From July 1, 2025: Bond issuance must have liabilities not exceeding 5 times equity

The National Assembly voted to pass the Law amending and supplementing a number of articles of the Enterprise Law on the morning of June 17.

With the majority of National Assembly deputies participating in the vote in favor, this morning (June 17), the National Assembly passed the Law amending and supplementing a number of articles of the Enterprise Law.

One of the important amendments and supplements to the Law is the requirement that when issuing individual corporate bonds, non-public companies must meet the following condition: "Having liabilities (including the value of bonds expected to be issued) not exceeding 5 times the equity of the issuing organization according to the audited financial statements of the year immediately preceding the year of issuance; except for issuing organizations that are state-owned enterprises, enterprises issuing bonds to implement real estate projects, credit institutions, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, securities companies, and securities investment fund management companies, which must comply with the provisions of relevant laws".

Supplementing regulations on beneficial owners of enterprises

One of the new points of the Law amending and supplementing a number of articles of the Law on Enterprises is the addition of regulations related to beneficial owners of enterprises. In the report on receiving, explaining and revising the draft Law, the Government said that it had accepted the opinions of National Assembly deputies on technical comments on the responsibility of collecting, storing and providing information on beneficial ownership of enterprises and the content of the regulation assigning the Government to provide specific guidance on criteria for determining beneficial ownership of enterprises, sanctions for violations when not providing information as prescribed... The Law does not stipulate a specific time limit for enterprises established before the effective date of this Law to provide information on beneficial ownership of enterprises to the business registration agency.

In the report on acceptance, explanation and revision of the draft Law of the Government, it was stated that some delegates proposed to consider not stipulating this content in the draft Law but assign the Government to specify the details. However, the Government proposed to keep this provision in the draft Law for the following reasons.

Firstly, the addition of regulations on debt ratio conditions for enterprises issuing individual bonds is to increase the financial capacity of the issuing enterprises, limit the payment risks of issuing individual bonds for both the issuing enterprises and investors as recently commented by inspection and examination agencies (Government Inspectorate, Central Inspection Committee).

In this regard, private bond issuance is a risky financial product, and bond buyers themselves assess the level of risk and are responsible for the risks when purchasing bonds issued on the basis of transparent information about the "health" of the enterprise. However, recently, when violations of the law on private bond issuance occurred, the issuing enterprise could not pay the principal and interest of the bond in full and on time, bond buyers organized many protests and lawsuits... demanding the government to intervene.

Second, the rate of not exceeding 5 times is proposed on the basis of synthesizing and absorbing opinions from ministries, branches, and market members during the process of the Ministry of Finance drafting the Decree amending and supplementing Decree No. 155/2020/ND-CP (the Ministry of Finance has submitted to the Government the content of regulations on debt ratio, issuance value on equity when offering corporate bonds to the public). At the same time, the Law on Real Estate Business and Decree 96/2024/ND-CP guiding the implementation of the Law on Real Estate Business also have regulations on the limit on outstanding loans and capital mobilization of corporate bonds of real estate businesses.

Third, the value of bonds expected to be issued is not more than 5 times the owner's equity, which basically does not affect capital mobilization for production and business activities, serving the goal of economic growth; setting a boundary for enterprises to restructure debt when reaching the debt ratio ceiling (in addition to issuing individual bonds , enterprises can mobilize capital through issuance on the stock market or borrowing from banks).

According to statistics from the Hanoi Stock Exchange, in 2024, there will be 13 issuing enterprises (excluding commercial banks) with outstanding loans on equity at the time of corporate bond offering of over 5 times equity. Therefore, this regulation does not affect many enterprises and the entire market of issuing individual bonds .

To ensure the review of cases in progress of private corporate bond offerings that have submitted information disclosure content before the effective date of the Law, the Government proposes to supplement the provisions in the transitional provisions of the draft Law as follows: "For private corporate bond offerings that have submitted information disclosure content before the offering to the Stock Exchange before the effective date of this Law, they shall continue to be implemented in accordance with the provisions of the Enterprise Law No. 59/2020/QH14, which has been amended and supplemented by a number of articles under Law No. 03/2022/QH15".

In Notice No. 2001/TB-VPQH, the National Assembly Standing Committee agreed to add to the draft Law the regulation on the debt-to-equity ratio of 5 times as one of the conditions for issuing individual bonds of companies that are not public companies in order to increase the financial capacity of the issuing enterprise and limit the risks of corporate bond payment for both the issuing enterprise and investors.

The Law amending and supplementing a number of articles of the Law on Enterprises will take effect from July 1, 2025.

Source: https://baodautu.vn/tu-ngay-172025-phat-hanh-trai-phieu-phai-co-no-phai-tra-khong-qua-5-lan-von-chu-so-huu-d306065.html