Raising funds by issuing bonds is an effective solution to the capital shortage of enterprises, consequently reduce their dependence on bank credit for funds.

However, in recent years, enterprises’ effort to raise funds still faces many challenges, especially in regards to of enterprises operating in real estate. Currently, the private placement of bonds is regulated by Decree 153/2020/ND-CP (“Decree 153”), however, this Decree has many loopholes that need to be amended. Decree 65/2022/ND-CP (“Decree 65”) amending and supplementing a number of articles of Decree 153 is expected to overcome the shortcomings of the old regulations, subsequently creating business conditions that promote the plan to issue bonds of qualified enterprises. The new Decree’s notable contents as follows:

Requirements for transparency for the bond issuance purposes

Compared to the previous bond issuance purposes laid out in Decree 153, Decree 65 has supplemented more transparent regulations on bond issuance purposes. Accordingly, enterprises must specifically state their bond issuance purposes in their published issuance plan and publicize the information to investors who register to buy bonds. This amendment help enhance the issuing enterprises’ responsibilities and duties with regards to the proper use of proceeds from issuing bonds.

Supplementing rules for issuance of bonds and use of raised funds

In addition, Decree 65 supplements rules for issuance of bonds and use of raised funds, specifically, for bonds already issued in the domestic market, enterprises are only allowed to change the terms and conditions of bonds specified in Article 6 of this Decree when: it is approved by the enterprises’ competent authorities; approved by the number of bondholders representing 65% of the total number of bonds of the same type in circulation.

Along with that, Decree 65 also supplemented the information that changes of terms and conditions of bonds must be abnormally disclosed by the issuer. In addition, the face value of a bond is also revised to increase from VND100 thousand or a multiple of VND100 thousand to VND100 million or a multiple of VND100 million.

Tighter regulations for professional investors

The identification of professional investors is stipulated more tightly in Decree 65. Accordingly, professional investors are investors with financial capacity or professional qualifications in securities as prescribed in Article 11 of the Law on Securities. The identification of professional investors using a securities portfolio require that the portfolio holds an average value of at least VND2 billion within 180 days with the investor's assets, excluding loans. Investors are not allowed to sell or contribute capital to invest in bonds with investors who are not professional investors.

The Decree supplements regulations to increase the professionalism of retail investors when buying privately placed corporate bonds, and minimize fraud by retail investors to buy privately placed corporate bonds.

Supplementing regulations on the representative of bondholders

Another new point in Decree 65 is the supplement of regulations on the representative of bondholders to increase the supervision of the purposes of raised funds from issuer’s bonds along with enhanced supervision of the fulfillment of the issuer’s commitments;

Accordingly, the representative of bondholders shall report to the State Securities Commission and the Stock Exchange on a quarterly and annual basis and report in cases the detected violations of the issuer affect the interests of bondholders.

The representatives of bondholders are responsible for complying with the provisions of securities law and Article 14 of this Decree when providing bondholders' representative services. At the same time, they are subjected to the management and supervision of the State Securities Commission according to regulation.

Enhancing transparency by changing the time limit to disclose information

In order to enhance the transparency of bond issuers and use of funds from bond issuance, the time limit for disclosing information on bond offering results in Decree 65 is set to decrease from 10 days down to five days.

In case the enterprises offer unsuccessfully or cancel the offering of bonds, within five working days from the end of the bond distribution, the enterprise shall disclose information and send the information disclosed to the Stock Exchange.