Which of the following valuable papers are debt securities under Vietnamese law?
“Hello Lawyer, I just recently learned to play the stock market. My main job is as an office worker, and my monthly salary is just enough to spend, so I want to invest and earn more. Incidentally, I have a guide. and invited me to play securities. However, my knowledge in this field is still very limited. I have a question I want to ask a lawyer, Which of the following valuable papers is debt securities? help me. I would like to sincerely thank Lawyer“. It can be seen that stock investment is an investment channel that brings huge profits, knowledge about securities is limitless, one of which is the knowledge about debt securities and debt securities including which types are certain. Today, LSX Lawfirm will give you an article about “Which of the following valuable papers are debt securities under Vietnamese law?”, as follows:
Legal grounds
Securities Law 2019
Decree 156/2020/ND-CP of the Government
What are debt securities?
Debt securities are securities that certify the owner’s creditor relationship with the issuing company. Debt securities exist in the form of bonds, debt and paper securities, money market instruments, and financial derivatives. In many countries, debt securities account for a large proportion of products traded on the market. The interest rate on debt securities depends on the risk level of the borrower (hereinafter the company issuing the security) and the borrowing activity. Government-controlled debt securities are issued at low-interest rates. In the economies of developed countries, debt securities have a relatively high trading proportion on the stock market.
Which of the following valuable papers are debt securities?
Debt securities often exist in many different forms, such as bonds, debt securities, and notes, money market instruments, financial instruments, etc. financial derivatives.
Bonds
A bond is a type of security that confirms the owner’s interest in the debt capital of the issuer. It can be the state, business, or financial institutions issuing. Thus, bonds are considered debt instruments, the issuer is obliged to pay both principal and interest upon a certain maturity.
Accordingly, bondholders are entitled to a fixed interest, which does not depend on the results of capital use. However, bondholders do not have the right to participate in management activities for the issuer.
Currently, there are two popular types of bonds: Government bonds and corporate bonds then.
– Government bonds (public bonds, bonds) have the highest safety. Usually, the buyer entitles to a fixed interest rate for the term. Example: The yield on a 5-year bond is about 6.8%.
– Corporate bonds are issued by enterprises for the purpose of needing capital to expand their business scale or invest in technological innovation. Instead of taking a bank loan and having to wait for a specific appraisal and explanation time, businesses mobilize capital by issuing bonds to seize business opportunities in a timely manner.
Debt securities
Debt securities are similar to bonds but differ in terms of guarantees and related issues. The purpose of issuing this type of security is that the state or large companies need to mobilize capital into the budget.
Money Market Instruments
These are documents certifying the unconditional right to a fixed amount of income in money for a certain period of time then.
Derivative financial instruments
Derivatives are instruments that are issued based on existing financial instruments with the following objectives: Protect profits, generate profits, or spread risks. The basic financial derivatives are swaps and options then.
Are stocks debt security?
The answer is “No”. Shares are equity securities – A type of security issued by a joint-stock company that confirms ownership of a part of the company’s income and assets then.
What type of business can issue securities?
The issuance of securities of different types of enterprises regulate as follows:
Private enterprises not allowed to issue securities of any kind (Clause 2, Article 118 of the Enterprise Law 2020).
Then A partnership not allowed to issue any type of securities (Clause 3, Article 177 of the Enterprise Law 2020). Limited liability company:
Firstly, A limited liability company may not issue shares, except in the case of conversion into a joint-stock company.
Secondly, A limited liability company with two or more members may issue bonds in accordance with this Law and other relevant laws; the private placement of bonds must comply with the provisions of Articles 128 and 129 of the Enterprise Law 2020. (Clause 3, 4, Article 46, Clause 3, 4, Article 74 of the Law on Enterprises 2020).
So Joint-stock companies entitled to issue shares, bonds, and other securities of the company (Clause 3, Article 111 of the Enterprise Law 2020).
Conditions for a private placement of securities
Conditions for a private placement of securities by an issuer that is not a public company
Accordingly, Article 30 of the Securities Law 2019, it is stated: “Private securities offering by an issuer that is not a public company shall comply with the provisions of the Enterprise Law and other relevant laws.”
Conditions for private placement of shares; individual convertible bonds; bonds with individual warrants of public companies
- There is a decision of the General Meeting of Shareholders to approve the issuance plan; use the proceeds from the offering, and clearly define the criteria and number of investors then;
- Participants in the offering only include strategic investors; professional stock investors then;
- The transfer of shares offered for private placement, convertible bonds offered for private placement; bonds with warrants for private placement limited to at least 3 years for strategic investors; at least 01 year for professional securities investors from the date of completion of the offering.
- Except for the case of transfer between professional securities investors or execution under judgment; the Court’s decision has taken legal effect; the decision of the Arbitrator or inheritance as prescribed by law;
- Individual stock offerings, individual convertible bonds; Bonds with individual warrants must space at least 06 months from the end of the latest offering.
- The offering of shares; converting bonds into shares; The exercise of warrants must satisfy regulations on foreign investors’ ownership ratio as prescribed by law then;
Conditions for a private placement of bonds of securities companies, securities investment fund management companies that are not public companies
- Firstly, there is a decision of the General Meeting of Shareholders or the Board of Directors or the Board of Members or the company owner to approve the plan to issue and use the proceeds from the offering; clearly define criteria and number of investors;
- Secondly, Satisfy the provisions at Points b, c, dd, and e, Clause 2, Article 31 of this Law.
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Related questions
Simple release procedure. The amount of capital mobilized is small. The number of issued securities is not much.
According to the provisions of Article 72 of the Law on Securities 2019, a securities company has the right to be licensed for a number of operations as follows:
– Stockbroker.
– Securities trading.
– And Securities guarantee.
– Securities investment consulting then.
A trading member is a securities company approved by the Vietnam Stock Exchange to become a trading member; Special transaction members are commercial banks; foreign bank branches; and other organizations approved by the Vietnam Stock Exchange to become special trading members.
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