Revising Decree on private placement of corporate bonds

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The Decree revising Decree 153/2020/ND-CP has new regulations on private placement of corporate bonds.

To develop the corporate bond market in accordance with the State's policy, the Ministry of Finance has proposed competent authorities issue a legal framework on the unified corporate bond market in the Law on Securities in 2019, Law on Enterprises in 2020, and Government decrees (Decree 153/2020/ND-CP dated December 31, 2020 regulating private placement and trading of corporate bonds in domestic and foreign markets and Decree 155/2020/ND-CP dated December 31, 2020 detailing the implementation of a number of articles of the Law on Securities).

Accordingly, the legal framework for corporate bonds aims to develop an increasingly open and transparent market which protects the interests of investors. Vietnam's corporate bond market has taken rapid steps to become an important medium and long-term capital mobilization channel for enterprises, and gradually reduce dependence on bank credit.

However, recently, the corporate bond market has shown signs of rapid growth and capital mobilization through bonds in not in accordance with provisions of the law.

Therefore, in order for the market to continue to develop sustainably, transparently and effectively, it is necessary to continue to improve the legal framework and strengthen management and supervision of the market to develop a draft Decree amending and supplementing a number of articles of Decree 153/2020/ND-CP on private placement of corporate bonds.

The draft Decree is being consulted on by experts, market members and widely consulted on the websites of the Government and the Ministry of Finance from December 9, 2021.

The draft Decree amending Decree 153/2020/ND-CP has some notable contents:

Accordingly, the draft Decree amends the regulations on the purpose of bond issuance in order to strengthen the responsibilities and obligations of the issuer in using the proceeds from the bond issuance for the right purposes.

Along with that, the draft Decree adds regulations on credit ratings for some types of issued bonds to increase publicity and transparency, contributing to improving the quality of issued bonds, and helping the market have a habit of using credit rating results to assess the risks of bonds, approaching international practices and reducing risks for investors.

The draft also adds regulations on the representative of bondholders to strengthen the supervision of the bond capital use purpose of the issuer and strengthen the supervision of the implementation of other commitments of the issuer.

Another important content is how to identify professional securities investors - who are allowed to invest in and trade privately issued corporate bonds.

The draft Decree also adds regulations to speed up the establishment of a separate corporate bond trading market at the Stock Exchange for professional securities investors to increase liquidity and publicity, transparency, management and supervision of bonds which are traded on the secondary market.

In addition, the Draft also amends a number of regulations on the time limit and content of information disclosure in order to overcome recent shortcomings, and improve the transparency of bond issuers and the use of capital to issue corporate bonds.

Investors should not buy corporate bonds without assessing the risks of the bonds as well as the issuing company

Moreover, the Ministry of Finance has continued to request the State Securities Commission and relevant authorities to strengthen the management, supervision, and establishment of inspection teams to inspect the bond issuance of real estate enterprises, credit institutions related to real estate enterprises, enterprises with large issuance volume, high interest rates, enterprises with loss-making business results and issuers without collateral assets.