Currently, Vietnamese law allows bond issuers to modify the terms and conditions of issued bonds under certain conditions. However, such changes can directly impact the rights of bondholders. Therefore, the law provides a legal framework to protect the rights of bondholders in these situations.
Corporate bonds are securities with a term of one year or more, issued by an enterprise, that confirm the legal rights and interests of the holder concerning a portion of the debt owed by the bond issuer.(1) Through the issuance of bonds, the bond issuer can raise capital from investors and is obligated to repay this amount upon maturity. Conversely, investors lend money to the bond issuer by purchasing bonds and, in return, receive a certain amount of interest.
See more: Need-to-know things about bonds in Vietnam.
To offer bonds in the market, one of the conditions that bond issuers must fulfill is to have an approved and accepted bond issuance plan that clearly stipulates the terms and conditions of the bonds.(2) These terms and conditions are crucial for investors as they reflect key aspects of interest, such as the bond term, face value, and interest rate. Due to the specific nature of these terms and conditions being approved before the offering, Decree No. 153/2020/ND-CP initially stipulated that issuers were not allowed to change the terms and conditions of bonds in the approved issuance plan. However, with the issuance of Decree No. 65/2022/ND-CP, effective from September 16, 2022, bond issuers are permitted to modify the terms and conditions of bonds issued in the domestic market, provided they meet two conditions: (i) Approval by the competent authority of the bond issuer; and (ii) Approval by bondholders representing 65% or more of the total outstanding bonds of the same type.(3)
However, Decree No. 65/2022/ND-CP, which allows bond issuers to modify the terms and conditions of reissued bonds, may impact the rights of bondholders. Before purchasing bonds, bondholders typically rely on the basic terms and conditions that have been publicly announced, particularly those concerning the bond term and interest rate. Therefore, changes to these terms may not align with the needs and investment plans of some bondholders, potentially affecting the benefits they anticipated, such as the amount of interest they will receive.
To address these concerns, on March 5, 2023, the Government issued Decree No. 08/2023/ND-CP, which limits the extension of bond terms to a maximum of two years beyond the term stated in the bond issuance plan announced to investors. Additionally, for bondholders who do not agree to changes in the terms and conditions, the bond issuer is responsible for negotiating to ensure the protection of investors’ rights. If a bondholder does not accept the negotiation plan, the bond issuer must fully fulfill its obligations according to the original bond issuance plan announced to investors, even if the changes have been approved by bondholders representing 65% or more of the total outstanding bonds.(4)
With the additional provisions of Decree No. 08/2023/ND-CP, while bond issuers have the right to change the terms and conditions of the bonds, they remain bound by the previously announced terms and conditions for bondholders who do not consent to these changes, thereby ensuring the protection of bondholders’ rights.
(1) Clause 1, Article 4, Decree No. 153/2020/ND-CP.
(2) Point d, Clause 1, Article 9, Decree No. 153/2020/ND-CP.
(3) Clause 3, Article 1, Decree No. 65/2022/ND-CP.
(4) Article 2 Decree No. 08/2023/ND-CP.
Disclaimers:
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