23 frequently questions and answers about the issuance of bonds of public companies

1. What are bonds?

Bonds are securities that certify their holders’ lawful rights and interests to a part of the debt of the issuer. In other words, a bondholder is a lender to an issuer of bonds.

2. How many types of bonds are there?

Depending on the bond classification, there are the following types of bonds:

i. Classification according to the issuer:

  • Government bonds;
  • Corporate bonds;
  • Bank and financial institutions bonds.

ii. Classification according to the bond yield:

  • Bonds with fixed interest rates;
  • Bonds with variable interest rates;
  • The bond with zero interest rate.

iii. Classification according to the level of security of the payer:

  • Secured bonds;
  • Debenture.

iv. Classification according to the bond properties:

  • Bonds with the right to buy shares;
  • Redeemable bonds;
  • Convertible bonds.

v. Classification according to the bond form:

  • Registered bonds;
  • Anonymous bonds.
3. What is a public company?

A public company is a joint stock company in one of the following cases:

  1. A company has contributed charter capital of VND 30 billion or more and has at least 10% of the voting shares held by at least 100 investors who are not major shareholders; or
  2. A company has successfully conducted the initial public offering of shares through registration with the State Securities Commission.
4. How to become a public company?

Companies with contributed charter capital of VND 30 billion or more and having at least 10% of voting shares held by at least 100 investors who are not major shareholders are required to submit registration dossiers to the State Securities Commission within 90 days from the date the company completes the capital contribution and has a shareholder structure that meets regulations of law.

5. What kinds of bonds that the public company offers?

The public company is allowed to offer the following types of bonds: Non-convertible bonds without warrants, convertible bonds and bonds with warrants.

6. What are conditions for the public company to offer bonds?

The conditions for offering bonds of a company to the public including:

  1. Having had a contributed charter capital at the time of registration of the offering from VND 30 billion or more recorded in the accounting books;
  2. Having profit in the preceding year and has no accumulated loss until the offering date; there is no debt that is overdue for more than 01 year;
  3. Having a plan on issuance, plan on use and repayment of capital received from the offering approved by the General Meeting of Shareholders or the Board of Directors or the Board of Members or the company owner;
  4. Having a commitment to fulfill the obligations of the issuer to investors regarding the conditions for issuance, payment, assurance of the lawful rights and interests of the investor and other conditions;
  5. Having a securities company advise on the application for registration of the bond offering to the public, unless the issuer is a securities company;
  6. Not being examined for penal liability or has been convicted of one of the crimes of infringing upon the economic management order but has not yet been cleared the criminal record;
  7. Having credit rating results for bond issuers in accordance with the Government’s regulations on credit rating cases and time of application;
  8. Having an escrow account to receive payments for the offered bonds; and
  9. Having a commitment to have its shares listed on the securities trading system after the end of the offering.
7. What are the cases in which credit rating is required for offering bonds?

The issuer or offered bonds are rated by a credit rating organization that is granted the Certificate of eligibility by the Ministry of Finance in the following cases:

  1. The total value of bonds at their face value raised in every 12 months exceed 500 billion VND and exceed 50% of the equity according to the latest financial statement such as: the latest annual financial statement that is audited or examined half-year financial statement (if the issuer is required to disclose the examined half-year financial statement) by an approved audit organization; or
  2. The bond outstanding at face value on the offering registration date exceed 100% of the equity according to the latest financial statement such as: the latest annual financial statement that is audited or examined half-year financial statement (if the issuer is required to disclose the examined half-year financial statement) by an approved audit organization.
8. What is the procedure of a public company for offering bonds?

For the offering of non-convertible bonds without warrants of a public company, the bond offering process is as follows:

  1. The issuer shall prepare bond offering dossiers;
  2. The issuer shall disclose information before the offering;
  3. The issuer shall carry out registration and depositing of bonds.

For the offering of convertible bonds and warrant-linked bonds of a public company, the bond offering process is as follows:

  1. The issuer shall prepare bond offering dossiers;
  2. The issuer shall send 01 set of the bond offering dossier prescribed in item (i) above to the State Securities Commission;
  3. After obtaining the written approval from the State Securities Commission, the issuer shall disclose information before the offering and organize the issuance of bonds.The money from the offering shall be transferred to the escrow account opened at a bank or foreign bank branch;
  4. Within 10 days from the date of completion of the offering, the issuer shall submit a report on offering results, enclosed with confirmation of proceeds given by the bank or foreign bank branch where the escrow account is opened to the State Securities Commission; Within 03 working days from the receipt of the adequate report on offering results, the State Securities Commission shall give a notification to the issuer and publish information about the receiving of offering results on its website.
  5. After receiving the notification from the State Securities Commission, the issuer shall have the proceeds from the bond offering in escrow released;
  6. The issuer shall carry out procedures for registration and depositing of bonds.
9. What are the conditions for offering convertible bonds to the public?

The public company needs to meet the following conditions to issue the convertible bonds to the public:

  1. Having an issuance plan and a plan for use of revenue generated by the offering the convertible bonds or the warrant-linked bonds which is approved by the General Meeting of Shareholders;
  2. Having the securities company that provides consulting for preparation of the application for public offering of convertible bonds or the warrant-linked bonds, unless the issuer is a securities company;
  3. Having a commitment and list the bonds on the securities trading system at the end of the offering;
  4. Having an escrow account to receive payments for the offered convertible bonds or the warrant-linked bonds;
  5. The total value of the convertible bonds or the warrant-linked bonds at their face value does not exceed the total value of shares outstanding at face value, unless there is an underwriting agreement which underwriter the purchase of the entire convertible bonds or warrant-linked bonds for reselling or purchase of the undistributed convertible bonds or warrant-linked bonds;
  6. If the public offering is meant to raise capital for operation of the issuer’s project, the quantity of the convertible bonds and the warrant-linked bonds sold must be at least 70% of the convertible bonds and warrant-linked bonds offered for project operation. The issuer shall have a plan to make up for the deficiency of capital generated by the offering; and
  7. Satisfying other relevant regulations of the Law on Securities.
10. Are all bond public offerings required to be registered?

No, they are not. In case of falling into the following cases, issuers or shareholders of public companies do not require the public offering registration:

  1. The offering of debt instruments of the Government, Government-backed bonds issued by policy banks, and municipal bonds;
  2. The offering of bonds issued by international financial institutions approved by Vietnam’s Government;
  3. The offering of bonds under a legally effective court judgment or decision, the decision of the Arbitrator or the sale of bonds by the manager or the receiver of the property in the event of bankruptcy or inability to pay.
11. Who are the subjects for buying bonds of a public company?
  1. With non-convertible bonds without warrant: Buyers are professional investors;
  2. With convertible bonds and warrant-linked bonds: Buyers are professional investors and strategic investors, in which the number of strategic investors must be less than 100 investors.
12. What are the forms in which a public company offers bonds?

A public company may offer a private bond or offer a public bond.

13. What are the differences between a private bond offering and a public bond offering?

1. Public bond offering means the offering of bonds pursuant to the following methods:

  1. Through mass media;
  2. To at least 100 investors, not including professional investors; or
  3. To unidentified investors.

2. Private bond offering means the offering of bonds that is not subject to the offer through the mass media and by one of the following methods:

  1. The bonds are offered to less than 100 investors, not including professional investors;
  2. The securities are only offered to professional investors.
14. What are the procedures for public companies offering bonds in the international market?

Offering bonds in the international market, the public companies shall conduct the following procedures:

  1. The issuer shall prepare application dossiers for bond offering in the international market and send it to the State Securities Commission;
  2. After obtaining approval from the State Securities Commission, the issuer shall disclose information before offering and organize the offering according to regulations adopted in the issuing market;
  3. Within 10 days from the completion date of the bond offering, the issuer shall submit a report on offering results to the State Securities Commission.
15. What are the dossiers for offering bonds of the public company to the international market?

The dossier includes the following fundamental documents as follows:

  1. A bond offering plan approved and accepted by a competent authority;
  2. The written confirmation of foreign currency account used for receiving proceeds from bond issuance given by a licensed credit institution according to State Bank of Vietnam’s regulations;
  3. The State Bank of Vietnam’s certification of issuance limit must fall within the total national limit on commercial foreign loans;
  4. Decision to approve and accept the bond issuance plan issued by a competent authority;
  5. Financial statements prepared according to international accounting standards if required by regulations adopted by the issuing market;
  6. The application for registration of bond offering with a competent authority in the issuing market or legal opinions given by an international legal counseling company that the issuer is not required to register the bond offering with a competent authority in the home country.
  7. The application for registration of offering of bonds in the international market;
  8. The copy of the decision of GMS/Board of Directors or Board of Members/ Company’s President to approve the dossier for the offering of bonds in the international market.
16. How many months at least for private convertible bonds or warrant-linked bonds?

The offering of private convertible bonds or warrant-linked bonds must be separated at least 06 months from the date of completion of the latest offering.

17. What are main contents of the prospectus when issuing bonds?

In bonds public offering, the prospectus includes the following main contents:

  1. Summary of the issuer, including its organizational structure, business operations, assets, financial status, Board of Directors, the Board of Members or the company owner, General Director (Director), Deputy General Director (Deputy Director), Chief Accountant and shareholders (if any);
  2. Information about the offering and the offered securities, including: offering conditions, risk factors, estimated profit and dividends of the nearest year after the issuance, the issuance plan and the plan for use of capital generated by the offering;
  3. The issuer’s financial statements of the last 02 years; and
  4. Other information prescribed in the model prospectus.
18. Can bond offerings be issued in multiple waves?

Yes, they can. A public company can offer the bonds in multiple waves must satisfy the following conditions:

  1. Meeting the requirements for bond offering;
  2. Having demands for funds in multiple stages in conformity with the purposes of bond issuance approved;
  3. Having a bond issuance plan in which the quantity of bonds to be offered, issuing time and plan to use funds raised from each offering wave must be specified.
19. What are the cases of redemption of bonds before maturity?

Cases in which bonds are redeemed before maturity include:

  1. The redemption is made under an agreement between the issuer and bondholder.
  2. Bonds shall be compulsorily redeemed at the request of investors in the following cases:
  • The issuer commits violations against regulations of law on offering and trading of corporate bonds according to a decision issued by a competent authority and such violations cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuse to give approval.
  • The issuer fails to comply with the bond issuance plan and that violation cannot be rectified or a number of bondholders that represents at least 65% of total outstanding bonds of the same type refuse to give approval for remedial measures for that violation.
  • Other cases are defined in the bond issuance plan (if any).
20. Is it allowed to disclose information that contains advertising information or advertises the bonds that are offered or issued privately?

No, it isn’t. Disclosing information that contains advertising information on the mass media, except information to be disclosed as prescribed by law; advertising the private placement on the mass media could be fined with a fine up to VND150,000,000.

21. How is the failure to carry out registration or depositing of privately placed bonds or failing to perform within the time limit handled?

With the act of failing to carry out registration or depositing of privately placed bonds or failing to complete the registration or depositing of privately placed bonds within the time limit, the current law regulates a fine up to VND100,000,000.

22. Is it allowed for guaranteeing securities prices in the future, income or profit on the investors’ investment, or making a no-loss guarantee?

No, it is not. According to the provisions, giving comments or guaranteeing securities prices in the future, income or profit on the investors’ investment, or making a no-loss guarantee, except in cases of issuance of non-convertible bonds is prohibited by law. Therefore, this act can be fined with a fine up to VND100,000,000.

23. How is the failure to disclose information within the prescribed time limits about expected transactions and transaction results handled?

Failing to disclose information within the prescribed time limits about expected transactions and transaction results be fined according to registered stock transaction value could be fined up to VND75,000,000 depending on registered transaction value.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 29 March 2023

Writers: Tuyen Pham & Tram Nguyen

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