A bondholders’ representative (Đại diện người sở hữu trái phiếu) is defined in Decree 155/2020 as a depository member of the Vietnam Securities Depository or a fund management company which is appointed or selected to “represent” the bondholders’ interests. However, it is not clear whether the bondholders’ representative is a legal representative or an authorized representative of the bondholders.

The legal nature of the role of bondholders’ representative is quite important. For example, if the bondholders’ representative is the legal representative of the bondholders then the bondholders cannot directly exercise their rights under the bond terms. On the other hand, if the bondholders’ representative is only an authorised representative of the bondholders then technically, the bondholders could still directly exercise their rights under the bond terms.

First, the relationship between a bondholders’ representative and bondholders should be an agency relationship. This is because:

· Under the Civil Code 2015, an agency relationship is constituted when an individual or a legal entity acts in the name and for the benefit of another individual or legal entity to enter into and/or perform a civil transaction. Although Decree 155/2020 does not use the exact wording of the Civil Code 2015, it uses the word “represent” (đại diện) and “interests” (quyền lợi); and

· Decree 155/2020 also provides that the bondholders’ representative will “on behalf” of the bondholders to enforce the security package in case the bonds are secured.

On the one hand, since the role of the bondholders’ representative is provided in a legal document (i.e., Decree 155/2020), one could take the view that bondholders’ representative should be the legal representative of bondholders. However, this interpretation is inconsistent with several provisions of the law. In particular,

· If the bondholder is an individual then the list of potential legal representatives of a natural person under the Civil Code 2015 (e.g., parents for their children, a guardian or a person appointed by the court) does not include a bondholders’ representative; and

· If the bondholder is a company then under the Enterprise Law 2020, a legal representative of a company must be an individual whose details are recorded in the company’s enterprise registration certificate (ERC). A bondholders’ representative is an organisation whose details are not recorded in the ERC of the bondholders being a company.

Accordingly, a more logical interpretation is that the bondholders’ representative is an authorised representative of the bondholders. This interpretation is not without issues. For example, there is no written authorisation signed by bondholders to authorise the bondholders’ representative to act as an authorised representative of the bondholders. The bondholders’ representative usually only sign a contract with the bond issuer where the bondholders’ representative accepts to act as bondholders’ representative. The role of the bondholders’ representative is also included in the bond terms. It is not clear if such an arrangement could constitute an authorisation by the bondholders to the bondholders’ representative.

This post is written by Luu Tuan Hung and Nguyen Quang Vu.

Vietnam Business Law