Can a joint stock company that is not a public company issue private bonds in Vietnam?

Recently, we have received a question from our customer: “Dear lawyer, my company operates in the field of securities but is not a public company. May I ask if I can issue private bonds? Can a joint stock company that is not a public company issue private bonds?”
In this article, LSX legal firm will provide you with information to answer the question.

Legal ground

• Law on Enterprise 2020

Can a joint-stock company (not a public company) issue private bonds?

Article 128 of the Law on Enterprise 2020 provides for the private placement of bonds as follows:
“1. The joint-stock company that is not a public company may make sell bonds using private placement in accordance with this Law and relevant laws. Private placement of bonds by public companies and other organizations, and public offering of bonds shall comply with securities laws.

2. Private placement of bonds by a joint stock company that is not a public company means the offering of bonds without mass media to fewer than 100 investors, excluding professional securities investors, that satisfy the following conditions:
a) Strategic investors for privately placed convertible bonds and bonds attached to warrants;
b) Professional securities investors for privately placed convertible bonds, warrant-linked bonds, and other kinds of privately placed bonds.

3. A joint stock company that is not a public company must satisfy the following conditions to make a private placement of bonds:
a) The company has fully paid the principal and interest of the bonds that are offered and due or fully paid due debts over the last 03 years before the offering (if any), except the offering of bonds to creditors that are pre-selected finance organizations;
b) The company has the audited financial statement of the year preceding the year of the offering;
c) The liquidity ratios and prudential ratios are maintained;
d) Other conditions prescribed by relevant laws.”

Thus, if your company fully meets all the above conditions, your company can issue private bonds.

Procedures for making private placement of bonds and transfer of privately placed bonds

• Firstly, the company shall decide on the plan for the private placement of bonds in accordance with the Law on Enterprise 2020.
• Secondly, the company shall disclose information to the investors before each placement and send a notification to the stock exchange at least 01 day before the intended date of the offering.
• Thirdly, the company shall disclose information about the result of the offering to the investors before each placement and send a notification to the stock exchange within 10 days from the completion date of the offering.
• Fourthly, privately placed bonds may be transferred among eligible investors specified in Clause 2 Article 128 of the Law on Enterprise 2020, except transfer under an effective court decision or arbitration award or inheritance as prescribed by law.
• Lastly, pursuant to the Law on Enterprise 2020 and the Law on Securities, the Government shall provide for the types of bonds, procedures for the private placement of bonds; information disclosure; international issuance of bonds.

Deciding private placement of bonds

The company shall decide on the private placement of bonds as follows:

• The GMS shall decide the types and total value of bonds and the time of the offering of convertible bonds and warrant-linked bonds. Voting shall be carried out in accordance with Article 148 of the Law on Enterprise 2020;
• Unless otherwise prescribed by the company’s charter and except in the cases specified in Point an of this Clause, the Board of Directors is entitled to decide the types and total value of bonds and time of offering and shall submit a report to the nearest GMS. The report shall be enclosed with documents about the offering.

The company shall register the change in charter capital within 10 days from the day on which the bonds are converted into shares.

Private offering of shares before becoming a public company

The private offering of shares of a non-public company means a company’s increase in the number of shares allowed to offer and sell those shares in the course of its operations to increase its charter capital without going through the media, including the Internet for no more than 100 investors, excluding professional securities investors or only offering to professional securities investors.

A non-public joint-stock company shall conduct a private placement of bonds in accordance with the following provisions:

• The Company decides on the plan of the private placement of shares in accordance with the provisions of the Law on Enterprise 2020;
• Shareholders of the company exercise the priority right to purchase shares as prescribed in Clause 2, Article 124 of the Law on Enterprise 2020, except in the case of a merger or consolidation of the company;
• In case the shareholder and the transferee of the right to buy priority do not buy all of the bonds. Then, the company will sell the remaining bonds to others according to the plan of the private placement of bonds with conditions not more favorable than those offered to shareholders, unless otherwise approved by the General Meeting of Shareholders.

Note: the private placement of shares before becoming a public company carried out in accordance with the provisions of the Law on Enterprise. Therefore, the company must make a notice of offering to the business registration authority (the provincial Department of Planning and Investment where the company’s head office located) within 05 working days from the date of issuance of the decision to offer private bonds.

Legal service of LSX Legal Firm

LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:

• Legal advice related to new regulations;
• Representing in drafting and editing documents;
• We commit the papers to be valid, and legal for use in all cases;
• Represent to submit documents, receive results, and hand them over to customers.

With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.

Furthermore, using our service, you do not need to do the paperwork yourself; We guarantee to help you prepare documents effectively and legally.

Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.

After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.

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Contact LSX

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