Vietnam issues new decree on corporate bonds

22 January 2021

On 31 December 2020, the Government of Vietnam issued Decree No. 153/2020/ND-CP on corporate bonds (“Decree 153/2020”), which came into effect on 1 January 2021. Decree 153/2020 replaces the existing Decree No. 163/2018/ND-CP on corporate bonds (as amended) (“Decree 163/2018”).

This article discusses some of the salient points of Decree 153/2020.

1. Limitation on purchasers of corporate bonds

There was no restriction under Decree 163/2018 on who could purchase corporate bonds. However, in line with changes under the Law on Securities No. 54/2019/QH14 (“Law on Securities”), Decree 153/2020 now limits the purchase of bonds to the following:

• Professional securities investors, in respect of non-convertible bonds and bonds without warrants; and 
• Strategic investors and professional securities investors, in respect of convertible bonds and bonds embedded with warrants, with less than 100 strategic investors.A professional securities investor is an investor with financial capability or professional expertise in securities as specified under the Law on Securities. A strategic investor is selected by the issuer’s shareholders at its general meeting in accordance with the criteria on financial capability and technological qualifications as determined by issuer’s shareholders, and is committed to cooperate with the issuer for a minimum of three years. 

2. Removal of condition on minimum term of operation and bonds outstanding balance

The requirement for the issuer to have been in operation for at least one year prior to the date of issuance of the bonds has been removed by Decree 153/2020. Decree 153/2020 also removes the condition that the outstanding balance of privately issued bonds at the time of issuance must not exceed five times' the equity of the issuer in its most recent financial statement. 

3. Removal of six-month interval between issuance tranches of non-convertible bonds and bonds without warrants

Under Decree 163/2018, the interval period between two issuance tranches of privately issued bonds was stipulated as a minimum of six months. This requirement has been removed by Decree 153/2020 with respect to non-convertible bonds and bonds without warrants. Convertible bonds and bonds embedded with warrants are still subject to the six-month interval.  

4. Non-credit institution cannot issue bonds directly to bond purchasers

Decree 153/2020 only allows bond issuers that are credit institutions to directly sell bonds to purchasers. Issuers other than credit institutions must appoint a bidding organisation, underwriter or bond issuing agent to place their bonds for sale, regardless of whether there is only one purchaser or a limited number of purchasers.

5. Three-year lock up period applicable to strategic investors

Under Decree 163/2018, convertible bonds and bonds embedded with warrants were not transferable within the lock up period of a minimum of one year from the date of completion of the issuance tranche. Decree 153/2020 now restricts strategic investors from transferring convertible bonds or bonds embedded with warrants for at least three years from the date of completion of the issuance tranche. The one-year lock up period remains applicable to professional securities investors.

6. Timing for deposit of the bonds

Within five business days of completion of a bond issuance (instead of 10 business days as previously provided under Decree 163/2018), the issuer must register and deposit the issued bonds with the Vietnam Securities Depository and Clearing Corporation (“VSDCC”) or a depository member of VSDCC.

7. Disclosure requirements

The following table compares certain disclosure requirements applicable to the issuer under Decree 163/2018 and Decree 153/2020.

Disclosure requirement	Decree 163/2018	Decree 153/2020
Disclosure of information prior to the issuance tranche	·         Three business days (in case of domestic bonds) ·         One business day (in case of international bonds)	·         One business day (in case of domestic bonds) ·         10 business days (in case of international bonds)
Disclosure of completion of bond issuance	Five business days	10 days
Periodic disclosure	·         Semi-annual and annual (in case of domestic bonds) ·         Not required in case of international bonds	Semi-annual and annual (applicable to both domestic bonds and international bonds)
Disclosure of early redemption, conversion and exchange of bonds	·         No later than 15 business days before the redemption/exchange of the bonds ·         No later than 10 days after completion of the redemption/exchange of the bonds ·         No later than five business days after completion of the conversion of bonds	·         10 days before the redemption/exchange of the bonds ·         10 days after completion of the redemption/exchange of the bonds ·         Five business days after completion of the conversion of bonds

 

8. No transition period for reporting and disclosure requirements

Corporate bonds issued before the effective date of Decree 153/2020 should continue to comply with Decree 163/2018 until maturity, except in relation to the provisions on reporting and disclosure. Accordingly, an issuer who has issued bonds under Decree 163/2018 must now comply with disclosure requirements regulated under Decree 153/2020 as discussed above.