The Government just promulgated Decree 52/2006/CP on issuance of corporate bond. Coming into effect on July 1, 2006, this regulation is considered as a framework for a new channel for the capital mobilization of Vietnamese enterprises. In reality, even though, 2005 Law on Enterprise and Law on Investment allow enterprises to issue bond to mobilize capital, only legal framework for public bond issuance and issuance of bond for state-owned enterprises was existed.
This Decree will govern the issuance of corporate bond for joint-stock company, State-owned enterprises being restructured into limited liability companies, and foreign invested companies operating in Viet Nam. Article 26, however adds limited liability companies to the subject eligible for the bond issuance. In spite of such a conflict, since 2005 Law on Enterprise only prohibits limited liability company from issuing stock, it could be understood that limited liability company is entitled to issue bond. This matter is predicted to be clarified in the to-be-issued Circular of Ministry of Finance in the coming time. Companies can issue bond where: being in operation more than 1 year; having audited financial statement of the year prior to the year of bond issuance; making profit in the year prior to the year of issuance; having bond issuance plan approved by competent person.
The Decree has created a very comprehensive and detailed legal framework for the corporate bond from form of bond, mean of issuance to interest or par value ..etc,. It is provided for that companies can issue normal bond, convertible bond or guaranteed bond.
Corporate bond can be issued under the form of certificate, accounting or electronic data. Money for issuance and payment of the bond must be in Vietnamese currency excluding bond issued by financial institution which can be in foreign currency. Par value of the bond is decided by the company but the minimum par value must be set at 100,000 VND and other par value must be multiple of 100,000 VND. Interest of the bond is decided upon each issuance in accordance with prestige of the company, feasibility of project and financial market situation. The interest can be fixed for the whole term or floated in the market.
The Decree also stipulates that corporate bond can be transferred, given, inherited or pledged, mortgaged in credit activities. Bond can be listed and transacted in stock exchange center in accordance with relating regulation. In case of convertible bond, if at the convertible date, stock price fluctuation exceed margin fixed at the date of issuance, then companies have the right to adjust convertible rate. The right to approve bond issuance plan is Stockholder Committee in case of joint-stock company and Ministry of Finance in case of state-owned enterprises, state-owned joint-stock companies, state-owned limited liability companies with one or two members during the re-structuring.
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