Given the discovery and penalization of a series of violations in the issuance of corporate bond, investor’s confidence in bonds has been seriously reduced. Currently, the issuance of new bonds is almost paralyzed and investors holding other bonds not subject to sanctions also extremely concern about the "fate" of their investment in the future.
In that context, in order to stabilize the market, on November 25, 2022, the Ministry of Finance issued Documentary No. 12389/BTC-TCNH ("Documentary 12389") requiring enterprises issuing bonds to proactively take measures to put investors at ease before the Ministry of Finance can complete and implement mechanisms to support and remove obstacles as per regulations. Specifically, the Ministry of Finance requests bond issuers to:
- Ensure payment of bond principal and interest in full and on time to the investors:
- Prioritize fulfilling commitments with investors by using all of their own resources.
- If there is any difficulty, enterprises must proactively work with investors to find out appropriate solutions for bond principal and interest payment, ensuring the legitimate rights and interests of the investors.
Violations depending on their nature and extent shall be settled in accordance with the law[1].
- Comply with the information disclosure mechanism on private placement as prescribed.
- Actively use audit, rating, valuation services and publish post-audit, rating and valuation results to enhance investor’s confidence.
Documentary 12389 took effect from the date of issuance.
[1] According to Decree 153/2020/ND-CP (amended and supplemented by Decree 65/2022/ND-CP), the payment method of bond principal and interest is a mandatory content in the terms and conditions of bonds. The issuer may only change these terms and conditions when fulfilling the requirements of law, including the requirement of the approval of bond holders owning at least 65% of the total number of bonds of the same type in circulation.
Currently, pursuant to Decree 156/2020/ND-CP on penalties for administrative violations against regulations on securities (amended and supplemented by Decree 128/2021/ND-CP dated January 01, 2022), acts of illegally changing terms and conditions of bonds shall be fined from VND 200 to VND 300 million and may be subject to remedies such as forced withdrawal of bonds, and reimbursement of bond principal and interest to investors.
The act of late or delayed payment of bond principal and interest shall be likely subject to penalties according to the aforementioned provisions and simultaneously to sanctions against violation or compensation for damages as agreed with the investors.
Comment: