On 30 September 2022, the State Bank of Vietnam (SBV) issued Circular No. 12/2022/TT-NHNN on foreign exchange administration of overseas borrowing and debt repayment by enterprises (Circular 12). Circular 12 will replace Circular No. 3/2016/TT-NHNN (Circular 3). It regulates various matters on foreign borrowing and debt repayment, such as the registration procedure of the enterprise’s foreign loan without a Government guarantee, opening and use of accounts for foreign borrowing and debt repayment, and reporting regime related to the enterprise’s foreign loan. Circular 12 came into effect on 15 November 2022. In this update, we set out some remarkable points of Circular 12 compared to the current regulations.

1. Registration Regulations Applicable to Foreign Loans

1.1. Foreign Loans Subject to Registration with SBV

There is no change in the types of foreign loans that need to be registeerd, but there are some related changes The following types of foreign loans will need to be registered with the SBV:

• Medium to long term loans;
• Short-term loans renewed for the principal repayment period withing a maturity term of more than one year; and
• Short-term loans still owning the principal at the date of one year as from the first withdrawal date, but is not renewed after the principal repayment period.

  Circular 12 makes an exception that a loan as listed under c will not need to beregistered if the borrower completes the repayment in full within 30 working days after one year countedfrom the first drawdown date. This is a positive change compared to the current period of only ten working days.

1.2. Amending Foreign Loans already Registered with SBV

Generally, amendments to an approval by the SBV requires another approval. Circular 12, however provides some exceptions and the borrower only needs to submit a notification on SBV’s website after it has been updated to support this notification process. The notification process will apply to:

• Amendment of the period for principal withdrawal and repayment within ten working days compared to the original period stated in SBV’s written approval;
• Amendment of the borrower’s address within the same city or province;
• Amendment of the lender and relevant information of the lender. This does not apply  when a lender is also the representative for collective lenders in a syndicated loan, and such change may alter the role of representative for collective lenders;
• Amendment of the commercial trading name of the bank as the account service provider or secured transaction service provider;
• Amendment of the interest or fee payment plan while the interest and fee calculation method stated in the foreign loan agreement is not amended;
• Amendment of the withdrawal, repayment, interest or fee amount within 100 currency units as compared to the original period stated in SBV’s written approval; and
• Amendment of the actual withdrawal or repayment amount of a specific period less than the amount stated in the SBV’s written approval.

1.3. Registration Procedures

In the Annex the registration process of (a) the new medium - long term foreign loans and short term foreign loans to be extended, and (b) the amendment of the existing foreign loan with SBV is demonstrated.

2. Banks Serving the Secured Transactions

Circular 12 also introduces the concept of the bank supporting secured transactions This refers to credit institutions and foreign bank branches operating within Vietnam’s territory providing remittance services to fulfil guaranteed obligations or handle the secured assets relating to foreign loans. This means that the money transferred to fulfil the guaranteed or  secured assets obligations must be made through the bank supporting secured transactions. This bank will not necessarily be the same as the bank providing the account services for the relevant foreign loans.

3. Reporting Obligations

According to Circular 12, reports on foreign loans must be submitted to the SBV via its website. The traditional reporting methods allowed under Circular 3 will no longer be available. Circular 12 also requires the report on the implementation status of foreign loans to be conducted monthly instead of every quarter as currently done. It is worth noting that the guideline for individuals residing in Vietnam to register for the foreign loans from offshore lenders is still not included in Circular 12.

4. Conclusion

Under the government orientation until 2025, foreign loans will play an essential part in developing local enterprises’ operations. For that reason, the Vietnamese government has issued Circular 12 to reflect the government orientation and finalise the debt and borrowing policies for enterprises. TNP LAWYERS is one of the top international law firms in Vietnam. Our specialist team of foreign and Vietnamese lawyers advise on sectors and industries from banking and finance to corporate restructuring and from real estate to tax. We help clients to invest and set up companies in Vietnam and better understand the business opportunities of this fast-growing market. Our firm is a prominent fixture in the Legal 500 and other professional rankings thanks to our in-depth knowledge of Vietnam’s legal system and major legislation affecting foreign companies such as the Law on Investment, Labour Code, and Law on Enterprise. For more information on doing business in Vietnam - whether through incorporation, investment, or M&A - just contact our team.

In 2022, the corporate bond market witnessed severe losses for many investors. The losses were caused because the bonds were issued illegally, or organisations distributed bonds without providing complete and accurate information to investors. To help the market develop in a positive direction and address these issues, Decree No. 65/2022/ND-CP was issued on 16 September 2022 (Decree 65) and amends Decree No. 153/2020/ND-CP of 31 December 2020 on offering and trading private corporate bonds in domestic market and offering of corporate bonds in the international market (Decree 153). Decree 65 is expected to facilitate the authorities to manage, regulate and supervise the issuers and protect the investors at the same time. While Decree 153 applies to both domestic and international bonds, Decree 65 focuses on privately issued domestic bonds. It is expected to tighten the conditions for corporate bond issuance and enhance the transparency of issued bonds. Decree 65 entered into force on 16 September 2022. Note that some parts only enter into force on 1 January 2023. [1]

1. Scope of Secured Bonds

Decree 65 supplements the definition of secured bonds and these can now also be guaranteed for payment by credit institutions, foreign bank branches, overseas financial institutions, and international financial institutions. Before that, secured bonds could only be secured by the asset of the issuers or third party, or were subject to the regulation of relevant specialised laws.

2.  Professional Investors

Decree 65 expands on how to determine the professional securities investors who are allowed to invest and trade in privately issued corporate bonds. According to Decree 65, professional securities investors are investors with sufficient financial capacity or professional qualifications in securities as prescribed in Article 11 of the Law on Securities. The following companies or individuals can qualify as a professional securities investor:

• Commercial banks, foreign bank branches, finance companies, insurance business organisations, securities companies, securities investment fund management companies, securities investment companies, securities investment funds, international financial institutions, off-budget State financial funds, and State financial institutions permitted to purchase securities in accordance with relevant law;
• Companies whose paid-up charter capital reaches more than VND 100 billion (~USD 4,080,000) or listing organisations or registered trading organisations;
• Any individual having a securities business practicing certificate;
• Any individual holding a portfolio of securities listed or registered for trading with a value of at least VND two billion (~USD 81,600) as certified by securities companies at the time when the individual has the legal status of an institutional securities investor; and
• Any individual having a taxable income of at least VND one billion (~USD 40,800) in the most recent year prior to the time when the individual is identified to have legal status as an institutional securities investor in accordance with the tax declaration file submitted to the tax office or source documents for tax credit provided by the organisation or individual paying such income.

Decree 65 also allocates more responsibilities to the investors upon purchasing bonds. These include accessing the information disclosed by the issuer, clear understanding of the investment risks, self-evaluating the investment and being responsible for their investment decisions. When an investor buys bonds, they must read a document and subsequently certify that they have fully accessed the documents about the bonds they intend to buy, understand the law and accept risks on corporate bonds individually (both on primary and secondary markets). The information providers and the organisations responsible for the identification of professional securities investors shall both sign and certify on this document that they have provided sufficient information and documents to investors.  

3. Non-Professional Investors

3.1 Prohibited Types of Investment

Recently, several investors bought bonds through a contract to co-invest with other investors which may cause some risks in the market. A bond investment contract in the form of a civil agreement or in other forms of investment which are not clear according to the provisions of the securities law is risky. It may lead to the loss of money, and such an agreement may not be protected by law. To address this, Decree 65 prohibits investors who have bought bonds from redistributing them through investment contracts. Investors are not allowed to sell or jointly contribute capital to invest in bonds with investors who are not professional securities investors.

3.2 Minimum Amount

The Decree also increases the required par value of a corporate bond to VND 100 million (~USD 4,100) or a multiple of VND 100 million instead of VND 100,000 or a multiple of VND 100,000 as in Decree 153. This aims to restrict the access of non-professional investors to buying corporate bonds in private placements.

3.3 Violations

Violations of regulations on professional securities investors will be handled in accordance with the law. Decree 65 stipulates that in case investors violate the provisions of the securities law, they will be administratively sanctioned, or the violation will be handled as a criminal case depending on the nature and seriousness of it. For example, the State Securities Commission (SSC) issued Decision No. 216/QD-XPVPHC earlier this year fining Hong Hoang Investment Trading Joint Stock Company VND 70 million (~USD 2,860) for not disclosing information within the prescribed time limit to the Hanoi Stock Exchange.  

4. Offering Conditions

Decree 65 requires the issuance of credit rating results.[2] These rating results are intended to ensure the transparency of corporate bond issuances and to increase access to information on issuers and investors. The issuance of credit rating results shall apply from 1 January 2023 for companies issuing more than VND 500 billion (~USD 20,500) of bonds per year or the total outstanding debt of bonds is greater than 100% of the equity. Credit rating results are meant to enhance the public awareness and transparency of information of the capital-calling organisation and will support the synchronous development of both private placement and public offering. Decree 65 makes all market participants responsible for information transparency and their informed participation in the market.  

5.  Organised Corporate Bond Trading Market

Several authorities are involved in the corporate bond trading market establishment where the trading market can be understood as a procedure where the issued corporate bonds are initially registered at the Vietnam Securities Depository and Clearing Corporation (VSDCC), then registered for trading at the stock exchange. After that is done, the bond issuance plan that must be drawn up specifies the investors buying bonds. Finally, after the bond issuance, only transactions between the investors announced in the issuance plan are allowed. To complete the regulations on the management and supervision mechanism, Decree 65 supplements the supervisory responsibilities of the stock exchange, VSDCC and the responsibilities of the SSC on management, supervision, inspection and administrative or criminal penalties depending on the nature and seriousness of such violations., Penalties can be monetary or imprisonment. Furthermore, the Ministry of Finance is responsible for evaluating the implementation of mechanisms and policies, and managing and supervising auditing organisations and enterprises appraising prices when providing services related to corporate bonds. Finally. the State Bank is responsible for supervising credit institutions including granting licenses to credit institutions like banks, finance companies, finance leasing companies to provide bidding services and bond issuing agents.  

6.  Bond Redemption before Maturity

Besides an agreement between the issuer and bondholder, Decree 65 stipulates when bonds shall be compulsorily redeemed at the request of an investor when the issuer:

1. commits violations against regulations on offering and trading of corporate bonds according to a decision issued by a competent level, or
2. fails to comply with the bond issuance plan; and

such violations cannot be rectified, or remedies of such violations are refused by at least 65% of the total outstanding bonds of the same type, and

1. other cases defined in the bond issuance plan.

However, compulsory redemption at the request of investors shall not apply to bonds that are withdrawn according to a decision of a competent authority.  

7.  Conclusion

The corporate bond market is an important way of capital mobilisation for operating businesses. To recover the bonds and securities market in terms of a dynamic trading environment, Decree 65 strictly sets out a clear legal framework to protect those who join the capital market and is expected to create a transparent and integrity trading environment in the future.

On 10 February 2023, the Government issued Decree No. 3/2023/ND-CP (Decree 3) providing for the functions, rights and duties, and organisational structure of the Vietnam Competition Commission (VCC). The VCC was officially introduced in the 2018 Law on Competition as the leading authority in charge of the state management of competition matters. However, it was not operational until the promulgation of Decree 3, which took nearly four years since the inception of the Competition Law on 1 July 2019. The establishment of the VCC under Decree 03 is expected to enhance the enforcement by the competition regulators in Vietnam. Decree 3 will take effect on 1 April 2023. In this update, we set out some remarkable points of Decree 3.

1. Role

According to Decree 3, the VCC, also known as "Ủy Ban Cạnh Tranh Quốc Gia” in Vietnamese, is an authority that falls under the management of the Ministry of Industry and Trade (MOIT). Once established, the VCC shall take over the role of the existing authorities, including the Vietnam Competition and Consumer Protection Authority and the Vietnam Competition Council. This means that these authorities’ functions will no longer be operational, and the VCC will be solely responsible for the enforcement of competition-related matters in Vietnam.

2. Function

Decree 3 outlines the following functions for the VCC:

• conduct competition proceedings;
• regulate economic concentration activities;
• handle requests for exemptions from prohibited anti-competitive agreements;
• fulfill tasks in relation to the state management of competition, protection of consumers' interests, and management of multi-level marketing activities; and
• undertake other responsibilities as assigned by MOIT.

3. Organisational Structure

According to Decree 3, the organisational structure of the VCC consists of 15 members, including one chairman, one or several vice chairmen, and other members. The VCC will comprise the following departments:

• A competition investigation agency;
• A secretariat of councils for handling anti-competitive cases; and
• A competition supervision board.

In addition, MOIT may establish other departments under the VCC to handle other matters in relation to the protection of consumers’ interests and multi-level marketing activities as required.

4. Conclusion

The establishment of the VCC will create a foundation for a regulatory authority responsible for managing competition-related matters. It is important to note that MOIT will appoint the VCC’s members and issue additional regulations on the organisation of the VCC after the implementation of Decree 3, which is expected to happen soon. TNP Lawyers is one of the top international law firms in Vietnam. Our specialist team of foreign and Vietnamese lawyers advise on sectors and industries from banking and finance to corporate restructuring and from real estate to tax. We help clients to invest and set up companies in Vietnam and better understand the business opportunities of this fast-growing market. Our firm is a prominent fixture in the Legal 500 and other professional rankings thanks to our in-depth knowledge of Vietnam’s legal system and major legislation affecting foreign companies such as the Law on Investment, Labour Code, and Law on Enterprise. For more information on doing business in Vietnam - whether through incorporation, investment, or M&A - just contact our team.