Major changes to private issuance of corporate bonds in Vietnam

In response to the recent scandals of private issuance of corporate bonds, the Government has introduced several major changes to Decree 153/2020 on private issuance of corporate bonds in Vietnam. In particular, Decree 65/2022 amending Decree 153/2020 was issued in September 2022 and took effect immediately. We discuss below the key changes introduced by Decree 65/2022 which apply mostly to private domestic issuance of corporate bonds.

· Use of proceeds. Issuance of bonds to finance working capital or internal capital restructuring is no longer permitted. Issuance of bonds to refinance existing debt is still permitted. A bond issuer must now report how it uses the proceeds from bond issuance every six months. And the report must be verified by a qualified auditing company. When issuing a new bond, the bond issuer must also disclose how it uses the proceeds from earlier issuance in the issuance documents or the bond issuance plan.

· Voting of bond holders. Decree 65/2022 expressly allows bond holders holding 65% or more of the outstanding bond to have the right to (1) approve changes to bond terms and conditions; (2) approve the issuer’s remedial plan if the issuer breaches the bond issuance plan or the law; and (3) change of the bond holders’ representative. Decree 65/2022 requires the minimum voting threshold of a bondholder meeting is 65% of the outstanding bond.

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Written by Nguyen Quang Vu On In ,

Can a non-contractual claim be settled by commercial arbitration in Vietnam?

Vietnamese law is not clear that a non-contractual claim (i.e., a claim which is not based on a breach of contract) could be settled by commercial arbitration. However, Vietnamese courts seem to take the view that non-contractual claims cannot be settled by commercial arbitrations. The answer to this issue is also important to the enforcement and recognition of a foreign arbitral award which deals with non-contractual claims. This is because Vietnamese courts can refuse to recognise a foreign arbitral award if the dispute cannot be settled by arbitration under Vietnamese law.

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Written by Nguyen Quang Vu On In ,

Can a small-size Vietnamese joint stock company operate without an inspection committee and an independent director?

Article 137 of the Enterprise Law 2020 provides that a joint stock company (JSC) can decide to organise itself in accordance with the two options below:

  • Option 1: A General Meeting of Shareholders, a Board of Directors, and an Inspection Committee and general director; and

  • Option 2: A General Meeting of Shareholders, a Board of Directors with at least 20% members being independent directors and a general director.

Under Option 1, the Enterprise Law 2020 further provides that if a JSC has less than 11 shareholders and the shareholders being organizations together own less than 50% of the charter capital of the company, then the company does not have to have an Inspection Committee. However, if a JSC selects option 1 and decides not to have an inspection committee, then on its face, such JSC is organised under option 2. Accordingly, it is not clear if the Board of such JSC must have at least 20% members being independent directors.

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Written by Nguyen Quang Vu On In

Foreign ownership limits in Business Cooperation Contracts in Vietnam

In certain business sectors (e.g., film projection service, or road transportation services), Vietnam undertakes to allow foreign investors to invest though setting up a joint venture or a business cooperation contracts (BCC) with capital contribution not exceeding certain limits. However, it is not clear if the ownership limit provided in these commitments apply to investment through a joint venture only or to both investment through joint ventures and BCCs.

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Written by Nguyen Quang Vu On In ,