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;

·        There is clear requirement for privately-issued bonds to be registered with the Vietnam Securities Depository or its members within 10 business days from the issuance date. The bond registrar will need to ensure the transfer limitation is complied with.

·        “Green bond” is introduced;

·        Decree 163/2018 allows a bond to be issued in multiple tranches provided that all tranches must be issued within 12 months from the date of the first tranche and each tranche must be completed within 90 days;

·        Decree 163/2018 does not require an offshore issuance of bond by a Vietnamese company to have a credit rating report or to have a legal opinion regarding the issue;

·        An issuer is now allowed to issue bond directly to investors without having to engage an underwriter or a bond issuance agent. Under Decree 90/2011, only credit institutions can sell bonds directly to investors; and

·        Decree 163/2018 introduces a comprehensive disclosure regime for bond issuers including disclosure before issuance, disclosure about issuance result, regular disclosure (e.g., six month financial statements and use of proceeds report) and irregular disclosure (e.g., suspension to the business or change to the use of proceed or inability to repay the loan).