the debt.
  2. The purpose of the bond issuance is to finance investment programs, restructure the enterprise’s debt, or fulfill other purposes as prescribed by law. The enterprise must specify the purpose of issuance in the issuance plan as provided in Article 13 of this Decree and disclose the information to investors who register to purchase the bonds. Funds raised from the issuance of bonds must be used for the stated purposes in the issuance plan and the information disclosed to investors.
  3. For green bonds, in addition to the provisions in Clauses 1 and 2, the funds raised must be separately accounted for, managed, and allocated to environmental protection projects or projects that provide environmental benefits as per the approved issuance plan.
  4. For bonds issued in the domestic market, the enterprise may only amend the terms and conditions of the bonds, as stipulated in Article 6 of this Decree, provided the following conditions are met:
    • It is approved by the competent authority of the issuing enterprise;
    • The approval of holders of at least 65% of the total bonds of the same type currently in circulation.
  5. Any changes to the terms and conditions of the bonds must be disclosed by the issuing enterprise as extraordinary information in accordance with Article 22 of this Decree.

3. Conditions of Corporate Bonds under Legal Regulations

Pursuant to Article 6 of Decree 153/2020/ND-CP and Clause 4 of Article 1 of Decree 65/2022/ND-CP, the conditions and basic terms of corporate bonds are as follows:

  1. Bond Term: The term is determined by the issuing enterprise for each offering based on the enterprise’s capital needs.
  2. Issuance Volume: The volume is determined by the issuing enterprise for each offering based on the enterprise’s capital requirements.
  3. Currency of Issuance and Payment of Bonds:
    • For bonds offered in the domestic market, the currency for issuance, interest, and principal payments is the Vietnamese Dong.
    • For bonds offered in the international market, the currency for issuance, interest, and principal payments is foreign currency, as per the regulations of the issuance market and in compliance with foreign exchange management laws.
  4. Bond Face Value:
    • For bonds offered in the domestic market, the face value is one hundred million (100,000,000) Vietnamese Dong or multiples of one hundred million (100,000,000) Vietnamese Dong.
    • For bonds offered in the international market, the face value is determined as per the regulations of the issuance market.
  5. Bond Form:
    • Bonds are offered in the form of certificates, book entries, or electronic data.
    • The issuing enterprise will determine the specific form of the bond for each offering according to the regulations of the issuance market.
  6. Nominal Interest Rate of Bonds:
    • The nominal interest rate may be determined by one of the following methods: a fixed interest rate for the entire term of the bond, a floating interest rate, or a combination of fixed and floating interest rates.
    • If the nominal interest rate is floating or a combination of fixed and floating, the issuing enterprise must specify the reference base for determining the nominal interest rate in the issuance plan and disclose this reference to investors.
    • The issuing enterprise will determine the nominal interest rate for each offering based on its financial position and debt repayment capacity. For bonds issued by credit institutions, the interest rate must comply with the regulations of the State Bank of Vietnam.
  7. Types of Bonds: The issuing enterprise will determine the type of bonds in accordance with the law.
  8. Methods of Interest and Principal Payment: The enterprise will determine the methods of interest and principal payment based on its capital needs and market practices, and disclose this information to investors prior to the bond offering.