The Ministry of Finance is revising Decree 163 of 2018, proposing tightening conditions for private placement of corporate bonds, with a view to better protecting investors, especially small investors, and avoiding risks in raising capital through this channel.
Accordingly, a privately placed bond might only be issued and traded among 100 investors, excluding professional securities investors, throughout its life cycle.
As per conditions for issuance of cooperate bonds, under the draft, an enterprise’s debit balance arising from private placement of bonds must not exceed three times its equity stated in its latest quarterly financial statement. If wishing to issue a larger volume of bonds, the enterprise would have to choose another mode of bond issuance, e.g., public offering, which requires higher standards and conditions as well as is more open and transparent.
The interval between two private placements must be at least six months and bonds issued under all placements must have the same terms and conditions.
The ceiling interest rate of privately placed bonds must not exceed 20 percent per year. Expense for payment of bond interests would be treated as enterprises’ lending interests.
In addition, private placement of corporations bonds must be conducted via securities companies licensed to provide counseling services, except cases in which bond issuers are securities companies.- (VLLF)