In 2022, the corporate bond market witnessed severe losses for many investors. The losses were caused because the bonds were issued illegally, or organisations distributed bonds without providing complete and accurate information to investors. To help the market develop in a positive direction and address these issues, Decree No. 65/2022/ND-CP was issued on 16 September 2022 (Decree 65) and amends Decree No. 153/2020/ND-CP of 31 December 2020 on offering and trading private corporate bonds in domestic market and offering of corporate bonds in the international market (Decree 153). Decree 65 is expected to facilitate the authorities to manage, regulate and supervise the issuers and protect the investors at the same time.
While Decree 153 applies to both domestic and international bonds, Decree 65 focuses on privately issued domestic bonds. It is expected to tighten the conditions for corporate bond issuance and enhance the transparency of issued bonds.
Decree 65 entered into force on 16 September 2022. Note that some parts only enter into force on 1 January 2023. 
Decree 65 supplements the definition of secured bonds and these can now also be guaranteed for payment by credit institutions, foreign bank branches, overseas financial institutions, and international financial institutions. Before that, secured bonds could only be secured by the asset of the issuers or third party, or were subject to the regulation of relevant specialised laws.
Decree 65 expands on how to determine the professional securities investors who are allowed to invest and trade in privately issued corporate bonds. According to Decree 65, professional securities investors are investors with sufficient financial capacity or professional qualifications in securities as prescribed in Article 11 of the Law on Securities. The following companies or individuals can qualify as a professional securities investor:
Commercial banks, foreign bank branches, finance companies, insurance business organisations, securities companies, securities investment fund management companies, securities investment companies, securities investment funds, international financial institutions, off-budget State financial funds, and State financial institutions permitted to purchase securities in accordance with relevant law;
Companies whose paid-up charter capital reaches more than VND 100 billion (~USD 4,080,000) or listing organisations or registered trading organisations;
Any individual having a securities business practicing certificate;
Any individual holding a portfolio of securities listed or registered for trading with a value of at least VND two billion (~USD 81,600) as certified by securities companies at the time when the individual has the legal status of an institutional securities investor; and
Any individual having a taxable income of at least VND one billion (~USD 40,800) in the most recent year prior to the time when the individual is identified to have legal status as an institutional securities investor in accordance with the tax declaration file submitted to the tax office or source documents for tax credit provided by the organisation or individual paying such income.
Decree 65 also allocates more responsibilities to the investors upon purchasing bonds. These include accessing the information disclosed by the issuer, clear understanding of the investment risks, self-evaluating the investment and being responsible for their investment decisions. When an investor buys bonds, they must read a document and subsequently certify that they have fully accessed the documents about the bonds they intend to buy, understand the law and accept risks on corporate bonds individually (both on primary and secondary markets). The information providers and the organisations responsible for the identification of professional securities investors shall both sign and certify on this document that they have provided sufficient information and documents to investors.
Recently, several investors bought bonds through a contract to co-invest with other investors which may cause some risks in the market. A bond investment contract in the form of a civil agreement or in other forms of investment which are not clear according to the provisions of the securities law is risky. It may lead to the loss of money, and such an agreement may not be protected by law. To address this, Decree 65 prohibits investors who have bought bonds from redistributing them through investment contracts. Investors are not allowed to sell or jointly contribute capital to invest in bonds with investors who are not professional securities investors.
The Decree also increases the required par value of a corporate bond to VND 100 million (~USD 4,100) or a multiple of VND 100 million instead of VND 100,000 or a multiple of VND 100,000 as in Decree 153. This aims to restrict the access of non-professional investors to buying corporate bonds in private placements.
Violations of regulations on professional securities investors will be handled in accordance with the law. Decree 65 stipulates that in case investors violate the provisions of the securities law, they will be administratively sanctioned, or the violation will be handled as a criminal case depending on the nature and seriousness of it. For example, the State Securities Commission (SSC) issued Decision No. 216/QD-XPVPHC earlier this year fining Hong Hoang Investment Trading Joint Stock Company VND 70 million (~USD 2,860) for not disclosing information within the prescribed time limit to the Hanoi Stock Exchange.
Decree 65 requires the issuance of credit rating results. These rating results are intended to ensure the transparency of corporate bond issuances and to increase access to information on issuers and investors. The issuance of credit rating results shall apply from 1 January 2023 for companies issuing more than VND 500 billion (~USD 20,500) of bonds per year or the total outstanding debt of bonds is greater than 100% of the equity.
Credit rating results are meant to enhance the public awareness and transparency of information of the capital-calling organisation and will support the synchronous development of both private placement and public offering. Decree 65 makes all market participants responsible for information transparency and their informed participation in the market.
Several authorities are involved in the corporate bond trading market establishment where the trading market can be understood as a procedure where the issued corporate bonds are initially registered at the Vietnam Securities Depository and Clearing Corporation (VSDCC), then registered for trading at the stock exchange. After that is done, the bond issuance plan that must be drawn up specifies the investors buying bonds. Finally, after the bond issuance, only transactions between the investors announced in the issuance plan are allowed.
To complete the regulations on the management and supervision mechanism, Decree 65 supplements the supervisory responsibilities of the stock exchange, VSDCC and the responsibilities of the SSC on management, supervision, inspection and administrative or criminal penalties depending on the nature and seriousness of such violations., Penalties can be monetary or imprisonment.
Furthermore, the Ministry of Finance is responsible for evaluating the implementation of mechanisms and policies, and managing and supervising auditing organisations and enterprises appraising prices when providing services related to corporate bonds. Finally. the State Bank is responsible for supervising credit institutions including granting licenses to credit institutions like banks, finance companies, finance leasing companies to provide bidding services and bond issuing agents.
Besides an agreement between the issuer and bondholder, Decree 65 stipulates when bonds shall be compulsorily redeemed at the request of an investor when the issuer:
commits violations against regulations on offering and trading of corporate bonds according to a decision issued by a competent level, or
fails to comply with the bond issuance plan; and
such violations cannot be rectified, or remedies of such violations are refused by at least 65% of the total outstanding bonds of the same type, and
other cases defined in the bond issuance plan.
However, compulsory redemption at the request of investors shall not apply to bonds that are withdrawn according to a decision of a competent authority.
The corporate bond market is an important way of capital mobilisation for operating businesses. To recover the bonds and securities market in terms of a dynamic trading environment, Decree 65 strictly sets out a clear legal framework to protect those who join the capital market and is expected to create a transparent and integrity trading environment in the future.
For more information, please contact:
Thang Nguyen / Special Counsel
Duc Tran / Associate
Cuong Ta / Associate
© 2022 ACS Legal Vietnam Company Limited – All rights reserved
This legal update is not an advice and should not be treated as such.
 See section 4 on Offering Conditions for more information.
 A credit rating is an evaluation of the credit risk of a prospective debtor, predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting.
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