Do businesses issuing bonds to raise capital need to apply for a permit?

Bond concept

A bond is a type of security that confirms the owner’s legitimate rights and interests towards a portion of the debt of the issuer. In other words, a Bond is a certificate of debt obligation by the issuer that is obligated to pay the bondholder for a specified amount within a specified period, with a specified interest.

The purpose of enterprises issuing bonds is mainly to implement investment programs and projects; increase the scale of working capital; capital restructuring of the enterprise itself.

Public offering of bonds (stocks)

Pursuant to Article 16 of the Law on Securities in 2019, issuers and shareholders of public companies must register with the State Securities Commission before offering securities to the public, except for the following cases:

a) Offering for sale government debt instruments, government-guaranteed bonds issued by policy banks, local government bonds;
b) Offering bonds of international financial institutions approved by the Government of Vietnam;
c) Offering shares to the public to convert a state-owned enterprise, a one-member limited liability company in which 100% of charter capital is held by a state-owned enterprise, or a public non-business unit into a joint-stock company;
d) The sale of securities under a legally effective court judgment or decision, an arbitrator’s decision or the sale of securities by a manager or recipient of the property in case of bankruptcy or insolvency payment capacity.
Dossier for registration of public offering of bonds (securities)

Pursuant to Article 18 of the Securities Law 2019, a bond offering dossier includes the following components:

A dossier of registration for a public offering of bonds includes:

a) Certificate of registration for the public offering of bonds;
b) Prospectus, Charter of the issuer and a written commitment that the issuer is not being examined for penal liability or has been convicted of one of the crimes of infringing upon the management order. economy that has not been cleared
c) The decision of the General Meeting of Shareholders or the Board of Directors or the Board of Members or the company’s owner approving the issuance plan, the plan for using and repaying the capital collected from the bond offering; the public and the written commitment to list bonds on the securities trading system;
d) Commitment to perform the obligations of the issuer to investors regarding the conditions for issuance, payment, assurance of the legitimate rights and interests of the investor and other conditions;

dd) Report on credit rating results;

e) Consulting contract on dossiers of registration of public offering of bonds with a securities company;
g) A written certification of the bank or foreign bank branch on the opening of an escrow account to receive money to buy bonds of the offering;
h) Underwriting commitment (if any).

A dossier of registration for a public offering of convertible bonds includes:

a) Certificate of registration of public offering of convertible bonds;
b) Prospectus; The charter of the issuer; Consulting contract for registration of public offering of shares with a securities company; The written certification of the bank or foreign bank branch on the opening of an escrow account to receive money to buy shares of the offering; The report on the use of capital obtained from the latest offering is audited for 2 years up to the time of submission, unless the audited financial statement contains detailed explanations on the use of capital obtained from the tranche. the most recent offering and a written undertaking that the issuer is not under criminal prosecution or has been convicted of one of the crimes of infringing upon the economic management order but has not yet been cleared;
c) Decision of the General Meeting of Shareholders approving the issuance plan, the plan to use the capital collected from the offering and the written commitment to list or register for securities trading on the securities trading system;
d) Commitment to perform the obligations of the issuer to investors regarding the conditions for issuance, payment, assurance of the legitimate rights and interests of the investor and other conditions;

dd) Other documents related to the conversion into shares;

e) Underwriting commitment (if any).

The application file for registration of a public offering of bonds must be accompanied by a decision of the Board of Directors or the Board of Members or the company owner to approve the dossier. For the public offering of securities by an insurance business organization that changes its charter capital, the application must contain a written approval from the Ministry of Finance on the change in charter capital.

Issuing a certificate of registration for a public offering of securities

Pursuant to Article 25 of the Law on Securities in 2019, Within 30 days from the date of receipt of a complete and valid registration dossier, the State Securities Commission shall issue a Certificate of registration of a public offering of securities. ; in case of refusal, must reply in writing and clearly state the reason.

Certificate of registration of a public offering of securities issued by the State Securities Commission is a document certifying that the application for registration of a public offering of securities meets the conditions and procedures prescribed by law.

Within 07 working days from the effective date of the Certificate of Public Offering of Securities, the issuing organization must publish the Notice of Issuance on 01 electronic or printed newspaper in 03 issues. consecutive. Securities may only be offered to the public after the Notice has been published.

Legal consequences of the act of offering bonds (security) to the public without registering with the competent authority

Pursuant to Point c, Clause 5, Article 10 of Decree 156/2020/ND-CP stipulating the behavior of offering securities to the public but failing to submit registration documents with the State Securities Commission or having submitted registration dossiers with the State Securities Commission but have not been granted a certificate of securities offering to the public, they shall be fined from VND 500,000,000 to VND 600,000,000.

Remedies: Forced withdrawal of offered securities; refund to investors the money to buy securities or the deposit (if any) plus the interest calculated at the interest rate of demand deposits of the bank that the violating organization or individual opens an account to collect money for buying securities. or deposit at the time the decision to apply this measure takes effect, within a maximum of 15 days from the date of receipt of the investor’s request.

Thus, it can be seen that the sanction for the act of offering securities to the public but not registering with the competent state agency is not light. In recent times, the State Securities Commission has announced information and administratively sanctioned many violating enterprises on this issue. Therefore, in order to ensure that business activities always comply with the law, limit risks as well as create trust and reputation for customers (investors), businesses are and are about to have the need to offer an offer. When selling securities, you need to pay close attention to this issue.