Decree No. 52/2006/NĐ-CP on the issuance of corporate bonds

DECREE

On the issuance of corporate bonds

___________

 

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Enterprise Law dated November 29, 2005;

Based on the Investment Law dated November 29, 2005;

Based on the Law on Credit Institutions dated December 12, 1997; the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated June 15, 2004;

At the request of the Minister of Finance.

 

DECREE

 

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Decree stipulates the issuance of individual corporate bonds for various types of enterprises including joint-stock companies, state-owned enterprises during the period of transitioning to limited liability companies or joint-stock companies in accordance with the Enterprise Law, and foreign-invested enterprises within the territory of the Socialist Republic of Vietnam.

2. The issuance of corporate bonds to supplement the own capital of credit institutions under state ownership shall be carried out in accordance with Clause 3, Article 19, Clause 3 of Article 46, and Clause 1 of Article 47 of this Decree.

3. The issuance of corporate bonds guaranteed by the Government and the issuance of corporate bonds to the public do not fall within the scope regulated by this Decree.

Article 2. Interpretation of Terms

In this Decree, the following terms shall be understood as follows:

1. Corporate bonds (hereinafter referred to as bonds) are a type of debt security issued by enterprises, confirming the enterprise's obligation to pay both principal and interest to the bondholder.

2. Convertible bonds are a type of bond that can be converted into ordinary shares of the same issuer under conditions determined in the issuance plan.

3. Non-convertible bonds are a type of bond that cannot be converted into shares.

4. Secured bonds are a type of bond secured for full or partial payment of principal and interest upon maturity by assets of the issuing organization or a third party, or by a financial institution's guarantee of payment.

5. Unsecured bonds are a type of bond that is not secured for full or partial payment of principal and interest by assets of the issuing organization or a third party, or by a financial institution's guarantee of payment.

6. Issuance of bonds is the initial sale of bonds to buyers.

7. Individual issuance of bonds refers to cases where bonds are issued without being offered to the public in accordance with securities laws and stock market regulations.

8. The issuing organization is an enterprise implementing bond issuance in accordance with this Decree.

9. Bond issuance guarantee is the commitment of the guarantor organization to the issuing organization regarding the procedures before bond issuance, distribution of bonds to investors, purchasing bonds to resell, or buying remaining unsold bonds.

10. Issuing agents are organizations selling bonds to investors at the authorization of the issuing organization.

11. Payment agents are organizations executing the payment of principal and interest of bonds upon maturity at the authorization of the issuing organization.

12. Bond auction is the selection of organizations and individuals participating in the bidding process that meet the requirements of the issuing organization.

13. Competitive interest rate bidding is the process where organizations and individuals participating in the bidding offer their bid interest rates for the issuing organization or authorized organization to select the winning bid interest rate.

14. Non-competitive interest rate bidding is the process where organizations and individuals participating in the bidding do not offer bid interest rates but register to purchase bonds at the winning bid interest rate determined by competitive interest rate bidding results.

15. Warrant is a type of security issued together with bonds, confirming the right of the bondholder to purchase a certain amount of ordinary shares under predetermined conditions.

16. Conversion ratio of bonds into shares is the number of ordinary shares that the bondholder receives when converting one bond into shares.

17. Conversion period of bonds is the time from when the issuing organization begins the conversion of bonds until the end of the conversion of bonds.

18. Pledging of bonds is the act of the bondholder transferring their bonds to another organization or individual to hold as collateral for the fulfillment of civil obligations.

19. Credit rating organization is a legal entity with the function of evaluating the credibility of enterprises and the ability of an issuing organization to repay principal and interest throughout the term of the bond.

20. Registration of bonds is the act of the bondholder depositing their bonds with an organization permitted to hold and preserve bonds so that the organization can exercise rights over the bonds for the holder.

Article 3. Principles for Issuing Bonds

1. Enterprises issue bonds on the principle of self-borrowing, self-repayment, and bearing responsibility for the effectiveness of borrowed capital utilization.

2. Bond issuance activities must ensure transparency, fairness, and protection of investors' legitimate rights and interests.

3. The issuance of bonds must comply with the provisions of this Decree and other relevant laws.

Article 4. Purposes of Using Proceeds from Bond Issuance

1. Implement investment projects.

2. Reorganize medium and long-term loans.

3. Increase operational capital scale.

Article 5. Currency for Issuance and Payment

Corporate bonds are issued and paid in Vietnamese dong.

For bonds of credit organizations, issuance and payment in Vietnamese dong and foreign currency shall be carried out in accordance with the regulations of the State Bank of Vietnam.

Article 6. Forms of Bonds

Bonds are issued in the form of certificates, book-entry entries, or electronic data.

Article 7. Par Value of Bonds

Corporate bonds have a minimum par value of VND 100,000 (one hundred thousand dong). Other par values are multiples of VND 100,000.

The types of par values for bonds issued by enterprises are decided for each issuance period.

Article 8. Subjects Purchasing Corporate Bonds

1. The subjects purchasing corporate bonds are Vietnamese organizations and individuals; overseas Vietnamese residents; foreign organizations and individuals.

2. Vietnamese organizations may not use state budget funds to purchase corporate bonds.

Article 9. Interest Rates on Bonds

1. Based on the enterprise's credibility, the efficiency of investment projects, and financial and monetary market conditions, the enterprise issuing bonds decides the interest rate for each issuance period.

2. The bond interest rate can be fixed for the entire term of the bond or floating based on the market.

In cases where bonds are issued with a floating interest rate, the issuer announces a reference interest rate as the basis for determining the interest payable to bondholders.

3. Bonds are paid interest through the following methods:

a) Periodic interest payments;

b) Immediate interest payment upon issuance;

c) One-time payment together with principal at maturity.

Article 10. Scope of Bond Transactions

1. Corporate bonds may be freely transferred, given, gifted, inherited, or used for discounting, collateral, or pledge in credit relationships according to current legal regulations.

Enterprises may not use their own issued bonds for discounting, collateral, or pledge in credit relationships.

2. Bond transactions on the money market; listing, registration, custody, and trading of bonds at securities exchanges are carried out in accordance with relevant legal regulations.

3. Bonds may not be used to replace circulating currency or fulfill financial obligations to the State.

Article 11. Early Redemption of Bonds

The issuer may redeem issued bonds before maturity.

Article 12. Registration and Deposit of Bonds

The bondholder may register bonds with organizations permitted to register securities or deposit bonds with credit institutions for safekeeping in accordance with the provisions of the law.

Article 13. Obligations of the Bond Issuer

1. Use funds from bond issuance for the purposes agreed upon with investors.

2. Fully and timely repay principal and interest on bonds when due.

3. Fulfill all obligations to disclose information and be responsible for the accuracy and truthfulness of disclosed information.

4. Fulfill all commitments made to the bond issuance guarantor, underwriting agent, payment agent, and authorized auction organization.

5. Implement financial management, reporting, and accounting statistics systems in accordance with the provisions of the law.

Article 14. Rights of Bond Purchasers

1. Be guaranteed full and timely repayment of principal and interest on bonds when due by the issuer.

2. Use bonds for transfer, gift, inheritance, discounting, mortgage, and pledge in civil relations in accordance with the provisions of the law.

Article 15. Settlement of Bonds in Case of Loss or Damage

1. Unregistered bonds that are lost or torn, damaged, and no longer retain their original shape and content will not be settled.

2. Registered bonds that are lost or torn, damaged, if the person who lost the bond can prove ownership and the bond has not been fraudulently settled, will be settled by the issuer when due.

Article 16. Handling of Counterfeit Bonds

Any act of exploiting or counterfeiting bonds shall be dealt with according to the provisions of the law depending on the nature and severity of the violation.

Chapter II

CONDITIONS AND AUTHORITY TO ISSUE BONDS

Article 17. Conditions for Issuing Bonds

A business entity issuing bonds must meet the following conditions:

1. Being a business entity as specified in Clause 1, Article 1 of this Decree.

2. Having at least one year of operation since the date the business officially commenced operations.

3. Having audited financial statements of the immediately preceding year before issuance.

4. The results of production and business activities of the immediately preceding year before issuance must show profit.

5. Having a bond issuance plan approved by authorized individuals or organizations.

Article 18. Bond Issuance Plan

1. The bond issuance plan is developed by the issuer as the basis for organizing the issuance of bonds and publicly disclosing it to investors.

2. Contents of the bond issuance plan include:

a) Purpose of bond issuance;

b) Information about industry, business sector, and business results of the enterprise;

c) Quantity, term, and interest rate of issued bonds;

d) Conversion ratio, conversion period, and stock price fluctuation range (for convertible bonds);

đ) Method of bond issuance and organizations participating in issuance guarantee, payment guarantee, underwriting agents, and payment agents for bonds;

e) Locations for selling bonds and repaying principal and interest on bonds;

g) Plan for arranging sources to repay principal and interest on bonds;

h) Other commitments to bondholders.

Article 19. Approving the bond issuance plan

1. The shareholders' meeting approves the convertible bond issuance plan. The General Director (Director) of the enterprise organizes the implementation of the bond issuance plan.

2. The Board of Directors, the Board of Members, or the representative of the capital owner approves the non-convertible bond issuance plan. The General Director (Director) of the enterprise organizes the implementation of the bond issuance plan.

3. For supplementary equity bonds issued by state-owned credit organizations and state-owned enterprises (including state-owned companies, state-owned joint-stock companies, single-member state-owned limited liability companies, and state-owned limited liability companies with two or more members during the transition period as prescribed), the bond issuance plan must be approved by the Ministry of Finance.

Chapter III

TYPES OF BONDS ISSUED BY ENTERPRISES

Section 1

 CONVERTIBLE BONDS

Article 20. Issuance targets for convertible bonds

Convertible bonds are issued by joint-stock companies.

Article 21. Principles for issuing convertible bonds

1. At the time of issuance, information on conversion conditions, conversion period, conversion ratio of bonds, stock price fluctuation range, purpose of using proceeds from bond issuance, and other benefits of bondholders shall be disclosed publicly.

2. Ensure the participation rate of foreign parties in Vietnamese enterprises according to the regulations of the Prime Minister for each period.

3. The total issuance amount does not exceed the approved issuance limit.

Article 22. Conversion period for convertible bonds

The conversion period for convertible bonds is determined and publicly announced by the issuer when issuing bonds so that investors are aware.

Article 23. Conversion ratio of convertible bonds

1. The conversion ratio of convertible bonds is determined by the issuer at the time of issuance.

2. When converting bonds, if the stock price fluctuates beyond the stock price fluctuation range published at the time of bond issuance, the enterprise owner has the right to adjust the bond conversion ratio accordingly.

Article 24. Guarantee for payment of convertible bonds

1. Convertible bonds may be secured or unsecured bonds.

2. Secured bonds are guaranteed through the following methods:

a) Payment guarantee by financial and credit organizations;

b) Security by assets of the issuer;

c) Security by assets of third parties.

3. The Ministry of Finance specifies the details of the guarantee for bond payments.

Article 25. Warrants issued together with convertible bonds

1. Warrants issued together with convertible bonds confirm the right of bondholders to purchase a certain number of ordinary shares of the issuer under predetermined conditions.

2. The issuer publicly discloses information related to the rights of warrant holders to purchase ordinary shares when issuing bonds, including:

a) Conditions for warrant holders to purchase ordinary shares.

b) The number of ordinary shares to be purchased per warrant unit.

c) Other rights and obligations of warrant holders.

Section 2

NON-CONVERTIBLE BONDS

Article 26. Subjects Issuing Non-Convertible Bonds

1. State-owned enterprises.

2. Joint-stock companies.

3. Limited liability companies.

4. Enterprises with foreign investment capital in Vietnam.

Article 27. Principles for Issuing Non-Convertible Bonds

1. Publicly disclose the purpose of using funds from issuing non-convertible bonds.

2. The total issuance amount shall not exceed the approved issuance limit.

Article 28. Guarantee for Payment of Non-Convertible Bonds

Non-convertible bonds may be secured bonds or unsecured bonds.

The guarantee for payment of non-convertible bonds shall be carried out in accordance with Article 24 of this Decree.

Article 29. Warrants Issued Together with Non-Convertible Bonds

1. Only joint-stock companies are allowed to issue warrants together with non-convertible bonds that do not have conversion capability.

2. The issuance of warrants together with non-convertible bonds shall be carried out in accordance with Article 25 of this Decree.

Chapter IV

METHODS OF ISSUING BONDS

Section 1

GUARANTEE FOR ISSUING BONDS

Article 30. Organizations Guaranteeing Bond Issuance

1. Organizations guaranteeing bond issuance include securities companies and other financial institutions as prescribed by law.

2. The Ministry of Finance shall stipulate the standards for organizations guaranteeing bond issuance and publicly announce them annually for enterprises issuing bonds and organizations guaranteeing bond issuance to comply with.

Article 31. Methods of Guaranteeing Bond Issuance

1. The guarantee for issuing corporate bonds can be undertaken by one or several organizations simultaneously.

2. In cases where multiple organizations jointly undertake the guarantee for bond issuance, they shall carry it out through a joint guarantee method.

Article 32. Fees for Guaranteeing Bond Issuance

1. The fee for guaranteeing bond issuance is agreed upon between the issuer organization and the organization accepting the guarantee for issuance.

2. The fee for guaranteeing bond issuance is included in the issuance costs and recorded as business expenses or the value of projects and works funded by bond issuance proceeds.

Section 2

AGENT FOR ISSUING BONDS

Article 33. Organizations Acting as Agents for Bond Issuance

1. Organizations acting as agents for bond issuance include securities companies, credit institutions, and other financial institutions as prescribed by law.

2. The Ministry of Finance shall stipulate the standards for organizations acting as agents for corporate bond issuance.

Article 34. Methods of Acting as Agent for Bond Issuance

1. The bond issuer may entrust one or several organizations to act as agents for bond issuance.

2. The agent for issuance shall sell the bonds to investors in accordance with the agreement with the issuer. If not fully sold, the agent may return the unsold bonds to the issuer.

Article 35. Fees for Acting as Agent for Bond Issuance

1. The fee for acting as agent for bond issuance is agreed upon between the issuer organization and the agent for bond issuance.

2. The fee for acting as agent for bond issuance is included in the issuance costs and recorded as business expenses or the value of projects and works funded by bond issuance proceeds.

Section 3

BOND AUCTION

Article 36. Methods of Bond Auction

The bond issuer may choose from the following auction methods:

1. Direct auction at the bond issuing enterprise.

2. Auction through financial intermediaries.

3. Auction through the Securities Trading Center (Stock Exchange).

Article 37. Principles of Bond Auction

1. Confidentiality of information regarding organizations and individuals participating in the bidding process.

2. Ensuring equality among organizations and individuals participating in the auction.

3. Competition on interest rates among organizations and individuals participating in the auction.

Article 38. Participants in Bond Auctions

1. Participants in bond auctions are organizations and individuals as specified in Article 8 of this Decree.

2. Organizations and individuals participating in bond auctions through the Securities Trading Center (Stock Exchange) must meet all conditions stipulated by law.

Article 39. Forms of Bond Auctions

1. Competitive interest rate auction.

2. Combination of competitive interest rate auction with non-competitive interest rate auction.

The proportion of bonds in each auction round that are subject to non-competitive interest rate auction shall be decided by the issuing enterprise but shall not exceed 30% of the total volume of bonds announced for issuance in that auction round.

Article 40. Auction Fees for Bonds

1. Auction fees for bonds are agreed upon between the issuer and the organization authorized to organize the bond auction.

2. Auction fees for bonds are included in the issuance costs and recorded as business expenses or project/capital expenditure using proceeds from bond issuance (including cases where the issuer organizes the bond auction itself).

Chapter V

INFORMATION DISCLOSURE

Article 41. Principles of Information Disclosure

1. Ensuring full and timely provision of necessary information to bond purchasers.

2. The issuer, auditing organization, and credit rating organization (if applicable) are responsible for the accuracy and truthfulness of disclosed or confirmed information.

Article 42. Content of Information Disclosure for Bond Issuance

1. Audited annual financial report of the year preceding the issuance year.

2. Bond issuance plan approved by authorized organizations or individuals.

3. Credit rating results issued by the credit rating organization concerning the bond issuer and the type of bond being issued (if applicable).

4. Rights of bond purchasers and commitments of the bond issuer.

Article 43. Implementation of Information Disclosure

The issuer shall implement information disclosure according to the following provisions:

1. Announce information about bond issuance in at least three consecutive issues of a central newspaper or a local newspaper where the issuer's main office is located.

2. Publicly display the information as prescribed in Article 42 of this Decree at the issuer's headquarters, guarantor's headquarters, distribution agent's offices, auction organizer's offices, and other locations where bonds are distributed.

Depending on specific circumstances, issuers may use additional means such as radio, television, online newspapers, websites, etc., to disclose information.

Chapter VI

PRINCIPLES OF PRINCIPAL AND INTEREST PAYMENTS FOR BONDS

Article 44. Sources for Principal and Interest Payment of Bonds

1. The bond issuer shall be responsible for arranging sources for principal and interest payment of bonds to bondholders from the basic depreciation of projects and investment works and other lawful capital sources of the enterprise.

2. In the case of guaranteed bonds, when the issuer cannot balance the payment sources, the collateral assets will be auctioned off to repay the loan upon maturity.

Where financial and credit institutions guarantee the payment of bonds, such institutions shall be responsible for arranging funds to pay off debts to bondholders. The issuer has the obligation to recognize the debt and repay the guarantor institution or third party according to the agreed conditions.

Article 45. Bond Principal and Interest Payment Organization

1. The issuer may directly make payments or entrust a financial or credit institution with the necessary conditions to carry out bond principal and interest payments.

2. The issuer and the payment agent may agree on the advance funding of the payment agent to pay the principal and interest of bonds to bondholders. The issuer is responsible for repaying the temporarily advanced funds to the payment agent and bears the cost of using funds during the delay period as stipulated in the agreement between the organizations.

3. The payment fee for bond principal and interest is included in the issuance costs of bonds and recorded as business expenses or the settlement value of investment projects funded by bond issuance.

Chapter VII

RESPONSIBILITIES OF STATE MANAGEMENT ORGANIZATIONS AND ENTERPRISE SHAREHOLDER REPRESENTATIVES

           

Article 46. Ministry of Finance

1. To uniformly manage state administration over corporate bond issuance activities.

2. To monitor the safety debt limit for state-owned enterprises within the total state safety debt limit.

3. To review and approve the bond issuance plans of organizations as prescribed in Clause 3, Article 19 of this Decree.

4. To suspend the issuance of bonds by enterprises violating state regulations on bond issuance.

Article 47. State Bank

1. To review and decide on the issuance of bonds by credit institutions as prescribed in the Law on Credit Institutions and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions after obtaining approval from the Ministry of Finance as prescribed in Clause 3, Article 19 of this Decree.

2. To coordinate with the Ministry of Finance to guide credit institutions in performing guarantee and agency issuance of bond operations.

3. To manage state administration over the use of corporate bonds for transactions in the money market; discounting, mortgaging, and pledging bonds in credit relationships between credit institutions and bondholders as prescribed by law.

Article 48. Enterprise Shareholder Representatives

1. To approve the bond issuance plans of enterprises under their management scope.

2. To supervise the issuance, use, and principal and interest repayment of bonds upon maturity.

Chapter VIII

IMPLEMENTING PROVISIONS

Article 49. This Decree takes effect from July 1, 2006, and replaces Government Decree No. 120/CP dated September 17, 1994, promulgating the Interim Regulations on the Issuance of Shares and Bonds by State-Owned Enterprises.

Article 50. The Minister of Finance shall be responsible for guiding and organizing the implementation of this Decree.

Article 51. The Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial People's Committees under the central government; Boards of Directors, Members of Boards of Management, General Directors, Directors of enterprises issuing bonds shall be responsible for implementing this Decree./.