Bond issuance is one of the forms of raising capital of enterprises. In the following article, the lawyer would like to share about “Conditions, order and procedures for issuing bonds of limited liability companies”.
First of all need to understand what is “corporate bonds”?
According to Clause 1, Article 4 of Decree 163/2018 / ND-CP “Enterprise bonds” are securities with a term of 1 year or more issued by enterprises, certifying the obligation to pay principals, interests and Other obligations (if any) of the enterprises towards investors with bonds ”
Clause 3, Article 1 of the Securities Law 2010 provides:
“Securities are evidence confirming the lawful rights and interests of the owner over the issuer’s assets or capital holdings. Securities are presented in the form of certificates, book entries or electronic data, including the following types:
a) Shares, bonds, fund certificates
Thus, it can be understood that corporate bonds are a type of securities recognizing the legal rights and benefits of bondholders over the debt portion of the enterprise.
Second, what are the conditions that a limited liability company wants to issue bonds?
According to Article 10 of Decree 163/2018 / ND-CP, conditions for issuing bonds of limited liability companies are:
– Issuing businesses are joint-stock companies or limited liability companies established and operating under Vietnamese law;
– Having operated for at least 1 year from the date of the first issuance of an enterprise registration certificate or business registration certificate or equivalent license as prescribed by law. For reorganized or transformed enterprises, the operating time is calculated as the operating time of the divided enterprise (in case of division of enterprises), the operating time of the separated enterprise (in case of separation of enterprises), the longest operating time among the consolidating enterprises (in the case of consolidation), the operating time of the merging enterprise (in the case of a merger), the operating time before and after the conversion (in case of company conversion);
– Having financial statements of the preceding year of the issuance year audited by a qualified auditing organization in accordance with provisions of applicable laws.
– Ensure compliance with the limit on the number of investors when issuing, trading bonds:
+ Individual corporate bonds are corporate bonds issued to less than 100 investors, excluding professional securities investors and without the use of mass media or the Internet.
+ Bond trading: Corporate bonds are restricted from trading within less than 100 investors, excluding professional securities investors within 1 year from the date of completion of the issuance, except for cases where court’s decision or inheritance as prescribed by law. After the time mentioned above, corporate bonds can be traded without any restriction on the number of investors; unless otherwise issued by the issuing enterprise.
– Having a bond issue plan approved and approved by competent authorities according to regulations;
– Full payment for both principal and interest of bonds issued in 03 consecutive years before the bond issue (if any);
– Meet financial safety ratios and prudential ratios in operation according to specialized laws.
Thirdly, about the process of issuing bonds:
Issuing businesses prepare a bond issue dossier, including:
a) Bond issuance plan as prescribed in Clause 1 Article 14 of Decree 163/2018 / ND-CP.
b) Announcement of information on bond issuance in accordance with Appendix I issued with this Decree;
c) Contracts signed between issuing businesses and service-providing organizations related to bond issuance (if any);
d) The financial statements of the preceding year of the audited issuing year;
d) Credit rating results of the credit rating organization for bond issuing enterprises and types of issued bonds (if any).
Issuing enterprises shall disclose information before the issuance according to Article 22 of this Decree.
Issuing businesses shall issue bonds under the provisions of Article 15 of this Decree.
Issuing businesses shall disclose information on bond issuance results and report on issuance results according to Article 23 of this Decree.
Issuing businesses shall deposit bonds in accordance with Article 16 of this Decree.
Issuing enterprises shall pay bond principals and interests according to the provisions of Article 17 of this Decree.
Issuing businesses shall disclose information and make periodical reports from the time the bond issuance completes to the maturity of bonds under the provisions of Article 24 of this Decree.
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