Decree 52/2006/ND-CP on Corporate Bond Issuance

DECREE On Corporate Bond Issuance

GOVERNMENT

Pursuant to the Law on the Organization of the Government dated December 25, 2001; Pursuant to the Law on Enterprises dated November 29, 2005; Pursuant to the Law on Investment dated November 29, 2005; Pursuant to the Law on Credit Institutions dated December 12, 1997; and the Law amending and supplementing some articles of the Law on Credit Institutions dated June 15, 2004;

At the proposal of the Minister of Finance,

DECREE:

Chapter I GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Decree regulates the issuance of individual corporate bonds by the following types of enterprises: joint-stock companies, state-owned enterprises during the period of conversion into limited liability companies or joint-stock companies as prescribed by the Law on Enterprises, and enterprises with foreign-invested capital within the territory of the Socialist Republic of Vietnam.
2. The issuance of bonds to supplement the charter capital of credit institutions owned by the State shall be implemented according to the provisions at Clause 3, Article 19; Clause 3, Article 46; and Clause 1, Article 47 of this Decree.
3. The issuance of bonds guaranteed by the Government and the public issuance of bonds are not within the scope of regulation of this Decree.

Article 2. Interpretation of Terms In this Decree, the following terms are understood as follows:

1. Corporate bond (hereinafter referred to as "bond") is a type of debt security issued by an enterprise, confirming the issuing enterprise's obligation to repay both principal and interest to the bondholder.
2. Convertible bond is a type of bond that can be converted into common shares of the same issuing organization according to conditions determined in the issuance plan.
3. Non-convertible bond is a type of bond that cannot be converted into shares.
4. Secured bond is a type of bond secured for the full or partial repayment of principal and interest upon maturity by the assets of the issuing organization or a third party, or by a payment guarantee from a financial or credit institution.
5. Unsecured bond is a type of bond not secured for the full or partial repayment of principal and interest by the assets of the issuing organization or a third party, or by a payment guarantee from a financial or credit institution.
6. Issuance of bonds is the initial sale of bonds to buyers.
7. Individual issuance of bonds refers to cases of bond issuance that are not public offerings as prescribed by laws on securities and the securities market.
8. Issuing organization is the enterprise that issues bonds according to this Decree.
9. Underwriting guarantee is the commitment by the underwriting organization to the issuing organization regarding the implementation of procedures prior to bond issuance, distribution of bonds to investors, purchase of bonds for resale, or purchase of the remaining undistributed bonds.
10. Issuing agent is the organization that sells bonds to investors on behalf of the issuing organization.
11. Payment agent is the organization that pays bond principal and interest upon maturity on behalf of the issuing organization.
12. Bond bidding is the selection of organizations and individuals participating in the bid, meeting all requirements of the issuing organization.
13. Competitive interest rate bidding is the process where participating organizations and individuals submit their proposed interest rates for the issuing organization or authorized organization to select the winning interest rate.
14. Non-competitive interest rate bidding is the process where participating organizations and individuals do not submit proposed interest rates but register to purchase bonds at the winning interest rate determined by the results of competitive interest rate bidding.
15. Warrant is a security issued together with a bond, confirming the bondholder's right to purchase a certain quantity of common shares according to determined conditions.
16. Bond-to-share conversion ratio is the number of common shares received by the bondholder when converting one bond into shares.
17. Bond conversion period is the time period from when the issuing organization begins bond conversion until the end of the conversion process.
18. Pledging of bonds is the act where the bondholder delivers their bonds to another organization or individual to hold as security for the performance of civil obligations.
19. Credit rating organization is a legal entity with the function of assessing the reputation of an enterprise and the ability of an issuing organization to repay bond principal and interest throughout the bond's term.
20. Bond custody is the act where the bondholder deposits their bonds at an authorized organization for safekeeping, allowing this organization to exercise rights over the bonds on behalf of the holder.

Article 3. Principles of Bond Issuance

1. Enterprises issuing bonds shall follow the principles of borrowing independently, repaying independently, and bearing responsibility for the effectiveness of capital usage.
2. Bond issuance activities must ensure openness, transparency, fairness, and the protection of the legitimate rights and interests of investors.
3. Bond issuance must comply with the provisions of this Decree and other relevant legal regulations.

Article 4. Purpose of Using Proceeds from Bond Issuance

1. Implementing investment projects.
2. Restructuring medium and long-term loans.
3. Increasing the scale of operating capital.

Article 5. Currency of Issuance and Payment Corporate bonds shall be issued and paid in Vietnamese Dong. For bonds of credit institutions, the currency of issuance and payment shall be Vietnamese Dong and foreign currency, implemented according to the regulations of the State Bank of Vietnam.

Article 6. Form of Bonds Bonds shall be issued in the form of certificates, book entries, or electronic data.

Article 7. Bond Par Value Corporate bonds shall have a minimum par value of 100,000 VND (one hundred thousand dong). Other par values shall be multiples of 100,000 VND. The types of par values for bonds issued by an enterprise shall be decided by the enterprise for each issuance batch.

Article 8. Buyers of Corporate Bonds

1. Buyers of corporate bonds include Vietnamese organizations and individuals; Vietnamese people residing abroad; and foreign organizations and individuals.
2. Vietnamese organizational buyers shall not use funds allocated from the state budget to purchase corporate bonds.

Article 9. Bond Interest Rates

1. Based on the enterprise's reputation, the effectiveness of the investment project, and the financial and monetary market situation, the issuing enterprise shall decide the bond interest rate for each issuance batch.
2. Bond interest rates may be fixed for the entire bond term or floating on the market. In the case of issuing bonds with floating interest rates, the issuing organization shall announce the reference interest rate to serve as the basis for determining the interest payable to bondholders.
3. Bonds shall be paid interest according to the following methods: a) Periodic interest payment; b) Interest payment upon issuance; c) Single payment together with principal upon maturity.

Article 10. Scope of Bond Trading

1. Corporate bonds may be freely transferred, gifted, bequeathed, or used for discounting, mortgage, or pledging in credit relations according to current legal regulations. An enterprise shall not use bonds issued by itself for discounting, mortgage, or pledging in credit relations.
2. Trading of bonds on the money market; listing, registration, custody, and trading of bonds at Securities Trading Centers (Stock Exchanges) shall be implemented according to relevant legal regulations.
3. Bonds shall not be used to replace currency in circulation or to fulfill financial obligations to the State.

Article 11. Early Repurchase of Bonds The issuing organization may repurchase issued bonds before maturity.

Article 12. Bond Custody and Deposit Bondholders may custody bonds at authorized securities custody organizations or deposit them at credit institutions for safekeeping according to legal regulations.

Article 13. Responsibilities of the Bond Issuing Organization

1. Use proceeds from bond issuance for the purposes committed to investors.
2. Fully and timely repay bond principal and interest upon maturity.
3. Fully implement information disclosure obligations and bear responsibility for the accuracy and truthfulness of disclosed information.
4. Fully implement commitments to the underwriting organization, issuing agent, payment agent, and organization authorized to conduct bond bidding.
5. Implement financial management, reporting, and statistical accounting systems according to legal regulations.

Article 14. Rights of Bond Buyers

1. Be ensured by the issuing organization to receive full and timely repayment of bond principal and interest upon maturity.
2. Use bonds for transfer, gift, bequest, discounting, mortgage, and pledging in civil relations according to legal regulations.

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

1. Bearer bonds that are lost, torn, damaged, or no longer retain their original shape and content shall not be settled.
2. Registered bonds that are lost, torn, or damaged, if the person who lost them proves their ownership and that the bonds have not been used for fraudulent settlement, shall be settled by the issuing organization upon maturity.

Article 16. Handling of Forged Bonds Any act of exploiting or forging bonds shall be handled according to legal regulations depending on the nature and severity of the violation.

Chapter II CONDITIONS AND AUTHORITY TO DECIDE ON BOND ISSUANCE

Article 17. Conditions for Bond Issuance An enterprise may issue bonds when meeting all the following conditions:

1. Being an enterprise within the scope specified at Clause 1, Article 1 of this Decree.
2. Having a minimum operating period of 01 year from the date the enterprise officially commenced operations.
3. Having audited financial reports for the year immediately preceding the year of issuance.
4. Having profitable production and business results in the year immediately preceding the year of issuance.
5. Having a bond issuance plan approved by an organization or individual with competent authority.

Article 18. Bond Issuance Plan

1. The bond issuance plan is constructed by the issuing organization to serve as the basis for organizing bond issuance and shall be publicly disclosed to investors.
2. The content of the bond issuance plan includes: a) Purpose of bond issuance; b) Information on the industry, business field, and enterprise performance; c) Volume, term, and interest rate of issued bonds; d) Conversion ratio, conversion period, and stock price fluctuation margin (in the case of issuing convertible bonds); d) Bond issuance method and organizations participating in underwriting, payment guarantee, issuing agency, and payment agency; e) Bond sales location and payment of principal and interest; g) Plan for arranging sources for bond principal and interest repayment; h) Other commitments to bondholders.

Article 19. Approval of Bond Issuance Plan

1. The General Meeting of Shareholders shall approve the issuance plan for convertible bonds. The General Director (Director) of the enterprise shall organize the implementation of the bond issuance plan.
2. The Board of Directors, Members' Council, or representative of the capital owner shall approve the issuance plan for non-convertible bonds. The General Director (Director) of the enterprise shall organize the implementation of the bond issuance plan.
3. For bonds supplementing charter capital issued by state-owned credit institutions and bonds issued by state-owned enterprises (including state-owned companies, state-owned joint-stock companies, one-member state-owned limited liability companies, and multi-member state-owned limited liability companies during the conversion period as prescribed), the bond issuance plan must be approved by the Ministry of Finance.

Chapter III TYPES OF CORPORATE BONDS

Section I CONVERTIBLE BONDS

Article 20. Issuers of Convertible Bonds Convertible bonds are issued by joint-stock companies.

Article 21. Principles of Issuing Convertible Bonds

1. Publicly disclose information at the time of issuance regarding conversion conditions, conversion period, bond conversion ratio, stock price fluctuation margin, purpose of using proceeds from bond issuance, and other rights of bondholders.
2. Ensure the ratio of foreign participation in Vietnamese enterprises according to the regulations of the Prime Minister for each period.
3. The total issuance volume shall not exceed the approved issuance limit.

Article 22. Bond Conversion Period The bond conversion period is determined and publicly disclosed by the issuing organization to investors at the time of bond issuance.

Article 23. Bond Conversion Ratio

1. The bond conversion ratio is determined by the issuing organization at the time of issuance.
2. At the time of bond conversion, if the stock price fluctuates beyond the announced stock price fluctuation margin, the bondholder has the right to adjust the bond conversion ratio to be appropriate.

Article 24. Payment Guarantee for Convertible Bonds

1. Convertible bonds may be secured or unsecured.
2. Secured bonds shall be secured by the following methods: a) Payment guarantee by financial and credit institutions; b) Security by assets of the issuing organization; c) Security by assets of a third party.
3. The Ministry of Finance shall specify the payment guarantee for issued bonds.

Article 25. Warrants Issued with Convertible Bonds

1. Warrants issued with convertible bonds confirm the bondholder's right to purchase a certain number of common shares of the issuing organization according to determined conditions.
2. The issuing organization shall publicly disclose information related to the common share purchase rights of warrant holders at the time of bond issuance, including: a) Conditions for warrant holders to purchase common shares. b) Number of shares purchasable per warrant unit. c) Other rights and responsibilities of warrant holders.

Section II NON-CONVERTIBLE BONDS

Article 26. Issuers of Non-Convertible Bonds

1. State-owned enterprises.
2. Joint-stock companies.
3. Limited liability companies.
4. Foreign-invested enterprises in Vietnam.

Article 27. Principles of Issuing Non-Convertible Bonds

1. Publicly disclose the purpose of using proceeds from bond issuance.
2. The total issuance volume shall not exceed the approved issuance limit.

Article 28. Payment Guarantee for Non-Convertible Bonds Non-convertible bonds may be secured or unsecured. The payment guarantee for non-convertible bonds shall be implemented according to the provisions at Article 24 of this Decree.

Article 29. Warrants Issued with Non-Convertible Bonds

1. Only joint-stock companies may issue warrants together with non-convertible bonds.
2. The issuance of warrants together with non-convertible bonds shall be implemented according to the provisions at Article 25 of this Decree.

Chapter IV METHODS OF BOND ISSUANCE

Section I UNDERWRITING OF BONDS

Article 30. Underwriting Organization for Bonds

1. Organizations underwriting corporate bonds include securities companies and other financial institutions as prescribed by law.
2. The Ministry of Finance shall prescribe the standards for bond underwriting organizations and publicly announce them annually for enterprises issuing bonds and underwriting organizations to implement.

Article 31. Methods of Bond Underwriting

1. The underwriting of corporate bonds may be performed by one or several organizations simultaneously.
2. In the case of multiple organizations jointly underwriting bonds, the method of joint underwriting shall be implemented.

Article 32. Bond Underwriting Fees

1. Bond underwriting fees are agreed upon by the issuing organization with the underwriting organization.
2. Bond underwriting fees are included in bond issuance costs and accounted for as business costs or project/construction value using proceeds from bond issuance.

Section II ISSUING AGENCY FOR BONDS

Article 33. Issuing Agency for Bonds

1. Issuing agencies for bonds include securities companies, credit institutions, and other financial institutions as prescribed by law.
2. The Ministry of Finance shall prescribe the standards for organizations acting as issuing agencies for corporate bonds.

Article 34. Methods of Bond Issuing Agency

1. The bond issuing organization may entrust one or several organizations to jointly perform the task of issuing agency.
2. The issuing agency shall sell bonds to investors according to commitments with the issuing organization. In case of unsold bonds, the agency may return the remaining bonds to the issuing organization.

Article 35. Bond Issuing Agency Fees

1. Bond issuing agency fees are agreed upon by the issuing organization with the issuing agency.
2. Bond issuing agency fees are included in bond issuance costs and accounted for as business costs or project/construction value using proceeds from bond issuance.

Section III BOND BIDDING

Article 36. Methods of Bond Bidding The bond issuing organization may choose the following bidding methods:

1. Direct bidding at the bond issuing enterprise.
2. Bidding through intermediary financial organizations.
3. Bidding through the Securities Trading Center (Stock Exchange).

Article 37. Principles of Bond Bidding

1. Confidentiality of information of organizations and individuals participating in the bid.
2. Ensuring equality among participating organizations and individuals.
3. Interest rate competition among participating organizations and individuals.

Article 38. Participants in Bond Bidding

1. Participants in bond bidding are organizations and individuals specified at Article 8 of this Decree.
2. Participants bidding through the Securities Trading Center (Stock Exchange) must meet all conditions prescribed by law.

Article 39. Forms of Bond Bidding

1. Competitive interest rate bidding.
2. Combination of competitive interest rate bidding and non-competitive interest rate bidding. The ratio of non-competitive interest rate bonds in each bidding batch is decided by the issuing enterprise but shall not exceed 30% of the total volume of bonds announced for issuance in that batch.

Article 40. Bond Bidding Fees

1. Bond bidding fees are agreed upon by the issuing organization with the organization authorized to conduct bond bidding.
2. Bond bidding fees are included in bond issuance costs and accounted for as business costs or project/construction value using proceeds from bond issuance (including the case where the issuing organization conducts bond bidding itself).

Chapter V INFORMATION DISCLOSURE

Article 41. Principles of Information Disclosure

1. Ensure the provision of complete and timely necessary information to bond buyers.
2. The issuing organization, auditing organization, and credit rating organization (if any) shall bear responsibility for the accuracy and truthfulness of disclosed or confirmed information.

Article 42. Content of Information Disclosure for Bond Issuance

1. Audited financial report of the year preceding the issuance year.
2. Bond issuance plan approved by an organization or individual with competent authority.
3. Rating results of the credit rating organization for the bond issuing organization and the type of bond issued (if any).
4. Rights of bond buyers and commitments of the bond issuing organization.

Article 43. Implementation of Information Disclosure The issuing organization shall implement information disclosure according to the following regulations:

1. Disclose information on bond issuance in at least 3 consecutive issues of 01 central newspaper or 01 local newspaper where the issuing organization has its headquarters.
2. Publicly post information according to Article 42 of this Decree at the headquarters of the issuing organization, underwriting organization, issuing agency, bidding organization, and bond distribution locations. Depending on specific conditions, issuing organizations may use additional media for information disclosure such as radio, television, electronic newspapers, websites, etc.

Chapter VI PAYMENT OF BOND PRINCIPAL AND INTEREST

Article 44. Sources for Bond Principal and Interest Payment

1. The bond issuing organization shall arrange sources for bond principal and interest payment for bondholders from the basic depreciation of investment projects/constructions and other legal capital sources of the enterprise.
2. For secured bonds, when the issuing organization cannot balance payment sources, the secured assets shall be liquidated to repay loans upon maturity. In the case where financial and credit institutions provide payment guarantees for bonds, these institutions shall arrange capital sources to repay bondholders. The issuing organization has the obligation to receive the debt and repay the payment guarantee organization or third party according to committed conditions.

Article 45. Organization of Bond Principal and Interest Payment

1. The issuing organization may directly pay or entrust a financial or credit institution meeting sufficient conditions to implement bond principal and interest payment.
2. The issuing organization and payment agent may commit to the payment agent's capital advance for paying bond principal and interest to bondholders. The issuing organization shall repay the advanced capital to the payment agent and bear capital usage fees during the delay period according to the contract agreed upon by the organizations.
3. Bond principal and interest payment fees are included in bond issuance costs and accounted for as business costs or project/construction settlement value using bond issuance proceeds.

Chapter VII RESPONSIBILITIES OF STATE MANAGEMENT AGENCIES AND ENTERPRISE OWNER REPRESENTATIVES

Article 46. Ministry of Finance

1. Unified state management of corporate bond issuance activities.
2. Supervise the safe debt limit for state-owned enterprises within the state's total safe debt limit.
3. Review and approve the bond issuance plans of organizations as prescribed at Clause 3, Article 19 of this Decree.
4. Suspend the bond issuance of enterprises violating state regulations on bond issuance.

Article 47. State Bank of Vietnam

1. Review and decide on the bond issuance of credit institutions according to the Law on Credit Institutions, the Law amending and supplementing some articles of the Law on Credit Institutions, after receiving the approval opinion of the Ministry of Finance as prescribed at Clause 3, Article 19 of this Decree.
2. Coordinate with the Ministry of Finance to guide credit institutions in implementing underwriting and issuing agency business for bonds.
3. Exercise state management over the use of corporate bonds for trading on the money market; discounting, mortgage, and pledging of bonds in credit relations between credit institutions and bondholders according to legal regulations.

Article 48. Enterprise Owner Representative

1. Approve bond issuance plans for enterprises within their management scope.
2. Supervise the issuance, use, and payment of bond principal and interest upon maturity.

Chapter VIII IMPLEMENTATION PROVISIONS

Article 49. This Decree takes effect from July 01, 2006, and replaces Decree 120/CP dated September 17, 1994, of the Government promulgating the Temporary Regulations on the Issuance of Shares and Bonds of State-Owned Enterprises.

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

Article 51. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, Chairpersons of Provincial/City People's Committees; Boards of Directors, Members' Councils, General Directors, and Directors of enterprises issuing bonds shall be responsible for implementing this Decree.