In other markets, a bond trustee acting for the benefits the bondholders is intended to make it easier for numerous bondholders to take collective action against the bond issuer especially in case of default by the bond issuer. In the U.S, a bond trustee is subject to duties under the Trustee Indenture Act of 1939.
In Vietnam, a representative of bondholders (đại diện người sở hữu trái phiếu) is the nearest concept to bond trustee in other markets. However, there are only a few provisions under Vietnamese law about a representative of bondholders:
- in a public offering of secured bonds, there must be a representative of bondholders appointed by the issuer via a contract between the issuer and the representative of bondholders in order represent the bondholders to monitor the issuer’s compliance and to represent the rights of the bondholders. Unlike other markets, Vietnamese law only requires a public offering of bonds to have a representative of bondholders when the bonds are secured bonds; and
- the representative of bondholders (1) must be a member of the VSD; (2) must not provide payment guarantee for debts of the issuer; (3) must not a major shareholder of the issuer; (4) must not have the issuer being a major shareholder of the representative of bond-holders; (5) must not have the same major shareholder with the issuer; and (6) must not have the same manager with the issuer or be under control of the issuer.
Given the lack of detailed provisions on the rights and obligations of a representative of bondholders, it is not clear how a representative of bondholders should function under Vietnamese law. Under the Civil Code 2005, an agency relationship is established either by law or by authorisation by the principal. It is not clear if the agency relationship between the representative of bondholders and the bondholders is established by law or by authorisation.
On the one hand, the representative of bondholders is appointed by and signs a contract with the issuer of the bond not the bondholders. Therefore, one could argue that the agency relationship between the representative of bondholders and the bondholders is not based on an authorisation from the bondholders. Even if there is an authorisation by each bondholder (e.g. by including such authorisation on the terms of the bonds), under Civil Code 2005, the authorisation can be cancelled at will by the bondholder.
On the other hand, if the representative of bondholders is considered as the legal representative of the bondholders then given the lack of clear authorities of the representative of bondholders under securities regulations, the scope of authorities of the representative of bondholders is not clear.
For example, the Civil Code 2005 provides that the legal representative of a legal person will be terminated when the legal person is terminated. However, the agency relationship between the representative bondholders and the bondholders should be terminated when, among other things, the bonds are terminated. In addition, in addition to the representative of bondholders, a bondholder may have other legal representatives and may take action against the bond issuer via such other legal representatives. This is different from a bond trustee arrangement whereby usually bondholders can take action against bond issuer via the bond trustee only.