Issue 171025 – Private offering of corporate bonds

Dear Valued Clients,

In the context of Vietnam’s growing capital market, the need to diversify mobilized capital sources has become a vital factor for many enterprises. In addition to bank credit, private bond issuance is emerging as an effective, flexible capital mobilization channel aligned with the financial strategies of joint-stock companies and limited liability companies.

However, the issuance of private bonds is a complex legal and financial operation, governed by many legal documents such as the Law on Enterprises No. 59/2020/QH14 amended and supplemented by Law No. 76/2025/QH15 (“Law on Enterprise 2020“), the Law on Securities No. 54/2019/QH14 (“Law on Securities 2019”), and guiding decrees such as Decree No. 153/2020/ND-CP and Decree No. 65/2022/ND-CP.

This article is designed to help enterprises, managers, and investors understand the legal order and procedures when conducting a private placement of bonds in Vietnam to ensure compliance with the law during the issuance process.

1. Definition of bond

According to the provisions of Article 4.3 of the Law on Securities 2019, a bond is defined as a type of security that certifies the lawful rights and interests of its holder in respect of a portion of the issuer’s debt. In other words, it is a debt certificate issued by an issuer (which may be an enterprise, a state agency, or a local government) to raise capital for its operations. In essence, a bond is a debt instrument that represents the issuer’s financial obligations to the bondholder. Accordingly, bondholders (investors) have the right to receive periodic interest payments at the agreed rate, regardless of the issuer’s business performance, and to be repaid the principal when the bond matures.

Compared with bank loans, bond issuance allows enterprises to mobilize capital more flexibly, promptly, and proactively, often at a lower cost than commercial lending rates. Conversely, investors enjoy more attractive returns than bank deposit interest rates while indirectly participating in the issuer’s investment and development activities.

2. Types of bonds

Currently, there are many different types of bonds offered for sale, these types of bonds are classified according to the following criteria:

3. Principles for issuance and use of bond capital

When issuing and using bond capital, enterprises must comply with the following principles[1]:

• Enterprises shall issue bonds based on the principles of self-borrowing, self-repayment, self-responsibility for the efficiency of capital use, and assurance of debt repayment.
• The purpose of bond issuance must be to implement investment programs and projects, restructure debts of the enterprise itself, or serve other purposes permitted under specialized laws. Enterprises must clearly specify the purpose of issuance in the issuance plan as prescribed, and disclose this information to investors registering to purchase bonds. The use of capital raised from bond issuance must strictly adhere to the stated purposes in the issuance plan and the disclosed information provided to investors.
• For green bonds (i.e., corporate bonds issued to finance projects in the field of environmental protection or projects that bring environmental benefits in accordance with the Law on Environmental Protection), in addition to the two principles mentioned above, the proceeds from bond issuance must be separately accounted for, managed, monitored, and disbursed for environmental protection projects and projects that generate environmental benefits in line with the approved issuance plan.
• For bonds issued in the domestic market, enterprises are only permitted to change the terms and conditions of the bonds when the following requirements are met:

a) The change has been approved by the competent authority of the issuing enterprise;

b) It has been approved by bondholders representing 65% or more of the total outstanding bonds of the same type.

c) Information on changes in conditions and terms of bonds must be disclosed by the issuer as prescribed.

4. Conditions and procedures for issuance of individual corporate bonds.

Within the scope of this article, we focus on the issuance of private bonds by limited liability companies and joint-stock companies that are not public companies.

According to Articles 46, 74, and 128 of the Law on Enterprises, limited liability companies and joint-stock companies that are not public companies may issue private bonds in accordance with the provisions of this Law and other relevant legislation. Conversely, the private placement of bonds by public companies and other organizations, as well as the public offering of bonds, shall comply with the provisions of the Law on Securities.

Accordingly, the private placement of bonds by a limited liability company or a joint-stock company that is not a public company refers to an offering conducted without the use of mass media, to fewer than 100 investors, excluding professional securities investors, and meeting the following conditions for individual bond buyers:

a) Strategic investors in the case of private placement of convertible bonds or bonds with attached warrants;

b) Professional securities investors participating in the purchase, trading, and transfer of private bonds must comply with the provisions of the Law on Securities.

4.1. Conditions and procedures for issuance of individual corporate bonds.

According to the provisions of Article 128.3 of the Law on Enterprises, limited liability companies and joint stock companies that are not public companies offering individual bonds must meet the following conditions:

• The enterprise has fully paid both principal and interest of the bonds offered and is due or fully paid debts due for 03 consecutive years before the bond offering (if any), except for the case of offering bonds to creditors who are selected financial institutions;
• Having audited financial statements of the year preceding the year of issuance;
• Ensuring the conditions on the financial prudential ratio and the safety ratio in operation in accordance with the law;
• Having liabilities (including the value of bonds expected to be issued) not exceeding 05 times the equity of the issuer according to the audited financial statements of the year preceding the year of issuance; except for issuers being state-owned enterprises, bond issuers for the implementation of real estate projects, credit institutions, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, securities companies, securities investment fund management companies shall comply with relevant laws.
• Other conditions as prescribed by relevant laws[2].

4.2. Order and procedures for private placement of corporate bonds.

Pursuant to Article 129 of the Law on Enterprises, the private placement of corporate bonds in limited liability companies and joint stock companies other than public companies (hereinafter collectively referred to as “the Company“) is carried out as follows:

Step 1: The company decided on a private placement of bonds.

The company clearly defines the type of bond (ordinary bonds, convertible bonds or bonds with warrants) and the purpose of raising capital (implementation of investment projects, debt restructuring, or other lawful purposes).

Step 2: Determine the competence to decide on the private placement of bonds.

The Company decides to offer private placement of bonds according to the following provisions:

a) The General Meeting of Shareholders shall decide on the type, total value of bonds and the time of offering for convertible bonds and bonds attached to warrants. The vote to approve the resolution on the private placement of bonds of the company shall comply with the provisions of Article 148 of Law on Enterprise;

b) In case the company’s charter does not provide otherwise and except for the case specified at section a, the Board of Directors may decide on the type of bonds, the total value of the bonds and the time of offering, but must report to the General Meeting of Shareholders at the nearest meeting. The report must be enclosed with documents and dossiers on the bond offering.

Step 3: Decide on the plan for private placement of bonds and prepare the offering dossier

The issuance plan must clearly state: Purpose of issuance; Total value, term, interest rate, interest payment method, collateral (if any); Bond buyers; Plans on use and repayment of mobilized capital; Commit to disclose information and obligations of the issuer.

Step 4: The company discloses information before the offering.

The company discloses information before each offering for investors to register to buy bonds and notifies the offering to the stock exchange at least 01 working day before the expected date of the bond offering.

Step 5: The company discloses information about the results of the offering to investors who have purchased bonds and notifies the results of the offering to the stock exchange within 10 days from the end of the bond offering.

Privately issued bonds are transferred between investors that meet the conditions on individual bond buyers specified in Article 128.2 of the Law on Enterprises, except for cases of implementation under legally effective court judgments or decisions, effective arbitral awards or inherited in accordance with law.

As always, we hope that our valued clients find this article useful, and we look forward to accompanying and supporting you in the time ahead.

Sincerely,

ENT Law LLC

Note: From July 1, 2025, enterprises issuing private bonds must ensure that their debt-to-equity ratio, including the value of the bonds to be issued, does not exceed five times their charter capital, except for enterprises operating in the fields of finance, banking, insurance, or securities, or for state-owned enterprises, in accordance with detailed regulations of the Government.

[1] Article 5 of Decree No. 153/2020/ND-CP is amended and supplemented by Decree No. 65/2022/ND-CP.

[2] Article 9.1 of Decree No. 153/2020/ND-CP.