Vietnam corporate bond rules after Decree 65 of 2022

Vietnam corporate bond rules changed on 16 September 2022, when the Government issued Decree 65/2022/ND-CP. The decree amends Decree 153/2020/ND-CP, which governs private placement bonds and their trading. It took effect the day it was issued. In short, private bonds are now open only to professional investors, each bond costs far more, and issuers must disclose results faster.

This note explains the main points for company leaders who issue, buy or advise on corporate bonds. It is a plain summary, not legal advice.

1. What Decree 65 changes

Decree 65 does not replace Decree 153. It edits it. The Government issued it on 16 September 2022, and it applies to bonds sold by private placement in the domestic market and to corporate bonds offered abroad.

Press reports in the days after it was issued named several main areas. Issuers must use bond proceeds for the purposes they stated. Changes to bond terms need more approvals. The par value is higher. The way to identify professional investors was revised. Disclosure deadlines are shorter. A Ministry of Finance official also said offering documents must add credit rating results in some cases.

Sources: Decree 65/2022/ND-CP of 16 September 2022, English text on LuatVietnam; Viet Nam News, "Changes in regulations to strengthen private placement bonds", 20 September 2022; Vietstock, 21 September 2022.

2. Who may buy private placement bonds

Only professional securities investors may buy non-convertible bonds that are not linked to warrants. If a bond is convertible or linked to warrants, strategic investors may also buy it. There must be fewer than 100 strategic investors.

The Law on Securities, No. 54/2019/QH14, sets out who counts as a professional securities investor in its Article 11. For an individual, the decree adds a clear test. The person must hold listed or registered securities with an average daily market value of at least VND 2 billion over 180 days. Margin loans and securities held for redemption are left out of that figure. The status stays valid for three months.

Buyers must also certify in writing that they meet these conditions. The certificate is kept in the issuance file or at the securities company that handles the trade.

Sources: LuatVietnam, "New regulations on trading of privately placed corporate bonds", 26 September 2022; Decree 65/2022/ND-CP, English text on LuatVietnam.

3. A much higher par value

The par value of privately placed domestic bonds rises from VND 100,000 to VND 100 million, or multiples of that sum. That is a 1,000-fold increase in the minimum unit.

The effect is simple. A single bond is now a large purchase. Small buyers are priced out, which fits the rule that only professional investors may hold these bonds.

Sources: LuatVietnam, "Bond par value of privately corporate increases 1,000 times", September 2022; Viet Nam News, 20 September 2022.

4. Use of proceeds and changes to terms

Issuers must state the purpose of the bonds in the issuance plan and use the money as stated. The decree lists the allowed purposes. They include funding programs and investment projects, restructuring the issuer's own debts, and purposes set by specialised laws. For credit institutions, the stated purposes must include raising tier-2 capital or funding loans and investments.

After issue, the terms of a domestic bond can change only with approval from the competent authority and agreement from holders of at least 65 percent of the bonds of the same type in circulation. The change must be disclosed as irregular information.

Sources: Decree 65/2022/ND-CP, English text on LuatVietnam; Vietstock, 21 September 2022.

5. Offering periods and disclosure

Each distribution period may not exceed 30 days from the date of the pre-offering disclosure. If an issuer sells in several placements, all of them must finish within six months of the first issue date.

The issuer must send its pre-offering disclosure to the stock exchange at least one working day before issuing. It must disclose the results within five working days after the placement ends. The old limit was ten days. A failed or cancelled placement also has a five working day deadline.

The decree repeats that the State does not guarantee payment of principal and interest on these bonds. A secured bond is one backed by assets or guaranteed by a credit institution, a foreign bank branch or an overseas or international financial institution.

Sources: Decree 65/2022/ND-CP, English text on LuatVietnam; Viet Nam News, 20 September 2022.

6. What leaders should check now

Treasurers and finance heads should review any bond plan that is still open. Check the stated purpose against how the money will be spent. Check that every buyer has a written certificate. Check the dates for each disclosure.

Buyers carry duties too. They should read the disclosed information and the bond terms, understand the risks and take responsibility for their decisions. Sellers must give buyers full information about the issuer, and must not sell to, or fund purchases by, investors who are not professional.

This summary does not cover every article of the decree. For issuer eligibility conditions, read Decree 153/2020/ND-CP and ask a qualified lawyer before acting.

Sources: LuatVietnam, 26 September 2022; Decree 65/2022/ND-CP, English text on LuatVietnam.