New Decree on private issuance of corporate bonds by Vietnamese companies

In December 2018, the Government issues Decree 163/2018 to replace Decree 90/2011 on private issuance of corporate by Vietnamese companies from February 2019. Decree 163/2018 introduces certain new important points as follows:

· To be able issue bonds, a company is no longer required to be profitable in year before the proposed issuance. Instead, the company only needs to operate for at least one year and its financial statement is audited by a qualified auditor. Issuer who has undergone certain restructuring (e.g., merger, conversion or division) may rely on the historical operation of other related companies to meet the one year operating test;

· Secondary trading of privately-issued bonds is limited within up to 100 investors excluding “professional investors” within one year from the issuance date. The new limitation seems to aim at the practice of issuing bonds privately at the first place and reselling the same to public investors in secondary market;

SOME LEGAL ISSUES IN TRADING DEBTS IN VIETNAM

Set out below are some legal issues in transfer of debts (Debts) from a credit institution (Originator) to a company licensed to trade debts in Vietnam (Debt Trading Co). Debt trading between a credit institution and a credit institution is useful for the credit institution to handle its bad debts or to issue assets-backed securities:

Credit institutions are allowed to negotiate loan interest rates based on market demand and supply and the creditworthiness without being restricted to maximum interest rate except in some cases. Meanwhile, interest rates of loans extended by non-credit institutions are subject to the maximum interest rate of 20% per annum under the Civil Code 2015. In practice, interest rates of consumer loans are quite high and could be higher than the maximum rate of 20% per annum. If the interest rate of the Debts is higher than 20% per annum, it is not clear at law whether the Debt Trading Co, upon owning the Debt, can continuously charge such interest rate;

Vietnamese regulator’s imposing prohibition on cryptocurrency activities

Under a recent announcement in Official Letter No. 4486/UBCK-GSDC dated 20 July 2018, the State Securities Commission of Vietnam (SSC) requires public companies, securities companies, asset management companies, and securities investment funds (quỹ đầu tư chứng khoán) (i) not to conduct any illegal offering, transaction or transaction brokerage relating to virtual money (tiền ảo) which should include cryptocurrencies like Bitcoin and to (ii) adhere to the legal regulations on anti-money laundering.

The above official letter was based on Directive 10/CT-TTg of the Prime Minister dated 11 April 2018. Both of them once again confirm the view of Vietnamese government on virtual money that was stated by the State Bank of Vietnam in its press release dated 27 February 2014 about Bitcoin in Vietnam:

(a) virtual money is not currency; and

(b) virtual money is not a legal tender.

No acting in concert concept under Vietnamese securities regulations

In other jurisdictions, acting in concert is generally understood to mean the intentional cooperation between two or more parties to exercise control of a listed company. And persons deemed to be acting in concert will have their voting rights combined for the purpose of calculating whether or not a mandatory disclosure and/or tender offer is required. Vietnamese securities regulations do not clearly contemplate or nor regulate the concept of “acting in concert”. As such, it is quite common in Vietnam for technically-unrelated persons to coordinate their voting to control (or influence the control) of a public company without having to disclose the coordination or making a public tender offer. This practice could potentially cause damages to public investors who are not aware of the potential change of control of a public company.

The provision under Vietnamese law which is most relevant to the “acting in concert” concept is the definition of a related person under the Enterprise Law 2014. Under the Enterprise Law 2014, a group of persons agreeing to co-operate among themselves to takeover a share of capital contribution, a share or interest in the company or to control the issuance of decisions by the company will be considered as a related person of the company. However, the Enterprise Law 2014 only considers a group of concerting parties as a related person to the company that such parties are trying to control but not as related persons between themselves.

Update 30 April 2017 - Remove the sentence "In addition, it is not clear if the concept of “related persons” under the Enterprise Law 2014 would apply to a public listed company since the Securities Law 2006 has its own definition of related persons." since under Decree 71/2017, a related person includes both related persons under the Securities Law 2006 and Enterprise Law 2014.

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Vietnam Business Law